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Outokumpu financial statement release 2023: Solid adjusted EBITDA in 2023 in a weaker stainless steel market

Outokumpu financial statement release 2023: Solid adjusted EBITDA in 2023 in a weaker stainless steel market

Highlights in Q4 2023 

•        Stainless steel deliveries were 450,000 tonnes (450,000 tonnes)*.

•        Adjusted EBITDA amounted to EUR 72 million (EUR 110 million).

•        EBITDA was EUR 15 million (EUR 103 million).

•        ROCE amounted to -2.1% (22.6%).

•        Operating cash flow was EUR 236 million (EUR 289 million incl. discontinued operations).

•        Net debt amounted to EUR -60 million (September 30, 2023: EUR 29 million).

•        Gearing was -1.6% (September 30, 2023: 0.7%).

•        Earnings per share was EUR -0.56 (EUR 0.69).

•        Share buyback program of EUR 50 million and a maximum of 11 million shares was launched on November 29, 2023. Outokumpu repurchased a total of 2,642,455 shares during the fourth quarter.

•        Impairment booking related to the renegotiated hot rolling agreement in business area Americas had EUR 264 million negative impact on EBIT and the net result.

Highlights in January–December 2023

•        Stainless steel deliveries were 1,906,000 tonnes (2,106,000 tonnes).

•        Adjusted EBITDA amounted to EUR 517 million (EUR 1,256 million).

•        EBITDA was EUR 416 million (EUR 1,248 million).

•        Operating cash flow amounted to EUR 325 million (EUR 778 million incl. discontinued operations).

•        Earnings per share was EUR -0.26 (EUR 2.40).

•        Dividend of EUR 152 million for 2022 was paid in April.

•        EUR 70 million repurchase of 13,903,534 own shares.

•        Divestment of the majority of the Long Products business was completed on January 3, 2023. Since September 2022, these businesses were classified as assets held for sale and reported as discontinued operations. Comparative figures include discontinued operations if separately stated. Divestment of the remaining units was completed on August 1, 2023.

•        The Board of Directors proposes a dividend of EUR 0.26 per share be paid for year 2023.

Key figures, continuing operations   Q4/23 Q4/22 Q3/23 2023 2022
Sales EUR million 1,513 1,895 1,531 6,961 9,494
EBITDA EUR million 15 103 18 416 1,248
Adjusted EBITDA 1) EUR million 72 110 51 517 1,256
EBIT EUR million -314 31 -45 -100 992
Adjusted EBIT 1) EUR million 13 48 -12 274 1,010
Result before taxes EUR million -320 13 -60 -133 933
Net result for the period EUR million -242 312 -55 -111 1,086
Earnings per share EUR -0.56 0.69 -0.13 -0.26 2.40
Diluted earnings per share EUR -0.51 0.64 -0.11 -0.22 2.22
Return on capital employed, rolling 12 months (ROCE) 2) % -2.1 22.6 5.3 -2.1 22.6
Capital expenditure EUR million 86 60 31 170 158
Stainless steel deliveries 1,000 tonnes 450 450 449 1,906 2,106
Personnel at the end of period, full-time equivalent   8,469 8,357 8,512 8,469 8,357
Key figures, including discontinued operations   Q4/23 Q4/22 Q3/23 2023 2022
Net result for the period EUR million -242 315 -56 -106 1,140
Earnings per share EUR -0.56 0.70 -0.13 -0.24 2.52
Diluted earnings per share EUR -0.51 0.64 -0.11 -0.21 2.33
Return on capital employed, rolling 12 months (ROCE) % -2.0 24.5 5.8 -2.0 24.5
Net cash generated from operating activities EUR million 236 289 -11 325 778
Net debt at the end of period EUR million -60 -10 29 -60 -10
Debt-to-equity ratio at the end of period (gearing) % -1.6 -0.3 0.7 -1.6 -0.3

 

1) Adjusted EBITDA or EBIT = EBITDA or EBIT – Items classified as adjustments.

2) The balance sheet component in 2022 includes the equity component of discontinued operations.

*Figures in parentheses refer to the corresponding period for 2022, unless otherwise stated.

President & CEO Heikki Malinen

Our performance in 2023 was solid and our adjusted EBITDA amounted to EUR 517 million. During the year, we saw a shift in the market environment, and the second half of the year was challenging. Distributor de-stocking came close to its end in the second quarter, but the stainless steel market remained muted still in the last quarter. In 2023, our stainless steel deliveries declined by 9% from the previous year reflecting a weaker market. We have taken prompt, preventative measures to restore our profitability across the company.

The European market clearly declined in the second quarter, and the third quarter was the lowest point for business area Europe. Since then, market recovery has been slow.  For business area Europe, our annual adjusted EBITDA amounted to EUR 148 million and stainless steel deliveries decreased by 4% from the previous year. Profitability was negatively impacted by substantially lower stainless steel prices and our result decreased from the exceptionally high levels in 2021 and 2022.

In the Americas, the market environment remained relatively strong in 2023 and started to weaken only toward the end of the year. The year was solid for business area Americas, and we generated EUR 285 million of adjusted EBITDA even though our stainless steel deliveries declined by 16% from the previous year. I am proud that we have managed to establish our position in the Americas market and our geographically diversified asset portfolio makes us more resilient.

For business area Ferrochrome, annual adjusted EBITDA amounted to EUR 96 million. The Ferrochrome market weakened in the second half of the year and, therefore, in January 2024, we took the decision to adjust our ferrochrome production to match the lower demand. We also proceeded towards our target of carbon neutrality at the Kemi mine. This is an important aim for us as our in-house produced ferrochrome enables us to produce stainless steel with the lowest carbon footprint in the industry.

Throughout the year, we diligently executed our strategy and announced four key focus areas for the upcoming third phase of the strategy: Americas expansion, European competitiveness, value-chain integration, and sustainability, including the possible biocoke investment.

As part of the Americas expansion, we evaluated building of our own hot rolling mill in Calvert, Alabama, but decided that continuing with the current hot rolling partnership is the best solution for Outokumpu and its shareholders. We will continue to assess the cold rolling capacity expansion, which would allow us to increase our deliveries in the attractive North American market, and foresee decisions within a year.

In 2023, we announced many great Outokumpu Circle Green® partnerships with our customers, who want to reduce their emissions. The carbon footprint of Outokumpu Circle Green® is up to 93% lower than the global industry average representing the lowest carbon footprint ever achieved in commercial stainless steel production. Strong customer interest in this product proves that we are taking our business in the right direction.

In 2023, we formed new partnerships with junior mining and development company FPX Nickel, biocarbon producer Envigas and scrap supplier CRONIMET to ensure a sufficient future supply of critical raw materials with a low carbon footprint.

The strong focus on energy efficiency continued throughout the year. It is clear already now that we will exceed our 8% energy efficiency improvement target but with a longer timeframe than originally anticipated. So far, our actions have resulted in savings of EUR 10 million. In 2023, our emissions were reduced successfully in line with the SBTi climate target.

The year 2023 reflects our great co-operation as a team full of resilience and dedication. I am especially proud of our world-class safety performance which achieved a new record of TRIFR 1.5. Although market conditions shifted, we took immediate actions to restore our profitability while also keeping safety as our top priority. In 2023, we kept the company net debt free, and our business delivered solid cash flow. With the strongest balance sheet in the industry, we are ready to face more challenging market conditions which are a natural part of the cyclical stainless steel industry.

I am happy to say that our Board of Directors has today proposed a dividend of EUR 0.26 per share to be paid for the year 2023. Together with our ongoing share buyback program, this reflects our strong commitment to shareholder returns.

I want to thank all our employees and stakeholders for the good collaboration and teamwork in 2023. Let’s continue the good work also in 2024!

Outlook for Q1 2024:

Group stainless steel deliveries in the first quarter are expected to increase by 5–15% compared to the fourth quarter.

Market environment started to weaken at the end of the fourth quarter for business area Americas, and in Europe, a slow recovery is expected to continue. Also, scrap market has recently tightened.

Ferrochrome production is running at 80% of its full capacity as one of the three ferrochrome furnaces and one of the two sintering plants were closed in January 2024 due to weak ferrochrome market conditions.

Maintenance costs in the first quarter are expected to decrease by approximately EUR 20 million compared to the fourth quarter.

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

Guidance for Q1 2024:

Adjusted EBITDA in the first quarter of 2024 is expected to be at a similar level compared to the fourth quarter.

Results

Q4 2023 compared to Q4 2022

Outokumpu’s sales in the fourth quarter of 2023 decreased to EUR 1,513 million (EUR 1,895 million) while adjusted EBITDA amounted to EUR 72 million (EUR 110 million). The decrease compared to the reference period was mainly driven by a significantly more challenging market environment in Europe. ROCE for the rolling 12 months was -2.1% (22.6%), mainly due to lower profitability during the past 12 months but also the EUR 264 million impairment booking related to the renegotiated hot rolling agreement in business area Americas and other adjustment items.

In the fourth quarter of 2023, the total stainless steel deliveries remained stable (change  0%) compared to the reference period. Realized prices for stainless steel were at a significantly lower level in Europe but declined also in the Americas. Profitability in business area Ferrochrome was better compared to the reference period due to higher deliveries and lower fixed costs. Maintenance costs for the group increased while lower consumable prices, especially for electricity and ferrosilicon, supported profitability. Raw material-related inventory and metal derivative gains amounted to EUR 0 million (losses of EUR 47 million). Other operations and intra-group items’ adjusted EBITDA totaled EUR -8 million (EUR 4 million).

Net result was EUR -242 million in the fourth quarter of 2023 (EUR 312 million). The decrease in net result was driven by a weaker EBITDA development as well as the notable adjustment items totaling EUR -327 million and related mainly to impairments and restructuring. Net result in the reference period was positively impacted by the recognition of the EUR 297 million deferred tax asset.

Q4 2023 compared to Q3 2023

Outokumpu’s sales amounted to EUR 1,513 million in the fourth quarter of 2023 (Q3/2023: EUR 1,531 million) while adjusted EBITDA increased to EUR 72 million (Q3/2023: EUR 51 million). Improvement in adjusted EBITDA from the previous quarter was mainly driven by a gradual market recovery in Europe. As a result of lower profitability in the past 12 months and the EUR 264 million impairment booking related to the renegotiated hot rolling agreement in business area Americas and other adjustment items, ROCE for the rolling 12 months was -2.1% (5.3%).

In the fourth quarter, total stainless steel deliveries remained almost stable (change  0%) compared to the third quarter. Realized prices for stainless steel slightly increased in Europe, while they remained relatively stable in the Americas. Costs were at a higher level, mainly as a result of increased maintenance work in business areas Europe and Ferrochrome. Raw material-related inventory and metal derivative gains amounted to EUR 0 million in the fourth quarter (Q3/2023: losses of EUR 27 million). Other operations and intra-group items’ adjusted EBITDA totaled EUR -8 million (Q3/2023: EUR 5 million).

Net result in the fourth quarter was EUR -242 million and was impacted by notable adjustment items related mainly to impairments and restructuring (Q3/2023: EUR -55 million).

January–December 2023 compared to January–December 2022

During January–December 2023, Outokumpu’s sales decreased to EUR 6,961 million (EUR 9,494 million) and adjusted EBITDA amounted to EUR 517 million (EUR 1,256 million). The decrease in adjusted EBITDA was mainly driven by a substantially weaker market environment in Europe. The previous year was exceptionally strong and in 2023 the market shifted. Due to the same reason as well as the impairment booking in business area Americas and other adjustment items, ROCE for the rolling 12 months was -2.1% (22.6%).

In January–December 2023 total stainless steel deliveries were 9% lower compared to the previous  year. Realized prices for stainless steel were at a significantly lower level in Europe, but also declined in the Americas. Lower profitability in business area Ferrochrome negatively impacted the group result and costs in business area Europe increased compared to the previous year. Raw material-related inventory and metal derivative losses amounted to EUR 44 million in January–December 2023 (losses of EUR 131 million). Other operations and intra-group items’ adjusted EBITDA totaled EUR -12 million (EUR -28 million).

EBIT amounted to EUR -100 million (EUR 992 million) and net result declined to EUR -111 million (EUR 1,086 million) in 2023. Negative development was mainly driven by a lower profitability as well as notable adjustment items related mainly to impairment, divestments and restructuring. Net result in 2022 was positively impacted by the recognition of the EUR 297 million deferred tax asset.