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 million 1 923 2 064 2 192 9 458
EBITDA EUR million -52 -72 -40 -176
Adjustments to EBITDA 1) EUR million 17 84 41 203
Underlying EBITDA EUR million -35 12 0 27
EBIT EUR million -142 -164 -137 -692
Adjustments to EBIT 2) EUR million 17 84 44 344
Underlying EBIT EUR million -126 -80 -93 -348
Result before taxes EUR million -214 -228 n/a n/a
Net result for the period from continuing operations EUR million -203 -225 n/a n/a
excluding non-recurring items EUR million -202 -179 n/a n/a
Net result for the period EUR million -239 -250 n/a n/a
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 activities, continuing oper. EUR million 124 -160 n/a n/a
Net interest-bearing debt at the end of period EUR million 2 981 3 041 n/a n/a
Debt-to-equity ratio at the end of period % 131,8 120,6 n/a n/a
Capital expenditure, continuing operations 3) EUR million 62 42 217 821
Stainless steel external deliveries, continuing oper. 4) 1,000 tonnes 647 656 663 2 786
Stainless steel base price 5) EUR/tonne 1 043 1 137 1 155 1 172
Personnel at the end of period, continuing operations,
excl. summer trainees 6) 15 321 15 540 16 808 16 649

© Publicnow - 2013
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Outokumpu Oyj is one of the world's leading manufacturers of stainless steels. Net sales break down by activity as follows: - sales of generic steel products (95.3%): rolled products, plates, flat steels, etc. The group also develops ferrochrome production activity. Net sales break down by geographical area between Europe (71.6%) and America (28.4%); - ferrochrome production (3%); - other (1.7%): primarily holdings in industrial groups. Net sales are distributed geographically as follows: Finland (3.5%), Europe (61.2%), North America (28.7%), Asia/Pacific (5.3%) and other (1.3%).
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  5. Outokumpu Oyj : Outokumpu - Financial results still unsatisfactory – but positive operating cash flow of EUR 124 million
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