OUTOKUMPU OYJ
INTERIM STATEMENT
April 27, 2016 at 12.00 pm EET
Highlights in the first quarter 2016
Outokumpu’s underlying EBIT was EUR -20 million, compared to EUR -11 million in the fourth quarter of 2015. Delivery volumes grew in both Europe and the Americas, but this positive development was offset by continued downward pressure on prices and an increase in scrap costs, as well as write-downs of a trade receivable in Europe and aged inventories in the Americas.
- Stainless steel deliveries were 610,000 tonnes[1] (574,000 tonnes)[2].
- Underlying EBITDA[3] was EUR 38 million (EUR 50 million).
- Underlying EBIT[4] was EUR -20 million (EUR -11 million). Underlying EBIT includes net adjustments of EUR 8 million in the first quarter (EUR 352 million), including the net effect of raw material-related inventory and metal derivative gains/losses of EUR -9 million (EUR -29 million).
- EBIT was EUR -12 million (EUR 341 million).
- Operating cash flow was EUR 74 million (EUR 2 million).
- Net debt decreased to EUR 1,551 million (EUR 1,610 million).
- Gearing was 69.6% (69.1%).
- Return on capital employed (ROCE) was 5.3% (5.3%).
Outokumpu publishes an interim statement regarding its first and third quarter earnings. Interim statement has not been prepared in full accordance with the IAS 34 (interim financial reporting) however, it provides information on the quarterly development in all material aspects, including financial and business analysis. The second quarter and full year reports continue to follow IAS 34.
This interim statement reflects the new organizational structure with three business areas: Europe, the Americas and Long Products. Europe and the Americas cover Outokumpu’s entire flat products offering in these two markets, including all coil and plate business. The earlier European Quarto Plate operations and sales network in APAC are reported as part of Europe and the US Quarto Plate business under the Americas. The reporting of Long Products remains unchanged.
Figures in parentheses refer to the previous quarter, unless otherwise stated.
| Group key figures | |||||
| I/16 | IV/15 | I/15 | 2015 | ||
| Sales | EUR million | 1,386 | 1,435 | 1,768 | 6,384 |
| EBITDA | EUR million | 46 | 408 | 65 | 531 |
| Underlying EBITDA 1) | EUR million | 38 | 50 | 77 | 196 |
| EBIT | EUR million | -12 | 341 | -10 | 228 |
| Underlying EBIT 2) | EUR million | -20 | -11 | 2 | -101 |
| Result before taxes | EUR million | -47 | 352 | -46 | 127 |
| Net result for the period | EUR million | -41 | 308 | -45 | 86 |
| Earnings per share | EUR | -0.10 | 0.74 | -0.10 | 0.23 |
| Return on capital employed | % | 5.3 | 5.3 | -1.5 | 5.3 |
| Net cash generated from operating activities | EUR million | 74 | 2 | -62 | -34 |
| Net debt at the end of period | EUR million | 1,551 | 1,610 | 2,034 | 1,610 |
| Debt-to-equity ratio at the end of period | % | 69.6 | 69.1 | 91.5 | 69.1 |
| Capital expenditure | EUR million | 32 | 65 | 26 | 154 |
| Stainless steel deliveries 3) | 1,000 tonnes | 610 | 574 | 620 | 2,381 |
| Personnel at the end of period | 10,920 | 11,002 | 11,824 | 11,002 | |
1) EBITDA excluding items classified as adjustments, unaudited.
2) EBIT excluding items classified as adjustments, unaudited.
3) Excludes ferrochrome deliveries.
Business and financial outlook for the second quarter of 2016
Outokumpu expects that the stainless steel market conditions will continue to be challenging in the second quarter amid global economic uncertainties and subdued raw material prices. In Europe, the underlying demand in key sectors outside of Oil & Gas is expected to continue healthy but stock levels among distributors are still above historical averages. Market dynamics in Americas are showing some improvement: stock levels among distributors have come down, price increases have been announced and Chinese imports are being addressed with antidumping investigation.
Market uncertainties warrant prudence in the outlook statement for the second quarter. While steady progress in stainless business is expected, results will be burdened by weaker performance of the ferrochrome business driven by low ferrochrome price and USD/EUR exchange rate. Outokumpu expects its delivery volumes to be sequentially flat and the underlying EBIT to remain at a similar level as in the first quarter. With current prices, the net impact of raw material-related inventory and metal derivative gains/losses on profitability is expected to be marginal, if any.
Outokumpu is finalizing plans for the announced EUR 100 million reduction in its SG&A costs and estimates to book approximately EUR 40 million of redundancy provisions in the second quarter, out of which approximately EUR 5 million is expected to be cash effective during the quarter.
This outlook reflects the current scope of operations.
CEO Roeland Baan:
“Outokumpu’s first-quarter performance was largely in line with our expectations. In the challenging market environment, we made further progress in our operational performance especially in Europe. However, our financial results were impacted by the actions we took to prudently manage our business, including a write-down of a large customer receivable in Europe and aged inventories in Calvert. Together, these had a negative impact of EUR 15 million, contributing to the underlying EBIT of EUR -20 million.
In the business area Europe, sequentially higher deliveries led to a stronger underlying EBIT despite price pressures. In the Americas, we continued to grow the delivery volumes as planned. However, the business area remained heavily at loss, because despite the all-time high quarterly deliveries and the cost takeout measures, low prices continued to offset the positives.
Our strong efforts on ensuring financial stability resulted in positive cash flow and further reduction of net debt to below EUR 1.6 billion and gearing remained stable at 69.6%. The recently announced short-term efficiency measures coupled with the profitability improvement initiatives and net working capital efficiency actions will be the main levers to deliver further net debt reduction toward our goal of EUR 1.2 billion by the end of 2017.
The start of this year and the continued market uncertainties clearly show that additional measures are urgently needed to change Outokumpu’s cost and competitive position. While we expect steady progress in stainless business in the second quarter, our results will be burdened by weaker performance of the ferrochrome business driven by low ferrochrome price and US dollar. With sequentially flat delivery volumes, we expect the underlying EBIT to remain at a similar level as in the first quarter.”
Conference call today at 3.00 pm EET
A conference call will be held on Wednesday, April 27, 2016 at 3.00 pm EET (8.00 am US EST, 1.00 pm UK time, 2.00 pm CET). The results will be introduced by Outokumpu’s CEO Roeland Baan and CFO Reinhard Florey. To participate the conference call, please dial in 5-10 minutes before the beginning of the event:
UK/Europe: +44 20 3364 5728
US & Canada: +1 646 254 3368
Confirmation code: 3920485
The event can be viewed live online. Link to the webcast.
The stock exchange release and the presentation material will be available before the event at www.outokumpu.com/en/investors.
A recording of the event will be available at www.outokumpu.com/en/investors/IR-events/webcasts as of April 27, 2016 at around 6.00 pm EET.
For more information:
Investors: Johanna Henttonen, tel. +358 9 421 3804, mobile +358 40 530 0778
Media: Saara Tahvanainen, tel. +358 40 589 0223
Outokumpu Group
Outokumpu is a global leader in stainless steel. We create advanced materials that are efficient, long lasting and recyclable – thus building a world that lasts forever. Stainless steel, invented a century ago, is an ideal material to create lasting solutions in demanding applications from cutlery to bridges, energy and medical equipment: it is 100% recyclable, corrosion-resistant, maintenance-free, durable and hygienic. Outokumpu employs 11,000 professionals in more than 30 countries, with headquarters in Espoo, Finland and shares listed in Nasdaq Helsinki.
www.outokumpu.com outokumpu.com/stainless-news choosestainless.outokumpu.com
[1] Metric ton = 1,000 kg
[2] Figures in parentheses refer to the previous quarter, unless otherwise stated.
[3] EBITDA excluding items classified as adjustments. Adjustments are material income and expense items such as restructuring costs, impairments, and gains or losses on sale of assets or businesses, as well as raw material related inventory gains/losses and metal derivative gains/losses.
[4] EBIT excluding items classified as adjustments.
