Outokumpu interim report January–March 2023: Adjusted EBITDA increased to EUR 204 million - strong improvement from previous quarter

Outokumpu interim report January–March 2023: Adjusted EBITDA increased to EUR 204 million - strong improvement from previous quarter

Highlights in Q1 2023  

•        Stainless steel deliveries were 505,000 tonnes (605,000 tonnes)*.

•        Adjusted EBITDA decreased to EUR 204 million (EUR 350 million).

•        EBITDA was EUR 198 million (EUR 350 million).

•        ROCE declined to 18.4% (21.8%).

•        Operating cash flow was EUR 74 million (EUR 147 million incl. discontinued operations).

•        Net debt amounted to EUR -166 million (December 31, 2022: EUR -10 million incl. discontinued operations).

•        Earnings per share was 0.22 (0.53).

•        Gearing improved to -4.1% (December 31, 2022: -0.3% incl. discontinued operations).

•        Dividend of EUR 152 million was paid in April, and recognized in trade and other payables on March 31, 2023.

•        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		Q1/23	Q1/22	Q4/22	2022
Sales	EUR million	2,006	2,573	1,895	9,494
EBITDA	EUR million	198	350	103	1,248
Adjusted EBITDA 1)	EUR million	204	350	110	1,256
EBIT	EUR million	135	289	31	992
Adjusted EBIT 1)	EUR million	144	289	48	1,010
Result before taxes	EUR million	128	281	13	933
Net result for the period	EUR million	97	230	312	1,086
Earnings per share	EUR	0.22	0.53	0.69	2.40
Diluted earnings per share	EUR	0.21	0.49	0.64	2.22
Return on capital employed, rolling 12 months (ROCE) 2), 3)	%	18.4	21.8	22.6	22.6
Capital expenditure	EUR million	15	30	60	158
Stainless steel deliveries	1,000 tonnes	505	605	450	2,106
Personnel at the end of period, full-time equivalent		8,377	8,514	8,357	8,357
Key figures, including discontinued operations		Q1/23	Q1/22	Q4/22	2022
Net result for the period	EUR million	103	251	315	1,140
Earnings per share	EUR	0.23	0.55	0.70	2.52
Diluted earnings per share	EUR	0.22	0.51	0.64	2.33
Return on capital employed, rolling 12 months (ROCE) 3)	%	19.7	23.0	24.5	24.5
Net cash generated from operating activities	EUR million	74	147	289	778
Net debt at the end of period	EUR million	-166	294	-10	-10
Debt-to-equity ratio at the end of period (gearing)	%	-4.1	9.0	-0.3	-0.3
1) Adjusted EBITDA or EBIT = EBITDA or EBIT – Items classified as adjustments.
2) The balance sheet component in 2022 includes discontinued operations except for in Sep 30, 2022 and in Dec 31, 2022, where only the equity component of discontinued operations is included. Q1/2022 figure has been adjusted compared to what has previously been reported.
3) Outokumpu has redefined its capital employed and ROCE definitions in Q2/2022. Q1/2022 information has been restated accordingly.

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

 

President & CEO Heikki Malinen

We delivered another solid quarter and kept our operational performance strong. Our stainless steel deliveries rose by 12% in line with the seasonal pattern and adjusted EBITDA increased to EUR 204 million. I am proud that Outokumpu is now able to create value also in more challenging market conditions.

Distributor de-stocking continued in the first quarter in both Americas and Europe, which impacted our delivery volumes negatively. We have already seen replenishment in some parts of Europe, and de-stocking seems to be coming to an end also in the US.

We have succeeded in keeping our costs under control, and now both energy price volatility and inflation seem to be slowing down. Salary negotiations in our main locations have also been concluded with a reasonable outcome. Amidst weakening market conditions, our teams have been very efficient in raw material management, and we have been able to take advantage of the favorable situation in the raw material market.

Our business delivered strong results. In business area Europe, stainless steel deliveries increased by 15% and adjusted EBITDA reached EUR 122 million. Business area Americas achieved a solid result with increasing volumes, and continuing good performance over the past few years proves Americas’ sustainable ability to generate profits.

In business area Ferrochrome, adjusted EBITDA reached EUR 16 million, and was slightly better than in the previous quarter. Optimization of ferrochrome production continued throughout the first quarter and capacity utilization was slightly more than half. As energy prices have recently declined from the exceptionally high levels, we have now ramped up our ferrochrome production to a more normal level.

Once again, we took remarkable steps in strengthening our sustainability leadership in the industry. We also announced our plans to explore the decarbonization of Outokumpu’s stainless steel manufacturing operations with the emerging nuclear technology of small modular reactors. We are proudly on the frontline with Fortum and playing a key role in ensuring energy efficiency, emission reduction, and competitiveness in Finland.

Overall, our CO2 emission reduction continues in line with our approved 1.5 °C Science-Based Targets initiative (SBTi) target. We have maintained our recycled material content at the record level of 94% also in the first quarter, and this is an important measure to keep our direct emissions at the lowest level of the stainless steel industry.

At the turn of the quarter, we announced an agreement to divest the remaining Long Products operations in Degerfors and Storfors, Sweden, to Cogne Acciai Speciali. I am happy that we are finalizing the divestment of our non-core Long Products business. Outokumpu will now focus on its core business.

As we have previously stated, we have a strong focus on shareholder returns. Not only did we complete our first-ever share buyback program, but also our Annual General Meeting approved the payment of a base dividend of EUR 0.25 per share plus an extra dividend of EUR 0.10 per share, totaling EUR 0.35. The dividend was paid in April. I am pleased to say that we have returned over EUR 250 million of capital to our shareholders, while we have kept our balance sheet the strongest in the industry.
 

Outlook for Q2 2023

Group stainless steel deliveries in the second quarter are expected to remain stable compared to the first quarter.

Ferrochrome production will increase and return to normal levels in the second quarter; however, the business area is preparing for a maintenance break in the third quarter.

With current raw material prices, no significant raw material-related inventory and metal derivative impacts are expected to be realized in the second quarter.

Guidance for Q2 2023:

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

Results

Q1 2023 compared to Q1 2022

The stainless steel market in the first quarter of 2023 was clearly weaker compared to the reference period, and Outokumpu’s sales decreased to EUR 2,006 million (EUR 2,573 million). Also, adjusted EBITDA decreased to EUR 204 million (EUR 350 million). ROCE for the rolling 12 months was impacted by lower profitability and amounted to 18.4% (21.8%).

In the first quarter of 2023, in a weakened market with distributor de-stocking, total stainless steel deliveries were 17% lower compared to the reference period. Realized prices for stainless steel declined in both regions, but especially heavily in Europe, while positive raw material impacts supported profitability. Fixed costs were stable compared to the reference period while variable costs increased due to high cost inflation. Business area Ferrochrome's profitability was lower as a result of production optimization due to exceptionally high electricity prices. Raw material-related inventory and metal derivative losses decreased to EUR 6 million (losses of EUR 43 million). Other operations and intra-group items’ adjusted EBITDA amounted to EUR -2 million (EUR -13 million). Net result was EUR 97 million in the first quarter of 2023 (EUR 230 million).

Q1 2023 compared to Q4 2022

Outokumpu’s sales increased to EUR 2,006 million in the first quarter of 2023 (Q4/2022: EUR 1,895 million) and adjusted EBITDA rose to EUR 204 million (Q4/2022: EUR 110 million). ROCE for the rolling 12 months, however, decreased to 18.4% (22.6%).

The first quarter of the year is seasonally strong, and despite heavy distributor de-stocking, total stainless steel deliveries increased by 12% from the previous quarter. Realized prices for stainless steel further declined in both Europe and Americas but the negative effect of lower prices was offset by positive raw material impacts, supported by favorable market conditions. Cost inflation in energy and consumable prices was lower than initially expected and, therefore, costs in the first quarter remained stable compared to the previous quarter. Raw material-related inventory and metal derivative losses decreased to EUR 6 million in the first quarter (Q4/2022: losses of EUR 47 million). Other operations and intra-group items’ adjusted EBITDA amounted to EUR -2 million (Q4/2022: EUR 4 million). Net result in the first quarter was EUR 97 million (Q4/2022: EUR 312 million, including a positive EUR 297 million impact from the recognition of the deferred tax asset).
 

A live webcast and conference call later today

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-q1-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 http://palvelu.flik.fi/teleconference/?id=10010349. 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