Year-End Report 2015
Fourth quarter 2015
- Sales volume was 2 percent lower and revenue 8 percent lower than in the previous year. The relatively larger decrease in revenue is primarily explained by lower scrap and alloy surcharges
- Order intake increased by 3 percent compared to the corresponding period in the previous year
- EBITDA before restructuring costs amounted to EUR -5 (4) million, impacted primarily by weaker sales, falling scrap and alloy prices and lower production volume compared to the previous year
- Operating profit (EBIT) amounted to EUR -20 (-15) million including restructuring costs and impairment
- Cash flow from operating activities amounted to EUR 11 (42) million
- Ovako’s restructuring program is proceeding according to plan, with some initiatives ahead of plan. 93 individuals have left the group as part of the program, including 27 who left on January 1, 2016.
- On November 24, Marcus Hedblom took over as President and CEO
- Sales volume and revenue were 2 percent and 3 percent, respectively, lower than in the previous year
- EBITDA before restructuring costs amounted to EUR 48 (69) million, including negative effects from falling scrap and alloy prices of 9 MEUR compared to last year
- Operating profit (EBIT) amounted to EUR 1 (15) million, including restructuring costs and impairment
- Cash flow from operating activities amounted to EUR 25 (66) million. Cash flow improved by EUR 19 million in 2014 through release from working capital, whereas in 2015, working capital has been maintained at the same level
- Earnings were charged with EUR 4 (0) million, attributable to restructuring costs, and EUR 3 (1) million for impairment in connection with restructuring
- On March 31, steel and metals distributor Ovako Metals Oy Ab (formerly Tibnor Oy) in Finland was acquired, which positively affected operating profit with a non-recurring effect of EUR 3 million
Amounts in brackets in this report refer to the corresponding period in the previous year.
Group key figures
|2015Q4||2014Q4||2015Full year||2014Full year|
|EBITDA before restructuring cost||EURm||-5||4||48||69|
|Adjusted EBITDA margin||%||-2.7 %||2.0 %||5.7 %||7.9 %|
|EBITDA margin||%||-4.0 %||2.0 %||5.2 %||7.9 %|
|EBIT before restructuring cost||EURm||-15||-14||7||15|
|Adjusted EBIT margin||%||-7.9 %||-7.0 %||0.9 %||1.8 %|
|Operating profit (EBIT)||EURm||-20||-15||1||15|
|EBIT margin||%||-10.6 %||-7.3 %||0.1 %||1.7 %|
|Earnings per share||EUR||-468||-306||-458||-302|
|Cash flow from operating activities||EURm||11||42||25||66|
|Net debt/equity ratio||%||181 %||152 %||181 %||152 %|
|Return on capital employed (ROCE)||%||0 %||3 %||0 %||3 %|
|Full time employees at end of period (FTE)||No.||2,905||2,925||2,905||2,925|
Comments from the CEO
“2015 was a challenging year, and the weak demand that marked the year continued into the fourth quarter. However, in the fourth quarter, order intake increased by 3 percent compared to the previous year. Ovako’s sales volume was somewhat weaker than in the same quarter of the previous year, as expected, and decreased by 2 percent. Deliveries for the full year amounted to just over 680 thousand metric tons.
Earnings in the fourth quarter were negatively impacted by the weak demand, as well as by falling scrap prices and lower utilization of production capacity. At the same time we have reduced our fixed costs by EUR 4 million compared to the same quarter in the previous year.
Work on the restructuring program, announced in October, is going according to plan. Some initiatives are ahead of plan, such as the shift reduction in Hofors, which was fully implemented by January 1, 2016. We are also preparing to move customers and production volumes from Forsbacka to other units. Work to prepare for the closure of the rolling mill in Hällefors has been ongoing during the fourth quarter and continues according to plan. The moving of volumes to other rolling mills in the group is expected to start during 2016 and to be fully completed in the second half of 2017.
The annual cost savings for the entire program are expected to amount to EUR 45 million, with full effect in 2018. The savings are expected to be approximately EUR 18 million already in 2016. During the fourth quarter 2015, the number of employees decreased by 80, and an additional nearly 30 individuals have left in early 2016.
Our ongoing development efforts within marketing and technology continue. The investments in the metallurgical platform in Hofors are carried out according to plan and will strengthen our offering in advanced applications for clean steel. Meanwhile, our safety efforts intensified during the year and the implementation of our safety program continued during the quarter.
In order to strengthen the commercial focus, simplify the organization and to assure quality and pace in implementation of the restructuring program we are introducing a new organization. Five business units will become four and a new Group Sales Unit will be formed.
The new organization, together with our restructuring program and technology investments, will result in improved efficiency and competitiveness, while laying the foundation for long-term profitability, for the benefit of our customers, employees and owners.
We expect the market for engineering steel in Europe to be characterized by continued uncertainty during the first quarter of 2016. Ovako’s deliveries in the first quarter are expected to be in line with the deliveries in corresponding quarter of the previous year.”
President and CEO
Further information can be obtained from:
Nicholas Källsäter, Head of Group Business Control, +46 (0)8 622 13 23
Elina Olsson, Group Communication, +46 (0)8 622 13 22
Ovako develops high-tech steel solutions for, and in cooperation with, its customers in the bearing, transport and manufacturing industries. Our steel makes our customers’ end products more resilient and extends their useful life, ultimately resulting in smarter, more energy-efficient and more environmentally-friendly products.
Our production is based on recycled scrap and includes steel in the form of bar, tube, ring and pre-components. Ovako is represented in more than 30 countries, and has sales offices in Europe, North America and Asia. Ovako’s sales in 2015 amounted to EUR 834 million, and the company had 2,905 employees at year-end. For more information, please visit us at www.ovako.com