Interim Report for Second Quarter 2013
Read CEO Tom Erixon's comments on Ovako's Interim Report for Second Quarter 2013 and get the financial report.
Second quarter 2013
- Order intake remained stable, and increased by 9 percent compared to the same period last year, but was 3 percent lower than during the first quarter due to seasonal variation.
- Delivery volumes were in line with the same period last year, and increased by 12 percent compared to the preceding quarter.
- Operating profit before depreciation and amortisation (EBITDA) amounted to EUR 19 million, an increase of EUR 4 million from the previous quarter, despite the negative effect of the fire in Imatra.
January – June 2013
- Order intake increased by 5 percent compared to the same period last year, and by 45 percent compared to the second half of 2012.
- Delivery volumes increased by 24 percent compared to the second half of 2012.
- Operating profit before depreciation and amortisation (EBITDA) amounted to EUR 33 million, an improvement of EUR 29 million compared to the second half of 2012, but EUR 29 million lower than in the first half of 2012.
(Amounts in brackets in this report refer to the corresponding period in the previous year.)
Group key figures
| 2013 Q2 |
2012 Q2 |
2013 Q1-2 |
2012 Q1-2 |
2012 Full year |
||
| Net sales | EUR million | 240 | 263 | 460 | 540 | 937 |
| Operating profit before depreciation (”EBITDA”) | EUR million | 19 | 30 | 33 | 62 | 66 |
| % of net sales | % | 7,8 % | 11,3 % | 7,3 % | 11,4 % | 7,0 % |
| Operating profit (”EBIT”) | EUR million | 6 | 19 | 10 | 40 | 20 |
| Operating margin (% of net sales) | % | 2,6 % | 7,0 % | 2,2 % | 7,3 % | 2,1 % |
| Net profit/loss | EUR million | 2 | 7 | -2 | 17 | -4 |
| Earnings per share | EUR | 38 | 142 | -36 | 329 | -74 |
| Cash flow from operating activities | EUR million | 8 | 21 | -6 | 38 | 87 |
| Net debt/equity ratio | % | 146 % | 117 % | 146 % | 117 % | 130 % |
| Return on capital employed (”ROCE”) | % | -2 % | 10 % | -2 % | 10 % | 4 % |
| Full time employees at end of period (”FTE”) | No. | 3 004 | 3 101 | 3 004 | 3 101 | 3 040 |
Comments from the CEO
“Market conditions and order intake in the second quarter were stable compared to the previous quarter, and remained significantly better than during the sharp slowdown towards the end of 2012. Compared to the same period last year, order intake was 9 percent better. Both invoicing and profits improved from the first quarter but remained, as previously indicated, at a lower level compared to the same quarter in 2012.
Despite improved profitability, Ovako was affected by a slightly negative price trend and an unfavourable product mix during the quarter. The main objectives of Ovako’s cost-saving programme exceeded plans. The savings amounted to EUR 15 million in the first half, and the previously estimated full-year impact of EUR 25 million may be surpassed.
A fire occurred in Imatra’s steel mill in May. After five weeks of downtime, mainly to restore the power system, steel production was restarted in late June. The fire negatively affected profits in the second quarter by approximately EUR 5 million. Insurance compensation not yet received is expected to have a positive effect on second-half profits.
The expansion of Ovako’s sales organisation continued according to plan, with the acquisition of BE Group’s Chinese sales company and the opening of a new sales unit in Italy. These activities will be included in the financial statements as of the third quarter. The units are expected to be profit-neutral in 2013 and to make a positive contribution to profits and sales in 2014.
The new peeling line in Hällefors was inaugurated during the second quarter, and creates favourable conditions for long-term growth in areas such as fuel injection. An agreement to refurbish and upgrade the continuous casting machine in Smedjebacken was signed in early June. Improved product quality and increased dimensional range will create new opportunities to grow within the Bar SmeBox business area. The investment is estimated at approximately EUR 15 million. The first phase of the project will be put into operation in August 2014.
Over the past two years, Ovako has taken a number of measures to enhance product quality and delivery capabilities, and to develop the sales organisation. At the same time, operational efficiency has been improved and total fixed costs have been reduced by 10 percent. Much work remains to complete the investments already decided and on continued operational improvements, but we are well on track to become Europe's most customer-oriented engineering steel company.
Short-term Outlook
Demand in the second half of the year is expected to remain at the same level as during the first half. However, uncertainty remains high and the group is maintaining the flexibility to adjust production capacity in either direction. The third quarter is affected by seasonal shutdowns as a result of maintenance work.”
Tom Erixon
President and CEO
Stockholm, July 18, 2013
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 engineering industries. Our production covers low-alloy steels and carbon steels in the form of bars, tubes, rings and pre-components. The company has production plants in 11 locations and a number of sales companies in Europe and the USA. Net sales in 2012 amounted to EUR 937 million and the company had 3,040 employees. Our total production capacity is 1.3 million tonnes of steel per year.