Interim Report for Third Quarter 2012
Read CEO Tom Erixon's comments on Ovako's third quarter 2012 and get the financial report.
Third quarter 2012
- Sales amounted to EUR 201 (244) million, a decrease of 18 percent compared to the third quarter of 2011.
- Operating profit (EBIT) amounted to EUR -7 (7) million.
- Net profit/loss for the quarter amounted to EUR -12 (-5) million.
- Cash flows from operating activities amounted to EUR 16 (13) million.
January–September 2012
- Sales amounted to EUR 741 (854) million, a decrease of 13 percent compared to the corresponding period in 2011.
- Operating profit (EBIT) amounted to EUR 33 (81) million, corresponding to 4.5 (9.5) percent of sales.
- Net profit for the period amounted to EUR 4 (40) million.
- Cash flows from operating activities amounted to EUR 54 (32) million.
- The net debt/equity ratio amounted to 124 percent, compared to 137 percent at 31 December 2011.
(Amounts in brackets in this report refer to the corresponding period in the previous year.)
Group key figures
| 2012 Q3 |
2011 Q3 |
2012 Q1-3 |
2011 Q1-3 |
2011 Full year |
||
| Net Sales | EUR million | 201 | 244 | 741 | 854 | 1 121 |
| Operating profit before depreciation (”EBITDA”) | EUR million | 5 | 17 | 66 | 114 | 134 |
| as % of Net Sales | % | 2,3 % | 6,9 % | 9,0 % | 13,3 % | 12,0 % |
| Operating profit (”EBIT”) | EUR million | -7 | 7 | 33 | 81 | 90 |
| Operating margin (% of Net Sales) | % | -3,3 % | 2,7 % | 4,5 % | 9,5 % | 8,0 % |
| Net profit/loss for the period | EUR million | -12 | -5 | 4 | 40 | 38 |
| Earnings per share | EUR | -245 | -91 | 84 | 797 | 755 |
| Cash flow from operations | EUR million | 16 | 13 | 54 | 32 | 56 |
| Net debt/equity ratio | % | 124 % | 133 % | 124 % | 133 % | 137 % |
| Return on Capital Employed (”ROCE”) | % | 7,6 % | n/a | 7,6 % | n/a | 17 % |
| Full time employees at end of period (“FTE”) | no | 3 120 | 3 301 | 3 120 | 3 301 | 3 239 |
Comments from the CEO
"Weaker demand and the increasing market uncertainty in Europe impacted Ovako during the third quarter. Order inflows were particularly weak in September and demand did not pick up as normal. Both lower production rates and inventory reductions among Ovako’s customers affected the sales volume negatively during the quarter. The group was also affected by a fire in Imatra, which led to a five-week production stoppage at the steel mill. No one was injured and the mill was restarted in late September. The majority of the damage is covered by insurance, but both sales and profits during the quarter were affected by the stoppage.
The profit on the EBITDA level in the third quarter was a result of a quick adjustment to lower production rates assisted by measures executed during the year to adjust to weaker demand. Cost savings in comparable currency amounted to EUR 10 million during the quarter. Rapid capacity adjustments and the implementation of flexible working agreements have been enabled by good working relationships with our unions in both Sweden and Finland. Profit was negatively impacted overall, however, in part because of a strong Swedish krona exchange rate, non-recurring expenses related to the stoppage in Imatra and negative effects of previously entered hedging contracts in the electricity market. Inventories have been reduced during the year and cash flow has improved significantly in the first three quarters compared to last year.
Important efforts to expand Ovako’s sales organisation are proceeding according to plan. A decision was taken during the quarter to set up a service centre in China, and a new Asia manager was recruited from 1 October. Expansion of the sales organisation in Eastern Europe and Russia also continues as scheduled and is expected to have some effect as early as by 2013. Important action was also taken in flat spring steel during the third quarter to secure a greater market share. This will mean approximately 15,000 tonnes of increased sales on an annual basis, beginning in the first half of 2013. Deliveries will take place from Smedjebacken and Boxholm. Improvements to working practices and efficiency as well as equipment upgrades at our larger facilities also continue as planned. A decision was taken during the quarter regarding phase two of the de-dusting system in Smedjebacken. The total investment amounts to approximately EUR 14 million over two years, and is expected to be operational in autumn 2013. The system meets future environmental standards and is one of many measures to ensure a good working environment for our employees and to minimise our environmental impact.
Short-term outlook
Work is continuing during the fourth quarter to further align costs and capacity in relation to an anticipated fragile market. The market in the fourth quarter is expected to be in line with, or slightly weaker than, the third quarter of 2012."
Stockholm, October 31, 2012
Tom Erixon
President and CEO
You will find the full report for third quarter 2012 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 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 several sales companies in Europe and the USA. Net sales in 2011 were EUR 1,121 million and the number of employees was 3,239. Total steel production capacity is 1.3 million tonnes per year.
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