Outokumpu Oyj - heavy restructuring actions taken, stainless market weaker
INTERIM REPORT 20 July 2011 at 9.00 am EET
Second-quarter 2011 highlights - Underlying operational result some EUR -5 million (I/2011: EUR -12 million). - Raw material-related inventory losses of some EUR 26 million (I/2011: gains of some EUR 45 million) and non-recurring items of EUR -138 million (I/2011: none). - Operating loss EUR -169 million (I/2011: profit of EUR 33 million) - Capital gains of EUR 242 million reported under net financial items, a positive impact of EUR 162 million on cash flow. - Net profit positive at EUR 50 million (I/2011: EUR 16 million) - Operational cash flow EUR -66 million (I/2011: EUR -10 million). - Customers destocking due to declining nickel price, deliveries at 348 000 tonnes (I/2011: 380 000 tonnes). - Implementation of the short-term agenda initiated. Group key figures II/11 I/11 II/10 2010 Sales EUR million 1 281 1 371 1 125 4 229 Operating profit EUR million -169 33 72 -83 EBITDA EUR million -4 93 129 172 Non-recurring items in operating profit EUR million -138 - - -17 Profit before taxes EUR million 21 17 64 -143 Non-recurring items in financial income and expenses EUR million 229 - - 9 Net profit for the period EUR million 50 16 44 -124 Earnings per share EUR 0,28 0,09 0,24 -0,68 Return on capital employed % -16,1 3,1 7,3 -2,1 Net cash generated from operating activities EUR million -66 -10 -317 -497 Capital expenditure EUR million 50 42 45 161 Net interest-bearing debt at end of period EUR million 1 885 1 873 1 696 1 837 Debt-to-equity ratio at end of period % 82,0 80,4 68,1 77,3 Stainless steel deliveries 1 000 tonnes 348 380 339 1 315 Stainless steel base price 1) EUR/tonne 1 223 1 215 1 317 1 252 Personnel at the end of period 2) 9 474 8 452 9 082 8 431 1) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet). 2) Personnel reported as head count. Up to 31 December 2010 reported as full-time equivalent. Comparative figures restated. The underlying operational result in the second quarter improved marginally to EUR -5 million. Operating loss in the second quarter included some EUR 26 million of raw material-related inventory losses and some EUR -138 million of non-recurring impairments and restructuring costs. Net financial items of EUR 191 million included capital gains of EUR 242 million from financial asset divestments. Net profit was positive at EUR 50 million. Outokumpu's gearing at the end of the second quarter increased to 82.0%. While the divestments had a positive effect on Group gearing, adverse impacts resulted from impairments, working capital increase and dividends. SHORT-TERM OUTLOOK Demand for standard grades of stainless steel slowed in Europe as summer approached and the nickel price began to decline. This led to destocking among customers. While normal seasonality resulting from the holiday season in Europe has affected the distributors' buying behaviour underlying demand continues to be relatively stable globally. Lead times for standard grades continue to be normal at 6-8 weeks. As a result of the slowdown in demand during the European holiday season and annual maintenance breaks at Group mills, Outokumpu expects that its stainless steel delivery volumes in the third quarter will be slightly lower than in the second quarter. Outokumpu's average base prices for stainless steel in the third quarter are expected to be somewhat lower than average prices in the second quarter. Lower delivery volumes and lower average base prices are expected to lead to negative underlying operational result in the third quarter. Additionally, declined metal prices are expected to result in raw material-related inventory losses (at current metal prices). Outokumpu therefore estimates the Group's third-quarter operating profit to be clearly negative. CEO Mika Seitovirta: "During my first months much of our attention has been on the Group's short-term agenda, and this has provided us with quick sources of cash and helped attack the most critical factors burdening Outokumpu's profitability. In the stainless business, improving sales, generating cash and reducing costs are part of a never-ending race. Current market circumstances mean that the pressure to move even faster with this work and related actions is higher." The attachments present the Management analysis for the second quarter operating result and the Interim review by the Board of Directors for January-June 2011, the accounts and notes to the interim accounts. This report is unaudited. For further information, please contact: Päivi Lindqvist, SVP - Communications and IR tel. +358 9 421 2432, mobile +358 40 708 5351 paivi.lindqvist@outokumpu.com Ingela Ulfves, VP - Investor Relations and Financial Communications tel. +358 9 421 2438, mobile +358 40 515 1531 ingela.ulfves@outokumpu.com Esa Lager, CFO tel. + 358 9 421 2516 esa.lager@outokumpu.com News conference and live webcast today at 1.00 pm A combined news conference, conference call and live webcast concerning the second-quarter 2011 financial results will be held on 20 July 2011 at 1.00 pm EET (6.00 am US EST, 11.00 am UK time, 12.00 pm CET) at Hotel Kämp, conference room Akseli Gallen-Kallela (2nd floor), Kluuvikatu 2, 00100 Helsinki. To participate via a conference call, please dial in 5-10 minutes before the beginning of the event: UK +44 203 043 2436 US & Canada +1 866 458 4087 Sweden +46 8 505 598 53 Password Outokumpu The news conference can be viewed live via Internet at www.outokumpu.com/ Investors/ Webcasts. Stock exchange release and presentation material will be available before the news conference at www.outokumpu.com/Investors. Link to the webcast An on-demand webcast of the news conference will be available as of 20 July 2011 at around 3.00 pm EET at www.outokumpu.com/Investors/Webcasts. OUTOKUMPU OYJ