Outokumpu Oyj : third quarter interim statement 2020 – Rigorous measures improved cash flow and net debt decreased to EUR 1...

Outokumpu third quarter interim statement 2020 - Rigorous measures improved cash flow and net debt decreased to EUR 1.1 billion

Highlights in Q3 2020

• Stainless steel deliveries were 488,000 tonnes (533,000 tonnes)¹.
• Adjusted EBITDA was EUR 22 million (EUR 45 million).
• EBITDA was EUR 10 million (EUR 45 million).
• Operating cash flow was EUR 170 million (EUR 12 million).
• Net debt decreased to EUR 1,105 million (June 30, 2020: EUR 1,243 million).
• Gearing was 45.1% (June 30, 2020: 49.2%).

Highlights in Q1-Q3 2020

• Stainless steel deliveries were 1,599,000 tonnes (1,738,000 tonnes).
• Adjusted EBITDA was EUR 172 million (EUR 190 million).
• EBITDA was EUR 161 million (EUR 176 million).
• Operating cash flow was EUR 210 million (EUR 228 million).
• Net result was EUR -78 million (EUR -60 million).

¹⁾Figures in parentheses refer to the corresponding period for 2019, unless otherwise stated.

Q3 2020 compared to Q3 2019

Outokumpu's sales decreased to EUR 1,254 million in the third quarter of 2020 (EUR 1,590 million) due to weakened global demand. Adjusted EBITDA decreased to EUR 22 million (EUR 45 million) and total stainless steel deliveries were 9% lower compared to the reference period of the prior year. Realized prices declined in Europe, but lower input costs supported profitability on the Group level. Also, fixed costs decreased in both Europe and Americas. The planned maintenance work related and other one-off costs in business area Ferrochrome had EUR 15 million negative impact on the Group's profitability. During the third quarter of 2020, Outokumpu recognized restructuring costs of EUR 11 million mainly relating to personnel reductions in business area Long Products. Some restructuring costs were also recognized in Other operations and in business areas Americas and Europe. These costs are reported as adjustments for the quarter (no adjustments). Raw material-related inventory and metal derivative gains amounted to EUR 3 million compared to the losses of EUR 31 million in the reference period. Other operations and intra-group items' adjusted EBITDA amounted to EUR -7 million (EUR 14 million).

Q3 2020 compared to Q2 2020

Outokumpu's sales amounted to EUR 1,254 million in the third quarter of 2020 (Q2/20: EUR 1,420 million). Adjusted EBITDA decreased to EUR 22 million (Q2/20: EUR 45 million) and total stainless steel deliveries were 7% lower compared to the previous quarter. Realized prices in Europe declined, but the Group's result was supported by lower fixed costs. Raw material-related inventory and metal derivative gains were EUR 3 million in the third quarter compared to the EUR 15 million losses in the previous quarter.

Q1-Q3 2020 compared to Q1-Q3 2019

During January-September 2020, Outokumpu's sales decreased to EUR 4,289 million (EUR 5,006 million) and adjusted EBITDA to EUR 172 million (EUR 190 million). Deliveries in the first three quarters of 2020 were 8% lower compared to the reference period last year. Realized prices declined in both Europe and Americas, but lower input and fixed costs affected positively on the Group's result. The lower ferrochrome benchmark price had a negative impact on profitability compared to the previous year. Raw material-related inventory and metal derivative losses amounted to EUR 31 million, while the losses in the reference period were EUR 60 million. Other operations and intra-group items' adjusted EBITDA amounted to EUR -19 million (EUR 4 million).

EBIT was EUR -22 million (EUR 3 million) and the net result amounted to EUR -78 million (EUR -60 million) in January-September 2020.

Group key figures		Q3/20	Q3/19	Q2/20	Q1-Q3/20	Q1-Q3/19	2019
Sales	EUR million	1,254	1,590	1,420	4,289	5,006	6,403
EBITDA	EUR million	10	45	45	161	176	266
Adjusted EBITDA 1)	EUR million	22	45	45	172	190	263
EBIT	EUR million	-51	-13	-16	-22	3	33
Adjusted EBIT 1)	EUR million	-39	-13	-16	-10	17	30
Result before taxes	EUR million	-77	-30	-38	-93	-47	-41
Net result for the period	EUR million	-63	-27	-37	-78	-60	-75
Earnings per share	EUR	-0.15	-0.06	-0.09	-0.19	-0.14	-0.18
Diluted earnings per share	EUR	-0.15	-0.06	-0.09	-0.19	-0.14	-0.18
Return on capital employed	%	0.2	1.0	1.1	0.2	1.0	0.8
Net cash generated from operating activities	EUR million	170	12	72	210	228	371
Net debt at the end of period	EUR million	1,105	1,336	1,243	1,105	1,336	1,155
Debt-to-equity ratio at the end of period	%	45.1	51.4	49.2	45.1	51.4	45.1
Capital expenditure	EUR million	32	56	57	141	156	221
Stainless steel deliveries	1,000 tonnes	488	533	523	1,599	1,738	2,196
Personnel at the end of period 2)		10,118	10,507	10,213	10,118	10,507	10,390
1)Adjusted EBITDA or EBIT = EBITDA or EBIT - Items classified as adjustments.
2)On June 30, 2020 the Group employed, in addition, some 540 summer trainees.

President & CEO Heikki Malinen

Outokumpu has continued extensive measures to limit the impacts of the COVID-19 pandemic on its employees, operations and business. Our top priority remains securing the health and safety of our employees and I am pleased our comprehensive actions have been successful. We have also adjusted our operations to meet lower demand and reduced fixed costs by continuing with cost compression measures. I am especially delighted to see our sales team proactively engaging with customers during these exceptional times to ensure the continuation of our service and remain our customers' trusted partner.

In the third quarter, Outokumpu's deliveries decreased as expected compared to the second quarter and our adjusted EBITDA was EUR 22 million. Business area Americas is developing in the right direction thanks to the successful operational and commercial stabilization, with the third quarter adjusted EBITDA increasing to EUR 14 million, compared to a negative result last year.

The market in Europe was difficult due to increased import pressure from Asia, resulting lower prices and typical seasonality, leading to a challenging quarter for business area Europe with adjusted EBITDA amounting to EUR 9 million.

In October, the European Commission imposed definitive anti-dumping duties on hot rolled stainless steel from Indonesia, China, and Taiwan. We welcome the measure as a first step towards restoring a level playing field and securing a sustainable future for the European stainless industry. This is still insufficient, however, and we would prefer to see the available trade enforcement tools applied in full. In September, the European Commission started an anti-dumping investigation on cold rolled stainless steel from India and Indonesia with the possibility of provisional measures.

Outokumpu announced today its new strategy with a focus on strengthening the balance sheet and creating strong returns in the long run. During the first phase of this strategy, our unwavering focus will be on reaching our financial targets: EUR 200 million EBITDA run-rate improvement and net debt to EBITDA <3.0x by the end of 2022. These targets will be achieved through strict cost and capital discipline, strong customer engagement and a lean and delayered organization.

In execution, we will increase raw material efficiency and operational cost savings and limit annual capital expenditure to EUR 180 million in 2021 and 2022 through maintenance optimization and strict asset management. We will also target fixed cost savings through planned restructuring measures and have today announced the start of employee negotiations targeting the planned reduction of 1,000 employees. The planned measures are hard especially during a pandemic and we will do everything we can to ensure a transparent and fair process. With this decisive and systematic strategy execution, we will unlock the true value in the company to benefit all of our stakeholders.

Outlook for Q4 2020

As communicated previously, the COVID-19 pandemic is expected to have a significant impact on the stainless steel industry throughout 2020, and increases uncertainty.

Outokumpu expects its stainless steel deliveries for the whole Group to remain stable in the fourth quarter compared to the third quarter.

The seasonal year-end maintenance work in Tornio, Finland is expected to have an approximately EUR 10 million negative impact on the fourth quarter result compared to the third quarter.

Adjusted EBITDA is expected to remain at the same level during the fourth quarter compared to the third quarter.

Live webcast and conference call today at 3.00 pm EET

Outokumpu will arrange a live webcast and a conference call for investors and analysts today on November 5, 2020 at 3.00 pm EET (8.00 am US EST, 1.00 pm UK, 2.00 pm CET). The event will be hosted by Outokumpu's CEO Heikki Malinen and CFO Pia Aaltonen-Forsell.

Please follow the live event athttps://outokumpu.videosync.fi/2020-q3-results.

To participate via a conference call, please dial in 10−15 minutes before the beginning of the event:

Finland: [phone]
Sweden: [phone]
UK / International [phone]
USA: [phone]
Confirmation code: 58057600#

The stock exchange release and the presentation material will be available before the event atwww.outokumpu.com/en/investors.

A recording of the event will be available atwww.outokumpu.com/webcasts, at the latest on Monday, November 9, 2020.

For more information:

Investors: Linda Häkkilä, Manager, Investor Relations, tel. [phone]

Media: Corporate Communications, tel. [phone]

Outokumpu Oyj