Outokumpu returned to profitability in 2016: full-year underlying EBIT at EUR 45 million

Outokumpu Oyj
Annual Accounts Bulletin
February 2, 2017 at 12.00

Highlights of the fourth quarter 2016

Outokumpu’s underlying EBIT was EUR 38 million compared to EUR 32 million in the third quarter. Business area Europe delivered a strong quarter driven by higher base prices and continued cost reductions. The Americas’ performance was negatively impacted by seasonality and a cost of EUR 9 million related to supplier invoicing correction.

• Stainless steel deliveries were 596,000 tonnes¹ (608,000 tonnes)².
• Underlying EBITDA³ was EUR 98 million (EUR 110 million).
• Underlying EBIT⁴ was EUR 38 million (EUR 32 million). Underlying EBIT includes net adjustments of EUR 30 million in the fourth quarter (EUR 8 million), including the net effect of raw material-related inventory and metal derivative gains/losses of EUR -0 million (EUR 6 million).
• EBIT was EUR 69 million (EUR 40 million).
• Operating cash flow was EUR 199 million (EUR 61 million).
• Net debt decreased to EUR 1,242 million (EUR 1,396 million).
• Gearing was 51.4 % (65.3%).
• Return on capital employed (ROCE) was 2.6% (9.3%).

Highlights of 2016

Outokumpu’s profitability for the full year 2016 improved significantly with positive underlying EBIT of EUR 45 million compared to EUR -101 million in 2015. This was driven by significant reduction in costs, as well as higher delivery volumes particularly in the Americas. The recognition of deferred tax income of EUR 189 million related to losses from prior years turned the full-year net result EUR 144 million positive.

• Stainless steel deliveries were 2,444,000 tonnes (2,381,000 tonnes).
• Underlying EBITDA was EUR 298 million (EUR 196 million).
• Underlying EBIT was EUR 45 million (EUR -101 million)⁵.
• EBIT was EUR 103 million (EUR 228 million)⁵.
• Net result was EUR 144 million (EUR 86 million).
• Operating cash flow was EUR 389 million (EUR -34 million).
• The Board of Directors is proposing a dividend of EUR 0.10 per share for 2016.

¹ Metric ton = 1,000 kg
² Figures in parentheses refer to the previous quarter for quarterly figures and previous year for full-year figures, 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.

¹⁾ Adjusted EBITDA = EBITDA – Items classified as adjustments. Net of raw material-related inventory and metal derivative gains/losses not classified as an adjustment.
²⁾ Underlying EBITDA = EBITDA – Items classified as adjustments. Net of raw material-related inventory and metal derivative gains/losses classified as an adjustment.
³⁾ Adjusted EBIT = EBIT – Items classified as adjustments.  Net of raw material-related inventory and metal derivative gains/losses not classified as an adjustment.
⁴⁾ Underlying EBIT = EBIT – Items classified as adjustments. Net of raw material-related inventory and metal derivative gains/losses classified as an adjustment.
⁵⁾ Excludes ferrochrome deliveries.

Business and financial outlook for the first quarter of 2017

In line with typical seasonality, the stainless steel market is expected to be strong in the first quarter with healthy underlying demand in both Europe and the US. Consequently, the first-quarter delivery volumes are expected to be higher in Europe, and significantly higher in the Americas compared to the fourth quarter of 2016. Furthermore, the cost saving initiatives are expected to continue according to plans and contribute positively in the first quarter. In addition, the higher ferrochrome contract price will have a significant positive impact on business area Europe’s profitability.

Therefore, Outokumpu’s adjusted EBITDA is expected to be over EUR 250 million in the first quarter of 2017.

Given the achievements with debt reduction, Outokumpu updates its 2017 net debt target and expects the net debt to be below EUR 1.1 billion at the end of 2017.

CEO Roeland Baan:

“The positive momentum and progress of 2016 culminated in a solid fourth quarter underlying EBIT of EUR 38 million and strong operating cash flow of EUR 199 million. For the full year, we recorded an underlying EBIT of 45 million – our first positive one in eight years.

Europe continued its strong performance. Despite flat delivery volumes, it grew its underlying EBIT to 74 million from the third-quarter EUR 45 million. For the full year, Europe delivered an underlying EBIT profit of EUR 191 million, compared to EUR 85 million in 2015.

As expected, deliveries in the Americas declined in the fourth quarter due to typical seasonality. However, the full year delivery volume growth from 533,000 to 690,000 tonnes is a testimony to the determination and hard work of the Americas team. While we still record a loss for the full year, the 25 percent reduction in variable costs per tonne and EUR 72 million improvement in financial performance show that the Americas is solidly on track to profitability.

Our relentless focus on working capital and net debt reduction also paid off. We overachieved our target of EUR 200 million net working capital reduction by releasing EUR 307 million in 2016. Our gearing dropped from 65.3 percent to 51.4 percent. We finished the year with a net debt of EUR 1,242 million. Encouraged by the progress, we have updated our target, and aiming for a net debt of below EUR 1.1 billion by the end of the year.

We have now turned the company back to profitability but we are still far from our target of EUR 500 million EBIT in 2020. However, the progress we made in 2016 puts us firmly on the right trajectory to fulfil our vision to become the best value creator in stainless steel by 2020 through customer orientation and efficiency.

The turnaround secured in 2016, combined with the progress made in debt reduction and the positive outlook that starts the year 2017, presents also the right time to start paying dividends.”

Conference call today at 3.00 pm EET

A conference call for investors and analysts will be held on Thursday, February 2, 2017 at 3.00 pm EET (8.00 am US EST, 1.00 pm UK, 2.00 pm CET). The results will be introduced by Outokumpu’s CEO Roeland Baan and CFO Christoph de la Camp. To participate in the conference call, please dial in 5-10 minutes before the beginning of the event:

UK/Europe: +44 20 3427 1911      

US & Canada: +1 646 254 3388

Confirmation code: 7987500         

The event can be viewed live online at http://edge.media-server.com/m/p/g98ge53a. 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 www.outokumpu.com/en/investors/IR-events/webcasts as of February 2, 2017 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 some 10,000 professionals in more than 30 countries, with headquarters in Helsinki, Finland and shares listed in Nasdaq Helsinki. 
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