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 second quarter 2018
Underlying stainless steel demand is expected to remain healthy. Base prices are trending upward in the US, supported by steel import tariffs, whereas in Europe, higher Asian imports are expected to result in further pressure on base prices.
The benefits from the higher ferrochrome price will be partly offset by a planned maintenance shutdown of one ferrochrome furnace.
Stainless steel deliveries are expected to be relatively flat compared to the first quarter in all business areas. Outokumpu expects its second-quarter adjusted EBITDA to be at a similar level to the first quarter (Q1/18: EUR 133 million).
The Board of Directors updated Outokumpu's dividend policy on January 31, 2018. According to the new policy, dividend pay-out ratio throughout a business cycle shall be in a range of 30-50 per cent of net income.
The Annual General Meeting 2018 decided on a dividend of 0.25 euros per share based on the balance sheet adopted for the account period ending December 31, 2017.
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 implement new IT systems and processes, improve operational reliability, drive competitiveness and further improve financial performance; risks and uncertainties related to market development in stainless steel, ferrochrome and competitor actions; availability and price of certain critical supplies; dependencies on certain critical suppliers; the risk of changes in metal prices impacting cash tied up in working capital; changes in the prices of electrical power, fuels, ferrochrome, nickel, iron and molybdenum; currency developments affecting the euro, the US dollar, the Swedish krona, and the British pound; fair value of shareholdings; project implementation risks; IT dependency and cyber security risks; risks due to fragmented system environment; counterparty risks related to customers and other business partners, including suppliers and financial institutions. Possible adverse changes in the global political and economic environment may have a significant adverse impact on Outokumpu’s overall business and access to financial markets.