August 5, 2021 at 9.00 am EEST
Outokumpu half-year report January-June 2021: Q2 adjusted EBITDA increased to EUR 223 million in a strong market environmentHighlights in Q2 2021
Highlights in January-June 2021
- Stainless steel deliveries were 626,000 tonnes (523,000 tonnes).
- Adjusted EBITDA increased to EUR 223 million (EUR 45 million).
- EBITDA was EUR 223 million (EUR 45 million).
- Operating cash flow amounted to EUR 6 million (EUR 72 million).
- Net debt decreased to EUR 897 million (March 31, 2021: EUR 1,073 million).
- Gearing decreased to 31.9% (March 31, 2021: 43.7%).
- Stainless steel deliveries were 1,234,000 tonnes (1,111,000 tonnes).
- Adjusted EBITDA amounted to EUR 400 million (EUR 151 million).
- EBITDA was EUR 400 million (EUR 151 million).
- Operating cash flow amounted to EUR 33 million (EUR 40 million).
- Net result was EUR 212 million (EUR -15 million).
[1)] Figures in parentheses refer to the corresponding period for 2020, unless otherwise stated.
Q2 2021 compared to Q2 2020
Outokumpu's sales increased to EUR 1,873 million in the second quarter of 2021 (EUR 1,420 million) and adjusted EBITDA amounted to EUR 223 million (EUR 45 million). Total stainless steel deliveries were 20% higher as the reference period last year was heavily impacted by weakened global demand caused by the COVID-19 pandemic. Increased realized prices for stainless steel in both Europe and Americas and higher ferrochrome sales price contributed to profitability. Freight costs were at a higher level in Americas and the successful roll-out of the new ERP system in Avesta, Sweden also increased costs compared to the reference period. Raw material-related inventory and metal derivative gains amounted to EUR 7 million compared to the losses of EUR 16 million in the reference period. Other operations and intra-group items' adjusted EBITDA was EUR -19 million (EUR -7 million).
Q2 2021 compared to Q1 2021
Outokumpu's sales increased to EUR 1,873 million in the second quarter of 2021 (Q1/2021: EUR 1,673 million) and adjusted EBITDA amounted to EUR 223 million (Q1/2021: EUR 177 million). Demand for stainless steel continued to be strong. Total stainless steel deliveries grew by 3% and realized prices for stainless steel increased in all regions compared to the previous quarter. A higher ferrochrome sales price also impacted positively on profitability in the second quarter. Fixed costs increased, mainly due to EUR 10 million higher planned maintenance costs and the successful roll-out of the new ERP system in Avesta, Sweden. On a group level, inflationary pressure was not yet recognized in consumable prices during the second quarter, but freight costs increased in Americas. Raw material-related inventory and metal derivative gains were significantly lower compared to the previous quarter and amounted to EUR 7 million (Q1/2021: gains of EUR 42 million). Other operations and intra-group items' adjusted EBITDA amounted to EUR -19 million (Q1/2021: EUR -8 million).
January-June 2021 compared to January-June 2020
During the first half of 2021, Outokumpu's sales rose to EUR 3,546 million (EUR 3,035 million) and adjusted EBITDA stood at EUR 400 million (EUR 151 million). As the reference period was negatively impacted by the global COVID-19 pandemic, stainless steel deliveries in the first half of 2021 were 11% higher than the same period last year. In 2021, profitability was also positively impacted by the higher ferrochrome sales price and lower variable and fixed cost levels. Raw material-related inventory and metal derivative gains amounted to EUR 49 million in the first half of 2021 (losses of EUR 38 million), mainly due to positive timing impacts. Other operations and intra-group items' adjusted EBITDA amounted to EUR -27 million (EUR -13 million).
EBIT increased to EUR 279 million (EUR 29 million) and net result to EUR 212 million (EUR -15 million) in the first half of 2021.
Group key Q2/21 Q2/20 Q1/21 Q1-Q2/ Q1-Q2/ 2020
figures 21 20
Sales EUR 1,873 1,420 1,673 3,546 3,035 5,639
EBITDA EUR 223 45 177 400 151 191
Adjusted EUR 223 45 177 400 151 250
EBITDA [1)] million
EBIT EUR 163 -16 116 279 29 -55
Adjusted EBIT EUR 163 -16 116 279 29 4
Result before EUR 143 -38 101 244 -16 -151
Net result for EUR 129 -37 82 212 -15 -116
the period million
Earnings per EUR 0.30 -0.09 0.20 0.50 -0.04 -0.28
Diluted EUR 0.28 -0.09 0.19 0.46 -0.04 -0.28
Return on % 5.2 1.1 0.5 5.2 1.1 -1.4
Net cash EUR 6 72 27 33 40 322
generated from million
Net debt at EUR 897 1,243 1,073 897 1,243 1,028
the end of million
Debt-to-equity % 31.9 49.2 43.7 31.9 49.2 43.6
ratio at the
end of period
Capital EUR 37 52 47 84 110 180
Stainless 1,000 626 523 608 1,234 1,111 2,121
Personnel at 9,088 9,903 9,256 9,088 9,903 9,602
the end of
[1)] Adjusted EBITDA or EBIT = EBITDA or EBIT - Items classified as adjustments.
[2)] Calculated based on the share-issue-adjusted weighted average number of shares. Comparative information is presented accordingly.
[3)] In Q4/2020, Outokumpu changed its capital expenditure definition from accrual-based to cash-based capital expenditure. Comparative information is presented accordingly.
[4)] In Q1/2021, Outokumpu changed its main personnel amount measure from headcount to full-time equivalent personnel. Comparative information is presented accordingly. On June 30, 2021 the Group employed, in addition, some 690 summer trainees (June 30, 2020: some 540).
President & CEO Heikki Malinen
The stainless steel market has rebounded from the global COVID-19 pandemic across multiple segments. In this strong market environment, we increased our adjusted EBITDA to EUR 223 million in the second quarter. Our mills have been running at a high utilization rate and group stainless steel deliveries grew by 3% compared to previous quarter.
I am very pleased that we have achieved EUR 400 million of adjusted EBITDA in the first half of this year, which is markedly higher than last year's total.
All business areas improved their performance compared to the previous quarter. The favorable market environment supported business area Europe's profitability and adjusted EBITDA reached EUR 98 million with deliveries growing by 2%. In business area Americas, the upward trend continued in a strong market and we were also able to showcase the sustainable nature of all the improvement measures taken, especially in cost structure, commercial strategy and ways of working. In Americas, stainless steel deliveries were 9% higher compared to Q1, and adjusted EBITDA increased to EUR 65 million.
We have continued our diligent strategy execution and are fully on track to meet our target to achieve a EUR 200 million EBITDA run-rate improvement by the end of 2022. With our own measures, we reached a cumulative EUR 123 million realized EBITDA run-rate impact in the first half of the year.
In May, we launched a directed share issue to accelerate the strengthening of our balance sheet and reduce our net debt. With the proceeds of the equity raise, we prepaid our more expensive loans by EUR 210 million which means our interest costs on an annual run-rate decreased by EUR 18 million. As a result of our de-risking measures, rating agency Moody's upgraded our credit rating.
One of our key targets is to improve our net debt to EBITDA ratio to below 3.0. During the second quarter, we reached the net debt to EBITDA ratio of 1.8. Tailwinds from the market speeded up our ability to achieve our financial targets.
The second quarter was eventful in terms of trade regulation. We were pleased to see that the EU safeguard measures were extended for another three years until June 2024. In addition, the EU imposed provisional anti-dumping duties on cold rolled stainless steel from Indonesia and India. These regulatory measures are important steps to ensure a level playing field in Europe for sustainable stainless steel.
In our Capital Markets Update in May, we launched a holistic, more ambitious sustainability strategy aiming to become the sustainability benchmark for the stainless steel industry. We have committed to the SBTi 1.5 ºC climate ambition with an estimated greenhouse gas emission reduction of approximately 30% by 2030 compared to the company's 2020 level.
The first half of the year has been our strongest ever when it comes to safety performance. Our total recordable injury frequency rate was at 1.5. I would like to thank our employees and business partners for their continued commitment to improving safety at Outokumpu.
Outlook for Q3 2021
Group stainless steel deliveries in the third quarter are expected to decrease by 0-10% compared to the second quarter, in line with the seasonal pattern.
The European ferrochrome benchmark price remained stable at USD 1.56/lb for the third quarter.
Planned maintenance costs in the third quarter are expected to increase by approximately EUR 10 million compared to the second quarter.
With current raw material prices and exchange rates, significant raw material-related inventory and metal derivative gains or losses are not expected in the third quarter.
Adjusted EBITDA in the third quarter of 2021 is expected to be at a similar level compared to the second quarter.
A live webcast and conference call today at 3.00 pm EEST
A live webcast and conference call for media, investors and analysts will be arranged today, August 5, 2021 at 3.00 pm EEST. Follow the live event, hosted by President and CEO Heikki Malinen and CFO Pia Aaltonen-Forsell, at https://outokumpu.videosync.fi/2021-08-05-q2/.
To participate via conference call and to ask questions, please dial in the call 5-10 minutes before the beginning of the event:
Finland Toll: +358 9 8171 0310
Sweden Toll: +46 856 642 651
United Kingdom Toll: +44 333 300 0804
United States Toll: +1 631 913 1422
All the half-year report materials and link to the webcast and its recording are available at www.outokumpu.com/en/investors.
For more information:
Media: Päivi Allenius, VP - Communications, tel. +358 40 753 7374
Investors: Linda Häkkilä, Head of Investor Relations, tel. +358 400 719 669