May, 9, 2019 - President & CEO Roeland Baan said “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.”
Highlights in the first quarter of 2019
2. Adjusted EBITDA was EUR 54 million (EUR 133 million).
3. EBITDA was EUR 40 million (EUR 140 million).
4. Operating cash flow was EUR 39 million (EUR 39 million).
5. Net debt increased to EUR 1,370 million (Dec 31, 2018: EUR 1,241 million).
6. Gearing was 51.6% (Dec 31, 2018: 45.1%).
7. Return on capital employed (ROCE) was 4.3% (Dec 31, 2018: 7.0%).
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.
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).