Interim Report for Second Quarter 2012

Transcription

1 Interim Report for Second Quarter Second quarter Sales amounted to EUR 263 (307) million, a decrease of 14 percent compared to the second quarter of. Operating profit (EBIT) was EUR 19 (39) million, corresponding to 7.0 (12.6) percent of sales. Net profit for the quarter was EUR 7 (24) million. Cash flows from operating activities were EUR 21 (27) million. January June Sales amounted to EUR 540 (610) million, a decrease of 11 percent compared to the corresponding period of. Operating profit (EBIT) was EUR 40 (74) million, corresponding to 7.3 (12.2) percent of sales. Net profit for the period was EUR 17 (44) million. Cash flows from operating activities were EUR 38 (19) million. The net debt/equity ratio was 117 percent, compared to 137 percent at 31 December. (In the report, amounts in brackets refer to the corresponding period of last year.) The name of the parent company Ovako Group AB has been changed from Triako Midco AB in July, for further information see events after the end of the reporting period. Group key figures Net Sales Operating profit before depreciation ( EBITDA ) as % of Net Sales % 11,3 % 16,2 % 11,4 % 15,9 % 12,0 % Operating profit ( EBIT ) Operating margin (% of Net Sales) % 7,0 % 12,6 % 7,3 % 12,2 % 8,0 % Net profit/loss for the period Earnings per share EUR Cash flow from operations Net debt/equity ratio % 117 % 123 % 117 % 123 % 137 % Return on Capital Employed ( ROCE ) % 10 % n/a 10 % n/a 17 % Full time employees at end of period (FTE) no Comments from the President and CEO "Ovako's sales and profits during the second quarter were at the same level as in the first quarter, which was in line with expectations. The demand pattern in the second quarter, as in the first, was characterised by late orders with requests for short delivery times. Measures to reduce working capital have been implemented during the quarter with good results. Operating cash flow developed positively and amounted to EUR 38 million in the first half. Delivery security remained at our target level, significantly above last year. Capacity adjustments to respond to a weaker market in were started in autumn and the number of employees has continued to decrease during the year. Since Q3 approximately 300 full-time equivalents have left the company, including about 140 during, slightly more than we indicated earlier. Production capacity has been largely in balance with demand in the first half. 1

2 Following earlier announcements on investments, major installation and maintenance work is executed over the summer. Work is ongoing in Hofors on the new large-dimension ring mill and the first phase of renovating the tube works is being implemented. The first phase of a new de-dusting system at the steel mill is being implemented in Smedjebacken to comply with tougher air emission standards. Investments are made in Imatra to reduce processing time at the steel mill and to enhance quality assurance capacity for finished products. These long-term investments mean that Ovako will be able to meet future demands as a leading European producer of engineering steel. Short-term outlook The financial crisis in Europe continues to adversely affect the business climate. Demand is expected to remain weak for the rest of the year. Our readiness to adjust to a weaker market is high. The third quarter is affected by seasonal shutdowns as a result of holidays and maintenance. As in previous years, results in the third quarter will therefore be significantly lower than in the first two quarters." Tom Erixon President & CEO Market development Global production of crude steel in the period January May amounted to 636 million tonnes, which was 0.8 percent more than during the same period in. EU countries produced 74 million tonnes over the same period, which was a decrease of -4.4 percent compared to. North America increased its production by 7.6 percent and China by 2.2 percent, which was 10.2 million tonnes more than during the same period in. Finland and Sweden produced a total of 3.9 million tonnes of crude steel in the period January May, which was a decrease of -9.1 percent over the same period last year. Ovako s steel production fell by -17 percent to 512 thousand tonnes during the first half year, and by -19 percent to 256 thousand tonnes during the second quarter of, compared to the same periods last year. Ovako s strong first half of was characterised by growing demand and significant production against inventory. During the second half of demand weakened considerably and Ovako therefore adjusted production levels and capacity at the end of the year in line with the weaker market. The reduced steel production in the first half of was partly market-driven and partly a consequence of a lower build-up of inventories in preparation for the planned summer shutdowns compared to the same period last year. Orders received during the second quarter decreased by -20 percent over the same period last year. The demand pattern for the quarter was marked, like the first quarter, by late orders with requests for short delivery times. Sales volumes decreased by -14 percent in the first six months and by -18 percent in the second quarter compared to the corresponding periods in. Sales and profit for the second quarter Sales and profit for the second quarter were, as in the first quarter, negatively affected by uncertainty over the European economy. Consolidated sales amounted to EUR 263 (307) million, a decrease of -14 percent compared to the second quarter of. The external sales volume for the quarter declined to 194 (237) thousand tonnes, a decrease of percent. Earnings before interest, taxes, depreciation and amortisation (EBITDA) was EUR 30 (50) million, equivalent to an EBITDA margin of 11.3 (16.2) percent. The decrease in earnings compared to the second quarter of is primarily due to lower sales volume, EUR -25 million. The negative volume effect was partly compensated by a positive price/mix effect of EUR 5 million. The currency effect for the second quarter was insignificant compared to the same period last year. 2

3 Depreciation and amortisation during the period was EUR 11 (11) million. The operating profit (EBIT) for the second quarter was EUR 19 (39) million, equivalent to an operating margin of 7.0 (12.6) percent. Net financial items for the period was EUR -9 (-6) million. Impairment of financial receivables adversely impacted profit for the current year by EUR -1 million, while net financial income for the previous year included positive foreign exchange effects of EUR 2 million. The period s profit before tax was EUR 10 (33) million and net profit was EUR 7 (24) million. Sales and profit for the first half The external sales volume during the first half decreased to 403 (469) thousand tonnes, a reduction of percent. Consolidated sales amounted to EUR 540 (610) million, a decrease of -11 percent compared to the first half of. Earnings before interest, taxes, depreciation and amortisation (EBITDA) were EUR 62 (97) million, equivalent to an EBITDA margin of 11.4 (15.9) percent. The decrease in earnings compared to the first half of was primarily due to lower sales volume, EUR -36 million. The negative volume effect was partly compensated by a positive price/mix effect of EUR 16 million. The currency effect for the first half was insignificant compared to the same period last year. Depreciation and amortisation during the period was EUR 22 (23) million. The operating profit (EBIT) was EUR 40 (74) million, equivalent to an operating margin of 7.3 (12.2) percent. Net financial items for the period was EUR -17 (-13) million. Impairment of financial receivables and foreign exchange losses adversely impacted profit for the current year by EUR -2 million, while net financial income for the previous year included positive foreign exchange effects of EUR 2 million. The period s profit before tax was EUR 23 (61) million and net profit was EUR 17 (44) million. Cash flow and financing Cash flow from operating activities for the second quarter of was EUR 21 (27) million and cash flow before financing activities was EUR 13 (21) million. Cash flow from operating activities for the first half of was EUR 38 (19) million and cash flow before financing activities was EUR 22 (9) million. Despite a significantly lower operating profit in the second quarter, cash flow from operating activities were strong, explained mainly by the favourable development of working capital. Inventory build-up ahead of the planned summer shutdown was significantly lower than in the second quarter of, while stocks of raw materials were more than halved compared to June last year. Utilisation of loans under senior credit facilities per 30 June was EUR 293 (31 December : 296) million. Total interest-bearing net debt was EUR 226 (31 December : 247) million. Equity was EUR 194 (31 December : 180) million. The net debt/equity ratio therefore amounted to 117 percent, compared with 137 percent at 31 December. Equity during the period was adversely affected by EUR 2 million from items recognised in other comprehensive income, primarily relating to cash flow hedges. The group s liquidity buffer at 30 June was EUR 123 (31 December : 108) million, composed of cash and cash equivalents of EUR 52 (31 December : 33) million and unutilised credit facilities of EUR 71 (31 December : 75) million. Capital expenditure Capital expenditure for the second quarter of was EUR 8 (7) million and consisted mainly of expenditure on investments in progress, including the new ring mill and renovation of the tube works in Hofors. Capital expenditure during the first half of the year was EUR 16 (10) million. 3

4 Parent company The consolidated figures in the interim report are presented at the consolidated level of Ovako Group AB (former Triako Midco AB, corporate registration number ). The parent company, Ovako Group AB, directly and indirectly holds 100 percent of the shares in all subsidiaries in the group, including the subsidiary Ovako AB. Net profit for Ovako Group AB during the first half of was EUR 0.2 (0.2) million. Most significant risks and uncertainty factors For information regarding the most significant risks and uncertainty factors, please refer to the description in the annual report. The company does not consider there have been any material changes during the report period in the risks and factors of uncertainty presented in the annual report. The current macroeconomic uncertainty may, however, come to influence the development of the business. Related party transactions The group is under the controlling influence of Triako Holdco AB, the parent company of Ovako Group AB. Triako Holdco AB is under the controlling influence of Triton Fund III. There are no material transactions with companies in which Triton Fund III has significant or controlling influence. Events after the end of the reporting period As communicated in the interim report for the first quarter, and as part of the preparations for a possible future stock exchange listing, the new board of the parent company has been registered. The board, which is the same as previously in the subsidiary Ovako AB, is now composed of Finn Johnsson (chairman), Nizar Ghoussaini, Martin Ivert, Jyrki Lee Korhonen, Magnus Lindquist and Jorma Eloranta. The employee representatives Tord Göransson and Robert Nilsson will also take a seat on the board of Ovako Group AB. The change of name from Triako Midco AB to Ovako Group AB has been registered in July. Accounting policies The interim report for the group has been prepared in accordance with IAS 34 Interim Reporting, with the exception of segment reporting, see below. The interim report for the parent has been prepared in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board s recommendation RFR 2 (Accounting for Legal Entities). The group applies the International Financial Reporting Standards (IFRS) as adopted by the EU, and the Swedish Annual Accounts Act. The accounting policies applied in this interim report are the same as those applied in the consolidated annual accounts for. The term IFRS in this document includes the application of IAS and IFRS, as well as the interpretations of these standards as published by IASB s Standards Interpretation Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC). Segment reporting in accordance with IAS 34 is not disclosed as this is not mandatory for companies whose equity securities are not publicly traded. This report has been reviewed by the Company s auditors. Stockholm, 24 July Tom Erixon President & CEO 4

5 CONDENSED CONSOLIDATED INCOME STATEMENT Net Sales 263,3 307,2 540,2 610, ,6 Cost of goods sold -230,8-256,6-472,0-509,3-977,4 GROSS PROFIT 32,5 50,6 68,2 101,1 143,2 Sales and administrative expenses -14,9-12,8-30,1-28,1-56,7 Other operating income 0,9 0,9 1,4 1,4 3,3 OPERATING PROFIT 18,5 38,6 39,5 74,4 89,8 Financial income 0,1 2,2 0,2 2,3 0,6 Financial expenses -8,8-8,2-17,1-15,3-33,4 PROFIT BEFORE TAX 9,8 32,7 22,6 61,3 57,0 Taxes -2,7-8,5-6,1-16,9-19,3 NET PROFIT FOR THE PERIOD 7,1 24,2 16,5 44,4 37,7 Of which attributable to Owners of the parent 7,1 24,2 16,5 44,4 37,7 Non-controlling interests CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Net profit for the period 7,1 24,2 16,5 44,4 37,7 Other comprehensive income Exchange differences in translating foreign operations 0,7-1,9 0,8-1,0 0,3 Cash flow hedges -0,4-9,2-4,1-13,6-31,7 Income tax relating to cash flow hedges 0,1 2,6 1,1 3,5 8,3 Cash flow hedges (net of tax) -0,3-6,6-3,0-10,1-23,4 Actuarial gains and losses - -2,8 - -2,8-11,0 Income tax relating to actuarial gains and losses - 0,7-0,7 2,9 Actuarial gains and losses (net of tax) - -2,1 - -2,1-8,1 Other comprehensive income for the period, net of tax 0,4-10,6-2,2-13,1-31,2 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 7,5 13,6 14,3 31,3 6,5 KEY FIGURES 5 Sales volume kton Net Sales per ton - / ton Operating profit before depreciation ( EBITDA ) 29,8 49,9 61,8 97,0 134,2 as % of Net Sales 11,3 % 16,2 % 11,4 % 15,9 % 12,0 % Depreciation -6,2-6,3-12,3-12,7-25,4 Operating profit before amortization of surplus values ( EBITA ) 23,6 43,6 49,5 84,3 108,8 as % of Net Sales 9,0 % 14,2 % 9,2 % 13,8 % 9,7 % Amortization of surplus values -5,1-4,9-10,0-9,9-19,0 Operating profit (EBIT) 18,5 38,6 39,5 74,4 89,8 Operating margin (% of Net Sales) 7,0 % 12,6 % 7,3 % 12,2 % 8,0 % Number of shares Earnings per share (EUR)

6 CONDENSED CONSOLIDATED BALANCE SHEET ASSETS EQUITY AND LIABILITIES 30 Jun 31 Dec 30 Jun 31 Dec Property, plant and equipment 345,1 351,4 Equity 193,8 179,5 Intangible assets 3,0 3,1 Other financial assets 1,7 1,2 Non-current interest-bearing liabilities 278,6 279,1 Deferred tax assets 20,6 16,8 Deferred tax liabilities 79,0 73,3 Non-current assets 370,4 372,5 Other provisions 82,6 84,0 Other liabilities 0,3 0,3 Inventories 229,7 220,8 Non-current liabilities 440,5 436,7 Trade and other receivables 163,0 130,1 Current tax assets 6,6 1,6 Current interest-bearing liabilities 0,1 0,1 Derivative assets 1,8 1,7 Derivative liabilities 18,1 12,3 Cash and cash equivalents 52,2 32,7 Trade and other payables 164,4 112,4 Current assets 453,3 386,9 Current tax liabilities 0,4 12,0 Current liabilities to parent 6,4 6,4 Current liabilities 189,4 143,2 ASSETS 823,7 759,4 EQUITY AND LIABILITIES 823,7 759,4 KEY FIGURES Equity 193,8 209,1 179,5 Net debt 226,4 257,5 246,5 Net debt/equity ratio (%) 117 % 123 % 137 % Return on Capital Employed (%) 10 % n/a 17 % CONDENSED CONSOLIDATED CASH FLOW STATEMENT Operating profit 18,5 38,6 39,5 74,4 89,8 Adjustment for depreciation and amortization 11,3 11,2 22,3 22,6 44,4 Adjustment for other non-cash items 1,0-2,3 0,7-2,7-0,2 Interest paid -4,3-7,8-10,7-13,1-25,8 Tax paid -4,4-1,8-20,0-5,3-16,7 Change in working capital -1,4-10,5 6,0-56,9-35,4 Cash flow from operations 20,7 27,5 37,8 19,1 56,1 Investments in property, plant and equipment -7,9-6,8-15,7-9,9-33,8 Cash flow from investing activities -7,9-6,8-15,7-9,9-33,8 Cash flow before financing activities 12,8 20,6 22,1 9,1 22,3 Repayment of loans , ,0 Change in financial receivables 0,0 0,1 0,0 0,1 0,1 Cash flow from financing activities 0,0 0,1-2,9 0,1-13,9 Cash flow for the period 12,8 20,7 19,2 9,3 8,4 Cash and cash equivalents at the beginning of period 39,0 12,8 32,7 24,2 24,2 Translation difference on cash and cash equivalents 0,4 0,0 0,3 0,0 0,1 Cash and cash equivalents end of period 52,2 33,5 52,2 33,5 32,7 6

7 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to owners of the parent Share- Translation- Cash flow Retained Total capital reserve hedge reserves earnings equity Equity at January 1, 0,0 1,3-6,0 184,2 179,5 Other changes in equity Profit for the period ,5 16,5 Other comprehensive income - 0,8-3,0 - -2,2 Comprehensive income - 0,8-3,0 16,5 14,3 Equity at June 30, 0,0 2,1-9,0 200,7 193,8 Equity attributable to owners of the parent Share- Translation- Cash flow Retained Total capital reserve hedge reserves earnings equity Equity at January 1, 0,0 1,0 17,4 159,3 177,7 Other changes in equity Profit for the period ,4 44,4 Other comprehensive income - -1,0-10,1-2,1-13,1 Comprehensive income - -1,0-10,1 42,3 31,3 Equity at June 30, 0,0 0,0 7,4 201,7 209,1 7

8 PARENT COMPANY CONDENSED INCOME STATEMENT GROSS PROFIT 0,0 0,0 0,0 0,0 0,0 Selling and administrative expenses 0,0 0,0 0,0 0,0 0,0 OPERATING PROFIT 0,0 0,0 0,0 0,0 0,0 Group contribution ,7 Financial expenses 0,2 0,2 0,3 0,2 0,5 PROFIT BEFORE TAX 0,2 0,2 0,3 0,2 1,2 Taxes -0,1-0,1-0,1-0,1-0,3 NET PROFIT FOR THE PERIOD 0,1 0,2 0,2 0,2 0,9 PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME Net profit for the period 0,1 0,2 0,2 0,2 0,9 Other comprehensive income Other comprehensive income, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 0,1 0,2 0,2 0,2 0,9 PARENT COMPANY CONDENSED BALANCE SHEET 30 Jun 31 Dec Shares in subsidiaries 139,8 139,8 Receivables from subsidiaries 22,4 22,2 Deferred tax assets 0,1 0,1 Non-current assets 162,3 162,1 Receivables from subsidiaries 7,1 7,1 Current assets 7,1 7,1 ASSETS 169,4 169,2 Equity 163,0 162,8 Liabilities to parent company 6,4 6,4 Current liabilities 6,4 6,4 EQUITY AND LIABILITY 169,4 169,2 8

9 DEFINITIONS OF KEY FINANCIAL FIGURES Net sales Gross profit EBITDA EBITA Operating profit (EBIT) Operating margin Net debt Sales less deduction for value added tax, discounts and returns Net sales minus cost of goods sold Earnings before interest, taxes, depreciation, amortisation and impairments Earnings before interest, taxes, amortisation of surplus values from acquisitions and impairments Profit before interest and taxes Operating profit as a percentage of net sales Net debt/equity ratio (Net debt/total equity) x 100 Earnings per share before and after dilution Interest-bearing liabilities minus cash and cash equivalents Net profit for the period/weighted average number of shares during the period Return on capital employed ROCE EBIT rolling 12 months/equity plus financial liabilities (average of opening and closing balances for the period). 9

10 THIS IS A TRANSLATION FROM THE SWEDISH ORIGINAL Review report Ovako Group AB, company registration no Board of Directors Introduction We have reviewed the condensed interim report for Ovako Group AB as at June 30, and for the six months period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review. Scope of review We conducted our review in accordance with the Swedish Standard on Review Engagements, SÖG 2410 Review of Interim Reports Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material aspects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group, and in accordance with the Swedish Annual Accounts Act regarding the Parent Company. Stockholm, July 24 Ernst & Young AB Heléne Siberg Wendin Authorized Public Accountant 10