Outokumpu's Annual Accounts Bulletin 2012: Positive operating cash flow but negative operating results in a weak market environment

OUTOKUMPU OYJ
STOCK EXCHANGE RELEASE
February 14, 2013 at 9.00 am EET

Outokumpu has published its Annual Accounts Bulletin 2012. Both Annual Accounts and Q4 income statement comprise stand-alone Outokumpu. Balance sheet items, headcount and share information take into account Inoxum values and other related changes as the transaction was closed at the end of December 2012.

Highlights of the fourth quarter 2012

The continued challenging market environment led to a negative underlying operational result of EUR -76 million in the fourth quarter 2012. 

  • After the typically weak summer season, Outokumpu's external stainless steel deliveries were up and reached 337,000 tonnes (III/2012: 311,000 tonnes).
  • Even with higher deliveries, the fourth quarter result was below that of the third quarter due to continued weakness in prices, product mix and slightly increased costs. The underlying operational result was EUR
    -76 million (III/2012: EUR -56 million).
  • Including non-recurring costs of EUR 139 million (III/2012 EUR -14 million) and raw material related inventory losses of EUR 5 million (III/2012: EUR -18 million), the operating result was EUR -220 million (III/2012: EUR -89 million).
  • Operating cash flow remained positive and amounted to EUR 45 million (III/2012: EUR 83 million)

Highlights of 2012

The underlying operational result for 2012 remained weak at EUR -168 million. Highlight of the year and the starting point for the company's turnaround was the closing of the Inoxum transaction. 

  • Stainless steel deliveries for the full year increased to 1,428,000 tonnes (FY 2011: 1,391,000 tonnes).
  • The year was marked by a weak market environment, especially during the second half, leading to an underlying operational loss of EUR 168 million (FY 2011: EUR -61 million). Including non-recurring items of EUR -200 million (FY 2011: EUR -146 million) and raw material-related inventory losses of EUR 17 million (FY 2011: EUR -43 million) the operating loss was EUR 385 million (FY 2011: EUR -251 million).
  • The primary reasons for the weak performance were declining stainless steel base prices, a weaker product mix and the decline in nickel prices. Contributing to the loss were also the costs related to finalization of the expansion of ferrochrome production and the impact this had on production.
  • Operating cash flow for the full year remained strong at EUR 266 million (FY 2011: EUR 338 million).
  • Following the Inoxum transaction, net interest-bearing debt increased to EUR 2,620 million (December 31, 2011: EUR 1,720 million), leading to a gearing of 88.7% (December 31, 2011: 83.9%).
  • The highlight of 2012 was closing of the Inoxum acquisition. This transaction is the starting point for the company's turnaround - synergy savings and mill closures will lead to higher capacity utilization and market leadership.
  • The Board is proposing that no dividend be paid for 2012 (2011: no dividend). 

New efficiency measures

The company starts new efficiency measures in addition to the implementation of the expected EUR 200 million synergy savings: new programs established with the target of EUR 150 annual cost reductions and a EUR 300 million reduction of net working capital. Both programs are expected to be fully implemented by the end of 2014, and show first positive effects already in 2013.

Group key figures 2012

The following table shows Outokumpu stand-alone income and combined balance sheet figures: 

Group key figures
IV/12 III/12 IV/11 2012 2011
Restated 1) Restated 1) Restated 1)
Sales EUR million 1 004 974 1 125 4 538 5 009
EBITDA EUR million -67 -32 -10 -50 89
Adjusted EBITDA 2) EUR million -9 1 23 71 174
Operating result EUR million -220 -89 -69 -385 -251
excluding non-recurring items EUR million -81 -74 -59 -186 -104
underlying operational result 3) EUR million -76 -56 -35 -168 -61
Result before taxes EUR million -268 -132 -131 -523 -244
excluding non-recurring items EUR million -129 -117 -109 -324 -314
Net result for the period EUR million -309 -116 -116 -535 -180
excluding non-recurring items EUR million -170 -101 -93 -336 -242
Earnings per share 4) EUR -0,21 -0,08 -0,40 -0,46 -0,62
excluding non-recurring items 4) EUR -0,11 -0,07 -0,32 -0,29 -0,84
Return on capital employed % -19,4 -10,0 -7,2 -8,2 -6,3
excluding non-recurring items % -7,1 -8,4 -6,2 -4,0 -2,6
Net cash generated from operating activities EUR million 45 83 132 266 338
Capital expenditure 5) EUR million 2 885 98 95 3 155 255
Net interest-bearing debt at the end of period 6) EUR million 2 620 1 714 1 720 2 620 1 720
Debt-to-equity ratio at the end of period 6) % 88,7 95,2 83,9 88,7 83,9
External deliveries 1 000 tonnes 351 325 334 1 495 1 449
Stainless steel external deliveries 1 000 tonnes 337 311 323 1 428 1 391
Stainless steel base price 7) EUR/tonne 1 167 1 155 1 137 1 172 1 181
Personnel at the end of period, continuing operations 8) 16 649 7 366 8 253 16 649 8 253

1) Figures for July 1-Sept 30, 2012 and Jan 1-Dec 31, 2011 have been restated due to change in accounting principle of defined benefit plans and other long-term employee benefits.                                                                            

2) EBITDA excluding raw material-related inventory gains/losses and non-recurring items, unaudited.  

3) Operating result excluding raw material-related inventory gains/losses and non-recurring items, unaudited.

4) Calculated based on the rights-issue-adjusted weighted average number of shares. Comparative figures adjusted accordingly.
5) Includes Inoxum acquisition of EUR 2,720 million and acquisition-related finance leases and asset purchases of EUR 79 million.

6) Sept 30, 2012 adjusted to exclude the effect of the rights issue. Debt-to-equity ratio, including the effect of the rights issue, on Sept 30, 2012 is 26.8%.               

7) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
8) Excluding Terni operations.

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