Outokumpu Oyj
Half-year financial report
July 24, 2018 at 12.00 pm EEST
Outokumpu – Good performance in an adverse environment, Group adjusted EBITDA at EUR 136 million supported by record-high stainless steel deliveries
Highlights in the second quarter of 2018
- Stainless steel deliveries were 668,000 tonnes (625,000 tonnes)1.
- Adjusted EBITDA was EUR 136 million (EUR 199 million).
- EBITDA was EUR 136 million (EUR 209 million).
- Operating cash flow was EUR 71 million (EUR 150 million).
- Net debt increased to EUR 1,211 million (March 31, 2018: EUR 1,086 million).
- Gearing was 45.1% (March 31, 2018: 40.9%).
- Return on capital employed (ROCE) was 5.5% (March 31, 2018: 7.2%).
Highlights in the first half of 2018
- Stainless steel deliveries were 1,312,000 tonnes (1,264,000 tonnes).
- Adjusted EBITDA was EUR 269 million (EUR 493 million).
- EBITDA was EUR 276 million (EUR 518 million).
- Operating cash flow was EUR 110 million (EUR 97 million).
- Net result was EUR 74 million (EUR 291 million).
1 Figures in parentheses refer to the corresponding period for 2017, unless otherwise stated.
Q2/2018 compared to Q2/2017
Outokumpu’s sales increased to EUR 1,883 million (EUR 1,657 million). The second-quarter adjusted EBITDA of EUR 136 million was significantly weaker than EUR 199 million in the second quarter of 2017. Lower European base prices, higher input costs and steep increases in the cost of truck freight in the Americas led to decreased profitability. The result was further negatively impacted by lower ferrochrome price. The record-high stainless steel deliveries had a positive impact on profitability supported by improved cost efficiency in all business areas. Raw material-related inventory and metal derivative gains were EUR 1 million (losses of EUR 9 million). Other operations and intra-group items’ adjusted EBITDA increased to EUR 5 million (EUR -11 million) mainly due to gains from currency and other derivatives.
H1/2018 compared to H1/2017
During the first half of 2018, Outokumpu’s sales increased to EUR 3,553 million (H1/17: EUR 3,413 million). Adjusted EBITDA declined to EUR 269 million (H1/17: EUR 493 million) primarily driven by significantly lower ferrochrome price, as well as lower base prices in Europe. In addition, the input cost pressure has increased substantially compared to the previous year. These large negative impacts were partly offset by improved cost efficiency and higher stainless steel deliveries. Raw material-related inventory and metal derivative gains were EUR 25 million compared to losses of EUR 4 million in the first half of 2017. EBIT was EUR 176 million (H1/17: EUR 407 million) and net result amounted to EUR 74 million (H1/17: EUR 291 million).
| Group key figures | II/18 | II/17 | I/18 | I–II/18 | I–II/17 | 2017 | |
| restated | restated | restated | |||||
| Sales | EUR million | 1,883 | 1,657 | 1,671 | 3,553 | 3,413 | 6,356 |
| EBITDA | EUR million | 136 | 209 | 140 | 276 | 518 | 663 |
| Adjusted EBITDA 1) | EUR million | 136 | 199 | 133 | 269 | 493 | 631 |
| EBIT | EUR million | 86 | 154 | 90 | 176 | 407 | 445 |
| Adjusted EBIT 1) | EUR million | 86 | 145 | 83 | 169 | 382 | 414 |
| Result before taxes | EUR million | 49 | 127 | 70 | 119 | 351 | 327 |
| Net result for the period | EUR million | 25 | 109 | 49 | 74 | 291 | 392 |
| Earnings per share | EUR | 0.06 | 0.26 | 0.12 | 0.18 | 0.71 | 0.95 |
| Diluted earnings per share | EUR | 0.06 | 0.25 | 0.12 | 0.18 | 0.67 | 0.90 |
| Return on capital employed | % | 5.5 | 13.2 | 7.2 | 5.5 | 13.2 | 11.3 |
| Net cash generated from operating activities | EUR million | 71 | 150 | 39 | 110 | 97 | 328 |
| Net debt at the end of period | EUR million | 1,211 | 1,239 | 1,086 | 1,211 | 1,239 | 1,091 |
| Debt-to-equity ratio at the end of period | % | 45.1 | 48.4 | 40.9 | 45.1 | 48.4 | 40.1 |
| Capital expenditure | EUR million | 63 | 31 | 37 | 100 | 50 | 174 |
| Stainless steel deliveries | 1,000 tonnes | 668 | 625 | 644 | 1,312 | 1,264 | 2,448 |
| Personnel at the end of period 2) | 10,419 | 10,254 | 10,111 | 10,419 | 10,254 | 10,141 |
Outokumpu has adopted IFRS 15 – Revenue from Contracts with Customers retrospectively. Comparable financial figures for 2017 have been restated accordingly.
Further information on changes to Outokumpu's accounting principles and restatement impacts can be found in the Financial Information section of this report.
1) Adjusted EBITDA or EBIT = EBITDA or EBIT – Items classified as adjustments.
2) On June 30, 2018, the Group employed, in addition, some 690 summer trainees (June 30, 2017: some 750).
President & CEO Roeland Baan:
“Despite market volatility and the global uncertainty created by the US steel tariffs, we maintained our market position and financial performance during the second quarter. Our adjusted EBITDA amounted to EUR 136 million supported by record-high stainless steel deliveries. Business area Americas’ result improved as expected, and business area Europe was able to maintain its good performance in a challenging market environment with unprecedented price pressure.
The impacts of the US steel tariffs implemented in early May have been two-fold. On the downside, we have witnessed surging imports to Europe resulting in heavy price pressure while in the Americas, base prices have risen throughout the spring benefiting local manufacturers including us. The provisional safeguard measures imposed by the European Commission as of July 19 are a logical reaction to restore balance in the European steel markets and stem the flow of low-priced steel imports. We expect the provisional safeguards to be commuted into permanent safeguards within the next 200 days.
We are halfway through our journey to become the best value creator in stainless steel. Despite substantial market headwinds during the past months, we delivered one of our strongest quarters in our history. This development highlights the significant progress we have made to achieve our 2020 targets.”
Outlook for Q3/2018
In line with the market, third-quarter stainless steel deliveries are expected to be seasonally lower in business area Europe and to remain stable in the Americas. Base price pressure continues in Europe but the negative impact of this is partly offset by higher base prices in the US supported by steel import tariffs.
After the successful planned maintenance shutdown of a ferrochrome furnace, Outokumpu expects to achieve normalized ferrochrome production in the third quarter.
Outokumpu expects its third-quarter adjusted EBITDA to be lower than in the second quarter (Q2/18: EUR 136 million) but significantly higher than in the third quarter of 2017 (Q3/17: EUR 56 million).
Financial and market data available online
An Excel file including key financial and market data for the Group and business areas is available at www.outokumpu.com/en/investors. The data will be updated on a quarterly basis after the results announcements.
Conference call today at 3.00 pm EEST
A conference call for investors and analysts will be held on Tuesday, July 24, 2018 at 3.00 pm EEST (8.00 am US EST, 1.00 pm UK, 2.00 pm CET). 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 7479 0404
UK/Europe: +44 330 336 9411
US & Canada: +1 929 477 0448
Confirmation code: 3556696
The event can be viewed live at https://edge.media-server.com/m6/p/db7wexnv.
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/materials as of July 24, 2018 at around 6.00 pm EEST.
For more information:
Investors: Tommi Järvenpää, tel. +358 9 421 3466, +358 40 576 0288
Media: Reeta Kaukiainen, tel. +358 50 522 0924 or Corporate Communications, tel. +358 9 421 3840
Outokumpu Group
Outokumpu is the global leader in stainless steel. We aim to be the best value creator in stainless by 2020, through our competitive edge of customer orientation and efficiency. The foundation of our business is our ability to tailor stainless steel into any form and for almost any purpose. Stainless steel is sustainable, durable and designed to last forever. Our customers use it to create civilization’s basic structures and its most famous landmarks as well as products for households and various industries. Outokumpu employs 10,000 professionals in more than 30 countries, with headquarters in Helsinki, Finland and shares listed in Nasdaq Helsinki. www.outokumpu.com
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