EUR33M profit for Outokumpu in 1st quarter
Demand for stainless steel began to improve in early 2011 and Outokumpu's results for the first quarter reflect this as the company posts an operational profit of EUR33M. Growth in the first quarter was supported by restocking among distributors. In March the nickel price declined and this resulted in some destocking towards the end of the quarter. The coming summer period may create some softness in demand from distributors in the second quarter. Underlying demand has continued to improve and is expected to remain stable in the second quarter. While the order intake from investment-driven end-use segments has been improving, no major projects utilising special grades have materialised.
Outokumpu's deliveries of stainless steel increased by 14% to 380 000 tonnes in the first quarter compared to the first quarter of 2010. Base prices were unchanged but transaction prices, which also include raw-material costs, increased by 34%. The prices of the key raw-materials, nickel and ferrochrome, gained strongly from their year-ago levels: nickel price increased by 35% and ferrochrome price by 24%. Clearly higher delivery volumes and transaction prices resulted in a strong 48% increase in sales, which amounted to EUR 1.4 billion in the first quarter.
Outokumpu's operating profit in the first quarter was positive at EUR 33 million whereas in the first quarter of 2010 the Group reported EUR 21 million operating loss. The operating profit benefits from EUR 45 million of raw-material related inventory gains (EUR 10 million gains in 2010). Thus, the underlying operational result was at loss by EUR 12 million compared to EUR 32 million loss in the first quarter of 2010. The main reason for the profitability improvement is increase in delivery volumes.
Net cash from operating activities was slightly negative at EUR -10 million as EUR 93 million of cash was tied up in the working capital during the quarter. Outokumpu's gearing increased to 80.4%, above the Group's target maximum of 75%.
In February, Outokumpu's Board of Directors appointed Mr Mika Seitovirta as the new Chief Executive Officer from 1 April 2011. The earlier CEO Mr Juha Rantanen will support the new CEO in his taking on the new duties until August 2011.
Outokumpu estimates that the Group's delivery volumes in the second quarter will be at a similar level as the volumes in the first quarter. Average base prices are expected to be somewhat higher compared to the average prices in the first quarter. Outokumpu's operating profit in the second quarter is expected to be slightly positive or around break-even with no material impact from raw-material related inventory gains or losses (at current metal prices).
CEO Mika Seitovirta:
"The first weeks at Outokumpu have proven to be a great learning experience. I am energised and encouraged while going forward and gaining further knowledge of this great company and fascinating industry. Our immediate actions will be focused on profitability, cash flow and improving the balance sheet. Most of the management attention this year will be spent on the implementation of the short-term agenda, which is currently being prepared."
This press release presents the highlights of Outokumpu's official interim report, which has been distributed as a separate stock exchange release and is available at www.outokumpu.com/investors.
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