The decline in adjusted EBITDA is due to a significantly weaker market environment in Europe. Despite this, Outokumpu points to a solid result in its 2023 financial report.
In 2023, the market shifted after an exceptionally strong previous year. For this reason, as well as due to the impairment entries in the Americas division and other adjustment items, the return on capital employed (ROCE) for the rolling 12 months was -2.1% (22.6%). Total shipments of stainless steel in the January-December 2023 period were 9% lower year-on-year. The realized prices for stainless steel were at a significantly lower level in Europe, but also fell on the American continent.
The lower profitability of the Ferrochrome division had a negative impact on the group result, and costs in the Europe division increased compared to the previous year. Commodity-related losses from inventories and metal derivatives amounted to EUR 44 million (losses of EUR 131 million) in the period January-December 2023.
2023 compared to the previous year
Stainless steel shipments fell to 1,906,000 tons in January-December 2023 (from 2,106,000 tons in 2022). Adjusted EBITDA was EUR 517 million (EUR 1,256 million in 2022), EBITDA was EUR 416 million (EUR 1,248 million). Outokumpu's sales fell to EUR 6,961 million (EUR 9,494 million) in the January-December 2023 period. Accordingly, earnings per share amounted to EUR -0.26 (EUR 2.40 in 2022).
Operating cash flow amounted to EUR 325 million (EUR 778 million including discontinued operations). The sale of the majority of the Long Products business was completed on January 3, 2023. Since September 2022, these businesses have been classified as assets held for sale and reported as discontinued operations. The comparative figures include discontinued operations if they are reported separately. The disposal of the remaining units was completed on August 1, 2023.
Review from CEO Heikki Malinen
After exceptionally high values in 2021 and 2022, the result fell in 2023. The ferrochrome market weakened, which is why ferrochrome production had to be adjusted to the lower demand in January 2024. The more difficult market conditions are a natural part of the cyclical stainless steel industry, explains Heikki Malinen.
The group immediately took preventive measures to restore profitability across the company while maintaining safety as a top priority. In 2023, the company remained net debt-free and the business delivered solid cash flow.
“Our performance in 2023 was solid and our adjusted EBITDA was EUR 517 million. The market environment changed over the course of the year; the third quarter was the low point for the Europe division. Since then, the market has only recovered slowly,” explains Malinen.
We managed to consolidate our position on the American market. The expansion of cold rolling capacities is being examined, which would make it possible to increase deliveries to the attractive North American market. A decision is expected to be made within a year.
I am pleased to announce that our Board of Directors today proposed a dividend of EUR 0.26 per share for 2023. This, together with our ongoing share repurchase program, reflects our strong commitment to shareholder returns.
Energy efficiency in focus
The company represents four focus areas: expansion in North and South America, competitiveness in Europe, value chain integration and sustainability, including a possible investment in biocoke.
The strong focus on energy efficiency continued throughout the year. The goal of improving energy efficiency by 8% could be exceeded, but with a longer time frame than originally assumed. Emissions were successfully reduced in 2023 in line with the SBTi climate target.
Outlook for Q1 2024
In the first quarter, stainless steel shipments are expected to increase 5-15% compared to the fourth quarter. Adjusted EBITDA in the first quarter of 2024 is expected to be at a similar level to the fourth quarter.
Currently, ferrochrome production is running at 80% of 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.
It is expected that some commodity-related losses from inventories and metal derivatives will be realized in the first quarter at current commodity prices. The market environment began to weaken at the end of the fourth quarter for the Americas division and a slow recovery is expected in Europe. The scrap market has also become tighter recently.
