Outokumpu's third quarter 2010 - seasonally lower demand resulted in a loss-making quarter
Outokumpu's third quarter 2010 - seasonally lower demand resulted in a loss-making quarter
Highlights
- Operating loss EUR 49 million, underlying operational result some EUR -10 million
- Deliveries down from the second quarter but 29% higher than in the third quarter of 2009
- Fourth-quarter underlying operational result expected to improve to around break-even due to higher volumes but somewhat softer prices
| Group key figures, EUR million | III/10 | III/09 | II/10 | |||||||||
| Sales | 999 | 587 | 1110 | |||||||||
| Operating profit | -49 | -65 | 71 | |||||||||
| Profit before taxes | -88 | -81 | 63 | |||||||||
| Net profit for the period | -56 | -56 | 44 | |||||||||
| Earnings per share, EUR | -0.31 | -0.31 | 0.24 | |||||||||
| Net cash generated from operating activities | -112 | -10 | -314 | |||||||||
| Stainless steel deliveries, 1000 tonnes | 307 | 238 | 339 | |||||||||
| Stainless steel base price, EUR/t 1) | 1 245 | 1 307 | 1 317 | |||||||||
| Stainless steel transaction price, EUR/t | 2 866 | 2 229 | 3 018 | |||||||||
| 1) CRU: German base price (2mm cold rolled 304 sheet) | ||||||||||||
There has been some pick-up in demand for stainless steel standard grades after the summer period in Europe. The increasing price of nickel has had a positive effect on mainly distributors' buying behaviour. Demand for special grades, however, continues to be softer and no clear recovery from investment-driven end-use segments has taken place.
Outokumpu's deliveries increased by 29% to 307 000 tonnes in the third quarter compared to the same quarter in 2009. Average base prices were 5% lower than a year ago. Main raw material prices continued to be clearly higher than in 2009. Average nickel price increased by 20% and ferrochrome price by 46%. As a result, Outokumpu's sales were significantly, 70%, higher than in 2009, at EUR 999 million.
Compared to the second quarter of 2010 deliveries declined by 9% as demand was weaker due to the European holiday season and the Group had its annual maintenance breaks. Lower deliveries and rather stable prices drove Outokumpu's underlying operational result in the third quarter to a small loss of EUR 10 million. In addition, there were EUR 39 million of raw material-related inventory losses resulting in an operating loss of EUR 49 million for the quarter. In the third quarter 2009, the underlying operational loss totalled EUR 82 million and operating loss EUR 65 million. Raw-material related inventory gains were EUR 32 million. The main contributor to the significant reduction in the underlying operational loss for 2010 is higher delivery volume. Net financial expenses were clearly higher than a year ago deepening the pre-tax-loss to EUR 88 million - higher than in the third-quarter 2009 - and earnings per share to EUR -0.31 - the same level as in 2009. Working capital continued to increase resulting in negative cash flow in the third quarter 2010.
Outokumpu's deliveries in the fourth quarter are expected to improve from the third quarter and be close to the volumes in the second quarter (339 000 tonnes). The underlying operational result in the fourth quarter is expected to be around break-even. Subject to metal price and currency developments, cash flow is expected to be positive as a consequence of reduced inventories.
CEO Juha Rantanen:
"Outokumpu's third-quarter loss is mainly a result of the seasonal decline in delivery volumes. We'll get back on the improving profit trend as we foresee better results in the fourth quarter compared to the third quarter this year and the fourth quarter a year ago. Underlying demand for standard grades continues to be satisfactory while the expected recovery in demand from investment-driven industries has not materialised yet. Customers are hesitant to make investment decisions due to overall macroeconomic uncertainty. This is the main reason why we are still operating at only 75% of our capacity. The recent currency fluctuations are also having a negative impact on our performance and overall market sentiment.
We are confident, however, of the attractiveness of the stainless industry. Several global trends are supporting the long-term growth of stainless markets. Outokumpu is uniquely positioned to capture these opportunities due to Tornio's cost competitiveness and our capabilities in the specialties products. The recently revised strategy provides concrete plans on how we will improve the profitability for the Group."
This press release is a summary of Outokumpu's official third quarter 2010 report.
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
OUTOKUMPU OYJ
Outokumpu is a global leader in stainless steel with the vision to be the undisputed number one. Customers in a wide range of industries use our stainless steel and services worldwide. Being fully recyclable, maintenance-free, as well as very strong and durable material, stainless steel is one of the key building blocks for sustainable future. Outokumpu employs some 7 500 people in more than 30 countries. The Group's head office is located in Espoo, Finland. Outokumpu is listed on the NASDAQ OMX Helsinki.
www.outokumpu.com