Outokumpu Oyj - Interim report (Q1 and Q3)

Outokumpu interim report January-March 2024: Gradual market recovery in Europe continued, while the political strike in Finland burdened results

Outokumpu Corporation
Interim report
May 7, 2024 at 9.00 am EEST

Highlights in Q1 2024

•        Stainless steel deliveries were 444,000 tonnes (505,000 tonnes)*.

•        Adjusted EBITDA amounted to EUR38million (EUR204million).

•        EBITDA was EUR37million (EUR198million).

•        ROCE amounted to -5.7% (18.4%).

•        Free cash flow was EUR-26million (EUR160million incl. discontinued
operations).

•        Earnings per share was EUR -0.05 (EUR 0.22).

•        The most recent share buyback program was completed on February 29,
2024, and during the first quarter, Outokumpu repurchased a total of 8,357,545
shares.

•        Due to the political strike in Finland, Outokumpu issued two negative
profit warnings during March.

•        After the reporting period, on April 4, 2024, the Annual General
Meeting approved a dividend of EUR 0.26 for year 2023 and the dividend was paid
in April.

*Figures in parentheses refer to the corresponding period for 2023, unless
otherwise stated.

[][][]
Key figures                                   Q1/24  Q1/23  Q4/23   2023
Sales                                EUR      1,479  2,006  1,513  6,961
                                     million
EBITDA                               EUR         37    198     15    416
                                     million
Adjusted EBITDA [1)]                 EUR         38    204     72    517
                                     million
EBIT                                 EUR        -19    135   -314   -100
                                     million
Adjusted EBIT [1)]                   EUR        -17    144     13    274
                                     million
Result before taxes                  EUR        -29    128   -320   -133
                                     million
Net result for the period            EUR        -23     97   -242   -111
                                     million
Earnings per share                   EUR      -0.05   0.22  -0.56  -0.26
Return on capital employed, rolling  %         -5.7   18.4   -2.1   -2.1
12 months (ROCE) [2)]
Capital expenditure                  EUR         59     15     86    170
                                     million
Free cash flow                       EUR        -26    160    156    290
                                     million
Stainless steel deliveries           1,000      444    505    450  1,906
                                     tonnes

Net result for the period from all   EUR        -23    103   -242   -106
operations incl discontinued         million
operations

1) Adjusted EBITDA or EBIT = EBITDA or EBIT - Items affecting comparability.

2) The balance sheet component in 2022 includes the equity component of
discontinued operations.

President & CEO Heikki Malinen
After a weak second half of the year 2023, the new year started off relatively
well. However, a wave of unexpected political strikes in Finland impacted
Outokumpu. Most of our operations and port in Tornio, Finland were shut down for
four weeks. We regret any inconvenience this caused our customers. We have done
everything under our control to mitigate the situation in order to limit the
negative impacts of the four-week strike to EUR 60 million from the earlier
estimated EUR 80 million.
In the first quarter of 2024, Outokumpu's adjusted EBITDA amounted to EUR 38
million. The political strike had negative impact of approximately EUR 30
million and we expect a similar impact in the second quarter. Compared to the
previous quarter, our stainless steel deliveries slightly decreased in the first
quarter. Our profitability was also burdened by the tightened scrap market,
which is due to lower supply of recycled material, resulting from weaker
industrial activity and high interest rates.
From a market perspective, we have seen positive signals. Gradual recovery in
Europe has continued. The third quarter of 2023 was the lowest point in the
cycle. Our realized stainless prices reflect this development.
Due to the above-mentioned challenges, business area Europe's adjusted EBITDA
was weak and amounted to EUR 4 million. Stainless steel deliveries were 7% lower
compared to the previous quarter, but higher realized stainless steel prices
supported our profitability.
In business area Americas, our adjusted EBITDA amounted to EUR 24 million.
Stainless steel deliveries seasonally increased by 15%. However, tight scrap
supply and weak stainless steel pricing, especially in Mexico burdened the
financial result. Americas' situation remains fundamentally strong, and we
confirm the normalized annual EBITDA of USD 170 million.
Business area Ferrochrome generated a solid adjusted EBITDA of EUR 22 million.
One of the ferrochrome furnaces has been shut down since January as market
demand remained modest.
We are now in the midst of the second phase of our strategy. We have met the
targets we set for ourselves, but the overall market environment is tough. I
want to emphasize that we are determined to push forward and therefore we are
now raising our EBITDA run-rate improvement target from EUR 200 million to EUR
350 million. This is also necessary to recover from the losses of the four-week
strike.
In April, our Chief Financial Officer, Pia Aaltonen-Forsell announced her
decision to leave Outokumpu to pursue a career opportunity outside the company.
I want to thank her for the past five years - Outokumpu has truly changed during
that time and is today financially much stronger than ever before.
I am pleased that we have found an excellent successor internally. Our new Chief
Financial Officer, Marc-Simon Schaar will start in his new position on June 1,
2024. With his strong background in finance, business, and procurement, I am
confident that Outokumpu continues to create long-term value.
After 12 years at Outokumpu with four years as Chief Executive Officer following
eight years on the Board, I have decided to pursue another opportunity outside
the company. During the past four years, we have transformed the company into a
leader in sustainable stainless steel with the strongest balance sheet in the
industry. I look forward to a smooth transition to my successor.
In the first quarter, we completed our second share buyback program and the
Annual General Meeting also decided that a dividend of EUR 0.26 per share was
paid for the year 2023. Strong shareholder returns and long-term value creation
remain at the center of our strategy.

Outlook for Q2 2024
Group stainless steel deliveries in the second quarter are expected to increase
by 5-15% compared to the first quarter.
The recent political strike in Finland is expected to have approximately EUR 30
million negative financial impact in the second quarter.
The scrap market is expected to remain tight.
With current raw material prices, some raw material-related inventory and metal
derivative losses are expected to be realized in the second quarter.
Guidance for Q2 2024:
Adjusted EBITDA in the second quarter of 2024 is expected to be at a similar or
higher level compared to the first quarter.

Results

Q1 2024 compared to Q1 2023

Outokumpu's sales in the first quarter of 2024 decreased to EUR1,479million
compared to the reference period (EUR2,006million). Total stainless steel
deliveries were 12% lower as volumes decreased significantly in business area
Europe.

Stainless steel deliveries and profitability in the first quarter of 2024 were
negatively impacted by the political strike in Finland and a weaker overall
market environment. As a result of these, adjusted EBITDA decreased to
EUR38million (EUR204million).

Due to the political strike, the majority of Outokumpu's stainless steel and
ferrochrome operations in Finland as well as the Port of Tornio in Finland were
shut down for three weeks in March. The strike also impacted indirectly the
company's operations in other countries through the disruption to internal
material flows in both Europe and Americas. Outokumpu was, however, able to
partially mitigate the adverse effects and the negative impact on the company's
adjusted EBITDA in the first quarter of 2024 was approximately EUR 30 million.

In the first quarter of 2024, realized prices for stainless steel were higher in
Europe, while decreased in the Americas compared to the reference period. The
tight scrap market impacted the profitability of both stainless steel businesses
while costs remained relatively stable. The result for business area Ferrochrome
improved, mainly due to lower costs. Raw material-related inventory and metal
derivative losses amounted to EUR 4 million (losses of EUR 6 million).

EBIT turned negative in the first quarter 2024 and amounted to EUR -19 million
(EUR 135 million). ROCE for the rolling 12 months was -5.7% (18.4%), due to
lower profitability and the significant impairment booking related to the
renegotiated hot rolling contract in business area Americas at the end of 2023.

Net result decreased to EUR -23 million in the first quarter of 2024 (EUR  97
million) and earnings per share amounted to EUR -0.05 (EUR 0.22). Net financial
expenses in the first quarter of 2024 increased to EUR 11 million (EUR 8
million) and interest expenses remained relatively stable at EUR 16 million (EUR
15 million).

Q1 2024 compared to Q4 2023

Outokumpu's sales amounted to EUR1,479million in the first quarter of 2024
(Q4/2023: EUR1,513million). Total stainless steel deliveries decreased slightly
compared to the previous quarter (decrease of 1%). At the beginning of 2024,
Outokumpu had expected its stainless steel deliveries to increase in the first
quarter of 2024 compared to the fourth quarter of 2023, but the political strike
in Finland had a negative impact on the company's volume development.

Outokumpu's adjusted EBITDA decreased to EUR 38 million in the first quarter
(Q4/2023: EUR 72 million). The total negative impact of the political strikes on
adjusted EBITDA was approximately EUR 30 million.

During the first quarter, realized prices for stainless steel continued to
increase in Europe, while slightly decreased in the Americas. The scrap market
remained tight throughout the quarter. Maintenance costs were lower due to less
maintenance work, but the positive impact on profitability was offset by the
negative impacts related to the strike. Raw material-related inventory and metal
derivative losses amounted to EUR 4 million in the first quarter (Q4/2023: gains
of EUR 0 million).

EBIT amounted to EUR  -19 million in the first quarter 2024 (EUR -314 million).
The reference period was negatively impacted by the significant impairment
booking in business area Americas as well as other notable items affecting
comparability. ROCE for the rolling 12 months was -5.7% (Q4/2023: -2.1%), mainly
due to lower profitability.

Net result in the first quarter amounted to EUR -23 million (Q4/2023: EUR -242
million) and earnings per share was EUR -0.05 (Q4/2023: -0.56). Net financial
expenses amounted to EUR 11 million (Q4/2023: EUR 6 million) and interest
expenses EUR 16 million (Q4/2023: EUR 14 million).

Adjusted EBITDA by segment (EUR million)  Q1/24  Q1/23  Q4/23  2023
Europe                                    4      122    4      148
Americas                                  24     68     54     285
Ferrochrome                               22     16     23     96
Other operations and intra-group items    -11    -2     -8     -12
Total adjusted EBITDA                     38     204    72     517

Items affecting comparability (EUR million)    Q1/24  Q1/23  Q4/23  2023
Europe                                         2      -6     -46    -52
Americas                                       —      —      -7     -16
Ferrochrome                                    —      —      -3     -3
Other operations                               -3     —      -1     -31
Total items affecting comparability in EBITDA  -2     -6     -58    -102

Total EBITDA                                   37     198    15     416

A live webcast and conference call today, May 7, 2024, at 3.00 pm EEST

A live webcast and conference call to analysts, investors and representatives of
media will be arranged later on the same day, at 3.00 pm EEST at
https://outokumpu.videosync.fi/q1-2024 hosted by President and CEO Heikki
Malinen and CFO Pia Aaltonen-Forsell.

To ask questions, please participate in the conference call by registering at
https://palvelu.flik.fi/teleconference/?id=50049023. After registration you will
receive phone number and a conference ID to access the conference call. If you
wish to ask a question, please dial *5 on your telephone keypad to enter the
queue.

All result materials, a link to the webcast and later its recording will be
available at www.outokumpu.com/en/investors.

For more information:
Investors: Linda Häkkilä, Head of Investor Relations, tel. +358 400 719 669
Media: Päivi Allenius, SVP - Communications, tel. +358 40 753 7374 or Outokumpu
media desk, tel. +358 40 351 9840

Outokumpu is accelerating the green transition as the global leader in
sustainable stainless steel. Our business is based on the circular economy: our
products are made from 95% recycled materials, which we then turn into fully
recyclable stainless steel. This steel is utilized in various applications
across society, including infrastructure, mobility, and household appliances. We
are committed to 1.5°C target to mitigate climate change, and with up to 75%
lower carbon footprint than the industry average, we support our customers to
reduce their emissions. Together, we are working towards a world that lasts
forever. Outokumpu Corporation employs approximately 8,500 professionals in
close to 30 countries, with headquarters in Helsinki, Finland and shares listed
in Nasdaq Helsinki. Read more: www.outokumpu.com

Attachments:

Interim report Q1_2024 FINAL.pdf