Outokumpu interim report January-September 2024 – Solid third-quarter adjusted EBITDA driven by business areas Europe and Ferrochrome

Outokumpu interim report January-September 2024 – Solid third-quarter adjusted EBITDA driven by business areas Europe and Ferrochrome

Highlights in Q3 2024

• Stainless steel deliveries were 459,000 tonnes (449,000 tonnes)*.
• Adjusted EBITDA amounted to EUR 86 million (EUR 51 million).
• EBITDA was EUR 81 million (EUR 18 million).
• ROCE amounted to -7.1% (5.3%).
• Free cash flow was EUR -113 million (EUR -24 million incl. discontinued operations).
• Earnings per share was EUR 0.05 (EUR -0.13).
• On July 9, 2024, Kati ter Horst was appointed as the President and CEO of Outokumpu and she started after the reporting period on October 1, 2024.

Highlights in Q1–Q3/2024

• Stainless steel deliveries were 1,371,000 tonnes (1,455,000 tonnes)*.
• Adjusted EBITDA amounted to EUR 180 million (EUR 445 million).
• EBITDA was EUR 174 million (EUR 401 million).
• ROCE amounted to -7.1% (5.3%).
• Free cash flow was EUR -105 million (EUR 134 million incl. discontinued operations).
• Earnings per share was EUR -0.02 (EUR 0.30)
• The impact of the political strike in Finland in the first half of 2024 was approximately EUR -60 million.
• The dividend of EUR 110 million from the year 2023 was paid in the second quarter
• The most recent share buyback program was completed on February 29, 2024, and Outokumpu repurchased 8,357,545 shares during 2024.

*Figures in parentheses refer to the corresponding period for 2023, unless otherwise stated.

Key figures (EUR million, or as indicated)	Q3/24	Q3/23	Q2/24	Q1-Q3/24	Q1-Q3/23	2023
Sales	1,518	1,531	1,540	4,537	5,447	6,961
EBITDA	81	18	56	174	401	416
Adjusted EBITDA 1)	86	51	56	180	445	517
EBIT	32	-45	1	14	214	-100
Adjusted EBIT 1)	31	-12	1	15	261	274
Result before taxes	22	-60	-7	-14	187	-133
Net result for the period	20	-55	-5	-8	131	-111
Earnings per share	0.05	-0.13	-0.01	-0.02	0.30	-0.26
Return on capital employed, rolling 12 months (ROCE), % 2)	-7.1	5.3	-8.7	-7.1	5.3	-2.1
Capital expenditure	37	31	37	133	84	170
Free cash flow3)	-113	-24	35	-105	134	290
Stainless steel deliveries, 1000 tonnes	459	449	468	1,371	1,455	1,906
Net result for the period from all operations incl discontinued operations	20	-56	-5	-8	136	-106

¹⁾ Adjusted EBITDA or EBIT = EBITDA or EBIT – Items affecting comparability.

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

³⁾ The 2023 reference periods include discontinued operations.

During 2022, Outokumpu announced that it had signed an agreement to divest the majority of the Long Products business operations to Marcegaglia Steel Group and Outokumpu reclassified its Long Products businesses to be divested assets held for sale and discontinued operations. The divestment was completed on January 3, 2023, and the gain on sale of EUR 5 million was reported in discontinued operations. In this report, all the comparative numbers are reported as continued operations without the impact of the gain on sale, if not otherwise stated.

President & CEO Kati ter Horst

I am honored to have started as Outokumpu’s President and CEO and be given the opportunity to lead the company into its next strategic phase. My immediate focus will be on ensuring a smooth transition and continuing to deliver on the EUR 350 million profitability improvement target by the end of 2025. I want to thank my predecessor Heikki Malinen for his leadership to strengthen Outokumpu’s balance sheet and making us the undisputed sustainability leader in stainless steel. This is a good foundation on which to build our future success.

My priorities are to reinforce our operational performance, strengthen our competitiveness, and maintain financial discipline. These are even more important now, as we are facing challenging market conditions both in Europe and the Americas. For us at Outokumpu, financial discipline means acting promptly in response to a changing market environment. In this situation, we adjust our business and steer it towards focusing on cash flow and shareholder returns.

During the third quarter, Outokumpu’s adjusted EBITDA increased to EUR 86 million, while stainless steel deliveries decreased by 2% compared to the previous quarter. Imports into both Europe and North America have continued to increase, and put pressure on stainless steel prices. However, we maintained our strong market positions, ranking number one in Europe and number two in North America.

In business area Europe, adjusted EBITDA improved to EUR 59 million, and stainless steel deliveries remained stable compared to the previous quarter. Within advanced materials, I am pleased to welcome Rolf Schencking to Outokumpu's Leadership Team. He brings with him extensive technical and commercial experience in the specialty stainless steel business.

In business area Americas, adjusted EBITDA amounted to EUR 5 million, and stainless steel deliveries decreased by 8% compared to the previous quarter. Delivery volumes reflect the deterioration in the manufacturing sector, along with some postponements of deliveries to the fourth quarter due to flooding at our Mexico mill. However, our long-term view regarding the U.S. market remains highly positive.

Business area Ferrochrome had a solid result thanks to excellent operational performance and adjusted EBITDA reached EUR 29 million. The demand for our low emission ferrochrome remained resilient. Our Kemi mine is the only chrome mine in the EU area with the lowest carbon footprint globally and it will become the first carbon-neutral mine in the world by 2025.

Safety is our priority. Our safety performance remained at a world-class level despite a somewhat higher incident rate in the third quarter. We want to ensure that all our employees get home safe every day.

Decarbonization is one of the key focus areas in Outokumpu's strategy. I am pleased to state that we are firmly committed to this path and are making good progress. We have maintained our recycled material content at 95%, which is the highest in the industry and a key contributor to us having the industry's lowest carbon footprint.

I am very excited to embark on this journey at Outokumpu. My message is one of continuity and confidence – Outokumpu has a strong foundation, and there is great potential ahead. I look forward to working with our employees, customers, suppliers and other stakeholders to advance Outokumpu’s strategic journey.

Outlook for Q4 2024

Group stainless steel deliveries in the fourth quarter are expected to decrease by 0–10% compared to the third quarter, driven by deteriorating markets for both business areas Europe and Americas.

The planned maintenance break in Tornio, Finland is expected to have approximately EUR -10 million impact on business area Europe's adjusted EBITDA.

Energy costs for business area Europe are expected to increase by approximately EUR 5 million.

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

Guidance for Q4 2024:

Adjusted EBITDA in the fourth quarter of 2024 is expected to be lower compared to the third quarter.

Results

Q3 2024 compared to Q3 2023

Outokumpu's sales in the third quarter of 2024 decreased to EUR 1,518 million (EUR 1,531 million). Total stainless steel deliveries were 2% higher. Deliveries in business area Europe slightly decreased, while increased in business area Americas.

Adjusted EBITDA in the third quarter of 2024 increased to EUR 86 million (EUR 51 million). Profitability was supported by higher realized prices for stainless steel. Higher realized prices in Europe were partly offset by lower realized prices in Americas. The positive impact from realized prices was more than offset by the unfavorable raw material impacts resulting from tight scrap market. Costs increased due to salary inflation and maintenance work, partly offset by lower electricity and consumable prices. Profitability was supported by improved result for business area Ferrochrome. Raw material-related inventory and metal derivative gains amounted to EUR 10 million (losses of EUR 27 million), driven by a positive metal hedging result.

EBIT amounted to EUR 32 million in the third quarter of 2024 (EUR -45 million). EBIT in the comparison period includes a loss of EUR 26 million related to sale of the Long Products business in Sweden and other items affecting comparability. ROCE for rolling 12 months was -7.1% (5.3%), mainly due to weaker profitability and the significant impairment booking related to the renegotiated hot rolling contract in business area Americas at the end of 2023.

Net result increased to EUR 20 million in the third quarter of 2024 (EUR -55 million) and earnings per share amounted to EUR 0.05 (EUR -0.13). Net financial expenses in the third quarter of 2024 amounted to EUR 11 million (EUR 15 million) and interest expenses remained stable at EUR 15 million (EUR 15 million).
 

Q3 2024 compared to Q2 2024

Outokumpu’s sales decreased to EUR 1,518 million in the third quarter of 2024 (Q2/2024: EUR 1,540 million). Total stainless steel deliveries were 2% lower compared to the previous quarter. In business area Europe, stainless steel deliveries remained stable while decreased in business area Americas.

Outokumpu's adjusted EBITDA increased to EUR 86 million in the third quarter (Q2/2024: EUR 56 million). In the second quarter, the impact of the political strike on adjusted EBITDA was approximately EUR -30 million.

Realized prices for stainless steel remained stable in both Europe and Americas, and product mix in business area Europe was slightly weaker. Profitability was supported by positive raw material impacts and improved result for business area Ferrochrome. Raw material-related inventory and metal derivative gains amounted to EUR 10 million in the third quarter (Q2/2024: losses of EUR 8 million), driven by a positive metal hedging result.

EBIT amounted to EUR 32 million in the third quarter of 2024 (Q2/2024: EUR 1 million). ROCE for the rolling 12 months was -7.1% (Q2/2024: -8.7%). ROCE development during the third quarter was impacted by slightly improved profitability. Both periods were affected by the significant impairment booking related to the renegotiated hot rolling contract in business area Americas at the end of 2023.

Net result in the third quarter amounted to EUR 20 million (Q2/2024: EUR -5 million) and earnings per share was EUR 0.05 (Q2/2024: EUR -0.01). Net financial expenses amounted to EUR 11 million (Q2/2024: EUR 9 million) and interest expenses to EUR 15 million (Q2/2024: EUR 16 million).
 

Q1–Q3/2024 compared to Q1–Q3/2023

During January–September 2024, Outokumpu’s sales decreased to EUR 4,537 million (EUR 5,447 million). Total stainless steel deliveries were 6% lower compared to the previous year, driven by weaker market and the political strike in Finland. Stainless steel deliveries decreased significantly in business area Europe, while significantly increasing in business area Americas.

Outokumpu's adjusted EBITDA decreased to EUR 180 million in January–September 2024 (EUR 445 million). Profitability was negatively impacted by lower realized prices for stainless steel in both Europe and Americas and the unfavorable effects resulting from tight scrap market. Variable costs decreased, mainly due to lower energy and consumable prices and more efficient production, but the positive impact was partly offset by increased fixed costs, mainly in business area Americas due to higher tolling fee.

The impact of the political strike on adjusted EBITDA was approximately EUR -60 million in the first half of the year. Due to the political strike, the majority of Outokumpu’s stainless steel and ferrochrome operations in Finland as well as the Port of Tornio in Finland were shut down for four weeks. The strike also indirectly impacted the company's operations in other countries through the disruption to internal material flows in both Europe and the Americas.

Raw material-related inventory and metal derivative losses amounted to EUR 2 million in January–September 2024 (losses of EUR 45 million).

EBIT amounted to EUR 14 million (EUR 214 million) in January–September 2024. EBIT in the comparison period includes a loss of EUR 26 million related to sale of the Long Products business in Sweden and other items affecting comparability. ROCE for the rolling 12 months was -7.1% (5.3%), mainly driven by weaker profitability and the significant impairment booking related to the renegotiated hot rolling contract in business area Americas at the end of 2023.

Net result declined to EUR -8 million (EUR 131 million) in January–September 2024 and earnings per share was EUR -0.02 (EUR 0.30). Net financial expenses amounted to EUR 30 million (EUR 31 million) and interest expenses to EUR 48 million (EUR 46 million).
 

Adjusted EBITDA by segment (EUR million)	Q3/24	Q3/23	Q2/24	Q1-Q3/24	Q1-Q3/23	2023
Europe	59	-29	28	91	144	148
Americas	5	53	21	49	232	285
Ferrochrome	29	21	22	73	73	96
Other operations and intra-group items	--8	5	-15	-34	-4	-12
Total adjusted EBITDA	86	51	56	180	445	517

Items affecting comparability in EBITDA (EUR million)	Q3/24	Q3/23	Q2/24	Q1-Q3/24	Q1-Q3/23	2023
Europe	-4	—	0	-2	-7	-52
Americas	—	-5	—	—	-8	-16
Ferrochrome	—	—	—	—	—	-3
Other operations	0	-28	0	-4	-29	-31
Total items affecting comparability in EBITDA	-5	-33	0	-6	-44	-102
Total EBITDA	81	18	56	174	401	416

A live webcast and conference call today, October 30, at 3.00pm EET

A live webcast and conference call to analysts, investors and representatives of media will be arranged today at 3.00 pm EET at https://outokumpu.videosync.fi/q3-2024/register hosted by President and CEO Kati ter Horst and CFO Marc-Simon Schaar.

To ask questions, please participate in the conference call by registering at https://palvelu.flik.fi/teleconference/?id=50049025. 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 the interim report materials, a link to the webcast and later on its recording will be available at www.outokumpu.com/en/investors.

For more information:

Investors: Linda Häkkilä, Head of Investor Relations, tel. +358 400 719 669

Media: Päivi Allenius, SVP – Communications and Brand, tel. +358 40 753 7374, or Outokumpu media desk, tel. +358 40 351 9840, e-mail media(at)outokumpu.com

Outokumpu Corporation