Outokumpu half-year report January–June 2022: Adjusted EBITDA in the second quarter exceeded EUR 0.5 billion

Outokumpu half-year report January–June 2022: Adjusted EBITDA in the second quarter exceeded EUR 0.5 billion

Highlights in Q2 2022

• Stainless steel deliveries were 603,000 tonnes (626,000 tonnes)1.
• Adjusted EBITDA increased to EUR 547 million  (EUR 223 million).
• EBITDA was EUR 547 million (EUR 223 million).
• Return on capital employed increased to 29.9% (5.2%)
• Operating cash flow amounted to EUR 104 million (EUR 6 million).
• Net debt decreased to EUR 289 million (March 31, 2022: EUR 294 million).
• Gearing decreased to 7.3% (March 31, 2022: 9.0%).

 

Highlights in January–June 2022

• Stainless steel deliveries were 1,250,000 tonnes (1,234,000 tonnes).
• Adjusted EBITDA amounted to EUR 923 million (EUR 400 million).
• EBITDA was EUR 923 million (EUR 400 million).
• Operating cash flow amounted to EUR 251 million (EUR 33 million).
• Net result was EUR 636 million (EUR 212 million).

 

1) Figures in parentheses refer to the corresponding period for 2021, unless otherwise stated.

 

Q2 2022 compared to Q2 2021

Outokumpu’s sales increased to EUR 2,951 million in the second quarter of 2022 (EUR 1,873 million) and adjusted EBITDA amounted to EUR 547 million (EUR 223 million). Due to improved profitability, ROCE increased to 29.9% (5.2%) despite recent increase in capital employed. Total stainless steel deliveries were 4% lower compared to the reference period, while realized prices for stainless steel increased significantly in both Europe and Americas. Also, higher ferrochrome sales price impacted positively profitability. In the second quarter of 2022, variable costs were at a significantly higher level compared to the previous year due to increased cost inflation in energy and consumable prices. Fixed costs also increased and slightly burdened profitability. Raw material-related inventory and metal derivative gains amounted to EUR 86 million, mainly due to positive timing impacts, compared to the gains of EUR 7 million in the reference period. Other operations and intra-group items’ adjusted EBITDA amounted to EUR -34 million (EUR -19 million).

 

Q2 2022 compared to Q1 2022

Outokumpu’s sales increased to EUR 2,951 million in the second quarter of 2022 (Q1/2022: EUR 2,760 million) and adjusted EBITDA amounted to EUR 547 million (Q1/2022: EUR 377 million). ROCE increased to 29.9% (23.0%) as a result of strong profitability. Total stainless steel deliveries declined by 7% while realized prices for stainless steel continued to further strengthen in Europe and also in Americas. Profitability was negatively impacted by increased maintenance costs and higher variable costs, mainly due to significant cost inflation in freight and consumable prices. Raw material-related inventory and metal derivative gains were significantly higher compared to the previous quarter, mainly due to positive timing impacts, and amounted to EUR 86 million (Q1/2022: losses of EUR 43 million). Other operations and intra-group items’ adjusted EBITDA amounted to EUR -34 million (Q1/2022: EUR -11 million).

 

January–June 2022 compared to January–June 2021

During the first-half of 2022, Outokumpu’s sales increased to EUR 5,712 million (EUR 3,546 million) and adjusted EBITDA amounted to EUR 923 million (EUR 400 million). Strong profitability supported ROCE development and ratio increased to 29.9% (5.2%). Total stainless steel deliveries in the first-half of 2022 were 1% higher compared to the same period last year. In 2022, profitability was driven by remarkably increased realized prices for stainless steel in both Europe and Americas and a higher ferrochrome sales price. However, fixed and variable costs increased compared to the previous year. Especially significant cost inflation in energy, freight and consumable prices burdened profitability. Raw material-related inventory and metal derivative gains amounted to EUR 43 million in the first-half of 2022 (gains of EUR 49 million). Other operations and intra-group items' adjusted EBITDA amounted to EUR -45 million (EUR -27 million). EBIT increased to EUR 796 million (EUR 279 million) and net result to EUR 636 million (EUR 212 million) in the first-half of 2022.

 

Group key figures		Q2/22	Q2/21	Q1/22	Q1-Q2/22	Q1-Q2/21	2021
Sales	EUR million	2,951	1,873	2,760	5,712	3,546	7,709
EBITDA	EUR million	547	223	377	923	400	1,009
Adjusted EBITDA 1)	EUR million	547	223	377	923	400	1,021
EBIT	EUR million	483	163	313	796	279	705
Adjusted EBIT 1)	EUR million	483	163	313	796	279	758
Result before taxes	EUR million	467	143	305	772	244	640
Net result for the period	EUR million	385	129	251	636	212	553
Earnings per share	EUR	0.85	0.30	0.55	1.40	0.50	1.26
Diluted earnings per share	EUR	0.78	0.28	0.51	1.29	0.46	1.17
Return on capital employed, rolling 12 months 2)	%	29.9	5.2	23.0	29.9	5.2	18.4
Net cash generated from operating activities	EUR million	104	6	147	251	33	597
Net debt at the end of period	EUR million	289	897	294	289	897	408
Debt-to-equity ratio at the end of period	%	7.3	31.9	9.0	7.3	31.9	13.1
Capital expenditure	EUR million	32	37	31	62	84	175
Stainless steel deliveries	1,000 tonnes	603	626	647	1,250	1,234	2,395
Personnel at the end of period, full-time equivalent 3)		9,173	9,088	9,197	9,173	9,088	9,096
1) Adjusted EBITDA or EBIT = EBITDA or EBIT – Items classified as adjustments.
2) Outokumpu has redefined it's capital employed and ROCE definitions in Q2/2022. Comparative information has been restated accordingly. Please see more information at the end of this report.
3) On June 30, 2022 the Group employed, in addition, some 800 summer trainees (June 30, 2021: some 690).

President & CEO Heikki Malinen

Our strong performance continued in the second quarter – we delivered another record-level adjusted EBITDA of EUR 547 million, despite significant cost inflation and geopolitical turmoil. Our stainless steel deliveries declined, but realized prices for stainless steel continued to strengthen and support our profitability.

 

The past months have been eventful for Outokumpu. To mention a few of the key events of the second quarter, we launched the second phase of our strategy, introduced emission-minimized stainless steel product line Circle Green and announced our aim to achieve carbon neutrality at our Kemi chrome mine by 2025. In July, we announced that we will divest the majority of Long Products business area. This divestment represents a successful closing of the turnaround program, which was started two years ago.

 

At the end of the second quarter, our net debt totaled only 289 million. This is a great achievement, and I am proud that we have achieved the targets of the first phase of the strategy to deleverage the company and entered the second phase ahead of time. The aim of the second phase is to strengthen the core. We will be focusing on three key priorities: sustainability, growth from productivity and customer-focused steering.

 

In addition, new financial targets were launched: we aim to improve our EBITDA run-rate level by another EUR 200 million and keep our net debt to EBITDA ratio below 1.0 in a normal market environment. Our teams have done great work with the execution of the first phase, and I have full trust in that going forward.

 

In the first half of 2022, our adjusted EBITDA reached EUR 923 million, which is the best half-year result ever. Through diligent strategy execution, we have managed to strengthen the company significantly. Outokumpu is now more resilient to withstand also more challenging economic environments.

 

The market environment has been exceptionally favorable, but we have now started to see softening especially on the commodity business. Upcoming growth is expected to be generated from pro grades business looking for global expansion.

 

In the first half of 2022, Asian imports into Europe have increased and distributors’ inventory levels have continued to grow, which has had a negative impact on demand. Also, global cost inflation has started to impact Outokumpu, and we are doing our utmost to mitigate the negative impacts on our profitability.

 

In Europe, the war in Ukraine has led to an energy crisis with increased energy prices and uncertain availability for next winter. Yet, the realized impacts of the uncertain situation on stainless steel demand or economic growth are difficult to estimate.

 

We are living in exceptionally uncertain times both politically and economically. Outokumpu is financially stronger than ever and resilient to withstand changing circumstances.

 

Outlook for Q3 2022 for continuing operations*

Group stainless steel deliveries for continuing operations* in the third quarter are expected to decrease by 10–20% compared to the second quarter.

Prices for stainless steel in the already received orders have remained at a high level.

The European ferrochrome benchmark price decreased to USD 1.80/lb for the third quarter.

Energy costs are expected to increase in the third quarter and impact especially negatively business area Ferrochrome.

Planned maintenance costs in the third quarter are expected to increase by approximately EUR 10 million compared to the second quarter.

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

Guidance for Q3 2022

Adjusted EBITDA for continuing operations* in the third quarter of 2022 is expected to be lower compared to the second quarter.

*Continuing operations is excluding the Long Products business units to be divested, which will be classified as assets held for sale, reported and restated as discontinued operations in Q3/2022. Continuing operations represents approximately 90% of Group second-quarter adjusted EBITDA.

A live webcast and conference call today at 3.00 pm EEST

 

A live webcast and conference call to analysts, investors and representatives of media will be arranged today, August 4, 2022, at 3.00 pm EEST at https://outokumpu.videosync.fi/2022-q2-results, hosted by President and CEO Heikki Malinen and CFO Pia Aaltonen-Forsell.

 

To participate via conference call and to ask questions, please dial in the call 5–10 minutes before the beginning of the event:

 

Finland: +358 9 8171 0310

UK: +44 333 300 0804

US: +1 631 913 1422

PIN: 17728093#

 

All the half-year report materials, a link to the webcast and later on its recording are available at www.outokumpu.com/en/investors.

 

 

For more information: 

 

Investors: Linda Häkkilä, Head of Investor Relations, tel. +358 40 071 9669 

 

Media: Päivi Allenius, VP – Communications, tel. +358 40 753 7374