Outokumpu Oyj
Interim statement
October 26, 2017 at 12.00 pm EET
Highlights in the third quarter of 2017
Outokumpu’s third-quarter adjusted EBITDA amounted to EUR 56 million, compared to EUR 116 million in the third quarter of 2016. Despite successful cost reductions, higher base prices in Europe and increased deliveries in the Americas, profitability declined year-on-year due to raw material-related inventory and metal derivative losses of EUR 41 million (gains of EUR 6 million)1, as well as due to third-party supplier production issues in the Americas. The reference period includes a positive impact from a reversal of credit loss allowances of EUR 22 million.
- Stainless steel deliveries were 623,000 tonnes (608,000 tonnes).
- Adjusted EBITDA2 was EUR 56 million (EUR 116 million).
- EBITDA was EUR 62 million (EUR 119 million).
- Adjusted EBIT3 was EUR 2 million (EUR 38 million).
- EBIT was EUR 9 million (EUR 40 million).
- Operating cash flow was EUR 126 million (EUR 61 million).
- Net debt decreased to EUR 1,130 million (June 30, 2017: EUR 1,239 million).
- Gearing was 44.4% (June 30, 2017: 48.4%).
- Return on capital employed (ROCE) was 12.4% (9.3%).
Highlights during the first nine months of 2017
- Stainless steel deliveries were 1,887,000 tonnes (1,848,000 tonnes).
- Adjusted EBITDA was EUR 549 million (EUR 211 million).
- EBITDA was EUR 580 million (EUR 227 million).
- Adjusted EBIT was EUR 384 million (EUR 18 million).
- EBIT was EUR 415 million (EUR 34 million).
- Operating cash flow was EUR 223 million (EUR 190 million).
1) Figures in parentheses refer to the corresponding period for 2016, unless otherwise stated.
2) EBITDA excluding items classified as adjustments. Adjustments are material income and expense items such as restructuring costs, and gains or losses on sale of assets or businesses.
3) EBIT excluding items classified as adjustments.
| Group key figures | |||||||
| III/17 | III/16 | II/17 | I–III/17 | I–III/16 | 2016 | ||
| Sales | EUR million | 1,482 | 1,419 | 1,659 | 4,898 | 4,183 | 5,690 |
| EBITDA | EUR million | 62 | 119 | 209 | 580 | 227 | 355 |
| Adjusted EBITDA 1) | EUR million | 56 | 116 | 199 | 549 | 211 | 309 |
| EBIT | EUR million | 9 | 40 | 154 | 415 | 34 | 103 |
| Adjusted EBIT 2) | EUR million | 2 | 38 | 145 | 384 | 18 | 57 |
| Result before taxes | EUR million | -24 | 13 | 127 | 327 | -56 | -13 |
| Net result for the period | EUR million | -27 | 13 | 109 | 264 | -48 | 144 |
| Earnings per share | EUR | -0.07 | 0.03 | 0.26 | 0.64 | -0.12 | 0.35 |
| Diluted earnings per share | EUR | -0.07 | 0.03 | 0.25 | 0.62 | -0.12 | 0.35 |
| Return on capital employed | % | 12.4 | 9.3 | 13.2 | 12.4 | 9.3 | 2.6 |
| Net cash generated from operating activities | EUR million | 126 | 61 | 150 | 223 | 190 | 389 |
| Net debt at the end of period | EUR million | 1,130 | 1,396 | 1,239 | 1,130 | 1,396 | 1,242 |
| Debt-to-equity ratio at the end of period | % | 44.4 | 65.3 | 48.4 | 44.4 | 65.3 | 51.4 |
| Capital expenditure | EUR million | 40 | 43 | 31 | 90 | 103 | 164 |
| Stainless steel deliveries 3) | 1,000 tonnes | 623 | 608 | 625 | 1,887 | 1,848 | 2,444 |
| Personnel at the end of period 4) | 10,276 | 10,785 | 10,254 | 10,276 | 10,785 | 10,600 |
1) Adjusted EBITDA = EBITDA – Items classified as adjustments.
2) Adjusted EBIT = EBIT – Items classified as adjustments.
3) Excludes ferrochrome deliveries.
4) On June 30, 2017 Group employed in addition some 750 summer trainees.
Business and financial outlook for the fourth quarter of 2017
Underlying stainless steel demand is expected to remain healthy in both Europe and the US in the fourth quarter. However, typical seasonal slowdown in the US market is expected to have a negative impact on business area Americas’ deliveries in the fourth quarter. Business area Europe’s deliveries are expected to remain relatively flat compared to the third quarter.
Ferrochrome production is expected to be at normal levels. However, planned maintenance work in European stainless steel mills is expected to have a negative impact on fourth-quarter profitability with additional maintenance costs of approximately EUR 30 million.
The net impact of raw material-related inventory and metal derivative gains/losses is expected to be slightly positive in the fourth quarter.
Outokumpu expects its fourth-quarter adjusted EBITDA to be higher compared to the previous quarter (III/17: EUR 56 million).
CEO Roeland Baan:
“Outokumpu’s third-quarter results reflected the seasonal pattern with an adjusted EBITDA of 56 million euros. In addition to the typical third-quarter dip, profitability was burdened by low ferrochrome production volumes as well as the raw material related timing and hedging impacts. Third-party supplier production issues in the Americas had a notable negative impact on the business area’s profitability. We are confident that strict focus on commercial excellence and ongoing actions will bring the business area’s performance back on track. High deliveries and rigorous cost control during this year show that, operationally, business area Americas is continuously making progress.
Business area Europe’s deliveries were stable and underlying performance improved year-on-year. This development was supported by continued progress in reducing our cost base. I am also happy to confirm that our ferrochrome production is at full speed after the successful maintenance and ramp up of the damaged ferrochrome furnace. Normal production levels were reached at the end of August as planned.
Our actions to decrease net debt continue to pay off. Third-quarter cash flow was on a healthy level at 126 million euros. Net debt decreased to 1,130 million euros demonstrating that our net debt target of less than 1.1 billion euros by the end of 2017 is firmly in reach.
During the final quarter of the year, we expect improving profitability supported by positive market fundamentals and healthy underlying stainless steel demand in our main markets, Europe and the US. We are solidly on our way in achieving our 2020 vision to be the best value creator in stainless steel through customer orientation and efficiency.”
Conference call today on October 26, 2017 at 3.00 pm EET
A conference call for investors and analysts will be held on Thursday, October 26, 2017 at 3.00 pm EET (8.00 am US EDT, 1.00 pm UK, 2.00 pm CEST). The results call will be hosted by Outokumpu’s CEO Roeland Baan and CFO Christoph de la Camp. To participate in the conference call, please dial in 5−10 minutes before the beginning of the event:
Finland: +358 9 6937 9543
UK/Europe: +44 20 3427 1909
US & Canada: +1 646 254 3365
Confirmation code: 3857660
The event can be viewed live at https://edge.media-server.com/m6/p/yvavn3x8. 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 October 26, 2017 at around 6.00 pm EEST.
For more information:
Investors: Tommi Järvenpää, tel. +358 9 421 34 66, mobile +358 40 576 0288
Media: Reeta Kaukiainen, tel. +358 50 522 0924
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 some 10,000 professionals in more than 30 countries, with headquarters in Helsinki, Finland and shares listed in Nasdaq Helsinki.
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