Year-End Report 2011
Fourth quarter 2011
• Net sales amounted to EUR 266 (250) million, an increase of 6.4 percent compared to the fourth quarter of 2010, despite 3 percent lower volume.
• Operating profit (EBIT) was EUR 9 (31) million, corresponding to 3.3 (12.4) percent of net sales.
• Net loss for the quarter was EUR -2 million.
• Cash flow from operations was EUR 24 million.
Full year 2011
• Net sales amounted to EUR 1,121 (861) million, an increase of 30.2 percent compared to full year 2010, of which volume growth accounted for 18.3 percentage points and revenue per tonne 10 percentage points.
• Operating profit (EBIT) was EUR 90 (67) million, corresponding to 8.0 (7.8) percent of net sales.
• Net profit for the period was EUR 38 million.
• Cash flow from operations was EUR 56 million.
• The net debt/equity ratio was 137 percent, compared to 149 percent at December 31, 2010.
• Return on capital employed (ROCE) at December 31, 2011 was 17 percent.
(In the report, amounts in brackets refer to the corresponding period of last year.)
Comments from the President & CEO
Demand for low-alloy special steels was highly volatile in 2011. For Ovako, the first half of the year began with very strong order intake and a significant increase in sales and improvement in operating profit and operating margin compared to the same period last year. In the second half, order intake fell and steel production was reduced from the second-quarter level of 317 thousand tonnes to 247 thousand tonnes in the fourth quarter, a decrease of 22 percent. Sales improved compared to fourth quarter last year and ended at EUR 266 million, primarily as a result of increased revenue per tonne sold. Profits was negatively impacted by the lower production rate, and amounted to EUR 9 million in the fourth quarter compared with 31 million last year. For the full year, the billion threshold was exceeded, with net sales of EUR 1,121 million, an increase of 30 percent with an improved operating profit of EUR 90 million compared to EUR 67 million in 2010.
Despite a weak performance in the second half, however, some customer segments went against the flow. For example, in the mining sector order intake was strong throughout the year, and demand for large rings for wind power improved tangibly towards the end of the year. In view of an overall uncertain market situation, Ovako has taken a number of measures to reduce its cost level, and in the fourth quarter it was decided to cut production capacity by about 15 percent in the first quarter 2012, representing a reduction in personnel of approximately 200.
New strategy and new financial targets
In autumn 2011 a new strategy was adopted for Ovako, including new financial targets. The financial objectives are summarised under the heading ”20-10-5”. This means that Ovako should achieve a return on capital employed of 20 percent (outcome 17 percent for 2011). The target for the operating margin is 10 percent (outcome 8 percent for 2011). The target for annual sales growth is 5 per cent per annum (outcome 30 percent for 2011). All targets are defined as an average over a business cycle.
Several investment decisions were taken in accordance with Ovako’s strategic focus on future growth segments. A new ring mill in Hofors will in particular support developments in offshore wind power. The ongoing upgrade of peeling and cutting lines in Hällefors will support the growth of advanced applications for diesel engines. A decision has also been taken to strengthen both the application development and sales organisation in Europe.
Although the economic situation, particularly in Europe, remains uncertain, order inflow stabilised towards the end of the year. The inventory adjustments that took place with many customers were expected to be completed in December. However, a weak order intake during the fourth quarter 2011 will affect the first quarter of this year negatively, so deliveries are expected to be lower than in the same period last year.
Stockholm, February 15, 2012
Aktiebolaget Ovako (publ.)
President and CEO
You will find the full report of Ovako’s Year-End Report 2011 here.
Further information can be obtained from: Viktoria Karsberg, Head of Group Communications, +46 70 209 93 96
Press release in English (pdf)
Pressmeddelande på svenska (pdf)
Lehdistötiedote suomeksi (pdf)
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 2011 were EUR 1,121 million and the number of employees was 3,239. Total steel production capacity is 1.3 million tonnes per year.