Outokumpu interim report January–September 2023: Solid performance in Americas compensated for the challenging market in Europe

Outokumpu interim report January–September 2023: Solid performance in Americas compensated for the challenging market in Europe

Highlights in Q3 2023  

•        Stainless steel deliveries were 449,000 tonnes (491,000 tonnes)*.

•        Adjusted EBITDA amounted to EUR 51 million (EUR 304 million).

•        EBITDA was EUR 18 million (EUR 304 million).

•        ROCE amounted to 5.3% (26.8%).

•        Operating cash flow was EUR -11 million (EUR 238 million incl. discontinued operations).

•        Net debt amounted to EUR 29 million (June 30, 2023: EUR -9 million).

•        Earnings per share was EUR -0.13 (EUR 0.46).

•        Gearing amounted to 0.7% (June 30, 2023: -0.2%).

•        Divestment of the remaining Long Products business was completed on August 1, 2023, and Outokumpu has now fully exited the Long Products business.

 

Highlights in January–September 2023

•        Stainless steel deliveries were 1,455,000 tonnes (1,656,000 tonnes).

•        Adjusted EBITDA amounted to EUR 445 million (EUR 1,146 million).

•        EBITDA was EUR 401 million (EUR 1,146 million).

•        Operating cash flow amounted to EUR 89 million (EUR 489 million incl. discontinued operations).

•        Earnings per share was EUR 0.30 (EUR 1.71).

•        Dividend of EUR 152 million was paid in April.

•        Share buyback program of EUR 100 million was completed in March.

•        Divestment of the majority of the Long Products business was completed on January 3, 2023. Since September 2022, these businesses were classified as assets held for sale and reported as discontinued operations. Comparative figures include discontinued operations if separately stated.

 

Key figures, continuing operations		Q3/23	Q3/22	Q2/23	Q1-Q3/23	Q1-Q3/22	2022
Sales	EUR million	1,531	2,339	1,911	5,447	7,598	9,494
EBITDA	EUR million	18	304	185	401	1,146	1,248
Adjusted EBITDA 1)	EUR million	51	304	190	445	1,146	1,256
EBIT	EUR million	-45	241	124	214	961	992
Adjusted EBIT 1)	EUR million	-12	241	129	261	961	1,010
Result before taxes	EUR million	-60	225	119	187	920	933
Net result for the period	EUR million	-55	207	89	131	775	1,086
Earnings per share	EUR	-0.13	0.46	0.21	0.30	1.71	2.40
Diluted earnings per share	EUR	-0.11	0.42	0.19	0.29	1.58	2.22
Return on capital employed, rolling 12 months (ROCE) 2)	%	5.3	26.8	11.4	5.3	26.8	22.6
Capital expenditure	EUR million	31	37	38	84	98	158
Stainless steel deliveries	1,000 tonnes	449	491	502	1,455	1,656	2,106
Personnel at the end of period, full-time equivalent		8,512	8,602	8,457	8,512	8,602	8,357
Key figures, including discontinued operations		Q3/23	Q3/22	Q2/23	Q1-Q3/23	Q1-Q3/22	2022
Net result for the period	EUR million	-56	189	89	136	825	1,140
Earnings per share	EUR	-0.13	0.42	0.21	0.31	1.82	2.52
Diluted earnings per share	EUR	-0.11	0.39	0.19	0.30	1.68	2.33
Return on capital employed, rolling 12 months (ROCE)	%	5.8	28.7	11.8	5.8	28.7	24.5
Net cash generated from operating activities	EUR million	-11	238	25	89	489	778
Net debt at the end of period	EUR million	29	90	-9	29	90	-10
Debt-to-equity ratio at the end of period (gearing)	%	0.7	2.2	-0.2	0.7	2.2	-0.3

1) Adjusted EBITDA or EBIT = EBITDA or EBIT – Items classified as adjustments.

2) The balance sheet component in 2022 includes the equity component of discontinued operations.

*Figures in parentheses refer to the corresponding period for 2022, unless otherwise stated.

 

President & CEO Heikki Malinen

The third quarter of 2023 reflects the cyclical nature of the stainless steel business. We experienced a very challenging market environment in Europe, but thanks to our geopolitically diversified asset portfolio and a solid performance in the Americas, we delivered EUR 51 million of adjusted EBITDA in the third quarter. Our stainless steel deliveries decreased by 11% from the second quarter, in line with the seasonal pattern.

For business area Europe, the market environment was even more difficult than during the pandemic. Stainless steel deliveries decreased from the second quarter and adjusted EBITDA amounted to EUR -29 million. We are on a journey to improve our competitiveness in Europe and have taken prompt actions. Today, we announced that we are streamlining our operations in Germany to ensure that we are utilizing our assets in the most efficient way.

For business area Americas, the market environment remained more favorable, and we continued to generate solid results. Adjusted EBITDA amounted to EUR 53 million, while stainless steel deliveries decreased compared to the second quarter. Our strategic plans in Calvert, Alabama are progressing well and the feasibility study to assess both our hot rolling and cold rolling operations is ongoing.

In business area Ferrochrome, third-quarter adjusted EBITDA amounted to EUR 21 million. We reached a great milestone in October when we had the inauguration of the Kemi mine expansion. We have now ensured the supply of chrome ore until at least the end of the 2040s. We are also taking determined steps toward our aim that the Kemi mine will become the first carbon-neutral mine globally by 2025.

Within decarbonization, our focus has been on energy efficiency improvements. These are crucial for energy-intensive industries such as stainless steel as they will reduce both our emissions and costs. We aim to improve our energy efficiency by 8% by the end of 2024 and have now achieved over 20% of that target, resulting in EUR 9 million savings. Our teams have provided innovative solutions to drive this great improvement. It is already now evident that we will overachieve our 8% target but it will take more time.

As part of our long-term ambition to decarbonize the company, we have taken strong actions to support our sustainability leadership. Our business is based on the circular economy and scrap is our most important raw material. 94% of all our raw material is recycled, and this is a critical factor in keeping our carbon footprint the lowest in the industry. Today, we announced we will acquire a 10% share of a large scrap dealer CRONIMET’s Northeastern business. By acquiring a share, we will strengthen our long-term partnership further and ensure access to high quality scrap near our European sites.

Earlier, we signed a letter of intent with Greenland Resources Inc. to strengthen our future supply of low-emission high-quality molybdenum. We have also acquired a share of FPX Nickel to ensure access to low-carbon nickel in the future. All these actions are part of our strategic plans to strengthen our value chain integration to ensure a sufficient future supply of critical raw materials with a low carbon footprint.

The market environment in Europe has been challenging, but it seems that the bottom is now behind us, and we have already seen some positive signals. Market recovery, however, is expected to take time.

I want to thank our employees for their resilience and dedication. Stainless steel is a volatile industry, but I am confident that as a team we will overcome the turbulent times. Our strong balance sheet and good liquidity will carry us through the cycle and ensure that we will create value also in more challenging conditions.
 

Outlook for Q4 2023

Group stainless steel deliveries in the fourth quarter are expected to increase by 0-10% compared to the third quarter as we see some recovery in Europe.

The planned maintenance break in business area Ferrochrome is expected to have an approximately   EUR 10 million negative impact on the business area's adjusted EBITDA.

With current raw material prices, some raw material related inventory and metal derivative losses are expected to be realized in the fourth quarter.

Guidance for Q4 2023:

Adjusted EBITDA in the fourth quarter of 2023 is expected to be at a similar or higher level compared to the third quarter.
 

Results

Q3 2023 compared to Q3 2022

Outokumpu's sales in the third quarter of 2023 decreased to EUR 1,531 million (EUR 2,339 million). Adjusted EBITDA amounted to EUR 51 million (EUR 304 million) and the decrease compared to the reference period was driven by a substantially weaker market environment, especially in Europe. As a result of lower profitability, ROCE for the rolling 12 months was 5.3% (26.8%).

In the third quarter of 2023, total stainless steel deliveries were 9% lower compared to the reference period. The significant decrease in profitability was mainly driven by substantially lower realized prices for stainless steel in Europe. Realized prices for stainless steel decreased also in Americas and the ferrochrome sales price was lower. Profitability was, however, supported by decreased variable costs, mainly due to lower electricity and ferrosilicon prices. Raw material-related inventory and metal derivative losses amounted to EUR 27 million (losses of EUR 107 million). Other operations and intra-group items’ adjusted EBITDA totaled EUR 5 million (EUR 7 million). Both net result and earnings per share turned negative for the quarter and were driven by weak EBITDA development. Net result was EUR -55 million in the third quarter of 2023 (EUR 207 million).

 

Q3 2023 compared to Q2 2023

Outokumpu’s sales decreased to EUR 1,531 million in the third quarter of 2023 (Q2/2023: EUR 1,911 million) and adjusted EBITDA amounted to EUR 51 million (Q2/2023: EUR 190 million). The decrease in adjusted EBITDA was mainly driven by the challenging market environment in Europe. As a result of lower profitability, ROCE for the rolling 12 months was 5.3% (11.4%).

In the third quarter, total stainless steel deliveries decreased by 11% from the second quarter, in line with the seasonal pattern. In addition to decreased volumes, profitability was also negatively impacted by lower realized prices for stainless steel in both Europe and Americas as well as the lower ferrochrome sales price. Positive impact in the third quarter compared to the previous quarter came from lower costs in business areas Europe and Ferrochrome. Raw material-related inventory and metal derivative losses increased to EUR 27 million in the third quarter (Q2/2023: losses of EUR 12 million). Other operations and intra-group items’ adjusted EBITDA totaled EUR 5 million (Q2/2023: EUR -8 million). Net result in the third quarter was EUR -55 million (Q2/2023: EUR 89 million).

 

January–September 2023 compared to January–September 2022

During January–September 2023, Outokumpu’s sales decreased to EUR 5,447 million (EUR 7,598 million) and adjusted EBITDA amounted to EUR 445 million (EUR 1,146 million). The market environment, especially in Europe, was significantly weaker in 2023 compared to the previous exceptionally strong year. ROCE for the rolling 12 months was 5.3% (26.8%).

In January–September 2023 total stainless steel deliveries were 12% lower compared to the same period last year. Weaker profitability was mainly driven by substantially lower realized prices for stainless steel in Europe while there was a decrease in Americas as well. Also, the lower ferrochrome sales price negatively impacted profitability in 2023. Variable costs decreased mainly due to the fact that the negative impact from the higher electricity price was more than offset by the lower ferrosilicon price. Raw material-related inventory and metal derivative losses amounted to EUR 45 million in January–September 2023 (losses of EUR 83 million). Other operations and intra-group items' adjusted EBITDA totaled EUR -4 million (EUR -33 million). EBIT amounted to EUR 214 million (EUR 961 million) and net result EUR 131 million (EUR 775 million) in January–September 2023.

 

A live webcast and conference call today, November 7, at 3.00pm EET

A live webcast and conference call to analysts, investors and representatives of media will be arranged today at 3.00 pm EET at https://outokumpu.videosync.fi/2023-q3-results, hosted by President and CEO Heikki Malinen and CFO Pia Aaltonen-Forsell.

To ask questions, please participate in the conference call by registering at https://palvelu.flik.fi/teleconference/?id=10010351. After registration you will receive phone number and a conference ID to access the conference call. If you wish to ask a question, please dial *5 on your telephone keypad to enter the queue.

All the interim report materials, a link to the webcast and later on its recording will be available at www.outokumpu.com/en/investors.

 

For more information:
Investors: Linda Häkkilä, Head of Investor Relations, tel. +358 400 719 669
Media: Päivi Allenius, VP – Communications, tel. +358 40 753 7374 or Outokumpu media desk, tel. +358 40 351 9840