Interim Report for First Quarter 2016
First quarter 2016
- Sales volume was 2 percent lower and revenue 12 percent lower than in the previous year. The relatively larger decrease in revenue is primarily explained by lower scrap and alloy surcharges, but also by a weaker sales mix
- Order intake increased by 2 percent compared to the corresponding period in the previous year
- EBITDA before restructuring costs amounted to EUR 18 (27) million, impacted primarily by lower sales
- Operating profit (EBIT) amounted to EUR 7 (17) million after restructuring costs of EUR 1 (0) million
- Cash flow from operating activities amounted to EUR 2 (-5) million after payment of restructuring costs of EUR 2 million. The positive cash flow is explained by a better working capital trend than in the previous year
- Ovako’s restructuring program is proceeding according to plan, lowering costs by EUR 4 million in the quarter, and the number of employees is 133 fewer than in the previous year
Amounts in brackets in this report refer to the corresponding period in the previous year.
Group key figures
| 2016Q1 | 2015Q1 | 2015Full year | |||
| Sales volumes | kton | 184 | 188 | 681 | |
| Net revenue | EURm | 201 | 229 | 834 | |
| EBITDA before restructuring cost | EURm | 18 | 27 | 48 | |
| Adjusted EBITDA margin | % | 8.8 % | 11.7 % | 5.7 % | |
| EBITDA | EURm | 17 | 27 | 44 | |
| EBITDA margin | % | 8.4 % | 11.7 % | 5.2 % | |
| EBIT before restructuring cost | EURm | 7 | 17 | 7 | |
| Adjusted EBIT margin | % | 3.7 % | 7.2 % | 0.9 % | |
| Operating profit (EBIT) | EURm | 7 | 17 | 1 | |
| EBIT margin | % | 3.3 % | 7.2 % | 0.1 % | |
| Net profit/loss | EURm | 1 | 8 | -23 | |
| Earnings per share | EUR | 11 | 149 | -458 | |
| Cash flow from operating activities | EURm | 2 | -5 | 25 | |
| Net debt/equity ratio | % | 189 % | 158 % | 181 % | |
| Return on capital employed (ROCE) | % | -2 % | 3 % | 0 % | |
| Full time employees at end of period (FTE) | No. | 2,848 | 2,981 | 2,905 |
Comments from the CEO
“Ovako has continued to develop its operations in the first quarter 2016 in order to compete more effectively in the challenging global market. Low industrial activity and increased imports into Europe put additional demands on Ovako's activities in both production and sales.
Generally, the market in the first quarter was characterized by a cautious attitude from customers. Demand from the bearing, and oil and gas, segments was weaker than last year, as was the Finnish market. There was, however, stronger demand for truck components and, for Ovako, an effect from new orders for components from the automotive and bearing industries. Other segments were in line with last year. Order intake in the first quarter was two percent higher than in the corresponding period of the previous year, but Ovako’s deliveries were two percent lower than in the same period last year.
Due to the challenging market environment, Ovako launched a comprehensive restructuring program in the second half of 2015. The program, which aims to reduce the group's costs by EUR 45 million by 2018, is proceeding according to plan, and in some cases faster than planned. A transfer of production is ongoing, from the manufacturing and distribution unit in Forsbacka to other Ovako units, and this is expected to be completed during the year. Preparations to reduce the group's rolling capacity are underway, and are scheduled for completion in the second half of 2017. The efforts to implement the restructuring program permeate the organization. Work is also underway at most of our facilities to identify and implement additional efficiencies.
Work on Ovako’s safety program has continued in the quarter. The frequency of accidents leading to lost time has improved by 25 percent over the past twelve months. Although there have been significant improvements in the area of safety, there is much that remains to be done.
One of the changes made to secure Ovako’s future was the launch of the new organization, which came into effect from March 1, 2016. A reduction in the number of business units from five to four will contribute to reduced costs. The new organization also provides us with a stronger focus on marketing, sales and customers, which will help Ovako win more market share in new and existing markets. Wider and closer collaboration with our customers in areas from product development to procurement and delivery is, and will be, an even more important factor for Ovako’s future market success.
Short-term outlook
We expect the market for engineering steel in Europe to be characterized by continued uncertainty during the second quarter of 2016. Ovako’s deliveries in the second quarter are expected to be in line with the corresponding quarter of the previous year.”
Marcus Hedblom
President and CEO
Further information can be obtained from:
Nicholas Källsäter, Head of Group Business Control, +46 (0)8 622 13 23
Ovako develops high-tech steel solutions for, and in cooperation with, its customers in the bearing, transport and manufacturing industries. Our steel makes our customers’ end products more resilient and extends their useful life, ultimately resulting in smarter, more energy-efficient and more environmentally-friendly products.
Our production is based on recycled scrap and includes steel in the form of bar, tube, ring and pre-components. Ovako is represented in more than 30 countries, and has sales offices in Europe, North America and Asia. Ovako’s sales in 2015 amounted to EUR 834 million, and the company had 2,905 employees at year-end. For more information, please visit us at www.ovako.com
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