Interim Report for First Quarter 2012
First quarter 2012
- Net sales amounted to EUR 277 (303) million, a decrease of 8.6 percent compared to the first quarter of 2011.
- Operating profit (EBIT) was EUR 21 (36) million, corresponding to 7.6 (11.8) percent of net sales.
- Net profit for the quarter was EUR 9 (20) million.
- Cash flow from operations was EUR 17 (-8) million.
(In the report, amounts in brackets refer to the corresponding period of last year.)
Group key figures
Comments from the President and CEO
"Ovako's market experienced a positive trend during the first quarter. This meant that sales were slightly higher than expected and ended up slightly below the level of the same quarter last year. At the same time, uncertainty persists in the market and the order book is still shorter than normal. The segment addressing the engineering industry had a solid performance, while the sector for heavy transport vehicles was weak during the quarter. The adjustment of the rate of production was completed in the first quarter, and this is now 15 percent lower than last year. This means that the capacity reduction decided upon last autumn is now complete. The lower production rate has had a negative effect on the quarter's results, despite the cost savings. The operating margin was 7.6 percent, which was 4.2 percentage points lower than in the first quarter of 2011.
Efforts to improve delivery service have been successful. Delivery accuracy for the quarter was 90 percent, which is in line with group objectives. Operating cash flow for the quarter amounted to EUR 17 million, significantly better than in the first quarter of last year. As a result, the group's net debt continues to fall, and now amounts to EUR 239 million.
During the quarter, it was decided to strengthen our presence in Eastern Europe and Italy. Key recruitment and supportive measures are being made in 2012 to strengthen Ovako's position in these markets. Efforts to also strengthen existing sales companies within the group are proceeding according to plan.
During the first quarter, it was also decided to invest EUR 13 million over the next three years in Ovako's tube mill in Hofors. The investment aims to increase productivity, reduce capital tied up, and strengthen the product portfolio. Among other things, this will create a better platform for growth in the oil and gas segment, which is regarded as strategically important in the long run.
Demand during the second quarter is expected to be in line with the beginning of the year. This means that both sales and profit are expected to be lower compared to the second quarter of last year. The signals from the European engineering industry are somewhat more positive than before, while the uncertainty regarding the overall European market remains. Ovako will therefore maintain a high state of readiness and flexibility throughout the year to deal with any fluctuations in demand."
Stockholm, May 10, 2012
Tom Erixon President and CEO
You will find the full interim report of Ovako's first quarter 2012 on the website: http://www.ovako.com/IR
Further information can be obtained from:
Viktoria Karsberg, Head of Group Communications, +46 70 209 93 96
Ovako is a leading European producer of engineering steel for customers in the bearing, transportation and engineering industries. Our production covers low-alloy steels and carbon steels in the form of bars, tubes, rings and pre-components. The company has production plants in 11 locations and several sales companies in Europe and the USA. Net sales in 2011 were EUR 1,121 million and the number of employees was 3,239. Total steel production capacity is 1.3 million tonnes per year.