Outokumpu half-year report January–June 2023: Adjusted EBITDA amounted to EUR 394 million in the first half of 2023

Outokumpu half-year report January–June 2023: Adjusted EBITDA amounted to EUR 394 million in the first half of 2023

Highlights in Q2 2023  

•          Stainless steel deliveries were 502,000 tonnes (560,000 tonnes)*.

•          Adjusted EBITDA amounted to EUR 190 million (EUR 491 million).

•          EBITDA was EUR 185 million (EUR 491 million).

•          ROCE amounted to 11.4% (28.3%).

•          Operating cash flow was EUR 25 million (EUR 104 million incl. discontinued operations).

•          Net debt amounted to EUR -9 million (March 31, 2023: EUR -166 million).

•          Earnings per share was EUR 0.21 (EUR 0.75).

•          Gearing amounted to -0.2% (March 31, 2023: -4.1%).

 

Highlights in January–June 2023

•          Stainless steel deliveries were 1,007,000 tonnes (1,165,000 tonnes).

•          Adjusted EBITDA amounted to EUR 394 million (EUR 842 million).

•          EBITDA was EUR 383 million (EUR 842 million).

•          Operating cash flow amounted to EUR 99 million (EUR 251 million incl. discontinued operations).

•          Earnings per share was EUR 0.43 (EUR 1.28).

•          Dividend of EUR 152 million was paid in April.

•          Share buyback program of EUR 100 million was completed in March.

•          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		Q2/23	Q2/22	Q1/23	Q1-Q2/23	Q1-Q2/22	2022
Sales	EUR million	1,911	2,686	2,006	3,916	5,259	9,494
EBITDA	EUR million	185	491	198	383	842	1,248
Adjusted EBITDA 1)	EUR million	190	491	204	394	842	1,256
EBIT	EUR million	124	431	135	259	720	992
Adjusted EBIT 1)	EUR million	129	431	144	273	720	1,010
Result before taxes	EUR million	119	413	128	247	695	933
Net result for the period	EUR million	89	338	97	186	567	1,086
Earnings per share	EUR	0.21	0.75	0.22	0.43	1.28	2.40
Diluted earnings per share	EUR	0.19	0.69	0.21	0.40	1.18	2.22
Return on capital employed, rolling 12 months (ROCE) 2)	%	11.4	28.3	18.4	11.4	28.3	22.6
Capital expenditure	EUR million	38	30	15	53	61	158
Stainless steel deliveries	1,000 tonnes	502	560	505	1,007	1,165	2,106
Personnel at the end of period, full-time equivalent 3)		8,457	8,480	8,377	8,457	8,480	8,357
Key figures, including discontinued operations		Q2/23	Q2/22	Q1/23	Q1-Q2/23	Q1-Q2/22	2022
Net result for the period	EUR million	89	385	103	192	636	1,140
Earnings per share	EUR	0.21	0.85	0.23	0.44	1.40	2.52
Diluted earnings per share	EUR	0.19	0.78	0.22	0.41	1.29	2.33
Return on capital employed, rolling 12 months (ROCE)	%	11.8	29.9	19.7	11.8	29.9	24.5
Net cash generated from operating activities	EUR million	25	104	74	99	251	778
Net debt at the end of period	EUR million	-9	289	-166	-9	289	-10
Debt-to-equity ratio at the end of period (gearing)	%	-0.2	7.3	-4.1	-0.2	7.3	-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.

3) On June 30, 2023, the Group employed, in addition, approx. 770 summer trainees (June 30, 2022: approx. 800).

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

 

President & CEO Heikki Malinen

Our performance in the second quarter of 2023 was solid in the Americas, albeit overshadowed by a softened market in Europe. Adjusted EBITDA amounted to EUR 190 million, while stainless steel deliveries remained modest as expected. During the first half of the year, we generated EUR 394 million of adjusted EBITDA, which is a strong result in the current market environment. I am proud of the fact that during the weakening market conditions we have kept our balance sheet the strongest in the industry.

We have successfully de-leveraged the company so that it is better positioned for the downturns that are part of the cyclical stainless steel business. After two exceptionally strong years, we are now in a weaker part of the cycle. Today, with our strong balance sheet, Outokumpu has the resilience to withstand even more challenging market conditions.

The execution of the second phase of our strategy has progressed well and we have started the preparations for the third phase commencing in 2026. In the second phase we are making the most out of our current asset base. In the third phase the focus will be on Americas expansion, European competitiveness, value-chain integration and sustainability leadership.

In the second quarter, the market environment in Europe weakened faster than expected and negatively impacted business area Europe’s profitability already at the end of the quarter. Stainless steel deliveries decreased from the previous quarter and adjusted EBITDA amounted EUR 52 million. In business area Ferrochrome, we ramped up our production back to normal levels in the second quarter and adjusted EBITDA increased to EUR 36 million.

Business area Americas once again delivered very strong results. This demonstrates the benefit of having a geopolitically diversified business. Stainless steel deliveries for business area Americas increased from the previous quarter and adjusted EBITDA reached EUR 110 million. This is a result to be proud of.

We have successfully turned around our business in the U.S. and aim to strengthen our position further in this attractive market with a favorable regulatory environment. We want to capture a fair share of the increasing demand for the locally produced sustainable stainless steel. As a result, we are conducting a feasibility study to investigate options to expand our operations in the U.S. We seek to increase our cold rolling capacity and at the same time investigate different options for our hot rolling arrangements. One option is to build our own hot rolling mill and we are in a good state of readiness to make a final investment decision as need be.

In the second quarter, we also had changes in our management as Marc-Simon Schaar was appointed Chief Procurement Officer and a member of Outokumpu Leadership Team. This role is crucial in strategically managing our cost base, inflationary impacts and sustainability actions, as well as ensuring effective relationship management. Our supply chain is at the core of our decarbonization journey and our ethical approach to sourcing. We want to ensure that Outokumpu’s stainless steel is made of raw materials with the lowest possible CO2 emissions. In the second quarter, we kept our recycled material content at a very strong level of 94%.

The market environment, especially in Europe, is expected to be challenging in the third quarter. However, we have great teams in place and a strong balance sheet, and this gives me confidence that we will manage the changing conditions also in the future.
 

Outlook for Q3 2023

Group stainless steel deliveries in the third quarter are expected to decrease by 5–15% compared to the second quarter, in line with the seasonal pattern. For business area Europe, the market environment is challenging in the third quarter.

The planned maintenance break in business area Ferrochrome is expected to have an approximately   EUR 10 million negative impact on the business area's adjusted EBITDA.

Maintenance costs for the rest of the group in the third quarter are expected to increase by up to EUR 10 million compared to the second quarter.

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

Guidance for Q3 2023:

Adjusted EBITDA in the third quarter of 2023 is expected to be lower compared to the second quarter.

 

Results
 

Q2 2023 compared to Q2 2022

Outokumpu's sales in the second quarter of 2023 decreased to EUR 1,911 million (EUR 2,686 million). In a weaker market environment, adjusted EBITDA amounted to EUR 190 million (EUR 491 million). As a result of the lower profitability, ROCE for the rolling 12 months also declined to 11.4% (28.3%).

In the second quarter of 2023, total stainless steel deliveries decreased by 10% compared to the reference period. Realized prices for stainless steel were at a significantly lower level in Europe, but declined also in Americas. Profitability was also negatively impacted by higher fixed and variable costs and a lower ferrochrome sales price. Raw material-related inventory and metal derivative losses amounted to EUR 12 million (gains of EUR 64 million). Other operations and intra-group items’ adjusted EBITDA totaled EUR -8 million (EUR -26 million). Net result was EUR 89 million in the second quarter of 2023 (EUR 338 million).

 

Q2 2023 compared to Q1 2023

Outokumpu’s sales decreased to EUR 1,911 million in the second quarter of 2023 (Q1/2023: EUR 2,006 million) and adjusted EBITDA amounted to EUR 190 million (Q1/2023: EUR 204 million). ROCE for the rolling 12 months further decreased as a result of lower profitability and was 11.4% (18.4%).

In the second quarter, total stainless steel deliveries remained stable compared to the previous quarter and decreased only by 1%. Realized prices for stainless steel declined in both Europe and Americas compared to the previous quarter. Ferrochrome production was increased back to normal levels after the optimization of the production due to high electricity costs was discontinued, and this had a positive impact on the group's result. Costs were slightly lower due to decreased energy prices. Raw material-related inventory and metal derivative losses amounted to EUR 12 million in the second quarter (Q1/2023: losses of EUR 6 million). Other operations and intra-group items’ adjusted EBITDA totaled EUR -8 million (Q1/2023: EUR -2 million). Net result in the second quarter was EUR 89 million (Q1/2023: EUR 97 million).

 

January–June 2023 compared to January–June 2022

During January–June 2023, Outokumpu’s sales decreased to EUR 3,916 million (EUR 5,259 million) and adjusted EBITDA amounted to EUR 394 million (EUR 842 million). ROCE decreased to 11.4% as a result of lower profitability (28.3%).

In a weaker market environment in January–June 2023 total stainless steel deliveries decreased by 14% compared to the same period last year. In 2023, profitability was negatively impacted by significantly lower realized prices for stainless steel especially in Europe, but also in Americas. Both fixed and variable costs decreased and positive raw material impacts supported profitability. Raw material-related inventory and metal derivative losses amounted to EUR 18 million in January–June 2023 (gains of EUR 22 million). Other operations and intra-group items' adjusted EBITDA totaled EUR -9 million (EUR -39 million). EBIT amounted to EUR 259 million (EUR 720 million) and net result to EUR 186 million (EUR 567 million) in January–June 2023.

 

A live webcast and conference call today, August 3, at 3.00pm EEST

A live webcast and conference call to analysts, investors and representatives of media will be arranged today at 3.00 pm EEST at https://outokumpu.videosync.fi/2023-q2-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 https://palvelu.flik.fi/teleconference/?id=10010350. 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