Interim Report for First Quarter 2014

Read CEO Tom Erixon's comments on Ovako's Interim Report for First Quarter 2014 and get the financial report.

First quarter 2014

• Sales volume increased by 20 percent compared with the same period last year, and net sales by 12 percent. The lower increase in sales relative to volume is due to lower scrap and alloy surcharges as a consequence of lower raw materials prices
• Order intake increased by 9 percent compared to the corresponding period last year
• Production volume increased by 22 percent compared to the corresponding period last year
• Operating profit before depreciation and amortisation (EBITDA) amounted to EUR 30 (15) million. The main reason for the improvement in earnings is the increased volumes
• Operating profit (EBIT) amounted to EUR 18 (4) million
• Cash flows from operating activities amounted to EUR 5 (-15) million

Amounts in brackets in this report refer to the corresponding period in the previous year.

Group key figures

Comments from the CEO

"Ovako’s sales continued to strengthen during the first quarter of this year, and have now experienced a positive trend since September last year. The volume increase of 20 percent over the same quarter in 2013 is a result of both higher production rates among our customers and new business won during 2013. The marketing investments made over the past two years have clearly contributed to the growth. The proportion of orders with short lead times remains relatively high, and we believe that our customers' inventory levels have not increased significantly. The order book has strengthened slightly in the quarter.

Although the business situation has improved, we are maintaining a strong focus on implementation of the efficiency programme that was announced late last year. The implementation is proceeding according to plan, with the goal of achieving EUR 17 million in savings during 2014.

Capacity utilisation in the steel mills has generally been high during the quarter. Implemented productivity improvements mean that further increases in volume can be handled within current shift patterns and staffing levels in most production areas. The announced workforce reduction of approximately 100 people is still necessary to ensure long-term efficiency, and is expected to be fully completed in 2014.

The earnings improvement compared with the first quarter of last year was driven mainly by good productivity and increased sales volumes. An improved product mix also contributed to the results, and this mix effect is also reflected in the order book.

The preparations for a new continuous casting machine in Smedjebacken are now in an intensive phase. The installation will be carried out during an extended summer break. The new casting machine will give Smedjebacken a broader range of dimensions and will contribute to the ongoing quality work. This is the final phase of a three-year investment programme in Smedjebacken, with the rebuilding of the scrap yard, a new high-tech de-dusting plant, adaptations of the rolling mill and increased cutting capacity. To assure the delivery service from Smedjebacken and Boxholm during and after the summer, there will be a planned build-up of inventory in the second quarter.

Safety is our top priority. All operational managers, including the CEO, are participating actively in safety work during April, with risk analysis and preventive actions in focus. On April 28, Ovako will participate in “The World Safety Day", in coordination with The World Steel Association.

Short-term outlook

Order intake has been stable during the first quarter, and the European economy is showing signs of a continued slightly positive trend. Delivery volume in the second quarter is expected to be somewhat higher than in the same quarter last year. The price trend for the remainder of the year is expected to be slightly positive.”

Tom Erixon
President and CEO

Stockholm, April 24, 2014

You will find the Interim report for the first quarter on the website:
http://www.ovako.com/Financial-information/

Further information can be obtained from:
Viktoria Karsberg, Head of Group Communications, 46 70 209 93 96

Ovako is a leading European producer of engineering steel for customers in the bearing, transportation and manufacturing industries. Our production is based on recycled steel and includes steel in the form of bars,tubes, rings and pre-components. Ovako is represented in more than 30 countries and has sales offices in Europe, North America and Asia. Sales in 2013 amounted to EUR 850 million and the company had 2,995 employees. For further information please visit us at www.ovako.com

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