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Outokumpu announces Q3 result

Steel News - Published on Tue, 30 Oct 2018

Image Source: forbes.com
Outokumpu announced solid performance despite continued market uncertainties, Group adjusted EBITDA at EUR 128 million. Mr Roeland Baan President & CEO said that “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.”

Highlights in the third quarter of 2018
Stainless steel deliveries were 582,000 tonnes (623,000 tonnes)
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).

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.

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Posted By : Nanda Koijam on Tue, 30 Oct 2018
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