CEO s review. Capital Markets Day President and CEO Pertti Korhonen. November 30 - Hamburg, Germany. Outotec - All rights reserved

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1 CEO s review Capital Markets Day 2012 President and CEO Pertti Korhonen November 30 - Hamburg, Germany

2 OUTOTEC TODAY 2

3 Sustainability is the key driver in all we do 3

4 Life cycle offerings delivered globally through four business areas Market Operations Supply Business Infrastructure Strategy Technology Management Non-ferrous Solutions Ferrous Solutions Energy, Light Metals & Environmental Solutions Services Finance & Control Legal Affairs Human Capital Communications and Corporate Responsibility for the processing of copper, nickel, zinc, lead, gold, silver, platinum group metals, industrial minerals as well as valuable minor metals for the production of concentrates, industrial minerals, pellets, sinter, pig iron, direct reduced iron, ferroalloys, and titanium feedstock for oil shale, oil sands and biomass processing, light metals and sulfuric acid production, off-gas handling, and industrial water treatment providing life cycle services partners peers competitors Competitive landscape is fragmented Jacobs (Aker), Andritz, Bateman Engineering/Litwin, BGRIMM, CITIC, Delcor, EPCM, FLS, Krupp Polysius, Mesco, Metso, PERI, Siemens, SMS Meer, Thermo Fisher, WesTech, Xstrata Jacobs (Aker), Bateman Engineering, BSIET, Danieli, Downer, FLS, Kobelco, Metso, Midrex, Siemens, SMS Siemag, Tenova Pyromet Jacobs (Aker), Alcan, Alstom, Brochot, FLS, Foster Wheeler, GEA, MECS, Siemens, Solios, Stultz, Veolia FLS, Metso, local competitors, internal maintenance departments Engineering: AMEC, Ausenco, Bechtel, Chalieco, Enfi, Fluor, Hatch, MCC, NERIN, NFC, SNC-Lavalin, SRK, Worley Parsons 4

5 Over a century as a technology leader, active M&A with 12 acquisitions since 2010 Year Listing on the Helsinki Stock Exchange OUTOKUMPU TECHNOLOGY BACKFILL SPECIALISTS TME GROUP, DEMIL MANUTENÇÃO INDUSTRIAL NUMCORE KILN SERVICES VPF, ASH DEC MILLTEAM EDMESTON AUBURN 2001 BOLIDEN CONTECH NORDBERG GRINDING MILLS OUTOKUMPU KHD ALUMINIUM AISCO, SUPAFLO WENMEC LURGI METALLURGIE LAROX AUSMELT ENERGY PRODUCTS OF IDAHO

6 Diversified sales split with roughly 2/3 coming from emerging markets Sales by destination Sales by end product 2011 (2010) 2011 (2010) Americas 31% (34%) EMEA (incl. CIS) 44% (38%) Other *) 11% (16%) Other metals Copper 33% (25%) 8% (6%) Sulfuric acid 5% (8%) Nickel 6% (7%) Zinc 3% (5%) Asia Pacific 25% (28%) Precious metals 10% (11%) Ferroalloys 4% (3%) *) incl. energy, water and chemical industry Aluminum 5% (7%) Iron 15% (12%) 6

7 MARKET REVIEW INDUSTRY S MEGATRENDS PROVIDE ATTRACTIVE GROWTH OPPORTUNITIES FOR OUTOTEC 7

8 Emerging markets GDP growth is driving metals demand GDP (PPP) growth in BRIC and Emerging vs Advanced economies China 150 India 140 Russia 130 Brazil Emerging and developing economies Advanced economies Source: IMF, October

9 Metals demand has stayed on a good level and is expected to continue to grow 140 Demand growth for selected commodities (2011=100) Alumina Aluminium Copper Zinc Nickel Gold Iron Ore S-Acid Source: Brook Hunt, Macquarie, CRU /July-October

10 Middle class is growing globally and drives demand for metals 10

11 Constantly increasing demand for sustainable technologies drives Outotec s business Peak oil Water Emissions Energy Ore grade Ore grades are declining and becoming more complex Making metals is energy-intensive Cleaner solutions must be developed to limit CO 2 and other emissions Water availability and pollution are critical issues Alternative energy sources are needed We have a deep knowledge of minerals and metals processing technologies We provide the most energy efficient process technologies in the industry Adoption of our best practice technologies worldwide could save million tonnes of CO 2 in nonferrous metals production only Our solutions provide significant reduction in fresh water consumption and water loss and increase recycling of process water We enable environmentally sustainable use of waste, oil shale, oil sand and biomass as new alternative energy sources Recycling More recycling is needed We provide technologies for metals recycling 11

12 Economic growth and its impact on environment can be decoupled by using advanced technologies Welfare Environmental impact Eco-efficiency Advanced technologies Environmental impact Source: 12

13 Significant new production capacity is needed to meet the increasing metals demand with degrading ore grades 13

14 OUTOTEC S STRATEGY IN ACTION 14

15 We launched our current strategy in 2010 Our strategic intent: The leading provider of sustainable minerals and metals processing solutions, Sustainable life cycle solutions enabling customers get the best return on investment and license to operate. and an innovative provider of sustainable energy and water processing solutions. Services Best return on customer s investment with minimized ecological impact Strong local market presence and global integrated operations Our mission: Sustainable use of Earth s natural resources. Project delivery Systems integration Proprietary equipment Technology Increasing value through life cycle solutions Applying core technologies in new attractive growth areas Leadership in technology and innovation Improving cost competitiveness and scalability Sustainable use of Earth s natural resources Outotec Values 15

16 Outotec is a technology company with minerals and metals processing as core competence Technology development and deliveries since 1890s to over 80 countries in all key markets Strong R&D and IP portfolio 5,618 patents or applications (Q3/2012) EUR 33.5 million in R&D (2011) Several Best Available Techniques (BAT) 87% of order intake in 2011 is classified as Environmental Goods and Services (OECD definition) STOXX Global ESG Leaders Patented innovations by filing year 16

17 Outotec covers the entire ore-to-metal value chain and offers innovative applications to other industries Natural resources (ores, minerals, energy, water) Portfolio of the world s leading technologies Minerals processing Grinding Flotation Filtration Physical separation Thickening and clarification Analyzers and process automation Metallurgical processing Smelting and refining Roasting and off-gas handling Calcination Leaching and solution purification Solvent extraction Electrorefining and electrowinning Sintering and pelletizing Direct and smelting reduction Process control Chemicals Sulfuric acid production Water treatment Neutralization, effluent treatment, drinking water Energy Combustion and gasification, heat recovery, gas handling, bio energy, oil sand and oil shale processing Services Expert services, spare parts and maintenance, operation, modernization and expansion, life cycle service contracts Industrial minerals/concentrates Copper Nickel Zinc Cobalt Precious metals Aluminum Ferroalloys Pellets/sinter DRI/HBI/ Pig Iron Sulfuric acid Water Shale oil Char Energy 17

18 Example: combination of continuous own R&D and M&A has transformed Outotec to full minerals processing plant supplier Equipment supplier Process module supplier Plant supplier Acquisition of Backfill Specialists Acquisition of Larox filters Acquisition of Supaflo thickeners Acquisition of Nordberg grinding mills Acquisition of Boliden paste technology First flotation machines and analyzers developed (in house) 1960 Continuous R&D

19 Fully integrated solution offering of minerals processing plant - optimized production efficiency for entire life cycle Comminution Our comminution solutions include various proprietary grinding mill types and advanced control tools to optimize any comminution process. Flotation We are the leading supplier of flotation technology and modular process sections with low energy consumption. Industry benchmark proprietary flotation control system provides the best flotation performance. Dewatering We are a leading supplier of full service solid-liquid separation solutions. Our highly effective modular dewatering plant is based on proprietary filtration and thickening technologies. Paste backfill We offer comprehensive tailings treatment solutions that reduce the area needed for tailings storage. We provide operation and maintenance services to help customers to maintain and improve efficiency during the entire life cycle of the plant. 19

20 Increasing value capture of the industry CAPEX and OPEX by strengthening our earnings logic In 2010, we said we will... Strengthen our earnings logic by offering ore-to-metal total solutions and life cycle services Maximize life cycle profitability for our customers and Outotec Offer larger scopes leveraging our turnkey solution delivery and project management capability we... Introduced new offerings to the market to leverage all layers of our earnings logic Won several customer orders with scopes utilizing all layers of our earnings logic Introduced new life cycle services offerings Improved our capability to better price based on delivered value we will focus on... Offering industry benchmark process and plant solutions Leverage our unique capability to give process guarantees and deliver turnkey solutions with predictable performance, time and total cost Grow Services business through further penetration to installed base and expanding service offerings 20

21 Applying core technologies in attractive new growth areas In 2010, we said we will... Enter adjacent industries with high technological synergies and manageable risks Seek opportunities to provide innovative technological solutions for alternative and renewable energy and industrial water treatment applications we... Acquired EPI with biomass/wasteto-energy expertise Won customer orders for wastewater and effluent treatment Acquired AshDec to offer phosphorous recycling Started Narva oil shale plant commissioning and did several studies in oil shale for new customers Received biomass-to-energy and sludge incineration customer orders we will focus on... Promoting biomass and waste-to-energy solutions Advancing IWT technology and offerings Continuing oil shale and sand R&D and commercialization efforts Winning new off-gas treatment and sulfuric acid orders Acquisitions complementing our energy and IWT offerings 21

22 Improving cost-competitiveness and scalability Customers In 2010, we said we will... Establish platform for growth by implementing an integrated global operating model Build strong global engineering and supply capabilities Leverage modular core product designs Partner with the most innovative suppliers Maintain an asset-light business model we... Succeeded in scalability by doubling our business volume Invested significantly in development and implementation of global processes and tools Implemented global supply management Improved operating leverage we will focus on... Improving cost competitiveness and margins through supply savings Operating leverage by growing revenues faster than SG&A Improving productivity through global processes and tools implementation 22

23 Strong global presence and integrated operations ensure optimal solutions to customers wherever they are In 2010, we said we will... Establish strong local presence in growth markets Deliveries to over 80 countries Strengthen the collaboration and relationships with our customers Strengthen our global solutions offering and delivery capability Fully leverage our technologies and capabilities globally we... Strengthened our presence in emerging and rapidly growing markets Leveraged our global presence and strong offerings resulting to faster sales growth than our industry peers we will focus on... further strengthening our market reach growing our Services sales and delivery capabilities delivering more value to customers through highly skilled local market organisations leveraging the competitive strength of our end to end process technology offerings and lifecycle solutions 23

24 We guarantee performance and the best return on customer s investment with minimized ecological impact In 2010, we said we will... Leverage our unique capabilities to offer customers Performance guarantees Optimized processes Fast and reliable ramp up High material recovery Efficient use of raw materials, energy and water Low lifetime operating cost we... Have won a large number of solution deals Have grown our order intake and sales faster than our peers Have won several deals based on BAT environmental advantages we will focus on... Growing life cycle solutions offerings and orders Expanding Services product offerings and penetration to installed base Further differentiating from competitors through our unique capabilities in the industry 24

25 Acquisitions continue to be an integral part of our growth strategy We are looking for acquisitions which will complement the existing technology portfolio, accelerate growth in new application areas such as energy and industrial water treatment, and expand the Services offering and resources. Since 2010 we have completed 12 acquisitions in line with this strategy Life cycle solutions Services Processes Proprietary equipment Technology 25

26 Outotec SWOT Strengths Minerals and metals processing core competences Wide and Deep Proprietary technology portfolio Systems integration and turn-key project implementation capabilities Reputation, references and installed base Global footprint Weaknesses Sensitivity to minerals and metals process industry CAPEX cycles => We are expanding to adjacent industries like energy and industrial water treatment Low % share of services sales => We are growing our services business decisively (new target of 1 B by 2017) Opportunities Increasing sustainability demands due to global warming and other environmental problems Declining ore grades Growing renewable and alternative energy demand Underserved installed base Mergers and Acquisitions as additional source of growth Threaths Slow global GDP growth reduces metals prices, demand growth and industry s capacity investment growth => We are expanding our share of industry capex and opex and expanding to new industries Low energy prices slow down adaptation of renewable and alternative energy solutions => leverage Outotec s global footprint to grow Energy business 26

27 DELIVERING TOTAL SHAREHOLDER RETURN (TSR) 27

28 Outotec s goal is to deliver TSR through 1. Sustainable sales growth 2. Continuous profitability improvement 3. Distributing dividends 4. Reducing volatility of share price 28

29 EUR million Growing the order intake has been one of our top priorities in 2011 and Order backlog at the end of the period Order intake by quarter Share of unannounced orders 29

30 Outotec has been growing faster than its peers Net sales Outotec Metso FLSmidth e 2012e figures are based on consensus average estimates, rebased 2010=100 FLSmidth (incl. Customer Services, Non-Ferrous, Bulk Materials) Metso (Metso Mining & Construction) 30

31 We have been able to grow faster than what we targeted in 2010 MEUR Guidance 2012 Sales: EUR bn E Sales 10 % growth 20 % growth 31

32 12 % 10 % Steady positive EBIT % development toward the long term target Guidance 2012 Ebit%: approx % 6 % 4 % 2 % 0 % E EBIT % (from business operations excl. one time items and PPA) 32

33 Outotec can pull several levers to continue improving EBIT% in line with long term target Quartely and annual fluctuations Project scope & mix (CAPEX vs Service) Timing of license fees Timing and success of project completions Percentage of Completion schedules Foreign Exchange rates _ Larger scopes Expanding market reach Investments in processes & tools R&D investments Pricing pressures Competition Cost inflation + Services sales Life cycle solutions Leadership in technology Value pricing License fee incomes Supply savings Engineering productivity Global resourcing Operating leverage Long-term target: average 10% 33

34 Outotec has been distributing dividends in line with the dividend policy while executing the growth strategy 1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00 Dividend & Payout Ratio Dividend Payout ratio % 140 % 120 % 100 % 80 % 60 % 40 % 20 % 0 % 34

35 Good ROI and ROE due to asset light operating model and negative net working capital ROI %, quarterly ROE %, quarterly Net interest-bearing debt Working capital 35

36 Outotec s long-term financial targets Targeting continuous profitable growth CAGR 10-20% Outotec targets to achieve annual average sales growth of 10-20% Sales Services sales target EUR 1 billion by the end of 2017 Operating profit margin On average 10% Annual operating profit margin from business operations is targeted to be on average at 10% over the cycle, excluding one-time costs and purchase price allocations of acquired businesses. Balance sheet Outotec targets to maintain strong balance sheet to provide operational flexibility and enable acquisitions. Dividend policy: at least 40% of the annual net income 36

37 Reducing share price volatility Outotec s Outotec s goal is goal to reduce is to reduce the dependency the dependency on mining on industry CAPEX mining volatility industry by CAPEX volatility by 1. Growing services business strongly Upgrading the Services sales target from EUR 500 million by 2015 to EUR 1 billion by Growing energy and industrial water treatment businesses 3. Further strengthening the end-to-end technology offering for all metals to increase self-hedging 37

38 KEY PRIORITIES AND GUIDANCE FOR

39 Key focus areas in 2013 Focus area Status Ensure continuous sales growth through order intake and services growth as well as earnings logic enhancement Improve profitability through value based pricing, supply savings and sales mix improvement Continue making acquisitions to strengthen the offering portfolio and accelerate growth Continue investments in developing and rolling out global platforms to lay the foundation for future growth and profitability improvement 39

40 Industry investments are expected to continue on high level in 2013 bus$ Global Mining Capex *) bus$ Global GDP growth and growing metals demand drive further investments e 2013e 2014e Capex Brook Hunt Outotec 0 *) Gray area on the graph represents a range of possible scenarios based on analysts and market institutes reports 40

41 We continue to see market activity in all market areas and metals as well as all parts of the value chain Greenfield (no existing infra) Brownfield Type of investment project No of projects 10/2012 Greenfield 540 Brownfield 134 Source: Raw Materials Data. Copyright: Raw Materials Group 41

42 2013 Financial guidance Based on the strong order backlog, current market outlook and the customer tendering activity, the management expects that in 2013: Sales will grow from 2012, and Operating profit margin from business operations ( * will further improve compared to 2012 ( *excluding one-time items and PPA amortizations Factors affecting Outotec s financial guidance are described in the Financial Statements and Interim Reports 42

43 Our mission: Sustainable use of Earth's natural resources. 43

44 Why to invest in Outotec - Key take-ways from CMD Outotec participates global growth markets with strong secular demand drivers Outotec has unique competitive advantages due to its technology core competences and technology porftolio covering all metals end-to-end Energy and Industrial Water treatment are new growth opportunities in addition to growing minerals and metals processing core business Outotec has a good growth strategy and good execution track record Outotec has a global footprint, 2/3 of the business comes from rapidly growing markets Outotec has ambituous financial goals and good momentum 44

45 Outotec CMD 2013 Save the date for next year December 4,