OUTOKUMPU OYJ HALF YEAR FINANCIAL REPORT July 26, 2016 at 12.00 pm EET
Highlights in the second quarter 2016
Outokumpu’s underlying EBIT was EUR -5 million, compared to EUR -20 million in the first quarter. The improved earnings were mainly the result of higher delivery volumes and decreased production costs in the Americas. Profitability in Europe was negatively impacted by lower ferrochrome prices.
- Stainless steel deliveries were 629,000 tonnes 1 (610,000 tonnes) 2 .
- Underlying EBITDA 3 was EUR 51 million (EUR 38 million).
- Underlying EBIT 4 was EUR -5 million (EUR -20 million). Underlying EBIT includes net adjustments of EUR 11 million in the second quarter (EUR 8 million), including the net effect of raw material-related inventory and metal derivative gains/losses of EUR 15 million (EUR -9 million).
- EBIT was EUR 6 million (EUR -12 million).
- Operating cash flow was EUR 54 million (EUR 74 million).
- Net debt decreased to EUR 1,485 million (EUR 1,551 million).
- Gearing was 69.1% (69.6%).
- Return on capital employed (ROCE) was 6.2% (5.3%).
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.
Figures in parentheses refer to the previous quarter, unless otherwise stated.
| Group key figures | |||||
| II/16 | I/16 | II/15 | 2015 | ||
| Sales | EUR million | 1,379 | 1,386 | 1,694 | 6,384 |
| EBITDA | EUR million | 62 | 46 | 55 | 531 |
| Underlying EBITDA 1) | EUR million | 51 | 38 | 57 | 196 |
| EBIT | EUR million | 6 | -12 | -26 | 228 |
| Underlying EBIT 2) | EUR million | -5 | -20 | -25 | -101 |
| Result before taxes | EUR million | -22 | -47 | -65 | 127 |
| Net result for the period | EUR million | -20 | -41 | -62 | 86 |
| Earnings per share | EUR | -0.05 | -0.10 | -0.14 | 0.23 |
| Return on capital employed | % | 6.2 | 5.3 | -1.8 | 5.3 |
| Net cash generated from operating activities | EUR million | 54 | 74 | -41 | -34 |
| Net debt at the end of period | EUR million | 1,485 | 1,551 | 2,116 | 1,610 |
| Debt-to-equity ratio at the end of period | % | 69.1 | 69.6 | 96.4 | 69.1 |
| Capital expenditure | EUR million | 28 | 32 | 35 | 154 |
| Stainless steel deliveries 3) | 1,000 tonnes | 629 | 610 | 616 | 2,381 |
| Personnel at the end of period 4) | 10,645 | 10,920 | 11,665 | 11,002 |
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 (June 30, 2015: some 800).
Business and financial outlook for the third quarter of 2016
Third quarter market outlook is impacted by typical seasonal decline in demand, particularly in Europe. In Europe, stock levels among distributors are currently at historical averages and the underlying demand in key sectors outside of Oil & Gas is expected to continue to be relatively healthy. In Americas, while a drop in demand is expected in the third quarter, there are also a number of positive signs: stock levels among distributors are below historical average levels, the announced price increases are gaining traction, and the preliminary antidumping ruling is expected to curb unfair competition.
Outokumpu expects sequentially flat delivery volumes for the third quarter. Outokumpu’s ferrochrome operations will be impacted by major maintenance work during the third quarter, partly offsetting the positive impact of higher ferrochrome price. Outokumpu expects the pace of the efficiency improvements to continue and the Group’s underlying EBIT to turn positive in the third quarter.
CEO Roeland Baan:
“Outokumpu recorded an underlying EBIT loss of EUR 5 million for the second quarter. While our financial results are still not where they should be, we are clearly gaining momentum: during the quarter, we achieved record deliveries in Americas, applied vigorous cost control, released net working capital, generated positive cash flow, and further reduced our net debt.
At the start of the quarter, we announced the new vision for Outokumpu, including measures to drive competitiveness and further improve the financial performance of the company. We took decisive steps and started the implementation of these measures during the quarter by streamlining our organizational structure and initiating related job reductions.
One of the main levers to achieve our vision is ensuring continuous productivity gains through manufacturing excellence. This focus on production costs and efficiency is already reflected in our second quarter results. In the business area Americas, we achieved a 14% reduction in variable costs during the quarter, and record-high deliveries of 177,000 tonnes. The improved efficiency has put us in a good position to capture the positive market momentum in the Americas, and helped us reduce the business area’s underlying EBIT loss to EUR 24 million from the first-quarter loss of EUR 43 million. This is good progress, and we expect the trend to continue, with significant further improvement potential.
Parallel to these efforts, we continued our relentless drive to improve efficiency and reduce our cost base also in Europe. In the second quarter, we achieved further EUR 15 million cost savings in the business area Europe. However, the financial performance was burdened by the weaker ferrochrome price, slightly lower stainless steel deliveries and increase in raw material prices. While these negative impacts were partly offset by the reduced costs and improved productivity, the business area Europe’s profitability declined from EUR 42 million to EUR 29 million.
With the positive development in the Americas, our total deliveries for the Group increased to 629,000 tonnes. Even with the higher deliveries, we continued to reduce our net working capital across the Group, achieving EUR 117 million net working capital reduction for the first half of the year and a positive operating cash flow of EUR 54 million for the second quarter. Debt reduction remains a key priority for us: at the end of the second quarter our net debt was EUR 1,485 million, down from EUR 1,551 million at the end of the first quarter, and gearing at 69.1%.
We have improved our financial performance throughout this year, and expect the pace of efficiency improvements to continue. Thus, for the third quarter, we expect a positive underlying EBIT for the Group, driven mainly by further improvement in Americas. In Europe, the typical seasonal effects will have a negative impact. Additionally, a planned major maintenance on our largest ferrochrome furnace will reduce our ferrochrome output by approximately 30% in the third quarter.
While we still have a long way to go to realize our full potential, I am encouraged by the momentum and convinced of our ability to reach our vision and target of EUR 500 million EBIT in 2020.”
Conference call today at 3.00 pm EET
A conference call will be held on Tuesday, July 26, 2016 at 3.00 pm EET (8.00 am US EST, 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 1936 US & Canada: +1 646 254 3370 Confirmation code: 9174154
The event can be viewed live online at http://edge.media-server.com/m/p/fb7xm323 . 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 www.outokumpu.com/en/investors/IR-events/webcasts as of July 26, 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
