Third quarter 2011
• Net sales amounted to EUR 244 (204) million, an increase of 20 percent compared to third quarter 2010, of which volume increased with 9 percentage points.
• Operating profit (EBIT) was EUR 7 (2) million, corresponding to 2.7 (1.0) percent of net sales during the seasonally weak third quarter.
• Net profit for the quarter was EUR -5 million.
• Cash flow from operations was EUR 13 million.
January–September 2011
• Net sales amounted to EUR 854 (611) million, an increase of 40 percent compared to January–September 2010, of which volume increased with 26 percentage points.
• Operating profit (EBIT) was EUR 81 (36) million, corresponding to 9.5 (6.0) percent of net sales.
• Net profit for the period was EUR 40 million.
• Cash flow from operations was EUR 32 million.
• The net debt/equity ratio was 133 percent, compared to 149 percent at 31 December 2010.
(In the report, amounts in brackets refer to the corresponding period of last year)
Comments from the CEO
Demand for our products during the first half of 2011 was strong. During the third quarter most markets gradually slowed down in response to the macro-economic environment. The slowdown was mostly noted in the automotive segment and a weaker than expected demand from the wind energy sector. The order intake was lower than invoicing.
Despite a weaker market, Ovako shows stable development for third quarter sales. Net sales amounted to MEUR 244, an increase of 9 percent in volume and 20 percent overall, compared to the corresponding period last year. In addition to seasonal variations, the third quarter result was affected by extensive maintenance programs and some start-up problems in August. Still, the EBITDA margin was 6.9 percent during the quarter, slightly above third quarter last year.
In anticipation of a weaker market situation Ovako has announced measures to reduce costs and production capacity starting from the first quarter of 2012. The capacity will be reduced by approximately 15 percent compared to the first half of 2011, resulting in a workforce reduction of around 200 full-time employees. The adjustment will be carried out within the framework of fixed-term employment contracts as well as the flexibility agreements between the company and the trade unions.
The program to further strengthen Ovako’s long-term market position continues according to plan. During the third quarter Ovako decided to invest MEUR 7.5 in a new automated peeling line in Hällefors in order to meet the long-term growth in the high-performance diesel engine segment. Production is scheduled to start up during the first half of 2013.
Changes in company management
After the close of the third quarter, Ovako appointed Göran Nyström to a new position in Group Management, as Head of Group Marketing and Technology. Göran Nyström, with a long career at Sandvik, will start in his new role on January 1, 2012, and he will lead the important work in new application development. The ongoing initiative to strengthen Ovako’s R&D and sales organization will continue as planned during 2011–2012.
Rickard Qvarfort will take up the position as Head of Business Area Bar SmeBox with immediate effect. Ulf Wilandh, former Head of the Business Area, will leave the Group at year-end. Rickard Qvarfort was previously Head of Ovako’s Business Area Tube & Ring.
Carl-Michael Raihle has been appointed Head of the Tube & Ring Business Area. Carl-Michael Raihle was previously Head of the Luvata Rolled Products division and has held various positions at Luvata and Outokumpu. He will start his new role on December 1, 2011.
Short-term outlook
The weaker market conditions are expected to continue into 2012. The fourth quarter 2011 will be supported by the existing order book, while demand for the first half of 2012 is expected to be lower than in 2011.
Stockholm, November 9, 2011
Aktiebolaget Ovako
(publ.)
Tom Erixon
President and CEO
You will find the full report of Ovakos Nine-month results 2011 on the website. http://www.ovako.com/Financial-information
Further information can be obtained from:
Tom Erixon, CEO, +46 8 622 13 00
Marcus Hedblom, CFO, +46 8 622 13 00
Viktoria Karsberg, Head of Group Communications,
+46 70 209 93 96
Ovako is a leading European producer of long special steel products for the heavy vehicle, automotive and engineering industries. Our production covers low-alloy steels and carbon steels in the form of bars, tubes, rings and pre-components. The company has 14 production units and several sales companies in Europe and the USA. Net sales in 2010 were EUR 861 million and the number of employees was 3,141. Total steel production capacity is 1.3 million tonnes per year.