Outokumpu's second quarter 2009 - difficult market with some signs of
improvement, operating loss declining
July 23, 2009 at 9.05 am
- Operating loss EUR 94 million
- Deliveries and prices low but higher than in the first quarter
- Cost saving programmes progressing ahead of schedule
Group key figures, EUR million II/09 I/09 II/08
Sales 617 679 1 549
Operating profit -94 -249 174
Profit before taxes -105 -252 166
Net profit for the period -87 -187 56
Earnings per share, EUR -0.48 -1.04 0.31
Net cash generated from operating activities 23 301 103
Stainless steel deliveries, 1000 tons 268 247 391
Stainless steel base price, EUR/t 1) 1 117 925 1 307
Stainless steel transaction price, EUR/t 1 751 1 818 3 195
1) CRU: German base price (2mm cold rolled
Stainless steel demand continued to be low during the second quarter
of 2009 reflecting the global economic downturn. There was, however,
a slight improvement compared to the first quarter of the year. It
seems that the reduction of inventories by distributors and end-users
has ended. Also the recent increase in the price of nickel has
triggered some purchasing activity. However, there is no major
improvement in the underlying demand for stainless steel.
Similarly to other producers of stainless steel, Outokumpu continued
to cut back production at all of the Group's production units.
Capacity utilization during the second quarter was approximately 60%.
Outokumpu's deliveries were 268 000 tons, 31% lower than in the
second quarter of 2008. Compared with the first quarter of this year
deliveries increased by 9%. Also base prices improved from the first
quarter. Compared with a year-ago they were down by 15%. Transaction
prices, which also include raw material costs, dropped even more by
45% compared with the second quarter of 2008. Raw material prices
have risen strongly from the beginning of this year but are far from
the levels in 2008. The second-quarter average price for nickel was
50% lower and for ferrochrome 64% lower than the previous year.
Consequently, Outokumpu's sales in the quarter totalled EUR 617
million, which is as much as 60% lower than in 2008.
Outokumpu's operating profit was negative at EUR 94 million mainly
due to the very low delivery volumes. The operating loss was,
however, clearly smaller than the first quarter loss of EUR 249
million. The improving price and volume trends as well as the
benefits from the cost saving programmes had a positive impact on the
underlying profitability. Additionally, there were no major
raw-material related inventory losses, which burdened the first
quarter operating profit by some EUR 110 million. Operating cash flow
remained positive despite continued losses as the decrease in
inventory levels in Outokumpu's supply chain released cash from
working capital. Balance sheet remained strong: gearing stood at 37%
at the end of June.
Outokumpu's cost saving programmes are proceeding ahead of schedule.
The total fixed cost savings are estimated to be EUR 150 million in
2009. To reflect the somewhat increased order intake Outokumpu will
increase its production capability after the summer vacation period.
Temporary layoffs for some 700 employees at the Tornio plant in
Finland will be adjusted accordingly.
Due to temporary production constraints, maintenance breaks and
seasonality of demand, delivery volumes in the third quarter are
estimated to be somewhat below the level of the first quarter (247
000 tons). Outokumpu's underlying operational result in the third
quarter is estimated to be at the same level or somewhat better than
in the second quarter.
CEO Juha Rantanen:
"Despite the continued rather heavy operating loss, the second
quarter brought some signs of improvement. During the quarter we saw
a slight increase in the order intake for stainless steel and we were
able to increase base prices. The recovery in demand is a function of
destocking coming to an end and there is no major improvement in the
underlying demand for stainless steel from end-users. Outokumpu's
management will continue to maintain a tight focus on cash flow,
sales and cost-saving actions. This will have an increasing impact in
late 2009. It is our ambition to reach a break-even operating profit
towards the end of the year."
This press release is a summary of Outokumpu's official second
quarter 2009 report.
For further information, please contact:
PÃ¤ivi Lindqvist, SVP - Communications and IR
tel. +358 9 421 2432, mobile +358 40 708 5351
Ingela Ulfves, VP - Investor Relations and Financial Communications
tel. +358 9 421 2438, mobile +358 40 515 1531
Esa Lager, CFO
tel +358 9 421 2516
Vice President - Investor Relations & Financial Communications
tel. + 358 9 421 2438, mobile +358 40 515 1531
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