Outokumpu – Solid performance despite continued market uncertainties, Group adjusted EBITDA at EUR 128 million

Interim statement
October 26, 2018 at 12.00 pm EEST

Outokumpu – Solid performance despite continued market uncertainties, Group adjusted EBITDA at EUR 128 million

Highlights in the third quarter of 2018

  • Stainless steel deliveries were 582,000 tonnes (623,000 tonnes)1.
  • Adjusted EBITDA was EUR 128 million (EUR 56 million).
  • EBITDA was EUR 128 million (EUR 62 million).
  • Operating cash flow was EUR 61 million (EUR 126 million).
  • Net debt decreased to EUR 1,205 million (June 30, 2018: EUR 1,211 million).
  • Gearing was 44.5% (June 30, 2018: 45.1%).
  • Return on capital employed (ROCE) was 6.9% (June 30, 2018: 5.5%).

Highlights in the first nine months of 2018

  • Stainless steel deliveries were 1,894,000 tonnes (1,887,000 tonnes).
  • Adjusted EBITDA was EUR 397 million (EUR 549 million).
  • EBITDA was EUR 404 million (EUR 580 million).
  • Operating cash flow was EUR 171 million (EUR 223 million).
  • Net result was EUR 103 million (EUR 264 million).

1 Figures in parentheses refer to the corresponding period for 2017, unless otherwise stated.

Q3/2018 compared to Q3/2017

Outokumpu’s sales increased to EUR 1,733 million (EUR 1,480 million). The third-quarter adjusted EBITDA of EUR 128 million was significantly higher than EUR 56 million in the third quarter of 2017. Raw material-related inventory and metal derivative gains were EUR 3 million compared to losses of EUR 41 million in the third quarter of 2017. Earnings were supported further by improved Ferrochrome and Long Products performance. Improved product mix in Europe and better cost efficiency in all business areas increased profitability, whereas lower European base prices, higher input costs and increased truck freight cost in the Americas had a negative impact on the result. Other operations and intra-group items’ adjusted EBITDA declined to EUR -4 million (EUR 7 million).

Q1-Q3/2018 compared to Q1-Q3/2017

During the first nine months of 2018, Outokumpu’s sales increased to EUR 5,286 million (Q1-Q3/17: EUR 4,892 million). Adjusted EBITDA declined to EUR 397 million (Q1-Q3/17: EUR 549 million), driven largely by a weaker market. European base prices during the first nine months of 2018 were 14% lower compared to the same period last year, and the ferrochrome price fell by USD 0.10/lb. In addition, costs related to graphite electrodes and other inputs, as well as truck freight costs in the Americas have increased significantly. These substantial market headwinds have been partly offset by improved cost efficiency and reliability of the mills, and higher base prices in the Americas. Raw material-related inventory and metal derivative losses were EUR 1 million (Q1-Q3/17: losses of EUR 16 million). During the first nine months of 2018, EBIT was EUR 241 million (Q1-Q3/17: EUR 415 million) and net result amounted to EUR 103 million (Q1-Q3/17: EUR 264 million).

Group key figures III/18III/17II/18I–III/18I–III/172017
   restated  restatedrestated
SalesEUR million1,7331,4801,8835,2864,8926,356
EBITDAEUR million12862136404580663
Adjusted EBITDA 1)EUR million12856136397549631
EBITEUR million65986241415445
Adjusted EBIT 1)EUR million75286244384414
Result before taxes EUR million36-2449155327327
Net result for the period EUR million29-2725103264392
Earnings per shareEUR0.07-
Diluted earnings per shareEUR0.07-
Return on capital employed%6.912.45.56.912.411.3
Net cash generated from operating activitiesEUR million6112671171223328
Net debt at the end of periodEUR million1,2051,1301,2111,2051,1301,091
Debt-to-equity ratio at the end of period%44.544.445.144.544.440.1
Capital expenditureEUR million56406315690174
Stainless steel deliveries1,000 tonnes5826236681,8941,8872,448
Personnel at the end of period 2) 10,45910,27610,41910,45910,27610,141

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.

President & CEO Roeland Baan:

“During the third quarter, we were able to strengthen our market leadership position in a tough environment. Our financial performance was solid with adjusted EBITDA amounting to EUR 128 million. Despite the US steel tariffs, high stainless steel imports and record low prices, business area Europe maintained healthy profitability driven by richer product mix. Business area Long Products continued strong performance fueled by focused efficiency and productivity measures. In the Americas, base price increases have materialized as expected, but the higher input and freight costs as well as heavy distributor destocking burdened the business area’s profitability. 

The overall uncertainty on the stainless steel markets is expected to continue. The EU’s provisional safeguard measures are forecast to become permanent within a few months, but their real impact in balancing the import situation in the European steel markets is expected to start materializing only during next year.

Thanks to our strong focus on customers, improved reliability and efficiency, our financial performance continues to be on the right trajectory to reach our long-term financial targets. Putting aside the current market uncertainties, the long-term growth prospects for stainless steel are sound, and as the market leader, we are well positioned to capture our fair share of this growth.”

Outlook for Q4/2018

Fourth quarter is expected to follow typical pattern with seasonal market slowdown and annual maintenance work in business area Europe. Stainless steel deliveries in business area Europe are expected to remain at the third-quarter level whereas in the Americas, deliveries are expected to decline.

The ferrochrome contract price declined by USD 0.14/lb., which will have a negative impact on business area Ferrochrome’s result. For the stainless operations, raw material-related inventory and metal derivative losses are expected to be substantial.

Outokumpu expects its fourth-quarter adjusted EBITDA to be at a similar level to the fourth quarter of 2017 (Q4/17: EUR 82 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/materials. 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 Friday, October 26, 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 0361
UK/Europe: +44 330 336 9125
US & Canada: +1 646 828 8193

Confirmation code: 5025436

The event can be viewed live at https://edge.media-server.com/m6/p/xjwmwrzw.

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 October 26, 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