Outokumpu Oyj - Interim report (Q1 and Q3)

Outokumpu – Solid progress continued, Group underlying EBIT clearly positive at EUR 32 million

OUTOKUMPU OYJ
INTERIM REPORT
November 3, 2016 at 12.00 pm EET


Highlights in the third quarter 2016

Outokumpu’s underlying EBIT was EUR 32 million, compared to EUR -5 million in
the second quarter. The improved earnings were mainly the result of continued
progress in the Americas and improved market sentiment in Europe. 

  -- Stainless steel deliveries were 608,000 tonnes1 (629,000 tonnes)2.
  -- Underlying EBITDA3 was EUR 110 million (EUR 51 million).
  -- Underlying EBIT4 was EUR 32 million (EUR -5 million). Underlying EBIT
     includes net adjustments of EUR 8 million in the third quarter (EUR 11
     million), including the net effect of raw material-related inventory and
     metal derivative gains/losses of EUR 6 million (EUR 15 million).
  -- EBIT was EUR 40 million (EUR 6 million).
  -- Operating cash flow was EUR 61 million (EUR 54 million).
  -- Net debt decreased to EUR 1,396 million (EUR 1,485 million).
  -- Gearing was 65.3% (69.1%).
  -- Return on capital employed (ROCE) was 9.3% (6.2%).


Highlights during the first nine months of 2016

  -- Stainless steel deliveries were 1,848,000 tonnes (I-III/15: 1,807,000
     tonnes).
  -- Underlying EBITDA was EUR 200 million (I-III/15: EUR 146 million).
  -- Underlying EBIT was EUR 7 million (I-III/15: EUR -90 million)5.
  -- EBIT was EUR 34 million (I-III/15: EUR -113 million)5.
  -- Operating cash flow was EUR 190 million (I-III/15: EUR -36 million).


1 Metric ton = 1,000 kg
2 Figures in parentheses refer to the previous quarter, unless otherwise stated.
3 EBITDA excluding items classified as adjustments. Adjustments are material
income and expense items such as restructuring costs, impairments, and gains or
losses on sale of assets or businesses, as well as raw material related
inventory gains/losses and metal derivative gains/losses. 
4 EBIT excluding items classified as adjustments.
5 The comparability between the periods is impacted by the change in estimated
useful lives of property, plant and equipment in the fourth quarter of 2015. 


Group key figures                                                               
                                  III/16   II/16  III/15  I-III/  I-III/    2015
                                                              16      15        
--------------------------------------------------------------------------------
Sales                        EUR   1,419   1,379   1,487   4,183   4,949   6,384
                         million                                                
EBITDA                       EUR     119      62       3     227     123     531
                         million                                                
Underlying EBITDA 1)         EUR     110      51      13     200     146     196
                         million                                                
EBIT                         EUR      40       6     -77      34    -113     228
                         million                                                
Underlying EBIT 2)           EUR      32      -5     -67       7     -90    -101
                         million                                                
Result before taxes          EUR      13     -22    -113     -56    -224     127
                         million                                                
Net result for the           EUR      13     -20    -115     -48    -222      86
 period                  million                                                
Earnings per share           EUR    0.03   -0.05   -0.27   -0.12   -0.51    0.23
Return on capital              %     9.3     6.2    -3.4     9.3    -3.4     5.3
 employed                                                                       
Net cash generated from      EUR      61      54      67     190     -36     -34
 operating activities    million                                                
Net debt at the end of       EUR   1,396   1,485   2,012   1,396   2,012   1,610
 period                  million                                                
Debt-to-equity ratio at        %    65.3    69.1    96.5    65.3    96.5    69.1
 the end of period                                                              
Capital expenditure          EUR      43      28      29     103      89     154
                         million                                                
Stainless steel            1,000     608     629     570   1,848   1,807   2,381
 deliveries 3)            tonnes                                                
Personnel at the end of           10,785  10,645  11,560  10,785  11,560  11,002
 period 4)                                                                      
--------------------------------------------------------------------------------

1) EBITDA excluding items classified as adjustments, unaudited.
2) EBIT excluding items classified as adjustments, unaudited.
3) Excludes ferrochrome deliveries.
4) On June 30, 2016 Group employed in addition some 800 summer trainees.


Business and financial outlook for the fourth quarter of 2016

Underlying stainless steel demand is expected to remain healthy in both Europe
and the US in the fourth quarter. However, a typical softening of distributor
demand is expected towards the end of the year, particularly in the US, due to
the holiday season. 

With the seasonal slowdown in the US, fourth-quarter stainless steel deliveries
of business area Americas are expected to be significantly lower compared to
the third quarter. In Europe, stainless steel deliveries are expected to remain
flat. 

In the ferrochrome business, October production was negatively impacted by
technical issues during the post-maintenance ramp-up. The facilities are now
back to normal operation but ferrochrome deliveries in the fourth quarter are
expected to be at a lower level than in the third quarter, offset by higher
ferrochrome prices. Consequently, the profitability contribution of the
ferrochrome operations is expected to remain sequentially flat
quarter-on-quarter. 

Outokumpu expects the base price improvements to have a slight positive impact
on fourth-quarter profitability. However, with the delay in ferrochrome
production ramp-up, lower deliveries in the Americas, and annual maintenance
work at the Tornio mill in Europe, Outokumpu expects its fourth-quarter
underlying EBIT to remain at a similar level to the third quarter.
Consequently, underlying EBIT for the full year 2016 is expected to be clearly
positive. 

Outokumpu has closed its defined benefit pension scheme in the UK to future
pension accruals and has made changes to the terms of retirement. As a result,
Outokumpu anticipates a reduction in its net pension obligations, and expects
to recognize gain of approximately EUR 25 million in its fourth quarter
results. This income will be adjusted from underlying EBIT. 

CEO Roeland Baan:

“We continued significant progress in the third quarter, reaching a clearly
positive underlying EBIT. The Americas broke yet another record in deliveries
and continued to improve its financial performance, reducing its losses to
seven million euros. Europe continued its steady progress, and recorded its
strongest third quarter ever. 

The changes we have made across our company are yielding results. In the
Americas, we continued to make great progress. With our improved efficiency and
delivery reliability, we have been able to capitalize on the robust demand and
positive price development. 

In Europe, we mitigated the typical third quarter dip by changing our
maintenance patterns. By phasing the maintenance in our Nordic plants between
the third and fourth quarters, we were able to significantly improve our
profitability during the traditionally weaker third quarter and align Tornio
maintenance with the typical market slowdown towards the end of the year. 

We continued to make good progress on our debt reduction. A net working capital
release of EUR 149 million from the beginning of the year keeps us in line with
the target of EUR 200 million release by the end of the year. The improved
profitability coupled with the progress in net working capital brought our net
debt down to below EUR 1.4 billion. 

During the first nine months, we achieved an underlying EBIT of EUR 7 million.
The solid performance will continue in the fourth quarter. Despite the seasonal
slowdown towards year-end and the temporary setback in our ferrochrome
production, we are looking at another quarter of positive underlying EBIT.
Thus, for the full year 2016, we are expecting a clearly positive underlying
EBIT, which moves us firmly towards our target of EUR 500 million underlying
EBIT by 2020.” 

Conference call today on November 3, 2016 at 3.00 pm EET

A conference call will be held on Thursday, November 3, 2016  at 3.00 pm EET
(9.00 am US EDT, 1.00 pm UK time, 2.00 pm CET). The results will be introduced
by Outokumpu’s CEO Roeland Baan and CFO Christoph de la Camp. To participate
the conference call, please dial in 5-10 minutes before the beginning of the
event: 

UK/Europe: +44 20 3427 1931
US & Canada: +1 646 254 3375
Confirmation code: 3362266

The event can be viewed live online at
http://edge.media-server.com/m/p/e2gckmtv. The stock exchange release and the
presentation material will be available before the event at
www.outokumpu.com/en/investors. 

A recording of the event will be available at
http://www.outokumpu.com/en/investors/IR-events/webcasts/Pages/default.aspx as
of November 3, 2016 at around 6.00 pm EET. 

For more information:

Investors: Tommi Järvenpää, tel. +358 9 421 3466, mobile +358 40 576 0288

Media: Saara Tahvanainen, tel. +358 40 589 0223

Outokumpu Group



Outokumpu is a global leader in stainless steel. We create advanced materials
that are efficient, long lasting and recyclable – thus building a world that
lasts forever. Stainless steel, invented a century ago, is an ideal material to
create lasting solutions in demanding applications from cutlery to bridges,
energy and medical equipment: it is 100% recyclable, corrosion-resistant,
maintenance-free, durable and hygienic. Outokumpu employs 11,000 professionals
in more than 30 countries, with headquarters in Helsinki, Finland and shares
listed in Nasdaq Helsinki. 
www.outokumpu.com      outokumpu.com/stainless-news     
choosestainless.outokumpu.com

Attachments:

Outokumpu_Interim_Statement_January-September_2016.pdf