Outokumpu (OUT1V) Q4 2016 earnings summary

Executive summary

• Returned to positive full-year EBIT of €45 million in 2016, from a €100 million loss in 2015, after eight consecutive loss years; cost reductions, stronger volumes and commercial execution drove the turnaround.

• 2020 targets: €500 million EBIT, at least 12% return on capital employed and gearing no higher than 35%.

Financial highlights

• Full-year deliveries increased strongly YoY, led mainly by the Americas; sales declined as realized prices fell in Europe and the U.S.

• Underlying EBIT was €38 million in Q4, up from €32 million in Q3; full-year underlying profitability improved substantially.

• Full-year operating cash flow was nearly €319 million, including approximately €200 million in Q4; the CEO cited cash flow of around €390 million.

• Net income was positive for 2016, helped by €189 million of deferred tax income recognized in Q4.

Outlook and guidance

• Q1 2017 adjusted EBITDA expected to exceed €250 million; guidance excludes positive inventory and nickel valuation effects.

• Q1 deliveries expected higher in Europe and significantly higher in the Americas vs. Q4; healthy demand and improved base prices expected in both regions.

• Year-end 2017 net debt target below €1.1 billion, despite dividend payment; cost-saving initiatives expected to continue.

• 2017 CapEx expected near €184 million; broader planning range is €150–200 million annually, with a potential Kemi mine-related increase in 2019–20.