Good afternoon and welcome to Otokumpu's third quarter results webcast. I'm Johan, responsible for investor relations. We will start with the presentation from our CEO, Kati ter Horst, and our CFO, Marc-Simon Schaar. And after the presentation, you have the opportunity to ask questions over the lines. And with that, I hand over to you, Kati.

Thank you, Johan. All right, let's then go forward and also very welcome to our webcast from my side. Our third quarter result was solid, stood at 101 million euros, and it was supported by very strong performance from Business Area Americas and Ferrochrome. Here I would like to highlight that regarding Business Area Americas, this was the best quarterly result in three years. However, then in Europe, the weak demand and high customer inventories waited on the result. When we then come to our evolved growth strategy, that is progressing well. So looking at the high nickel alloys, we are very well leveraging now on our current existing production capabilities to increase the business. And at the same time, we're working on the investment program that we have ongoing across commercialization, product development, and then as well operations. Also in the Ferrocom area we have now expanded our product portfolio and it also brings us to new customer segments. This is very important in the longer term because it increases our resilience and also then reduces over time the share of the charge chrome in our product portfolio. We have also launched the brand of Evomaterials, which is our technology platform that we are developing in the US. And the building of our pilot plant is progressing on time and it will be operational in the first half of next year. If we then look at the import statistics again, and I think the key focus here should be on Europe, which is the light blue line. So the EU policy measures, CBAM and the new safeguards, they are curbing imports. But as we all know, they have not basically fixed the underlying demand in Europe. And if you look at the chart, then you also notice that the imports to Europe were on a higher level than compared to Q1 in Q2. And this is also one of the explanation that there were more imports just before the new safeguards were valid as of 1st of July. And this has also then contributed to the higher inventories in the summer period next to the week underlying demand. Then talking about the market sentiment and giving it a bit of a flavor in different segments. So if we start with the consumer side, there I think we could say that if we look at the household appliances, both in Europe and US, the underlying demand is weak. And I think what makes the situation a bit worse even in Europe is that there's a lot of Asian inflow of household appliances, and that has been increasing in Europe. Then if we look at construction industry, if we look at building houses as such, it's also on a weak cycle, both in the US and in Europe. But the one area in the construction that is doing really well is data centers, as we all can read and see around us. And there, of course, that data center boom as to volumes and size is clearly bigger in the US than it is in Europe. And this drives heating and cooling, this drives water management and everything related to that. So that's the plus point. That's the kind of positive thing what we see on the market. And then if I comment on the industrial segment, then I would say America is much stronger currently with a robust demand compared to Europe. And automotive, I think, is not doing well in either continents. If we look at our deliveries then in the third quarter, we can see that we had lower deliveries clearly in Q3 in Europe than we had in Q2. So like I said, weak demand. And then if we look at PA Americas, actually we had really good deliveries. And I think you need to see this also in the context of the 50% average we still have from Mexico to US. which means that we cannot really use the Mexican capacity for demand in the US. So I think this is a good result and good deliveries in the Americas. And also Ferrochrome had good delivery volumes in the third quarter. Then on sustainability, we continue to be the sustainability leader in the industry. All our sustainability figures are as planned going in the right direction. The only thing what I'm unsatisfied is our safety result in Q3. So our total recordable incident rate year to date now stands as 2.1 and that's far away from our targeted result of 1.5. And obviously we're taking all the actions here to improve the result going forward. What would be also important maybe to mention that we have also now started our biocoque production at the Tornio site and this is an important contribution then going forward also for our ferrochrome production and reducing the emissions in there. We were also present at New York Climate Week and there I think one of the topics that we discussed a lot is how important it is to have a predictable price for carbon going forward when we also continue to do our smart investments in decarbonization. What I wanted to highlight here also is our investment program then in high nickel alloys, giving a bit again the phases. So where we are now it's the left basically box that you can see. So we have an established position in alloy 825 and we are progressing well now developing the volumes in alloy 60625. and customers are especially interested in our wide and heavy coils and the thick plates we are able to produce in the downstream assets. And then the next phase is now that we have already decided, is implementing the electro-slag remelting capability next to the current melt shop. And this, of course, then brings us to even more pure metals and applications that require that. And then next year, in the beginning of the year, we will then be coming back with the engineering study for the phase two, which then concerns the new melt shop. And the new melt shop would be planned to be operational in the end of 29. And with this, I hand to you, Marc-Simon.

Thank you, Kati, and welcome everyone also from my side. Building on the highlights Kati just shared, let me now talk you through our Q3 results in more detail, and let's begin here with the group highlights. In line with our guidance, adjusted EBITDA in the third quarter was at the same level as in the previous quarter. Given the typical seasonality, this is a solid third quarter result. Looking at the main components, deliveries and net of timing and hedging were slightly below our expectations. This was offset by better cost performance. Excluding now the net of timing and hedging, our underlying EBITDA improved compared with the second quarter, which points to a higher quality of earnings. As in the second quarter, our result was supported by the strong profitability in BA Americas and Ferrochrome. In Europe, the continued market weakness and seasonality led to slightly lower profitability in our business area in Europe in the third quarter but it remained ahead of the third quarter of last year. Now on the cash side, operating cash flow turned negative due to higher working capital, but our financial position remained solid with a liquidity reserve of 1.1 billion at the end of the quarter. I will come back to cash flow and leverage then at the end. But let me now turn to the business area, starting with the business area Europe. In Europe, the market environment has become increasingly difficult in the second half of the year. And this is visible in our Q3 deliveries, which were down 12% quarter-on-quarter. Three factors drove this. Continued weak market environment, higher customer inventories, and the usual seasonal slowdown. Inventories rose because customers imported more ahead of the new EU steel safeguards that took effect 1st of July, as already pointed out by Kati. Demand remains under pressure in key end markets. Construction, household goods and consumer durables such as white goods and cars are struggling with cost inflation and higher interest rates. and also as pointed further before data center related infrastructure investments on the other hand remained robust. On the earning side profitability was slightly lower as the volume decline was partly offset by a positive net impact from realized prices and raw material costs as well as seasonally lower fixed costs. Looking ahead, we are confident that the new EU steel safeguards, together with CBAM, will create a level playing field for European producers. Once the elevated customer inventories have been worked off, which we expect in the first half of next year, European producers should clearly benefit and the market should become more stable. Until then, the recovery will be delayed unless we see a clear upswing in end-use demand or in business and investment sentiment. With that, let's turn to Business Area Americas. Despite less tailwind from metals timing compared with the previous quarter, Business Area Americas delivered another strong financial performance. as pointed out its best adjusted EBITDA since the second quarter of 2023. This was mainly supported by 7% higher deliveries, quarter on quarter, driven by solid demand, particularly in industrial segments and data center driven infrastructure investments. Higher selling prices related to both base price and alloy surcharge also contributed. Demand in the US remained solid and the Mexican market continued on its recovery path. Looking ahead, negotiations on the USMCA review and a possible bilateral trade deal between Mexico and the US are ongoing. A positive outcome could be another catalyst for BA Americas and it would allow us to make full use of our Mexican production capacity. However, even if a deal is reached, Mexico will first need to demonstrate that its trade policy and enforcement protections are aligned with US standards. With that, let's turn to business area Ferrochrome. In Q3, Ferrochrome demand remained seasonally low, but healthy across all regions. North American continued to be the strongest market in Ferrochrome, supported by robust customer demand. Despite seasonally lower deliveries, BA Ferrochrome increased its profitability compared with the second quarter, but also compared to the third quarter of 2025 and 2024. This was achieved despite headwinds from increased mining tax, the end of electrification aid and other inflationary pressures. The improvement was supported by higher sales prices, energy optimization and better fixed cost absorption. Looking ahead, the ferrochrome market is expected to remain under pressure for the rest of the year, driven by production ramp-up in South Africa. Demand should stay relatively stable, although some weakening is anticipated towards the end of the year. So the pressure comes mainly from supply and not from the demand side. The expected higher South African production and the associated exports have on charge chrome, is weighing on charge chrome and charge chrome squat prices and European index prices for the fourth quarter. This is exactly why we continue to focus on expanding our portfolio into higher margin ferrochrome products such as high and medium carbon ferrochrome. With that, let me close with a few words on cash flow and leverage in more detail. As mentioned in our last webcast, working capital increased in quarter three as we prepared for the annual planned maintenance shutdowns in quarter four, especially in business area Europe. Lower than expected deliveries and their timing in the third quarter caused net working capital to increase further. This is a temporary outflow which we expect to reverse over the coming quarters and it has our full focus. Our capital expenditure in Q3 was 41 million euros and based on our updated annual capex schedule we now expect full year capex of approximately 170 million euros compared with our initial plan of 200 million. The difference is mainly a matter of timing in the execution schedule. Due to the negative free cash flow of 124 million euros mainly driven by working capital our net debt increased to 348 million and accordingly our leverage ratio increased moderately from 1.1 to 1.3 with the improved rolling 12-month profitability limiting the rise. Yes and now with that handing back over to you Kati.

Thank you, Marc-Simon. Yeah, and then I think we come to the outlook and guidance. So look, in outlook, we're trying to give you the elements to understand the guidance, and I then will also say a couple of words about the guidance. So our adjusted EBITDA in the fourth quarter of 2016 is expected to be affected by The impact is expected to be the largest in business area Europe where demand is anticipated to remain weak and customer inventory levels are still elevated Stainless steel delivery volumes are forecasted therefore to decrease by 5 to 15 percent from the third quarter of 2026. And with the current raw material prices, some raw material related inventory and metal derivative losses are forecasted for the fourth quarter. Then our guidance reads that the adjusted EBITDA in the fourth quarter of 26 is expected to be at the similar level to the Euro 10 million in the fourth quarter of 25. And look, what I want to say here is the reason that we decided to use the quarter four in 25 as a reference point is that our expectation for the adjusted EBITDA in 2026 fourth quarter is closer to the result in Q4 25 than in a result now in Q3 26. And with that, I go to the key messages from this call. So we had a solid quarter result, especially supported by strong performance in business area Americas and Ferrochrome, while Europe suffered from the weak market conditions. We have a good momentum in our Evolve strategy in Heinickel Alloys, expanding Ferrochrome's business and product portfolio to new customer segments, and then also advancing with our proprietary technology and building our pilot plant now on time. And from my side, I would say that despite the weak market conditions we're experiencing in Europe, we absolutely remain confident in our future as the Evolve Growth Strategy will strengthen our businesses, will bring more resilience and will create new platforms for growth. And with that, I open the Q&A session. So please go ahead.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Adana Ikoku from Morgan Stanley. Please go ahead.

Hi, good afternoon. Thank you for the presentation. I've got a few questions that I can take in turn. So maybe first on Europe. Could you just help us understand how the weakness in Q4 could potentially reverse into Q1, assuming no kind of proper demand recovery? Should we still assume the typical seasonal uplift in volumes or will the inventories continue to weigh on this? and is there any colour you could give on costs or any extended maintenance that continues into Q1 as well?

So maybe if I start answering that. Look, we guide per quarter, as you know. But like Marc-Simon said earlier, we do think that these inventories that are very elevated level, they will need to be kind of worked through. And once they are worked through, it should basically improve the deliveries. And then I think we should also remember that always in Europe, the first quarter and the second quarter, so the first half of the year, Tristan Gresser, BNP Paribas

Yes, thanks for taking my questions. The first one is on the Q4 guidance. I'm struggling a bit to see how you could be flat year-on-year despite what we've seen. I mean, we've seen the CBAM, the quotas, U.S. EBITDA is double from a year ago in Q3. You have $60 million of restructuring gains for the year, and you don't have the negative ERP impact that you had last year. I'm really struggling, so if you could help me and us understand a bit the building blocks by division, that would be helpful.

Maybe if I can start here and, Kati, you can, of course, chip in. So, first of all, as Kati pointed out earlier, our guidance is here against the fourth quarter of last year in a sense that it's closer to the fourth quarter of last year than the third quarter of this year. This is an important starting point here, which should give you an anchor point, so it's closer, okay? Then, number two, we said that volumes go down in a range of 5 to 15 percent, predominantly in terms of absolute numbers in business area Europe, but also America is seasonally lower, as you know. And this is really the biggest building block here when we think about our quarter result here against Q3. Then cost element is another driver in here. Three components to highlight. Seasonally higher costs which we have with heating, with electricity costs. We have the impact from the Middle East. and also a lower fixed cost absorption due to the reduction also in our working capital and as a result also of the lower demand. On the demand side, what we do see is that our market share and order intake in Europe hasn't dropped. Then the third component is net of timing and hedging. You might recall that we had a positive timing impact, net of timing and hedging of 3 million in the third quarter and now for the second quarter we said somewhat it is higher single digit, lower double digits, around 10 million negative impact which we have here. and then maybe third is ferrochrome as I already highlighted here. Also here you see then lower deliveries as an impact from the stainless steel sector coming in and I think I also mentioned already the pricing element. So these are the components which it is driving then our Q4 result and hence also our guidance.

That's helpful, but just to confirm, so the presentation press release says adjusted EBITDA in Q4 is expected to be at similar level to 10 million recorded in Q4. Now you're saying it's going to be closer to 10 million than the 100 million. So is that the range, so 10 million to 100 million you had in Q3 this year and closer to 10 million? Is that the right way to think about it?

So look, you have to remember our guiding practice now, which has not changed. So we say higher, lower and similar. And that's what we have used here. What I'm trying to give it the color by saying closer to the Q4 last year than the Q3 this year. And I think Marc-Simon, if you calculate from the Q3 result, I think Marc-Simon has quite well given you the elements. to think about what we expect.

So I hope that helps. All right. Okay. And just on the guide, could you quantify the impact of energy costs so far in Q3 and what you expect in Q4? And I think last year you had this 20 million headwind in Q4, ERPN. and maintenance, what would be, I think you flagged for maintenance in Q4 in Europe, what would be the Euro impact of maintenance as well? Any quantitative color you can provide that would be helpful.

Absolutely. So, maintenance in itself as direct costs, there is no real impact really here, quarter on quarter, as we are accruing our maintenance costs over the year, number one. Number two, what maintenance drives, of course, is lower production to fixed cost absorption impact, what you then see here as well. In terms of energy, higher energy costs, and particularly when I now refer to the impact from the Middle East, we see in Q4 an impact of around 15.5 million euros compared to prior crisis levels. And that is around a 5 million increase from the third quarter to the fourth quarter. And then you were mentioning also the impact in terms of volumes in the fourth quarter of last year Absolutely right, valid. But there are a couple of other components we need to take into consideration. So first of all, with the rollout of the ERP system, yes, we weren't able to deliver as much as we could have to the market. But at the same time, we had a stronger production than what we see right now in the fourth quarter and then impacting the cost level. And then the second point here is that we don't have any electrification aid anymore here in Finland, which was supporting our fourth quarter last year. And also on the Ferrochrome side, we have a higher mining tax. So these are building blocks which help to understand here also the development. All right.

Thank you.

The next question comes from Bastian Sinigowicz from Deutsche Bank. Please go ahead.

Hi, good afternoon all and thanks for taking my questions. My first one is on Ferrochrome, which I think has done very well this year. I guess also really benefited from CBAN and a good performance overall. Now, I guess you've got a few moving parts. You mentioned shipments, which are down in Q4, and then there's pricing, I guess. Now with CBAN particularly, the pricing side is maybe a little bit more opaque than usual in terms of what is sticking for you relative how far you're being impacted by global spot prices. Now I guess when we look at the comp you're referring to in the fourth quarter, Ferrochrome has actually done very well last year, was around 40 million, very similar to what you just did in Q3. So could you please maybe help us to size the magnitude of the decline, particularly which comes from Ferrochrome? That would be great. And then maybe as a second question, following up on the cost side, where I guess you've Managing things overall quite well actually, just given your hedges on energy. Is there any sense you could give us how the 10 million you've been facing in the last couple of quarters would look like if you would mark that line to market? Those are my questions.

Maybe if I start with Ferrochrome, you can come back to the energy then. So, you know, our Ferrochrome deliveries go mainly to our, go half to our own production and then half basically to other steel producers. So basically when In U.S. as well, there's the seasonality in the fourth quarter and then Europe now is weak, so there is just less demand for ferrochrome. So that's why the volumes are lower in Q4. And then you have seen what happens on the market. So the ramp up of the South African volumes and production that has not had an impact yet in Q3. But it does impact the Ferrochrome price index already in Q4. So there's more competition and pressure on the market. So it's both volume and both price. It doesn't say that our Ferrochrome business would not be solid, but it's slower than in the Q3.

And then if I can add to that, Bastian, important also to remember you heard my comment on the electrification aid and ferrochrome business is, with the smelters, a very high consumer of energy and electricity. And a lot of that comment, what I mentioned earlier in terms of electrification aid, that was impacting positively Q4 last year. And we don't have that tailwind this year.

And we have a higher mining tax also this year.

And that one as well. Okay, but then to your second point on the energy side. So my comment in terms of the increase in the energy costs, quarter on quarter, five million, or in quarter four against quarter one prior to the Middle East conflict, We do hedge our electricity and our gas consumption and for the fourth quarter it's around 80% being being hedged and on the electricity side almost similar amount on On the gas side, the Middle East impact is not only about the consumption in terms of gas where we need to buy spot here, etc. on the market, but also related to freight costs impacting that in a meaningful amount.

And also fuel in the US for the trucking especially. So it's basically everything that's all related indirectly as well.

And if you mark that to market, would that mean that the 10 million you talked about earlier, would that double or would that go up even more? How should we think about that?

No, I didn't say that anything goes up even more. I mean, we have the typical seasonality in energy costs and prices, and typically energy costs go up in the fourth quarter against the third quarter by around 20%. Of course, it's pretty volatile. But also, as mentioned before, we are hedged to 80%. So from a market-to-market perspective, we are in the money.

Okay, then one more question just on the capex line and the budget for next year. I know it's early, you're thinking about a couple of strategic things you're obviously firmly looking at, but is there a ceiling you're happy to give out for next year? Would you still see 200 million as the ceiling? Would that potentially move up or down?

What we said earlier is that our maintenance capex, mandatory maintenance indeed has a A level of 100 million, and that is what we are working towards and basically can consider to be a ceiling in here. Then, as we already pointed out, we have a couple of investments in our Evolve growth strategy. Avesta is being mentioned, but also our technology platform, Evo Materials in the US. and to mention some others. So we do not yet give a guidance for the full year. We will do that then also with the quarter four Result Outlook, but I can't envisage a level where we go significantly above the 200 million here in terms of capex.

Okay, thank you and thanks for taking my questions.

The next question comes from Maxime Kogi from AutoBHF. Please go ahead.

Maxime Kogi Good afternoon. Thanks for taking my question. So the first one is on net debt. Could you be more precise on where you expect net debt to settle? You had this significant working cap outflow in Q3. How much of that could be unwound in Q4? Related to that, could you share something about the dividends for 2026 last year? The amount paid was relatively small and that was due to net leverage being above one times. I mean, if we are still above one time at the end of the year, one time EBITDA, should we also expect the dividend to remain quite limited?

To start with on the Net Depth side, for the end of this year, you asked about working capital. As I mentioned in my presentation earlier, the build-up in working capital takes a bit of time. I said over the coming quarters, going into the first quarter of next year. Reason also being the very weak demand which we see in Europe in the fourth quarter here. But as I said, full focus is on that topic for the fourth quarter. We expect some decrease in net working capital, but it's rather a lower double-digit number and more than to come later on. And important then for net debt, which we The dividend payment which we paid in October of 33 million euros is expected to somewhat increase towards the end of the year.

And otherwise on dividend, look, we have not even discussed it with the board yet, so it's not the time to comment on dividends at this moment.

Okay, I understand, yeah. And the second question is on fair value. So here you mentioned For Gatwin, in terms of supply now, with the restart of previously idle South African capacity, do you think the local market needs some safeguards, a bit like those existing already in steel, but also in some other ferroalloys, like ferromanganese or ferrosilicon? Or is Cibam fundamentally sufficient, according to you two? to protect you against imports. From what I understand, yes, COP2 is not included in CBAM, so I guess it's not really penalizing South African imports.

I think what we are advocating very much and what would be important that makes a difference. So we only have now in a CBAM basically the scope one. And what we would like to see, of course, that we would have the scope two. So purchase energy cost in CBAM because that's where the big difference is. When you produce based on nuclear or renewable energy like we do or then you are coil or oil based. So that is something we are advocating.

And then top, what is important for us as an industry as well to think about our clients. So CBAM should, and that is what we advocate also at the European Commission is to include CBAM also in downstream industries.

All right, thanks for that.

The next question comes from Joni Sandvall from Nordia. Please go ahead.

Thanks for the presentation. I have actually one question on Ferrochrome. Just wondering how large part of the sales are you expecting from these new customer segments in 2027? I mean how large part of sales is then planned to be other than charged Ferrochrome?

So I think the estimate currently and being worked on is about 50,000 tons. But what I can give you also as an example is that, for instance, in the US, where the demand for stainless steel is really high, also steel side very high, carbon steel side, all the melt shops are actually wanting to increase their efficiency. And our specialty ferrochrome grade, for instance, can do that. So you get more capacity out of your melt shops by using our ferrochrome. So that is, for instance, one aspect that's driving demand now for more specialty grade.

Okay, thanks. That's clear.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Dominic O'Kane from JP Morgan. Please go ahead.

Hello. I just have one question. So, against the guidance for the €10 million for Q4 and also the guide for the higher net debt and negative free cash flow for Q4, If we kind of extrapolate into 2027, what feels also like a profit warning for 2027, are you considering any business condition changes or strategic self-help that might alleviate some of these weaker market conditions? So again, maybe as a starting comment would be, are you considering reducing some of the capacity, maybe more permanently, just beyond the guidance that you've given Q4? So I just wonder if you could maybe give us some sense about how you're thinking about positioning the business as we move into 2027, what is clearly a much weaker market environment. What levers can you pull?

So let me start with that. Of course we have to also now say that visibility to next year is not very clear. But of course we make our scenarios and now when we are implementing our 100 million reduction program, mainly fixed cost reduction program, we will get 60 million of that indeed in this year and the 40 million next year. That's of course not enough if the European conditions don't improve. So you can imagine that we have built several scenarios and are working with several plans with those scenarios, but it's not the time to communicate about those yet. We will also want to see a bit where the Q1 now goes, but obviously we are planning for the measures that we as management need to take if the underlying demand in Europe doesn't start improving. America's, I would say, we can talk about America's market. We see it as a robust market. We see our federal crown business also being strong. So it's mainly a question of Europe, how that develops.

And in Europe, as I already mentioned in my part of the presentation, besides the The end-use demand and the pickup in the business sentiment, it's important to understand when the excess inventories on the customer side are being worked through, basically.

And maybe how the demand develops to our customer segments. So look at the automotive in Europe, look at the household appliances in Europe, look at the constructions in Europe if you then exclude the data centers. But those are all the segments that need to have some kind of recovery before we can really expect much better market in Europe. That can happen also. It has happened before. But what is the moment, I think, is the question.

Could you put maybe a timeframe on some of those decisions? Is it something we should expect to hear next quarter? Or are you willing to keep running negative free cash flow into next year's first Q1, Q2 periods?

It is definitely not to run a negative cash flow, but I cannot give you a timeframe right now.

Okay, thanks.

There are no more questions at this time, so I hand the conference back to the speaker.

Thank you very much for joining us today. Thank you for your questions. And then we will talk to you next time during our Q4 result webcast. Thank you very much.

Thank you.