Outokumpu first quarter interim statement – Solid cash generation in spite of challenging quarter, Group adjusted EBITDA at EUR 54 million

Outokumpu first quarter interim statement – Solid cash generation in spite of challenging quarter, Group adjusted EBITDA at EUR 54 million

Highlights in the first quarter of 2019

• Stainless steel deliveries were 621,000 tonnes (644,000 tonnes).
• Adjusted EBITDA was EUR 54 million (EUR 133 million).
• EBITDA was EUR 40 million (EUR 140 million).
• Operating cash flow was EUR 39 million (EUR 39 million).
• Net debt increased to EUR 1,370 million (Dec 31, 2018: EUR 1,241 million).
• Gearing was 51.6% (Dec 31, 2018: 45.1%).
• Return on capital employed (ROCE) was 4.3% (Dec 31, 2018: 7.0%).

Q1 2019 compared to Q1 2018

Outokumpu’s sales increased to EUR 1,715 million (EUR 1,671 million). The first-quarter adjusted EBITDA of EUR 54 million was significantly lower than EUR 133 million in the first quarter of 2018 driven particularly by increased graphite electrode and other input costs. Deliveries decreased due to high distributor inventories and softer demand in the Americas and Long Products. Realized base prices decreased as a result of a challenging market in Europe, partly offset by improved pricing and product mix in the Americas. Ferrochrome profitability was negatively impacted by lower contract price and higher costs. The adjusted EBITDA includes a loss of EUR 12 million from currency derivatives. Raw material-related inventory and metal derivative losses were EUR 13 million compared to losses of EUR 5 million in the first quarter of 2018. Other operations and intra-group items’ adjusted EBITDA amounted to EUR 1 million (EUR 10 million). Other operations and intra-group items’ result includes a EUR -14 million adjustment related to a preliminary settlement between Outokumpu and Thyssenkrupp regarding a tax consolidation claim in Italy, as well as other earlier claims from the merger between Outokumpu and Inoxum.

Group key figures			Q1/19	Q1/18	Q4/18	2018
Sales	EUR million		1,715	1,671	1,586	6,872
EBITDA	EUR million		40	140	92	496
Adjusted EBITDA 1)	EUR million		54	133	89	485
EBIT	EUR million		-17	90	38	280
Adjusted EBIT 1)	EUR million		-3	83	35	279
Result before taxes	EUR million		-35	70	20	175
Net result for the period	EUR million		-39	49	27	130
Earnings per share	EUR		-0.09	0.12	0.07	0.32
Diluted earnings per share	EUR		-0.09	0.12	0.07	0.32
Return on capital employed	%		4.3	7.2	7.0	7.0
Net cash generated from operating activities	EUR million		39	39	43	214
Net debt at the end of period	EUR million		1,370	1,086	1,241	1,241
Debt-to-equity ratio at the end of period	%		51.6	40.9	45.1	45.1
Capital expenditure	EUR million		50	37	104	260
Stainless steel deliveries	1,000 tonnes		621	644	534	2,428
Personnel at the end of period			10,449	10,111	10,449	10,449
1) Adjusted EBITDA or EBIT = EBITDA or EBIT – Items classified as adjustments.
Outokumpu has adopted IFRS 16 – Leases on January 1, 2019 using the modified retrospective approach. Comparative information has not been restated.
More information on the changes to Outokumpu's accounting principles and transition impacts is presented in the end of this interim statement.

President & CEO Roeland Baan

“Outokumpu’s first quarter performance was in line with our expectations. Our adjusted EBITDA amounted to EUR 54 million reflecting the challenging market situation. Seasonally demand in Europe was stronger than in the previous quarter but not to the extent we would usually experience. In spite of this, we increased our market share. Realized base prices came down slightly compared to fourth quarter. Business area Europe’s adjusted EBITDA was further burdened by EUR 12 million currency derivative loss.

As expected, business area Americas had a weak quarter caused by high inventories of expensive raw materials. These inventories have now been consumed and we expect the Americas’ profitability to improve supported by the new leadership and revamped commercial and supply chain processes.

Operating cash flow developed favorably thanks to increased focus on working capital. The increase of our net debt to EUR 1.37 billion was due to the IFRS 16 accounting change.

The EU’s permanent safeguards, introduced in February, have proven to be effective. Cold-rolled imports to Europe have come back to the levels before the introduction of steel tariffs. However, the full market recovery will take some time as the overall economic uncertainty is adversely influencing demand and volumes.

Thanks to diligent execution of our must-win battles, our productivity and operational stability have improved substantially providing us a hedge against adverse market circumstances.”

Outlook for Q2 2019

In the second quarter, there are no significant changes expected in the stainless steel markets. As a result, Outokumpu expects its stainless steel deliveries to remain at a similar level to the first quarter of 2019.

The Ferrochrome result will be positively impacted by the higher ferrochrome benchmark price, partly offset by planned maintenance work in the Tornio ferrochrome operations.

Outokumpu expects its second-quarter adjusted EBITDA to be higher than in the first quarter of 2019 (Q1/19: EUR 54 million).

Conference call today at 3.00 pm EEST

A conference call for investors and analysts will be held on Tuesday, May 7, 2019 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 Pia Aaltonen-Forsell. To participate in the conference call, please dial in 5−10 minutes before the beginning of the event:

Finland: +358 9 424 51 472

UK/Europe: +44 20 30 95 710  

US & Canada: +1 91 77 20 01 78

Confirmation code: 1445898

The event can be viewed live at https://edge.media-server.com/m6/p/wepuk2t4.

The stock exchange release and the presentation material will be available before the event at www.outokumpu.com/investors.

A recording of the event will be available at www.outokumpu.com/en/investors/ir-events/webcasts as of May 7, 2019 at around 6.00 pm EEST.

For more information:

Investors: Tommi Järvenpää, VP, Investor Relations: tel. +358 9 421 3466, +358 40 576 0288

Media: Reeta Kaukiainen, EVP, Communications & IR: tel. +358 50 522 0924

Outokumpu Oyj



Outokumpu is the global leader in stainless steel. We aim to be the best value creator in stainless steel 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

 

Attachment

• Outokumpu Interim statement Q1 2019