Year-End Report 2014
Read CEO Tom Erixon's comments on Ovako's Year End report and Fourth Quarter 2014 and get the financial report.
Fourth quarter 2014
- Sales volumes were 6 percent below the fourth quarter of 2013, and revenue was down 3 percent
- Operating profit before depreciation and amortisation (EBITDA) amounted to EUR 4 (8) million. The weaker outcome is largely explained by lower sales volumes and inventory reductions
- Operating profit (EBIT) amounted to EUR -15 (-4) million
- Cash flows from operating activities amounted to EUR 42 (4) million, significantly strengthened through reductions of inventories and other trade working capital
- Order intake for the quarter was 7 percent weaker than in the same period the previous year. The order book at end of year was on the same level as at the end of 2013
Full-year 2014
- Sales volumes increased by 3 percent compared to the previous year, and revenue by 1 percent
- Operating profit before depreciation and amortisation (EBITDA) amounted to EUR 69 (47) million, supported by higher volumes, improved product mix, implemented cost reduction programme and a weaker Swedish krona
- Operating profit (EBIT) amounted to EUR 15 (1) million
- Cash flow from operating activities amounted to EUR 66 (20) million
Amounts in brackets in this report refer to the corresponding period in the previous year.
Group key figures
| 2014Q4 | 2013Q4 | 2014Full year | 2013Full year | ||
| Sales volumes | kton | 160 | 171 | 697 | 675 |
| Revenue | EURm | 199 | 205 | 862 | 850 |
| Operating profit before depreciation (EBITDA) | EURm | 4 | 8 | 69 | 47 |
| EBITDA margin | % | 2.0 % | 3.8 % | 7.9 % | 5.5 % |
| Operating profit (EBIT) | EURm | -15 | -4 | 15 | -1 |
| EBIT margin | % | -7.3 % | -2.0 % | 1.7 % | 0.0 % |
| Net profit/loss | EURm | -15 | -6 | -15 | -21 |
| Earnings per share | EUR | -306 | -128 | -302 | -412 |
| Cash flow from operating activities | EURm | 42 | 4 | 66 | 20 |
| Net debt/equity ratio | % | 152 % | 160 % | 152 % | 160 % |
| Return on capital employed (ROCE) | % | 3 % | 0 % | 3 % | 0 % |
| Number of employees at end of period (FTE) | No. | 2 925 | 2 995 | 2925 | 2 995 |
Comments from the CEO
"The gradual market improvement that started mid 2013 continued in the first half of 2014. Markets slowed again in the second half of 2014, with order intake and invoicing ending somewhat lower than in 2013. The contribution margin per ton stayed stable throughout the year, but the EBITDA margin decreased in the second half due to under absorption in production and lower sales volumes. For the full year Ovako grew 3 percent in volume and EBITDA improved with 47 percent to 69 MEUR. It was a good step forward in a volatile market.
Also in terms of cash flow, it was a strong year. Cash flow from operating activities more than tripled compared to the previous year to 66 MEUR.
The investments in new markets continued to gain momentum during the year. Our new sales companies in China, Italy, Eastern Europe, together with the increased efforts in the US and Russia, all grew ahead of the group average and now account for 22 percent of our sales. Our customer portfolio and prospects strengthened significantly, and we expect these markets to continue to grow towards our target level of 30 percent of our total sales in 2017.
From a product point of view 2014 has been a very exciting year. Our portfolio of M-Steel™ for improved machinability, WR-Steel® for improved wear resistance, and our BQ- and IQ-Steels® to avoid metal fatigue are now improved and launched in the market. High productivity and long tool life in machining, ability to reduce weight in critical components without risking fatigue, and extended durability in heavy wear applications is at the core of our customer offer.
Investments in our production system were still significant during 2014 and reached 34 MEUR, however decreased compared to the year before. The biggest project by far was the installation of a new continuous caster in the steel mill in Smedjebacken.
Operational efficiency remains high on the agenda. Ovako launched a three year program in 2014 to reduce costs with 34 MEUR. The program includes productivity improvements, cost reductions in purchasing, and an energy efficiency program. During the fourth quarter, the Cromax unit in Mora was closed as planned. The full program resulted in 15 MEUR of savings for 2014. For 2015 another 9 MEUR is planned for. The savings are off-setting inflationary pressure, especially on salaries and wages, but they are also contributing to fund the growth initiatives and improve the bottom line.
Ovako’s program to improve health and safety was accelerated in the end of 2014. Significant efforts are made to build a safer work place. The program for 2015 is our biggest ever, and includes training of all personnel, identification of risks, and selective investments.
Short-term outlook
Although the economic recovery in Europe is characterized by uncertainty, we expect the market for engineering steel in Europe to remain at a similar level compared to 2014. We expect Ovako sales volumes in the first quarter to be in line with or slightly lower than in the same quarter last year, but significantly above the seasonally weak fourth quarter."
Tom Erixon
President and CEO
Stockholm, February 11, 2015
You will find the Year-End Report 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 2014 amounted to EUR 862 million and the company had 2,925 employees at year-end. For further information please visit us at www.ovako.com
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