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1 1. 2 2 Prawdziwa klêska optymistów dopiero nadchodzi The real surrender of the optimists is still to happen 17 APRIL 2009 The Survival of the Fittest.

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Presentation on theme: "1 1. 2 2 Prawdziwa klêska optymistów dopiero nadchodzi The real surrender of the optimists is still to happen 17 APRIL 2009 The Survival of the Fittest."— Presentation transcript:

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2 2 2 Prawdziwa klêska optymistów dopiero nadchodzi The real surrender of the optimists is still to happen 17 APRIL 2009 The Survival of the Fittest Juergen Nusser Steel Markets 2009 The Survival of the Fittest Juergen Nusser PRESIDENT Steel Markets 2009 The Survival of the Fittest VICE PRESIDENT

3 3 3 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST CZECH REPUBLIC DENMARK FINLAND ASSOCIATION OF FINNISH TECHNICAL TRADERS (TKL) HUNGARY ASSOCIATION OF HUNGARIAN STEEL- AND METALTRADERS (MAFE) UNITED KINGDOM NATIONAL ASSOCIATION OF STEEL STOCKHOLDERS PORTUGAL ASSOCIAÇÃO PORTUGUESA DOS GROSSISTAS DE AÇOS METAIS E FERRAMENTES SLOVENIA POLAND POLSKA UNIA DYSTRYBUTORÓW STALI SWEDEN STÅL- OCH METALLFÖRENINGEN SWITZERLAND BELGIUM GROUPEMENT DES MARCHANDS DE FER DE BELGIQUE UNIÓN DE ALMACENISTAS DE HIERROS DE ESPAÑA SPAIN ASOCIACION ESPAÑOLA DE TRANSFORMADORES DE PRODUCTOS PLANOS SIDERURGICOS GERMANY BUNDESVERBAND DEUTSCHER STAHLHANDEL EDELSTAHLHANDELS-VEREINIGUNG AUSTRIA FRANCE FÉDÉRATION FRANÇAISE DE DISTRIBUTION DES MÉTAUX NETHERLANDSITALYASSOFERMET BULGARIA ASOCIATIA ROMANA A DISTRIBUITOTOLOR DE METAL ROMANIA GREECE NORWAY STÅL OG METALLGROSSISTENES FORENING

4 4 4 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST EUROMETAL ORGANIGRAMME NATIONAL ASSOCIATIONS OF STEEL, TUBE AND METALS DISTRIBUTION EUROMETAL - THE VOICE OF EUROPEAN STEEL DISTRIBUTION COMMON RESOURCES COMMON RESOURCES COMMON INTERESTS COMMON INTERESTS INTERNATIONAL STEEL TRADE ASSOCIATION EUROPEAN ASSOCIATION OF STEEL SERVICE CENTERS STUDY GROUP OF DISTRIBUTORS OF STEEL, TUBES AND METALS

5 5 5 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST WHO IS GOING TO STOP THE FREE FALL OF THE MARKETS? WHO IS GOING TO STOP THE FREE FALL OF THE MARKETS? OBVIOUSLY THE STEEL PARTY HAS COME TO AN END AFTER FOUR YEARS ON A VERY HIGH LEVEL AND IT IS NOT A SOFT LANDING BUT A VERY UGLY RECESSION! WHO IS GOING TO STOP THE FREE FALL OF THE MARKETS ? OUR POLITICAL LEADERS ?.... AND WHAT PRICE ARE THEY WILLING TO PAY ?

6 6 6 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST INDUSTRIAL CONFIDENCEPRODUCER PRICESUNEMPLOYMENT INDUSTRIAL PRODUCTIONCONSUMER PRICESEMPLOYMENT INDUSTRIAL MARKETMARKET PRICESLABOUR MARKET INDUSTRIAL BUSINESS ACTIVITY AND PRICES ARE DOWNDIVING WITH AN UNPRECEDENTED DIMENSION AND SPEED UNEMPLOYMENT IS EXPLODING WITH COMPARABLE DYNAMICS RECESSION: SOME BASIC INDICATORS IN THE EURO-ZONE RECESSION: A BASIC BUT IMPORTANT LESSON A MACROECONOMIC RECESSION INTENSIFIES STRUCTURAL CHANGE OF INDUSTRIAL PRODUCTION HARDLY EVER AGAIN REACHING THE FORMER LEVEL ECONOMIC CYCLE STRUCTURAL CHANGE IN MATURE AND SATURATED ECONOMIES THE UPSWINGS AND DOWNSWINGS OF THE MACROECONOMIC CYCLE SLOW DOWN OR SPEED UP CONTINUOUS STRUCTURAL CHANGE

7 7 7 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST The EU steel market is severely impacted by the recession and will be facing an unprecedented downturn this year. In the first half of 2009 the double-digit y-o-y decline in real consumption registered in Q4’08 and a further stock correction in distribution and at the end-user level will continue: apparent consumption will drop by 29% y-o-y in Q1'09 and by a further 23% y-o-y in Q2'09; it will continue to decline in the remainder of 2009, albeit at a less dramatic rate; Q4’09 is expected to see some growth compared with the very low Q4’08 level. Following the 15% drop in 2009, some growth in apparent consumption is foreseen for 2010, owing to the absence of a huge stock reduction as seen in The significant deterioration in economic fundamentals has fully hit the EU steel using industries; the first half of this year will see output falling by 10% y-o-y. The second half is expected to see a gradual easing of the downward trend, but on balance production in the steel using sectors will still fall 7-8% in Particularly the automotive sector is badly affected by the recession, but also construction, steel tubes and the engineering sectors cannot escape a sharply downward trend. Most sectors will see a mild improvement in The EU steel market is severely impacted by the recession and will be facing an unprecedented downturn this year. In the first half of 2009 the double-digit y-o-y decline in real consumption registered in Q4’08 and a further stock correction in distribution and at the end-user level will continue: apparent consumption will drop by 29% y-o-y in Q1'09 and by a further 23% y-o-y in Q2'09; it will continue to decline in the remainder of 2009, albeit at a less dramatic rate; Q4’09 is expected to see some growth compared with the very low Q4’08 level. Following the 15% drop in 2009, some growth in apparent consumption is foreseen for 2010, owing to the absence of a huge stock reduction as seen in The significant deterioration in economic fundamentals has fully hit the EU steel using industries; the first half of this year will see output falling by 10% y-o-y. The second half is expected to see a gradual easing of the downward trend, but on balance production in the steel using sectors will still fall 7-8% in Particularly the automotive sector is badly affected by the recession, but also construction, steel tubes and the engineering sectors cannot escape a sharply downward trend. Most sectors will see a mild improvement in EUROFER MARKET REPORT JANUARY 2009 BASICALLY BAD NEWS! WHAT DOES THIS MEAN FOR THE STEEL SECTOR?

8 8 8 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST UNPRECEDENTED STEEL PRODUCTION CUTS 2008Q4/2008JAN/2009 IN % Y-O-Y GLOBAL PRODUCTION = KTO ALBEIT NOT PREVENTING STEEL PRICES DOWNDIVING

9 9 9 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST 06 Q1 Q2 Q3 Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q1 Q2 Q2 JUNE JULY SEPT OCT NOV DEC 09 JAN FEB EARLY END EARLY END USD/MT AN EXTREMELY VOLATILE PRICE CYCLE ON A GLOBAL SCALE 06 Q1 Q2 Q3 Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q1 Q2 Q2 JUNE JULY SEPT OCT NOV DEC 09 JAN FEB EARLY END EARLY END USD/MT Q1 Q2 Q3 Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q1 Q2 Q2 JUNE JULY SEPT OCT NOV DEC 09 JAN FEB EARLY END EARLY END USD/MT Q1 Q2 Q3 Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q1 Q2 Q2 JUNE JULY SEPT OCT NOV DEC 09 JAN FEB EARLY END EARLY END USD/MT Q1 Q2 Q3 Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q1 Q2 Q2 JUNE JULY SEPT OCT NOV DEC 09 JAN FEB EARLY END EARLY END USD/MT Q1 Q2 Q3 Q4 07 Q1 Q2 Q3 Q4 08 Q1 Q1 Q2 Q2 JUNE JULY SEPT OCT NOV DEC 09 JAN FEB EARLY END EARLY END USD/MT CHINA RUSSIAUSABRAZILEU 27 HOT ROLLED COIL DOMESTIC PRICE EX MILL HAVE WE ALREADY REACHED THE BOTTOM ?

10 10 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST EU 27: IMPACT ON DISTRIBUTION BUSINESS QUARTER 1/2009 COMPARED TO QUARTER 1/2008 STEEL FOR INDUSTRIAL USE (SUPPLY CHAIN BUSINESS) STEEL FOR GENERAL USE (PROXIMITY BUSINESS) DEMAND- 30% USDPRICE- 55% USDPRICE DEMANDBUT DON'T FORGET: QUARTER 1/2008 WAS A VERY GOOD ONE !

11 11 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST AS A CONSEQUENCE, ALREADY SINCE 2007 = APPARENT CONSUMPTION = REAL CONSUMPTION + 4,0% -7,2% - 15,2% + 4,4 % - 3,2% - 8,2% IN THE AFTERMATH OF THE 2008 DEVELOPMENTS REAL STEEL CONSUMPTION MIGHT TURN DOWN EVEN FURTHER IN 2009 GROWTH RATES OF EUROPEAN REAL STEEL CONSUMPTION ARE NEGATIVE 2007 ESTIMATE 2008 FORECAST 2009

12 12 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST THE FINANCIAL CRISIS: KILLING THE STEEL MARKETS ? A CENTURY'S MISTAKE... HOPEFULLY THE LAST ONE... A CENTURY'S MISTAKE... HOPEFULLY THE LAST ONE... AFTER 9-11 ANOTHER TRAUMA AFTER 9-11 ANOTHER TRAUMA

13 13 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST BUT WHAT REALLY HAPPENED IN 2008? EVERYBODY SEEMS TO NAME THE FINANCIAL CRISIS AS THE MAIN REASON FOR THE TURMOIL IN THE STEEL MARKETS ACTUALLY WE SAW FOUR PROCESSES AFFECTING THE STEEL MARKET: A FINANCIAL CRISIS INCLUDING A CREDIT CRUNCH A GLOBAL ECONOMIC DOWNTURN INTO A RECESSION AN EXTREMELY VOLATILE STEEL PRICE CYCLE A STOCK MANAGEMENT TO REDUCE WORKING CAPITAL TWO MACROECONOMIC PROCESSES: TWO STEEL SPECIFIC PROCESSES: THIS IS LARGELY AN ALIBI ARGUMENT!

14 14 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST RECESSION: CHALLENGE AND CHANCE - MANAGEMENT OPTIONS What do do?.. What do do?.. The market will not give credit for yesterday’s success The experiences of the past are not necessarily the solutions for tomorrow He who does not move in time will be removed in time

15 15 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST RECESSION: CHALLENGE AND CHANCE - MANAGEMENT OPTIONS What do do?.. What do do?.. Macroeconomic trends affect different sectors differently Given the heterogeneous sectors general recommendations are very limited But there are some basic crash management rules....

16 16 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST OPERATIONAL MANAGEMENT ASSETS MANAGEMENT FINANCIAL MANAGEMENT SALES GROWTH EBITDA / EBIT / PBT WORKING CAPITAL CASH FLOWS FROM BUSINESS OPERATION CAPITAL EMPLOYED INVEST DECISIONS TIME HORIZON CAPEX CASH OUT DIVESTURES CASH IN. FINANCIAL DEBT. GEARING RATIO COST OF CAPITAL WEIGHTED AVERAGE COST OF CAPITAL = WACC FREE CASH FLOWS DISCOUNTING RATE ENTERPRISE VALUE THE FINANCIAL DEBT PARADOX: HAVING BANKERS LENDING YOU MONEY TODAY IS NO MORE CONSIDERED AS A LIABILITY BUT AS AN ASSET FOR COMPANIES SEEKING ENTERPRISE VALUE INSTEAD OF SHAREHOLDER VALUE ! THE RECESSION HAS REVERSED THE MANAGEMENT PARADIGMA VALUE CREATION LEVERS MANAGEMENT DECISIONS CASH FLOW SOURCING VALUING FREE CASH FLOWS

17 17 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST THE RECESSION HIGH STAKES CASH GAME THE STEEL BARONS OF THE GLORIOUS PAST ARE ABOUT TO GO PLAYING AT FOUR TABLES SIMULTANEOUSLY COST = LOSS CUT COSTS CUT COSTS NO COST = PROFIT INVESTMENT = RISK LIMIT CAPEX LIMIT CAPEX NO RISK = FUN DEBT = DEATH REDUCE WCR REDUCE WCR CASH = LIFE BUSINESS = DANGER ADAPT PORTFOLIO ADAPT PORTFOLIO LESS = MORE NEEDED TIME

18 18 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST 1967: ALL YOU NEED IS LOVE EUROMETAL POSITION GENERAL ASSEMBLY FEBRUARY : ALL YOU NEED IS CASH MANAGING FOR FREE CASH FLOWS IN STEEL, TUBES AND METALS DISTRIBUTION & TRADING MANAGING FOR FREE CASH FLOWS IN STEEL, TUBES AND METALS DISTRIBUTION & TRADING

19 19 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST DON'T START A PRICE CYCLE WHEN FUNDAMENTAL ECONOMIC INDICATORS SHOW A DOWNWARD TREND! STEEL PRODUCTION IS A BASE INDUSTRY AND ONLY EXCEPTIONALLY TRIGGERS THE USE OF STEEL! STEEL PRODUCTION (AND STEEL DISTRIBUTION) ARE A DERIVATIVE BUSINESS! 2008 / 2009: LESSONS TO BE FINALLY LEARNED? AND DON'T START RENEGOTIATIONS OF YEARLY CONTRACTS IN SUCH A NEGATIVE ECONOMIC SCENARIO! REGULARLY STEEL PRODUCTION IS FULLY DEPENDENT ON THE UPS AND DOWNS OF THE STEEL CONSUMING INDUSTRIES POOR GDP GROWTH = POOR INDUSTRIAL PRODUCTION POOR INDUSTRIAL PRODUCTION = POOR STEEL CONSUMPTION POOR GDP GROWTH = POOR INDUSTRIAL PRODUCTION POOR INDUSTRIAL PRODUCTION = POOR STEEL CONSUMPTION POOR GDP GROWTH = POOR INDUSTRIAL PRODUCTION POOR INDUSTRIAL PRODUCTION = POOR STEEL CONSUMPTION POOR STEEL CONSUMPTION = POOR STEEL PRODUCTION POOR GDP GROWTH = POOR INDUSTRIAL PRODUCTION POOR INDUSTRIAL PRODUCTION = POOR STEEL CONSUMPTION POOR STEEL CONSUMPTION = POOR STEEL PRODUCTION

20 20 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST - EXPORT STEEL MARKET STEEL PRODUCTION STEEL CONSUMING INDUSTRIES STEEL DISTRIBUTION + IMPORT MARKET SUPPLY MARKET SUPPLY = STEEL PRODUCTION - EXPORTS + IMPORTS ? A CLASSICAL TOP DOWN PERCEPTION ! STEEL MARKET STEEL CONSUMING INDUSTRIES MARKET SUPPLY THE NECESSARY BOTTOM UP PERCEPTION ! STEEL DISTRIBUTION STEEL PRODUCTION EXPORT IMPORT MARKET SUPPLY MARKET SUPPLY MARKET SUPPLY = SUPPLY OF THE STEEL CONSUMING INDUSTRIES ! MARKET SUPPLY STRUCTURES

21 21 HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST HUTNICTWO 2009 KATOVICE 17 APRIL 2009 JUERGEN NUSSER: THE SURVIVAL OF THE FITTEST Juergen Nusser PRESIDENT Steel Markets 2009 The Survival of the Fittest VICE PRESIDENT THE SURVIVAL OF THE FITTEST DON'T HOPE TO SURVIVE, BUT TRAIN FOR IT! AND MOST IMPORTANT - MOVE FAST! DON'T BE A SITTING DUCK!

22 22 THANK YOU FOR YOUR INTEREST AND ATTENTION THANK YOU FOR YOUR INTEREST AND ATTENTION 17 APRIL 2009


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