2020-08-07 08:00:00 CEST

2020-08-07 08:00:05 CEST


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Outokumpu Oyj - Half Year financial report

Outokumpu half-year financial report – Second-quarter adjusted EBITDA declined to EUR 45 million due to weak global demand caused by COVID-19 pandemic


Outokumpu Oyj
Half-year financial report
August 7, 2020 at 9.00 am EEST

Outokumpu half-year financial report – Second-quarter adjusted EBITDA declined
to EUR 45 million due to weak global demand caused by COVID-19 pandemic

Highlights in the second quarter of 2020

  · Stainless steel deliveries were 523,000 tonnes (584,000 tonnes)[1].
  · Adjusted EBITDA was EUR 45 million (EUR 91 million).
  · EBITDA was EUR 45 million (EUR 91 million).
  · Operating cash flow was EUR 72 million (EUR 177 million).
  · Net debt remained relatively flat at EUR 1,243 million (March 31, 2020: EUR
1,249 million).
  · Gearing was 49.2% (March 31, 2020: 48.0%).

Highlights in the first half of 2020

  · Stainless steel deliveries were 1,111,000 tonnes (1,205,000 tonnes)
  · Adjusted EBITDA was EUR 151 million (EUR 145 million).
  · EBITDA was EUR 151 million (EUR 131 million).
  · Operating cash flow was EUR 40 million (EUR 216 million).
  · Net result was EUR -15 million (EUR -33 million)

[1 ]Figures in parentheses refer to the corresponding period for 2019, unless
otherwise stated.

Q2 2020 compared to Q2 2019

Outokumpu’s sales decreased to EUR 1,420 million in the second quarter of 2020
(EUR 1,701 million) and adjusted EBITDA decreased to EUR 45 million (EUR 91
million). Stainless steel deliveries in the second quarter declined by 10%
compared to the reference period in 2019. Realized prices were lower compared to
prior year especially in Europe, but also in the Americas. Profitability was
positively impacted by lower input costs and fixed costs and includes also EUR 3
million of government support to avoid layoffs and other positive one-off items
of some EUR 8 million. Raw material-related inventory and metal derivative
losses were at the level of the reference period, EUR 16 million. Lower
ferrochrome benchmark price had a negative effect on business area Ferrochrome’s
profitability. Other operations and intra-group items’ adjusted EBITDA was EUR
-7 million (EUR -11 million).

Q2 2020 compared to Q1 2020

Outokumpu’s sales decreased to EUR 1,420 million in the second quarter of 2020
(Q1/20: EUR 1,615 million) due to weaker global stainless steel demand. Adjusted
EBITDA decreased to EUR 45 million (Q1/20: EUR 106 million). Volumes were lower
in all business areas and the total stainless steel deliveries declined by 11%
compared to the previous quarter. Raw material efficiency was weaker compared to
the first quarter, but one-off items supported profitability in the second
quarter. Raw material-related inventory and metal derivative losses decreased by
EUR 6 million compared to the first quarter.

H1 2020 compared to H1 2019

During the first half of 2020, Outokumpu’s sales decreased to EUR 3,035 million
(EUR 3,415 million) while adjusted EBITDA increased to EUR 151 million (EUR 145
million). Deliveries in the first half of 2020 declined by 8% compared to the
same period last year and realized prices were lower in both Europe and the
Americas. Higher nickel price and positive raw material impacts supported
profitability while the lower ferrochrome benchmark price had a negative impact
on result compared to the first half of 2019. Raw material-related inventory and
metal derivative losses were EUR 38 million (losses of EUR 26 million). Other
operations and intra-group items’ adjusted EBITDA amounted to EUR -13 million
(EUR -10 million).

EBIT was EUR 29 million (EUR 16 million) and net result amounted to EUR -15
million (EUR -33 million) in the first half of 2020.

[][][][][]
Group key                    Q2/20   Q2/19   Q1/20  Q1–Q2/2  Q1–Q2/1    2019
figures                                                   0        9
Sales          EUR million   1,420   1,701   1,615    3,035    3,415   6,403
EBITDA         EUR million      45      91     106      151      131     266
Adjusted       EUR million      45      91     106      151      145     263
EBITDA [1)]
EBIT           EUR million     -16      33      45       29       16      33
Adjusted       EUR million     -16      33      45       29       30      30
EBIT [1)]
Result         EUR million     -38      17      22      -16      -18     -41
before taxes
Net result     EUR million     -37       6      22      -15      -33     -75
for the
period
Earnings per           EUR   -0.09    0.01    0.05    -0.04    -0.08   -0.18
share
Diluted                EUR   -0.09    0.01    0.05    -0.04    -0.08   -0.18
earnings per
share
Return on                %     1.1     2.9     2.3      1.1      2.9     0.8
capital
employed
Net cash       EUR million      72     177     -32       40      216     371
generated
from
operating
activities
Net debt at    EUR million   1,243   1,307   1,249    1,243    1,307   1,155
the end of
period
Debt-to                  %    49.2    49.8    48.0     49.2     49.8    45.1
-equity
ratio
at the end
of period
Capital        EUR million      57      49      52      109      100     221
expenditure
Stainless     1,000 tonnes     523     584     588    1,111    1,205   2,196
steel
deliveries
Personnel at                10,213  10,483  10,315   10,213   10,483  10,390
the end
of period
[2)]
[1)]
Adjusted
EBITDA
or EBIT =
EBITDA or
EBIT – Items
classified
as
adjustments.
[2)] On June
30, 2020
the Group
employed, in
addition,
some 540
summer
trainees
(June
30, 2019:
some 710).

President & CEO Heikki Malinen

“In the COVID-19 world, securing the health and safety of our employees and
people around us has been a top priority at Outokumpu. Thanks to our proactive
actions, the COVID-19 impact on our people and operations has been limited, and
consequently our customer service and deliveries have continued largely
uninterrupted. I am proud of our employees’ hard work and ability to adjust to
the new ways of working under these exceptional circumstances.

The pandemic started to impact Outokumpu in April with lower demand and
declining order intake. As a result, Outokumpu’s deliveries decreased by 11% in
the second quarter and adjusted EBITDA declined to EUR 45 million. The EUR 125
million convertible bond that was successfully launched in July is an important
funding element that improves our debt maturity profile in these harsh times.

In business area Americas, deliveries were down by 20% from the first quarter
due to continued distributor destocking and COVID-19. By improving operational
efficiency, we have been able to bring down the break-even point significantly
enabling positive results even with lower production volumes.

Business area Europe’s result was burdened by lower deliveries, continued price
pressure and high import penetration. As a response to lower demand, production
has been adjusted with temporary shutdowns and shorter working hours in all
operating countries. On the positive side, productivity has continued to
improve, and we have maintained our market position.

The European Commission’s decision in June to increase the import quotas by 3%
was a major disappointment for the European steel industry. As the import
pressure from Asia continues, there is an urgent need to create a long-term
solution beyond the current safeguard quota period ending in June 2021 to secure
the viability of the European steel industry.

Since starting as the CEO of Outokumpu in mid-May, I have taken a deep dive into
Outokumpu’s operations and discussed with a large group of employees globally to
build a good understanding of the company. I am impressed by our operations and
the knowledge and expertise of our people which together provide a good
foundation for our future.

Despite some signs of gradual market recovery, the operating environment
continues to be difficult. The normal third-quarter seasonality will prevail,
now further challenged by COVID-19. Therefore, our short-term focus will be on
cash generation, securing liquidity and tight cost control. We have also decided
to accelerate the Long Products’ strategic review with new management. For the
longer term, we are currently in the process of formulating a new vision,
strategy and targets for Outokumpu for the coming years. These will be
communicated before the announcement of the third quarter results.”

Outlook for Q3 2020

Due to the global economic uncertainty caused by the COVID-19 pandemic,
Outokumpu will not give quarterly guidance on adjusted EBITDA until further
notice.

The COVID-19 pandemic and related measures are expected to have a significant
impact on the stainless steel industry throughout 2020.

Due to seasonally low quarter, especially in Europe, combined with the
continuing COVID-19 situation, Outokumpu expects its stainless steel deliveries
to decrease in the third quarter for the whole Group by approximately 10%
compared to the second quarter. The European stainless steel market remains
challenging as a result of continuing import and price pressure.

The planned maintenance work at the Ferrochrome mill in Tornio, Finland is
expected to have approximately EUR 15 million negative impact on the third
-quarter result.

Live webcast and Conference call today at 3.00 pm EEST

Outokumpu will arrange a live webcast and a conference call for investors and
analysts on the result publication day, Friday, August 7, 2020 at 3.00 pm EEST
(8.00 am US EST, 1.00 pm UK, 2.00 pm CET). The event will be hosted by
Outokumpu’s CEO Heikki Malinen and CFO Pia Aaltonen-Forsell.

You can participate in the event and ask questions through a live webcast at
https://webcast.reloadmedia.fi/player/login/?video=S202007291617430 or via the
conference call.

For the conference call, please dial in 10−15 minutes before the beginning of
the event:

Finland: +358 9 4245 0806
UK/Europe: +44 20 71 92 8000
US & Canada: +1 631 510 7495
Confirmation code: 1428255

The stock exchange release and the presentation material will be available
before the event at www.outokumpu.com/investors.

A recording of the event will be available at
https://www.outokumpu.com/en/investors/financial-calendar/webcasts at the latest
on Monday August 10, 2020.

For more information:

Investors: Marja Mäkinen, VP, Investor Relations: tel. +358 40 671 2999

Reeta Kaukiainen, EVP – Communications & IR, tel. +358 50 522 0924

Outokumpu Oyj

Outokumpu is the global leader in stainless steel. We aim to be the best value
creator in stainless steel through customer orientation and efficiency. The
foundation of our business is our ability to tailor stainless steel into any
form and for almost any purpose. Stainless steel is sustainable, durable and
designed to last forever. Our customers use it to create civilization’s basic
structures and its most famous landmarks as well as products for households and
various industries. Outokumpu employs 10,000 professionals in more than 30
countries, with headquarters in Helsinki, Finland and shares listed in Nasdaq
Helsinki. www.outokumpu.com