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Outokumpu Moves Forward with its Short-term Agenda, Non-recurring Costs EUR 148 Million for the Second Quarter - Outokumpu's short-term agenda focuses on improving the Group's cash flow, creating balance sheet flexibility and restoring profitability
Outokumpu Moves Forward with its Short-term Agenda, Non-recurring Costs EUR 148 Million for the Second Quarter

 

NewswireToday - /newswire/ - Espoo, Finland, 2011/06/14 - Outokumpu's short-term agenda focuses on improving the Group's cash flow, creating balance sheet flexibility and restoring profitability. OUT1V

   
 
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The actions consist of disposal of non-core assets, separation and turnaround actions related to loss-making units as well as actions to limit capital expenditure, cut costs and strengthen the balance sheet. Some of the actions have already been implemented. Related to the actions, Outokumpu expects to record a total of some EUR 148 million of non-recurring asset impairments and restructuring costs in the second quarter 2011. As a result, Outokumpu's reported operating profit in the quarter will be significantly negative.

CEO Mika Seitovirta: "We are now ready to move forward with the actions that are needed to address our short-term issues: cash flow, balance sheet and profitability. Some of the actions have been fast to execute whereas some will require more fundamental changes and it will take some time until we see permanent results."

Disposal of non-core assets

- Disposal of shares in Talvivaara Mining Company Ltd and part of the shares in Talvivaara Sotkamo Ltd announced on 1 June 2011;
- Disposal of shares in Tibnor AB announced on 24 May 2011;
- Potential divestment of the shares in Fagersta Stainless AB;
- Potential divestment of the brass-producing units in Sweden and the Netherlands.

The transactions that have already been realised have resulted in EUR 240 million of capital gains and EUR 162 million cash inflow in the second quarter of 2011. Additionally, there is a potential additional cash inflow of EUR 240 million if Talvivaara exercises the option to buy the remaining shares in Talvivaara Sotkamo Ltd.

Loss-making units
Outokumpu has defined its tubular unit (OSTP) as a non-core asset and has decided on a turnaround plan for the unit. OSTP produces welded stainless steel process pipes and tubes as well as threaded and butt weld fittings. It has 11 production sites in Sweden, Finland, USA, Saudi Arabia, Estonia and Canada employing some 970 people. The turnaround plan would mean separation of OSTP from Outokumpu and managing the business through OSTP Board. The plan includes significant streamlining of the production structure, optimisation of product portfolio and general cost reduction. Outokumpu is also considering potential partners that would provide industry and management expertise for the implementation of the turnaround plan and potentially become owners of the business in the future. Based on the plan some EUR 70 million of one-time costs related to asset impairment and restructuring are expected for the second quarter 2011.

Similarly, a turnaround plan on how to return Outokumpu's thin and precision strip mill Kloster to sustainable profitability has been prepared. The business plan is based on simplification and optimisation of the product mix, re-segmentation of the customer base and providing the internal material feed mostly from Tornio. Within the next 12 months Outokumpu will evaluate whether the turnaround plan is delivering sufficient results. If there was no visible progress towards clear profitability improvement, Outokumpu would consider partnerships, divestment or closure of the business.

Kloster is situated in Långshyttan, Sweden and employs 275 people. Outokumpu will record an asset impairment of some EUR 60 million related to Kloster in the second quarter 2011.

In total OSTP and Kloster made an operating loss of some EUR 50 million in 2010.

Capital expenditure, costs and balance sheet
Outokumpu will continue with its two major expansion projects, doubling the ferrochrome production capacity and expanding the capabilities and capacity of the quarto plate production, as planned. After the review of the capital expenditure plans for 2011, the total capital expenditure is now expected to be EUR 250-300 million.

As announced in April and May the actions to increase efficiency and remove overlaps in sales, supply chain and supporting functions will reduce some 350 jobs by the end of 2011. This will result in EUR 27 million cost savings from 2012 and EUR 18 million non-recurring costs in the second quarter 2011.

The total of the non-recurring asset impairments and restructuring costs, EUR 148 million, will impact Outokumpu's reported operating profit in the second quarter 2011. As a result, Outokumpu's reported operating profit in the quarter will be significantly negative. The non-recurring capital gains, EUR 240 million, will have a positive impact on the Group's financial income and net profit in the quarter.

The second-quarter non-recurring capital gains, asset impairments and restructuring costs will have positive 8 percentage point net impact on Outokumpu's gearing.

On 1 June Outokumpu signed a new three-year EUR 750 million revolving credit facility. The new facility has a gearing covenant at 115%.

For further information, please contact:
Mika Seitovirta, CEO, T: +358 9 421 3200
Päivi Lindqvist, SVP - Communications and IR, T: +358 9 421 2432, mobile +358 40 708 5351

About OUTOKUMPU OYJ
Outokumpu (outokumpu.com) is a global leader in stainless steel with the vision to be the undisputed number one. Customers in a wide range of industries use our stainless steel and services worldwide. Being fully recyclable, maintenance-free, as well as very strong and durable material, stainless steel is one of the key building blocks for sustainable future. Outokumpu employs some 8 000 people in more than 30 countries. The Group's head office is located in Espoo, Finland. Outokumpu is listed on the NASDAQ OMX Helsinki.

 
 
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Written by / Agency / Source: Outokumpu OYJ

 
 

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Outokumpu Moves Forward with its Short-term Agenda, Non-recurring Costs EUR 148 Million for the Second Quarter

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OUTOKUMPU OYJ |
Publisher Contact: Press Office - Outokumpu.com 
+358 9 4211 corporate.info[.]outokumpu.com
 
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