Outokumpu reports Q2 results in line with cautious Q3 guidance

Outokumpu reports Q2 results in line with cautious Q3 guidance

den 18 augusti 2017

The Finnish company reported solid Q2 results, which are in line with its revised guidance.

Outokumpu is a global leader in stainless steel with a crude stainless steel capacity of 3.1 million tonnes. The company is headquartered in Helsinki, Finland employing over 10,000 professionals in over 30 countries and shares listed on the Nasdaq Helsinki. Their main business areas are Europe and Americas. Stainless steel is a material used in applications from cutlery to bridges, energy to medical equipment.

The company published its Q2 interim report in the end of July. Outokumpu’s second quarter adjusted EBITDA amounted to EUR 199 million, compared to EUR 66 million in the second quarter of 2016. The financial performance was positively impacted by robust market environment with significant higher ferrochrome prices and by higher base prices in both Europe and Americas. Furthermore, Outokumpus’s efficiency improvement measures continued to yield solid results. The performance was negatively impacted by low ferrochrome production. Adjusted EBITDA includes raw material-related inventory and metal derivative net losses of EUR 9 million (Q2 16: gains of EUR 15 million). Cash flow from operations remained solid with EUR 150 million, supporting the reduction of net debt to EUR 1,239 million (Q1 17: EUR 1,376 million).

Although the stainless steel producer is consistently trying to improve the safety of their employees, there was another deadly accident to a contactor at Degerfors, Sweden in May. A third-party truck driver was stuck by a fork lift truck during vehicle loading activities. The total recordable injury frequency rate (TRIFR) was 4.6 for the first half of 2017 against the target of less than 8.0 for 2017.


Cautious Outlook

The outlook for Q3 is very cautious, pointing to “significantly lower Adj. EBITDA” QoQ driven by lower base prices, ferrochrome volumes & prices, and inventory losses. Bloomberg Q3 consensus is at EUR 149 million (-25% QoQ).

The company is undergoing an aggressive restructuring effort, which might translate into higher earnings on the mid- to long term, and it has exposure to the strong US market. However, Outokumpu is the stainless steel player most exposed to the risk of an increasing supply of nickel from Indonesia and potential downside to the price of ferrochrome, which they produce internally.

The stock is currently trading with a P/E of 6.87 at around EUR 8.19 and shows a market capitalization of EUR 3.4 billion. 17 Bloomberg analysts recommend BUY, 3 Hold and 3 analysts have a SELL rating. The consensus target price is set at EUR 8.88, 8.56% higher than the current price.



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2022-12-09 14:42:12