Outokumpu profit misses market view as Europe drags, but steel market improves
Outokumpu's First-Quarter Performance and Market Outlook
By Jagoda Darlak
May 12 (Reuters) - Finland's Outokumpu reported a first-quarter core profit below market expectations on Tuesday, weighed down by weak profitability in its European business.
Financial Results Overview
The steelmaker's quarterly adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) were 65 million euros ($76 million) and missed analysts' forecast of 70 million euros in a Vara Research poll.
Market Dynamics and EU Measures
However, it sees an overall improvement in the stainless steel market dynamics, supported by the European Union's measures to protect the local steel industry.
Outokumpu's finance chief Marc-Simon Schaar told Reuters that while underlying end-user demand remains weak, the combination of the EU's Carbon Border Adjustment Mechanism, upcoming July safeguards, and reduced risk of an Asian import surge creates an environment that is more likely to improve than deteriorate.
Impact of Carbon Levy and Supply Chain Challenges
The company has seen the share of cold-rolled stainless steel imports into the 27-country bloc nearly halve since the carbon levy on high-emission imports was introduced in January.
The company also lost a market opportunity arising from this shift, Schaar said, citing challenges with a new supply chain planning solution. He estimated this impact at between 20 million and 30 million euros.
"It's clear that our competitors benefited more from the reduction in imports," Schaar said.
European Business Performance
While profitability in the European business, Outokumpu's largest, improved from historically low levels aided by higher volumes, the region's adjusted EBITDA, a loss of 13 million euros, was well below analyst expectations.
The result was negatively impacted by backlog orders related to the implementation of the supply chain solution, which carried lower prices and margins, Outokumpu said.
Outokumpu expects to work through this backlog during the second quarter, Schaar said.
Other Influences and Outlook
The company said the direct impact of the war in the Middle East was limited in the quarter, mainly affecting freight costs. It is 70% hedged on electricity and gas for the remainder of the year, Schaar added.
($1 = 0.8502 euros)
(Reporting by Jagoda Darlak in Gdansk, editing by Milla Nissi-Prussak)
