2014-11-05 08:00:00 CET
2014-11-05 08:00:05 CET
REGULATED INFORMATION
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Outokumpu Oyj - Interim report (Q1 and Q3)
Outokumpu - Positive EBIT excluding non-recurring items and operating cash flow in seasonally slow market
OUTOKUMPU OYJ
INTERIM REPORT
November 5, 2014 at 9.00 am EET
Highlights in the third quarter 2014
For the first time since the merger with Inoxum, Outokumpu posted positive EBIT
excluding non-recurring items of EUR 3 million. Continued cost savings and
higher prices contributed positively, while at the same time performance was
negatively impacted by lower deliveries in a seasonally slow market. Strong
focus on net working capital resulted in better than estimated operating cash
flow, which was positive EUR 23 million for the quarter.
-- Stainless steel deliveries decreased by 4.6% to 644,000 tonnes1) (II 2014:
675,000 tonnes).
-- Underlying EBITDA2) was EUR 48 million (II 2014: EUR 75 million). The
decline in profits was driven by lower deliveries, while at the same time
an average base price increase of 10-20 EUR/tonne was achieved.
-- EBIT was EUR -9 million (II 2014: EUR -10 million). EBIT includes
non-recurring items of EUR -12 million related to restructuring programs,
as well as a higher than expected positive net effect of raw
material-related inventory and hedging gains/losses of EUR 31 million (II
2014: EUR -7 million and EUR 3 million). Therefore underlying EBIT was EUR
-28 million (II 2014: EUR -6 million).
-- Operating cash flow was EUR 23 million (II 2014: EUR -257 million) due to a
successful reduction in working capital.
-- Net interest-bearing debt remained unchanged at EUR 2,068 million andgearing was slightly up to 96.4% (June 30, 2014: 92.5%).
-- In September, following good progress in its efficiency programs, Outokumpu
announced further savings and efficiency potential and raised its ambition
level in targeted total savings by the end of 2017 to EUR 550 million and
cash release in net working capital to EUR 400 million by the end of 2015
compared to 2012.
1) metric ton = 1,000 kg
2) Due to the revised metal hedging policy from the beginning of 2014 Outokumpu
has adjusted the definition for underlying EBIT and underlying EBITDA: In
addition to non-recurring items and raw material-related inventory
gains/losses, Outokumpu now also excludes metal derivative gains/losses.
Group key figures
III/14 II/14 III/13 2013
--------------------------------------------------------------------------------
Sales EUR 1,799 1,753 1,609 6,745
million
EBITDA EUR 67 70 -50 -165
million
EBITDA excl. non-recurring items EUR 79 78 -50 -87
million
Underlying EBITDA 1) EUR 48 75 -34 -32
million
EBIT EUR -9 -10 -134 -510
million
EBIT excl. non-recurring items EUR 3 -3 -133 -432
million
Underlying EBIT 2) EUR -28 -6 -118 -377 million
Result before taxes EUR -73 -48 -207 -822
million
Net result for the period from EUR -77 -49 -197 -832
continuing operations million
excluding non-recurring items EUR -65 -42 -196 -706
million
Net result for the period EUR -77 -58 -238 -1,003
million
Earnings per share 3) EUR -0.18 -0.14 -1.79 -7.52
excluding non-recurring items 3) EUR -0.15 -0.12 -1.78 -6.56
Return on capital employed % -0.8 -1.0 -9.8 -10.3
excluding non-recurring items % 0.3 -0.3 -9.8 -8.7
Net cash generated from operating EUR 23 -257 43 34
activities, continuing oper. million
Net interest-bearing debt at the end of EUR 2,068 2,068 3,861 3,556
period million
Debt-to-equity ratio at the end of % 96.4 92.5 170.7 188.0
period
Capital expenditure, continuing EUR 25 33 40 183
operations million
Stainless steel deliveries, continuing 1,000 644 675 635 2,585
operations 4) tonnes
Stainless steel base price 5) EUR/ton 1,110 1,093 1,043 1,103
ne
Personnel at the end of period, 12,385 12,365 12,798 12,561
continuing oper., excl. summer
trainees 6)
--------------------------------------------------------------------------------
1) EBITDA excluding non-recurring items, other than impairments; raw
material-related inventory gains/losses and as of I/14 metal derivative
gains/losses, unaudited.
2) EBIT excluding non-recurring items, raw material-related inventory
gains/losses and as of I/14 metal derivative gains/losses, unaudited.
3) Calculated based on the rights-issue-adjusted weighted average number of
shares, comparative figures adjusted accordingly. Comparative figures adjusted
to reflect the reverse split on June 20, 2014.
4) Excludes ferrochrome deliveries.
5) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
6) On June 30, 2014 Group employed in addition some 800 summer trainees.
Business and financial outlook for the fourth quarter of 2014
Outokumpu estimates that the overall stainless steel operating environment will
be lackluster in the fourth quarter. This is driven by the recent decline in
the nickel price, which is negatively impacting demand in the distributor
sector as well as the general economic slowdown especially in Europe and China.
The company estimates lower delivery volumes and relatively stable stainless
steel base prices in the fourth quarter. The fourth-quarter underlying EBIT is
expected to be on a similar level as in the third quarter. Despite weaker
market conditions and lower deliveries, Outokumpu's financial performance is
supported by continued progress in the company's turnaround including the cost
efficiency initiatives and synergies. With current price, the net impact of raw
material-related inventory and metal hedging gains/losses on profitability is
expected to be marginally negative, if any.
Outokumpu's operating result may be impacted by non-recurring items associated
with the ongoing restructuring programs. This outlook reflects the current
scope of operations.
CEO Mika Seitovirta:
“As a result of relentless execution of our strategy for the first time since
the merger with Inoxum Outokumpu delivered a positive EBIT excluding
non-recurring items. This is a great milestone, especially when taking into
account that during the third quarter the market dynamics in stainless steel
shifted and the relatively healthy operating environment we saw in the first
half of the year deteriorated. Imports into Europe averaged 33% in the third
quarter, and even in the US imports exceeded 20%. Combined with the seasonally
slow holiday period in Europe and maintenance breaks at our mills, our delivery
volumes came down from the second quarter, as expected.
Despite the lower volumes and market developments, our EBIT excluding
non-recurring items was EUR 3 million positive. The underlying EBIT, taking
into account net hedging and timing impacts, came down from EUR -6 million to
EUR -28 million in line with our expectations. With focused net working capital
management efforts we turned the operating cash flow back to a positive track.
During the first nine months of 2014 we have improved our underlying EBIT by
EUR 209 million compared to the same period one year ago. This is the result of
our determined execution of our strategy: the restructuring in Europe, the
progress in our ramp-ups particularly in the Calvert mill and the traction from
our savings programs are all making a concrete, positive difference. The
progress has given us confidence to further accelerate our turnaround and set
the bar higher. Thus, as announced in connection with our Capital Markets Day
in September, we aim to complete the synergy savings already in 2015, raise the
total cost savings target and expand our net working capital efficiency
program.
Given the current cautiousness and volatility in the market, the rest of the
year in stainless steel is looking weaker than could have been anticipated at
the start of 2014. We will continue to deliver against our plans during the
rest of the year, and even with the lower volume outlook we estimate a similar
level of underlying EBIT as in the third quarter. As we are actively selling
for first-quarter deliveries we see positive signals for the start of 2015.
Together with continued progress of our turnaround, we are looking
optimistically towards next year.”
Calvert ramp-up
The repair work in the 54 inch cold rolling mill that was taken down for
technical reasons in June is still ongoing and the line is expected to be back
in operation in December. In August following the breakdown of the 54 inch cold
rolling mill, Outokumpu took maintenance and repair measures in the two other
cold rolling lines. The maintenance work was successfully concluded during the
third quarter and both lines are back in operation. Outokumpu estimates the
outages to have about 35,000 tonnes negative impact on deliveries during the
second half of 2014, and the financial impact to be partly covered by
insurance. While the lower volumes and production efficiency are additional
challenges, Outokumpu confirms the Coil Americas' EBITDA break-even target for
the full year 2014. The delivery target of 530,000 tonnes for 2014 remains
intact.
News conference, conference call and live webcast today at 1.00 pm EET
A combined news conference, conference call and live webcast concerning
publishing of the third-quarter 2014 financial results will be held on
Wednesday, November 5, 2014 at 1.00 pm EET (6.00 am US EST, 11.00 am UK time,
12.00 pm CET) at the 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
http://www.outokumpu.com/en/investors/webcasts/. An on-demand webcast will be
available at the same site as of November 5, 2014 at around 4.00 pm EET.
The stock exchange release and the presentation material will be available
before the news conference at www.outokumpu.com/Investors.
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 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 more than 12 000
professionals in more than 30 countries, with headquarters in Espoo, Finland
and shares listed on the NASDAQ OMX Helsinki. www.outokumpu.com
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