Outokumpu interim report January-September 2022: Strong adjusted EBITDA of EUR 304 million delivered, share buyback program launched

Rhea-AI Summary

Outokumpu reported a robust Q3 2022, with sales reaching EUR 2,339 million, a significant increase from EUR 1,845 million in Q3 2021. Adjusted EBITDA rose to EUR 304 million from EUR 288 million. A notable highlight was the reduction of net debt to an all-time low of EUR 90 million. The company launched a share buyback program for a maximum of 20 million shares. However, stainless steel deliveries fell by 12% in a challenging market environment, impacted by high imports and rising costs in energy and raw materials.

Positive

• Sales increased by EUR 494 million year-on-year.
• Adjusted EBITDA rose to EUR 304 million, highest in Q3 history.
• Net debt decreased to an all-time low of EUR 90 million.

Negative

• Stainless steel deliveries decreased by 12% compared to the previous quarter.
• Variable costs increased due to significant cost inflation in energy and raw materials.
• Raw material-related losses were EUR 107 million due to negative timing impacts.

HELSINKI, Nov. 3, 2022 /PRNewswire/ -- Outokumpu classifies its Long Products businesses to be divested as assets held for sale and reports the businesses as discontinued operations. All figures and comments in this report refer to continuing operations unless otherwise stated.

Highlights in Q3 2022                              

• Stainless steel deliveries were 491,000 tonnes (546,000 tonnes)*.
• Adjusted EBITDA increased to EUR 304 million  (EUR 288 million).
• EBITDA was EUR 304 million (EUR 288 million). 
• ROCE rose to 26.8% (12.0%).
• Operating cash flow (incl. discontinued operations) amounted to EUR 238 million (EUR 180 million).
• Net debt (incl. discontinued operations) decreased to EUR 90 million (June 30, 2022: EUR 289 million).
• Gearing (incl. discontinued operations) decreased to 2.2% (June 30, 2022: 7.3%).

Highlights in January–September 2022 

• Stainless steel deliveries were 1,656,000 tonnes (1,704,000 tonnes). 
• Adjusted EBITDA amounted to EUR 1,146 million (EUR 668 million).
• EBITDA was EUR 1,146 million (EUR 668 million).
• Operating cash flow (incl. discontinued operations) amounted to EUR 489 million (EUR 213 million).
• Net result was EUR 775 million (EUR 376 million).  

Key figures, continuing operations		Q3/22	Q3/21	Q2/22	Q1–Q3/22	Q1–Q3/21	2021
Sales	EUR million	2,339	1,845	2,686	7,598	5,160	7,243
EBITDA	EUR million	304	288	491	1,146	668	968
Adjusted EBITDA 1)	EUR million	304	288	491	1,146	668	980
EBIT	EUR million	241	229	431	961	494	674
Adjusted EBIT 1)	EUR million	241	229	431	961	494	728
Result before taxes	EUR million	225	212	413	920	442	610
Net result for the period	EUR million	207	178	338	775	376	526
Earnings per share	EUR	0.46	0.40	0.75	1.71	0.87	1.21
Diluted earnings per share	EUR	0.42	0.37	0.69	1.58	0.80	1.13
Return on capital employed, rolling 12 months (ROCE) 2), 3)	%	26.8	12.0	27.6	26.8	12.0	17.6
Capital expenditure	EUR million	37	30	30	98	113	171
Stainless steel deliveries	1,000 tonnes	491	546	560	1,656	1,704	2,254
Personnel at the end of period, full-time equivalent 4)		8,602	8,492	8,480	8,602	8,492	8,439
Key figures, including discontinued operations		Q3/22	Q3/21	Q2/22	Q1-Q3/22	Q1-Q3/21	2021
Net result for the period	EUR million	189	182	385	825	394	553
Earnings per share	EUR	0.42	0.40	0.85	1.82	0.91	1.26
Diluted earnings per share	EUR	0.39	0.37	0.78	1.68	0.84	1.17
Return on capital employed, rolling 12 months (ROCE) 3)	%	28.7	12.6	29.9	28.7	12.6	18.4
Net cash generated from operating activities	EUR million	238	180	104	489	213	597
Net debt at the end of period	EUR million	90	749	289	90	749	408
Debt-to-equity ratio at the end of period	%	2.2	24.6	7.3	2.2	24.6	13.1
1) Adjusted EBITDA or EBIT = EBITDA or EBIT – Items classified as adjustments.
2) According to definitions of key figures balance sheet component includes discontinued operations' assets and liabilities.
3) Outokumpu has redefined its capital employed and ROCE definitions in Q2/2022. Comparative information has been restated accordingly.
4) On June 30, 2022, the Group employed, in addition, some 800 summer trainees.

*Figures in parentheses refer to the corresponding period for 2021, unless otherwise stated.

Results

Q3 2022 compared to Q3 2021

Outokumpu's sales increased to EUR 2,339 million in the third quarter of 2022 (EUR 1,845 million) and adjusted EBITDA amounted to EUR 304 million (EUR 288 million). ROCE increased to 26.8% (12.0%). In the third quarter of 2022, total stainless steel deliveries decreased by 10% compared to the reference period, while higher realized prices for stainless steel supported profitability in both Europe and Americas. In the third quarter of 2022, variable costs were at a higher level due to significant cost inflation in electricity, gas, and ferrosilicon prices. However, the higher ferrochrome sales price had a positive impact on the group's result, while the optimization of ferrochrome production led to lower production volumes. Raw material-related inventory and metal derivative losses amounted to EUR 107 million, mainly due to negative timing impacts as various metal prices deteriorated significantly during the quarter (gains of EUR 17 million). Other operations and intra-group items' adjusted EBITDA amounted to EUR 7 million (EUR -8 million).

Q3 2022 compared to Q2 2022

Outokumpu's sales decreased to EUR 2,339 million in the third quarter of 2022 (Q2/2022: EUR 2,686 million) and adjusted EBITDA amounted to EUR 304 million (Q2/2022: EUR 491 million). At the end of September, ROCE stood at 26.8% (27.6%). In the third quarter, total stainless steel deliveries declined by 12% compared to the previous quarter, while positive metal impacts supported profitability. Realized prices for stainless steel declined slightly in Europe and remained at a previous quarter's level in Americas. Costs increased during the third quarter and profitability was negatively impacted by significant cost inflation, especially in the price of electricity, but also in freight, fuels, and slag formers prices, and higher maintenance costs. Also, the optimization of the ferrochrome production combined with decreased ferrochrome sales price negatively affected the group's result. Raw material-related inventory and metal derivative losses amounted to EUR 107 million in the third quarter compared to gains of EUR 66 million in the previous quarter. The realized impact in the third quarter was mainly driven by negative timing impacts as various metal prices deteriorated significantly during the quarter. Other operations and intra-group items' adjusted EBITDA amounted to EUR 7 million (Q2/2022: EUR -26 million).

January–September 2022 compared to January–September 2021

During January–September 2022, Outokumpu's sales increased to EUR 7,598 million (EUR 5,160 million) and adjusted EBITDA amounted to EUR 1,146 million (EUR 668 million). ROCE was 26.8% (12.0%). Total stainless steel deliveries were 3% lower in January–September 2022 compared to the same period last year. In 2022, realized prices for stainless steel were at a remarkably higher level in both Europe and Americas, and ferrochrome sales price also increased, all having a very positive impact on profitability. However, significant cost inflation, especially in electricity, gas, and ferrosilicon prices increased variable costs compared to the previous year. Raw material-related inventory and metal derivative losses amounted to EUR 83 million in January–September 2022 compared to gains of EUR 60 million in the previous year. Other operations and intra-group items' adjusted EBITDA amounted to EUR -33 million (EUR -32 million). EBIT increased to EUR 961 million (EUR 494 million) and net result to EUR 775 million (EUR 376 million) in January–September  2022.

President & CEO Heikki Malinen

Our third-quarter performance was solid. We delivered EUR 304 million of adjusted EBITDA, which is the best third-quarter result in Outokumpu's history. We also reached a significant milestone by reducing our net debt to an all-time low level of EUR 90 million, and our balance sheet is now stronger than ever. This enabled Outokumpu's Board of Directors to approve a share buyback program of a maximum of 20 million shares.

Our stainless steel deliveries fell by 12% in a softening market with exceptionally high imports. Distributors accelerated de-stocking of commodity grades, while end-user demand remained stable.

Business area Americas contributed once again strongly with a very high adjusted EBITDA of EUR 135 million. The US market has been exceptionally robust, but it has been clearly showing signs of weakening in the third quarter.

The energy crisis and related uncertainty cast a shadow across the quarter especially in business areas Europe and Ferrochrome. Despite the challenges in the operating environment, adjusted EBITDA for business area Europe's amounted to EUR 128 million.

Due to high electricity prices, we have been optimizing our ferrochrome production, which has led to lower production volumes, and adjusted EBITDA for business area Ferrochrome declined to EUR 34 million. We also decided to delay the restart of one of our three ferrochrome furnaces to at least the end of the first quarter of 2023.

Energy has become a major challenge in Europe. Therefore, we raise our energy efficiency improvement target to 8% by the end of 2024. To reach our new ambitious target, we will prioritize investments related to energy efficiency in the coming years and increase the annual capital expenditure for that by EUR 20 million for years 2023 and 2024. Annual capital expenditure for these years will remain limited to EUR 200 million.

We are determinedly progressing with our strategy. We concluded the first phase six months ahead of schedule and since then we have been ramping up the second phase. Having two customer-differentiated business lines, Advanced Materials and Stainless Europe, is proving to be a successful move in serving the specific needs of the two customer groups.

We have continued our strong emphasis on sustainability to further improve Outokumpu's position as the sustainability leader in the stainless steel sector. Earlier this year we launched our emission-minimized product, Circle Green, which has raised interest and demand among our customers across segments.

In September, we announced our plans to investigate a biocoke and biomethane plant investment in Tornio, Finland. With this project, we aim to significantly reduce our direct CO2 emissions and increase energy self-sufficiency in Finland.

Market uncertainty will continue in the fourth quarter and beyond, and the global economy faces a risk of recession. Outokumpu is much more resilient than ever before, and our significantly strengthened balance sheet gives us the stamina and strength to see us through these challenging times.

Outlook for Q4 2022

Group stainless steel deliveries in the fourth quarter are expected to decrease by 0–10% compared to the third quarter.

The European ferrochrome benchmark price decreased to USD 1.49/lb for the fourth quarter.

Ferrochrome production continues at 50–60% of its full capacity due to a furnace shutdown and the optimization of the ferrochrome production, caused by exceptionally high electricity costs.

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

Guidance for Q4 2022:

Adjusted EBITDA in the fourth quarter of 2022 is expected to be lower compared to the third quarter.

A live webcast and conference call today, November 3 at 3.00 pm EET

A live webcast and conference call to analysts, investors and representatives of media will be arranged later on the same day, at 3.00 pm EET at https://outokumpu.videosync.fi/2022-q3-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://call.vsy.io/access-8575. 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 interim report materials, a link to the webcast and later on its recording are available at www.outokumpu.com/en/investors.

For more information:

Investors: Linda Häkkilä, Head of Investor Relations, tel. +358 40 071 9669

Media: Päivi Allenius, VP – Communications, tel. +358 40 753 7374

 

The following files are available for download:

https://mb.cision.com/Public/18751/3660665/a8ca50cb2a866845.pdf

Outokumpu interim report report January-September 2022

 

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SOURCE Outokumpu Oyj

FAQ

What were Outokumpu's sales figures for Q3 2022?

Outokumpu's sales for Q3 2022 were EUR 2,339 million.

What were the adjusted EBITDA results for Outokumpu in Q3 2022?

The adjusted EBITDA for Outokumpu in Q3 2022 was EUR 304 million.

What is the significance of the share buyback program launched by Outokumpu?

Outokumpu's share buyback program allows for the repurchase of up to 20 million shares, aimed at enhancing shareholder value.

How did stainless steel deliveries perform in Q3 2022 for Outokumpu?

Stainless steel deliveries decreased by 12% in Q3 2022 compared to the previous quarter.

What were the impacts of cost inflation on Outokumpu in Q3 2022?

Cost inflation significantly increased variable costs, particularly in energy, impacting overall profitability.