Outokumpu Financial Statements Release 2019 – Significant reduction of net debt to EUR 1,155 million

Outokumpu Oyj
Financial statements release
February 5, 2020 at 9.00 am EET

Outokumpu Financial Statements Release 2019 – Significant reduction of net debt to EUR 1,155 million

Highlights in the fourth quarter of 2019

  • Stainless steel deliveries were 458,000 tonnes (534,000 tonnes)1.
  • Adjusted EBITDA was EUR 73 million (EUR 89 million).
  • EBITDA was EUR 90 million (EUR 92 million).
  • Operating cash flow was EUR 143 million (EUR 43 million).
  • Net debt was EUR 1,155 million (September 30, 2019: EUR 1,336 million).
  • Gearing was 45.1% (September 30, 2019: 51.4%).

Highlights of 2019

  • Stainless steel deliveries were 2,196,000 tonnes (2,428,000 tonnes).
  • Adjusted EBITDA was EUR 263 million (EUR 485 million).
  • EBITDA was EUR 266 million (EUR 496 million).
  • Operating cash flow was EUR 371 million (EUR 214 million).
  • Net result was EUR -75 million (EUR 130 million).
  • Return on capital employed (ROCE) was 0.8% (7.0%).
  • The Board of Directors proposes a dividend of
  • EUR 0.10 per share for 2019.

1 Figures in parentheses refer to the corresponding period for 2018, unless otherwise stated.

Q4/2019 compared to Q4/2018

Outokumpu’s sales decreased to EUR 1,398 million (EUR 1,586 million) and adjusted EBITDA to EUR 73 million (EUR 89 million). Stainless steel deliveries decreased by 14% from Q4/18. Lower deliveries and higher nickel price had a significant impact on profitability. Raw material-related inventory and metal derivative losses were EUR 9 million (losses of EUR 15 million). Business area Ferrochrome’s profitability was negatively impacted by lower ferrochrome benchmark price as well as lower production. Other operations and intra-group items’ adjusted EBITDA was EUR -19 million (EUR -4 million) due to higher costs in various areas. The real estate sale in Benrath had a positive impact of EUR 70 million on the fourth-quarter result. Outokumpu booked EUR 53 million provision in its fourth-quarter results related to the restructuring in Germany. The cash impact of the provision will materialize as of 2020. Both the gain on the real estate sale and provision are reported as adjustments to EBITDA.

2019 compared to 2018

In 2019, Outokumpu’s sales decreased to EUR 6,403 million (EUR 6,872 million). Adjusted EBITDA decreased to EUR 263 million (EUR 485 million). Stainless steel deliveries were 10% lower compared to 2018, but product mix was significantly better in 2019 for both business area Europe and business area Americas. Business area Ferrochrome’s profitability was suffering from lower ferrochrome benchmark price, but production was above 2018 level. Raw material-related inventory and metal derivative losses were EUR 64 million, significantly higher than the losses of EUR 16 million in 2018. Other operations and intra-group items’ adjusted EBITDA amounted to EUR -15 million (EUR 7 million). Other operations and intra-group items’ result includes a EUR -14 million expense related to a 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, which are reported as an adjustment to EBITDA.

EBIT amounted to EUR 33 million (EUR 280 million) and net result amounted to EUR -75 million (EUR 130 million). The net result does not include any material previously unrecognized deferred tax assets (EUR 34 million).

Group key figures   Q4/19 Q4/18 Q3/19 2019 2018
Sales EUR million 1,398 1,586 1,590 6,403 6,872
EBITDA EUR million 90 92 45 266 496
Adjusted EBITDA 1) EUR million 73 89 45 263 485
EBIT EUR million 30 38 -13 33 280
Adjusted EBIT 1) EUR million 13 35 -13 30 279
Result before taxes EUR million 6 20 -30 -41 175
Net result for the period EUR million -15 27 -27 -75 130
Earnings per share EUR -0.04 0.07 -0.06 -0.18 0.32
Diluted earnings per share EUR -0.04 0.07 -0.06 -0.18 0.32
Return on capital employed % 0.8 7.0 1.0 0.8 7.0
Net cash generated from operating activities EUR million 143 43 12 371 214
Net debt at the end of period EUR million 1,155 1,241 1,336 1,155 1,241
Debt-to-equity ratio at the end of period % 45.1 45.1 51.4 45.1 45.1
Capital expenditure EUR million 65 104 56 221 260
Stainless steel deliveries 1,000 tonnes 458 534 533 2,196 2,428
Personnel at the end of period   10,390 10,449 10,507 10,390 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 report.

President & CEO Roeland Baan

“In 2019, the European steel industry continued to suffer from the surge of imports and unprecedented price pressure caused by the US steel tariffs. It is evident that the EU needs to implement stronger safeguards and other trade defense measures to ensure a level playing field for all market participants.

In this harsh market environment, we kept our focus on enhancing our operational efficiency and securing our competitiveness. Our ongoing operational excellence efforts delivered a 4% productivity improvement in 2019. Furthermore, we were able to release almost EUR 220 million from net working capital, and most importantly we reduced our net debt to EUR 1,155 million.

I am also very proud of our constantly improving safety performance and organizational health. The latter is now only a notch away from the international top benchmark. Our latest customer survey tells a similar story: 72% of our customers are highly satisfied with our products and services which confirms our leading market position.

Outokumpu’s full-year adjusted EBITDA amounted to EUR 263 million, strongly affected by exceptionally low deliveries across all business areas. In the fourth quarter, profitability was positively impacted by improved raw material efficiency. Deliveries were low mainly due to distributor destocking in the US, high import penetration in Europe and low activity in the global automotive industry. These effects were further exacerbated by low prices in Europe. Given these challenging market conditions, business area Europe delivered a fair result demonstrating the resilience of our business model. In the Americas, underlying performance continued to improve, supported by commercial efforts and better product mix. The investment in ferritics production in Calvert is on track and expected to start production in the fourth quarter of 2020.

The dynamics in the stainless steel market have shifted as a result of trade wars and intensified Asian competition. Furthermore, there is an increased demand for organizations to reduce their carbon footprint and contribute to climate change mitigation. These are key targets also for Outokumpu. The high recycled content of 90% in our stainless steel production, continuous energy efficiency improvements and decreasing CO2 emissions support our position as a frontrunner in sustainable stainless steel manufacturing. We are confident that through pursuing our must-win battles with a highlighted focus on sustainability, customer orientation and efficiency, 2020 will be another year of continuing progress for Outokumpu.”

Outlook for Q1/2020

The stainless steel market is expected to strengthen during the first quarter, supported by typical seasonality.

Outokumpu expects its stainless steel deliveries to increase from the fourth quarter of 2019 in all business areas.

First-quarter adjusted EBITDA is expected to be higher compared to the fourth quarter of 2019 (Q4/19: EUR 73 million).

Conference call today at 3.00 pm EET

A conference call for investors and analysts will be held on Wednesday February 5, 2020 at 3.00 pm EET (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 4245 1472
UK/Europe: +44 20 3009 5710
US & Canada: +1 917 7200 178

Confirmation code: 5769789

The event can be viewed live at http://edge.media-server.com/mmc/p/47yd3c78.

The stock exchange release and the presentation material will be available before the event at fsxltkx.cn/investors.

A recording of the event will be available at fsxltkx.cn/en/investors/ir-events/webcasts as of February 5, 2020 at around 6.00 pm EET.

 

For more information:

Reeta Kaukiainen, EVP – Communications and IR, tel. +358 50 522 0924, +358 9 421 3466
 

Outokumpu Oyj