Outokumpu’s first quarter 2012 – Improved demand and profitability
INTERIM REPORT
27 April 2012 at 9.00 am EET
First-quarter 2012 highlights
- Underlying operational result improved to some EUR 2 million (IV/2011: EUR -34 million)
- Operating profit was EUR 3 million (IV/2011: EUR -71 million) including raw material-related inventory gains of some EUR 14 million (IV/2011: EUR -24 million) and net non-recurring items of EUR -13 million (IV/2011: EUR -13 million)
- Strong operating cash flow of EUR 116 million (IV/2011: EUR 132 million)
- Total external deliveries at 418 000 tonnes (IV/2011: 334 000 tonnes)
- Acquisition of Inoxum, ThyssenKrupp’s stainless business, announced
- EUR 1 billion rights offering successfully implemented
- Plans for new Outokumpu Leadership Team
- Plans for further personnel reductions in General Stainless
| Group key figures | |||||
| I/12 | IV/11 | I/11 | 2011 | ||
| Sales | EUR million | 1 304 | 1 125 | 1 371 | 5 009 |
| EBITDA | EUR million | 60 | -13 | 93 | 80 |
| Adjusted EBITDA 1) | EUR million | 59 | 24 | 48 | 169 |
| Operating result | EUR million | 3 | -71 | 33 | -260 |
| - excluding non-recurring | |||||
| items | EUR million | 15 | -58 | 33 | -109 |
| - underlying operational | |||||
| result 2) | EUR million | 2 | -34 | -12 | -66 |
| Result before taxes | EUR million | 6 | -134 | 17 | -253 |
| - excluding non-recurring | |||||
| items | EUR million | 19 | -108 | 17 | -318 |
| Net result for the period | EUR million | 12 | -118 | 16 | -186 |
| - excluding non-recurring | |||||
| items | EUR million | 24 | -92 | 16 | -244 |
| Earnings per share | EUR | 0.06 | -0.62 | 0.09 | -0.99 |
| - excluding non-recurring | |||||
| items | EUR | 0.13 | -0.48 | 0.09 | -1.31 |
| Return on capital employed | % | 0.3 | -7.4 | 3.1 | -6.5 |
| - excluding non-recurring | |||||
| items | % | 1.6 | -6.1 | 3.1 | -2.7 |
| Net cash generated from | |||||
| operating activities | EUR million | 116 | 132 | -10 | 338 |
| Capital expenditure | EUR million | 79 | 95 | 42 | 255 |
| Net interest-bearing debt | |||||
| at the end of period | EUR million | 1 495 | 1 720 | 1 873 | 1 720 |
| Debt-to-equity ratio at | |||||
| the end of period 3) | % | 78.4 | 82.5 | 80.4 | 82.5 |
| External deliveries | 1 000 tonnes | 418 | 334 | 395 | 1 449 |
| Stainless steel external deliveries | 1 000 tonnes | 399 | 323 | 380 | 1 391 |
| Stainless steel | |||||
| base price 4) | EUR/tonne | 1 185 | 1 137 | 1 215 | 1 181 |
| Personnel at the | |||||
| end of period | 7 968 | 8 253 | 8 452 | 8 253 | |
1) EBITDA excluding raw-material related inventory gains/losses
and non-recurring items, unaudited.
2) Operating result excluding raw material-related inventory gains/losses
and non-recurring items, unaudited.
3) 31 March 2012 adjusted to exclude the effect of the rights issue.
4) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
Raw-material related inventory gains or losses
The realised timing gain or loss per tonne of stainless steel is estimated based on the difference between the purchase price and invoice price of each metal in EUR per tonne times the average metal content in stainless steel. The unrealised timing impact consists of the change in net realisable value ─ NRV during each quarter. If there is a significant negative change in metal prices during the quarter, inventories are written down to NRV at the end of the period to reflect lower expected transaction prices for stainless steel in the future. As this timing impact is expected to be realised in the cash flow of Outokumpu only after the raw material has been sold, it is referred to as being unrealised at the time of the booking.
Outokumpu’s underlying operational result in the first quarter improved from the fourth quarter and was EUR 2 million. The improvement in profitability was primarily a result of higher delivery volumes but a somewhat weaker mix had an adverse effect. Outokumpu’s operating profit in the first quarter totalled EUR 3 million and includes some EUR 14 million of raw material-related inventory gains as a result of higher metal prices and EUR 13 million of non-recurring costs. The non-recurring costs in the first quarter relate to the Inoxum transaction. Excluding non-recurring items, operating profit totalled EUR 15 million. Net cash from operating activities in the first quarter remained strong and totalled EUR 116 million. The main contributor to the good cash flow was further reductions in levels of working capital. EUR 87 million was released from working capital in the first quarter. Outokumpu’s gearing at the end of the first quarter decreased to 78.4%, slightly above Outokumpu’s maximum target level of 75%. Net interest-bearing debt declined by EUR 225 million to EUR 1 495 million at the end of the quarter.
SHORT-TERM OUTLOOK
Improved demand for standard grades of stainless steel in the first quarter was supported by restocking among distributors. In the beginning of the second quarter, underlying demand has remained relatively stable. Restocking appears to have slowed as the nickel price declined and distributor inventories are estimated to be at normal levels.
As a result of the recent decline in the nickel price and a weaker product and geographic mix in the second quarter, Outokumpu’s average base prices for stainless steel in the second quarter are expected to be flat or slightly lower than in the first quarter. Based on the current level of order intake, Outokumpu’s external delivery volumes (stainless and ferrochrome) in the second quarter of 2012 are expected to be approximately at the same level as in the first quarter.
Despite the higher quarterly contract price for ferrochrome in the second quarter, the profitability of the Group’s ferrochrome operations is expected to weaken temporarily in the second quarter due to planned shut-downs at the concentration plant in Kemi connected with the Group’s ongoing ferrochrome investment project.
Outokumpu’s underlying operational result*) in the second quarter is expected to be at breakeven or slightly negative. At current metal prices, marginal raw material-related inventory losses are expected as a result of the decline in the nickel price. Outokumpu’s operating result in the second quarter could be impacted by non-recurring items associated with the Inoxum acquisition and the Group’s ongoing cost-cutting and turnaround programmes.
*) Underlying operational result=operating result excluding raw material-related inventory gains/losses and non-recurring items.
CEO Mika Seitovirta:
“We made significant progress in many important strategic areas in the first quarter. Implementation of our short-term turnaround programmes to improve profitability and cash flow continued. While profitability still remains unsatisfactory, the breakeven result confirms that the Group is moving in the right direction. I’m very pleased with our strong cash flow during the quarter. The Inoxum acquisition is of enormous strategic importance as it positions Outokumpu as a new global leader in stainless steel with a balanced production structure and a broad product offering and customer base. The success of our EUR 1 billion rights issue shows that Outokumpu shareholders share our view of the significant potential offered by this acquisition. To protect the Group’s profitability and cash flow, implementation of the planned cost saving programmes will continue in the second quarter. I am confident that we are in a good strategic position to drive our business forward with solid results.”
The attachments present the Management analysis for the first quarter 2012 operating result and the Interim Review by the Board of Directors for January-March 2012, the accounts and notes to the interim accounts. The report is unaudited.
For further information, please contact:
Ingela Ulfves, Investor Relations
tel. +358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com
Kari Tuutti, Communications, IR and Marketing
tel. +358 9 421 2432, mobile +358 40 717 0830
kari.tuutti@outokumpu.com
News conference and live webcast today at 1.00 pm EET
A combined news conference, conference call and live webcast concerning the first-quarter 2012 financial results will be held on 27 April 2012 at 1.00 pm EET (6.00 am US EST, 11.00 am UK time, 12.00 pm CET) at Restaurant Bank, meeting rooms 12-14, address Unioninkatu 20, 00130 Helsinki, Finland.
To participate via a conference call, please dial in 5-10 minutes before the beginning of the event:
UK +44 203 043 2436
USA & Canada +1 866 458 4087
Sweden +46 8 505 598 53
Password Outokumpu
The news conference can be viewed live via Internet. Please find a direct link to the webcast at the end of this release. The stock exchange release and presentation material will be available before the news conference at www.outokumpu.com/Investors.
An on-demand webcast of the news conference will be available at http://www.outokumpu.com/en/Investors/Pages/Webcasts.aspx as of 27 April 2012 at around 3.00 pm EET.
Link to the webcast
OUTOKUMPU OYJ