2013-11-01 11:00:00 CET
2013-11-01 11:00:03 CET
SÄÄNNELTY TIETO
Outokumpu Oyj - Interim report (Q1 and Q3)
Outokumpu - Financial results still unsatisfactory – but positive operating cash flow of EUR 124 million
OUTOKUMPU OYJ
INTERIM REPORT
November 1, 2013 at 12.00 pm EET
Developments in the third quarter 2013
In line with management expectations, Outokumpu posted higher underlying EBIT
losses of EUR -126 million versus EUR -80 million in the second quarter 2013.
On a positive note, operating cash flow was positive at EUR 124 million driven
by working capital release. Good progress in synergies, cost saving programs
and the ongoing ramp-ups of the Ferrochrome and Calvert operations were more
than offset by weak market and declining prices.
-- During the third quarter of 2013, global stainless steel demand decreased
by 6.2% versus the second quarter. While all the markets were down, EMEA
was the hardest hit with a decline of 19.1%. European stainless steel base
price was down by 6.8% and average nickel price by 7.1%. During the first
nine months stainless steel demand in the EMEA region declined to 5.2
million tonnes (I-III 2012: 5.3 million tonnes).
-- During the third quarter of 2013, Outokumpu's stainless steel external
deliveries declined by 1.4% and were 647,000 tonnes (II 2013: 656,000
tonnes). In the first nine months of 2013, the Group had stainless steel
deliveries of 2,006,000 tonnes, down by 6.3% compared to same period a year
earlier (I-III 2012: 2,141,000 tonnes).
-- The underlying EBITDA for the third quarter was EUR -35 million compared to
EUR 12 million in the second quarter and the underlying EBIT was EUR -126
million (II 2013: EUR -80 million). Higher losses were mainly driven by
lower base prices and negative mix impact from the fact that the relative
share of APAC and Americas in the deliveries increased at the expense of
higher margin business of EMEA and HPSA.
-- Including non-recurring items of EUR -1 million (II 2013: EUR -46 million)
and raw material-related inventory effects of EUR -15 million (II 2013: EUR
-38 million), the EBIT was EUR -142 million for the third quarter 2013 (II
2013: EUR -164 million). For the first nine months of 2013, non-recurring
items were EUR -49 million (I-III 2012: EUR -168 million) and raw
material-related inventory effects were EUR -57 million (I-III 2012: EUR
-30 million) with an overall EBIT of EUR -388 million (I-III 2012: EUR -385
million).
-- Operating cash flow was positive at EUR 124 million (II 2013: EUR -160
million) mainly driven by working capital release. For the first nine
months of 2013, operating cash flow was EUR -81 million and underlying
EBITDA EUR -6 million.
-- Net interest-bearing debt decreased to EUR 2,981 million (June 30, 2013:
EUR 3,041 million), and gearing was 131.8% (June 30, 2013: 120.6%).
Update on Terni
The Terni divestiture continues with an extended time frame that the European
Commission granted earlier in the year. Discussions continue with a number of
interested parties. Simultaneously with the Terni sale process, Outokumpu has
held discussions with the European Commission about the remedy package but this
has not resulted in any change to the overall situation with the Terni
divestiture. Outokumpu is working intensively to complete the divestment and
targets to sign a transaction during the remainder of the year.
Update on strategic review of VDM, the high performance alloys business of
Outokumpu
The strategic review of VDM operations continues as planned and is progressing
well. As part of this review process Outokumpu is assessing divestment options,
and thereby engaged in discussions with several potential buyer candidates.
Outokumpu expects to finalize the strategic review by the end of the year.
Business and financial outlook for the fourth quarter of 2013
Outokumpu expects no major improvement in the market demand for the rest of the
year and overall visibility continues to be weak. The company estimates
sequentially lower delivery volumes, some improvement in base prices, and
similar product mix as in the third quarter. The progress in the cost
efficiency initiatives, synergies, and cash release programs is expected to be
steady.
For the fourth quarter financial performance, Outokumpu estimates the
underlying EBIT to be on approximately the same level or slightly worse than in
the third quarter. At current metal prices, marginal raw material-related
timing losses, if any, are expected. Outokumpu's operating result in the fourth
quarter could be impacted by non-recurring items associated with the Group's
ongoing restructuring programs.
Note: This report contains comparisons to both Outokumpu stand alone as well as
comparable figures for the combined entity based on management estimates.
Tables that are marked as ‘comparable' show the combined entity comparisons. In
the text itself only comparable numbers are stated and analyzed. Terni is
reported as a discontinued operation.
Group key figures, comparable
III/13 II/13 III/12 2012
--------------------------------------------------------------------------------
Sales EUR 1 923 2 064 2 192 9 458
million
EBITDA EUR -52 -72 -40 -176
million
Adjustments to EBITDA 1) EUR 17 84 41 203
million
Underlying EBITDA EUR -35 12 0 27
million
EBIT EUR -142 -164 -137 -692
million
Adjustments to EBIT 2) EUR 17 84 44 344
million
Underlying EBIT EUR -126 -80 -93 -348
million
Result before taxes EUR -214 -228 n/a n/a
million
Net result for the period from EUR -203 -225 n/a n/a
continuing operations million
excluding non-recurring items EUR -202 -179 n/a n/a
million
Net result for the period EUR -239 -250 n/a n/a
million
Earnings per share EUR -0,11 -0,12 n/a n/a
excluding non-recurring items EUR -0,11 -0,10 n/a n/a
Return on capital employed % -10,5 -11,7 n/a n/a
excluding non-recurring items % -10,5 -8,4 n/a n/a
Net cash generated from operating EUR 124 -160 n/a n/a
activities, continuing oper. million
Net interest-bearing debt at the end EUR 2 981 3 041 n/a n/a
of period million
Debt-to-equity ratio at the end of % 131,8 120,6 n/a n/a
period
Capital expenditure, continuing EUR 62 42 217 821
operations 3) million
Stainless steel external deliveries, 1,000 647 656 663 2 786
continuing oper. 4) tonnes
Stainless steel base price 5) EUR/tonn 1 043 1 137 1 155 1 172
e
Personnel at the end of period,
continuing operations,
excl. summer trainees 6) 15 321 15 540 16 808 16 649
--------------------------------------------------------------------------------
1) Non-recurring items, other than impairments; and inventory gains/losses,
unaudited.
2) Non-recurring items and inventory gains/losses, unaudited.
3) Jan 1-Dec 31, 2012 includes acquisition-related finance leases and asset
purchases of EUR 79 million, but excludes Inoxum acquisition of EUR 2,720
million.
4) Excludes ferrochrome deliveries, includes high performance alloy deliveries.
5) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
6) On June 30, 2013 Group employed in addition some 700 summer trainees.
Raw material-related inventory gains or losses: The realized timing gain or
loss per tonne of stainless steel is estimated based on the difference between
the purchase price and invoice price of each metal in EUR per tonne times the
average metal content in stainless steel. The unrealized timing impact consists
of the change in net realizable value ─ NRV during each quarter. If there is a
significant negative change in metal prices during the quarter, inventories are
written down to NRV at the end of the period to reflect lower expected
transaction prices for stainless steel in the future. As this timing impact is
expected to be realized in the cash flow of Outokumpu only after the raw
material has been sold, it is referred to as being unrealized at the time of
the booking.
CEO Mika Seitovirta:
“The stainless steel market continued to be weak during the third quarter.
Global demand for stainless steel declined and the market in Europe was
particularly depressed, driven both by continued economic weakness and the slow
summer season. Our financial results remained unsatisfactory but were in line
with our expectations. A clear positive was that our operating cash flow was
positive at EUR 124 million driven by our systematic efforts to release working
capital throughout the company.
We continued to deliver post-merger synergies and other savings ahead of plans
to support our financial performance. On the operational side, the ramp-up of
our ferrochrome operations in Finland is progressing well and it continues to
play a key role in our competitiveness going forward. The investment in Calvert
is also gradually coming on stream and will strengthen our position in the
important US market. In Asia we are leveraging our local presence, and in the
quarter this was evidenced by improved order intake and higher delivery
volumes.
We at Outokumpu are committed to turn the company back to sustainable
profitability and to strengthen our financial position. Since we do not expect
any material improvement on the demand side and the global overcapacity in
stainless steel persists it is essential that we continue to focus on our
customers while at the same time implementing the ongoing cost savings and
working capital efficiency programs. On top of that we are accelerating our
restructuring actions in Europe with our new industrial plan. Our current
restructuring plans are necessary to return Outokumpu to profitability and will
result in total cost savings of EUR 380 million in 2015. The negotiations on
the sale of the Terni remedy assets are ongoing with several parties and we
plan to sign an agreement by end of the year. We are also finalizing the
strategic review of VDM. In addition, we have multiple actions ongoing to
strengthen our balance sheet.”
News conference, conference call and live webcast today at 2.00 pm EET
A combined news conference, conference call and live webcast concerning the
third-quarter 2013 financial results will be held on Friday, November 1, 2013
at 2.00 pm EET (8.00 am US EST, 12.00 pm UK time, 1.00 pm CET) at hotel Kämp,
in the Mirror Room (2nd floor), Kluuvikatu 2, 00100 Helsinki, Finland.
To participate via a conference call, please dial in 5-10 minutes before the
beginning of the event:
UK/Europe: +44 203 364 5374
US & Canada: +1 855 753 2230
Participant code: Outokumpu
The news conference can be viewed live via Internet. At the end of this
release, please find a direct link to the webcast.
The stock exchange release and the presentation material will be available
before the news conference at www.outokumpu.com/Investors.
An on-demand webcast of the news conference will be available as of November 1,
2013 at around 5.00 pm EET at
http://www.outokumpu.com/en/investors/webcasts/Pages/default.aspx.
Link to the webcast
For more information:
Investors: Johanna Henttonen, tel. +358 9 421 3804, mobile +358 40 530 0778
Media: Saara Tahvanainen, tel. +358 40 589 0223
Outokumpu Group
Outokumpu is the global leader in stainless steel and high performance alloys.
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
more than 15 000 professionals in more than 40 countries, with headquarters in
Espoo, Finland and shares listed in the NASDAQ OMX Helsinki. www.outokumpu.com
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