Targets and outlook
Long-term financial targets
Connected to our vision to be the best value creator in stainless steel by 2020 through customer orientation and efficiency, defined measures of success include profitability as well as further deleveraging. Quantified financial targets for the timeframe are:
- Adjusted EBITDA of EUR 750 million
- ROCE of 12%
- Gearing of <35%
These group level targets are expected to be reached by the end of 2020 at the latest. While the global demand for stainless steel continues to grow, Outokumpu takes a conservative approach on the market growth and metal price assumptions, and expects the targeted profitability improvement to come primarily through efficiency and cost improvements in the current scope of business, supported by further strengthening of Outokumpu’s cost competitiveness and market position market presence and market share particularly in Americas.
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).
The dividend policy established by the Board of Directors states that the dividend payout ratio over a business cycle should be at least one-third of the company's net profit for the period with the aim to have stable annual payments to shareholders.
In its annual dividend proposal, the Board of Directors will, in addition to financial results, take into consideration the Group's investment and development needs.
The Annual General Meeting 2017 decided on a dividend of 0.10 euros per share based on the balance sheet adopted for the account period ending December 31, 2016.
Short-term risks and uncertainties
Outokumpu is exposed to the following risks and uncertainties in the short-term: risks and uncertainties in implementing the announced vision, including measures to drive competitiveness and further improve the financial performance; risks and uncertainties related to market development in stainless steel and in ferrochrome as well as competitor actions; vulnerability to business interruptions due to high capacity utilization and increased price levels; risk of material changes in metal prices impacting cash flow and availability of financing; risks and uncertainties in implementing the new organizational structure, and the loss of key personnel; changes in the prices of electrical power, fuels, nickel and molybdenum; currency developments affecting the euro, US dollar, Swedish krona and British pound; counterparty risk related to customers and other business partners, including financial institutions. Possible changes in the global political and economic environment, including trade and fiscal policies could have an adverse impact on Outokumpu’s overall business and access to financial markets.