Outokumpu – Solid progress continued, Group underlying EBIT clearly positive at EUR 32 million
OUTOKUMPU OYJ
INTERIM REPORT
November 3, 2016 at 12.00 pm EET
Highlights in the third quarter 2016
Outokumpu’s underlying EBIT was EUR 32 million, compared to EUR -5 million in the second quarter. The improved earnings were mainly the result of continued progress in the Americas and improved market sentiment in Europe.
- Stainless steel deliveries were 608,000 tonnes1 (629,000 tonnes)2.
- Underlying EBITDA3 was EUR 110 million (EUR 51 million).
- Underlying EBIT4 was EUR 32 million (EUR -5 million). Underlying EBIT includes net adjustments of EUR 8 million in the third quarter (EUR 11 million), including the net effect of raw material-related inventory and metal derivative gains/losses of EUR 6 million (EUR 15 million).
- EBIT was EUR 40 million (EUR 6 million).
- Operating cash flow was EUR 61 million (EUR 54 million).
- Net debt decreased to EUR 1,396 million (EUR 1,485 million).
- Gearing was 65.3% (69.1%).
- Return on capital employed (ROCE) was 9.3% (6.2%).
Highlights during the first nine months of 2016
- Stainless steel deliveries were 1,848,000 tonnes (I-III/15: 1,807,000 tonnes).
- Underlying EBITDA was EUR 200 million (I-III/15: EUR 146 million).
- Underlying EBIT was EUR 7 million (I-III/15: EUR -90 million)5.
- EBIT was EUR 34 million (I-III/15: EUR -113 million)5.
- Operating cash flow was EUR 190 million (I-III/15: EUR -36 million).
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.
5 The comparability between the periods is impacted by the change in estimated useful lives of property, plant and equipment in the fourth quarter of 2015.
| Group key figures | |||||||
| III/16 | II/16 | III/15 | I-III/16 | I-III/15 | 2015 | ||
| Sales | EUR million | 1,419 | 1,379 | 1,487 | 4,183 | 4,949 | 6,384 |
| EBITDA | EUR million | 119 | 62 | 3 | 227 | 123 | 531 |
| Underlying EBITDA 1) | EUR million | 110 | 51 | 13 | 200 | 146 | 196 |
| EBIT | EUR million | 40 | 6 | -77 | 34 | -113 | 228 |
| Underlying EBIT 2) | EUR million | 32 | -5 | -67 | 7 | -90 | -101 |
| Result before taxes | EUR million | 13 | -22 | -113 | -56 | -224 | 127 |
| Net result for the period | EUR million | 13 | -20 | -115 | -48 | -222 | 86 |
| Earnings per share | EUR | 0.03 | -0.05 | -0.27 | -0.12 | -0.51 | 0.23 |
| Return on capital employed | % | 9.3 | 6.2 | -3.4 | 9.3 | -3.4 | 5.3 |
| Net cash generated from operating activities | EUR million | 61 | 54 | 67 | 190 | -36 | -34 |
| Net debt at the end of period | EUR million | 1,396 | 1,485 | 2,012 | 1,396 | 2,012 | 1,610 |
| Debt-to-equity ratio at the end of period | % | 65.3 | 69.1 | 96.5 | 65.3 | 96.5 | 69.1 |
| Capital expenditure | EUR million | 43 | 28 | 29 | 103 | 89 | 154 |
| Stainless steel deliveries 3) | 1,000 tonnes | 608 | 629 | 570 | 1,848 | 1,807 | 2,381 |
| Personnel at the end of period 4) | 10,785 | 10,645 | 11,560 | 10,785 | 11,560 | 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.
Business and financial outlook for the fourth quarter of 2016
Underlying stainless steel demand is expected to remain healthy in both Europe and the US in the fourth quarter. However, a typical softening of distributor demand is expected towards the end of the year, particularly in the US, due to the holiday season.
With the seasonal slowdown in the US, fourth-quarter stainless steel deliveries of business area Americas are expected to be significantly lower compared to the third quarter. In Europe, stainless steel deliveries are expected to remain flat.
In the ferrochrome business, October production was negatively impacted by technical issues during the post-maintenance ramp-up. The facilities are now back to normal operation but ferrochrome deliveries in the fourth quarter are expected to be at a lower level than in the third quarter, offset by higher ferrochrome prices. Consequently, the profitability contribution of the ferrochrome operations is expected to remain sequentially flat quarter-on-quarter.
Outokumpu expects the base price improvements to have a slight positive impact on fourth-quarter profitability. However, with the delay in ferrochrome production ramp-up, lower deliveries in the Americas, and annual maintenance work at the Tornio mill in Europe, Outokumpu expects its fourth-quarter underlying EBIT to remain at a similar level to the third quarter. Consequently, underlying EBIT for the full year 2016 is expected to be clearly positive.
Outokumpu has closed its defined benefit pension scheme in the UK to future pension accruals and has made changes to the terms of retirement. As a result, Outokumpu anticipates a reduction in its net pension obligations, and expects to recognize gain of approximately EUR 25 million in its fourth quarter results. This income will be adjusted from underlying EBIT.
CEO Roeland Baan:
“We continued significant progress in the third quarter, reaching a clearly positive underlying EBIT. The Americas broke yet another record in deliveries and continued to improve its financial performance, reducing its losses to seven million euros. Europe continued its steady progress, and recorded its strongest third quarter ever.
The changes we have made across our company are yielding results. In the Americas, we continued to make great progress. With our improved efficiency and delivery reliability, we have been able to capitalize on the robust demand and positive price development.
In Europe, we mitigated the typical third quarter dip by changing our maintenance patterns. By phasing the maintenance in our Nordic plants between the third and fourth quarters, we were able to significantly improve our profitability during the traditionally weaker third quarter and align Tornio maintenance with the typical market slowdown towards the end of the year.
We continued to make good progress on our debt reduction. A net working capital release of EUR 149 million from the beginning of the year keeps us in line with the target of EUR 200 million release by the end of the year. The improved profitability coupled with the progress in net working capital brought our net debt down to below EUR 1.4 billion.
During the first nine months, we achieved an underlying EBIT of EUR 7 million. The solid performance will continue in the fourth quarter. Despite the seasonal slowdown towards year-end and the temporary setback in our ferrochrome production, we are looking at another quarter of positive underlying EBIT. Thus, for the full year 2016, we are expecting a clearly positive underlying EBIT, which moves us firmly towards our target of EUR 500 million underlying EBIT by 2020.”
Conference call today on November 3, 2016 at 3.00 pm EET
A conference call will be held on Thursday, November 3, 2016 at 3.00 pm EET (9.00 am US EDT, 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 1931
US & Canada: +1 646 254 3375
Confirmation code: 3362266
The event can be viewed live online at http://edge.media-server.com/m/p/e2gckmtv. 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 http://www.outokumpu.com/en/investors/IR-events/webcasts/Pages/default.aspx as of November 3, 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.
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