Outokumpu Corporation, a leading global producer of stainless steel, has issued a profit warning for the fourth quarter of 2024, revealing that its adjusted EBITDA is expected to fall close to break-even or even turn negative. This updated guidance, provided on December 12, 2024, indicates a sharp decline compared to the EUR 86 million recorded in Q3 2024.
Outokumpu's latest forecast underscores the challenges facing the company in the final quarter of the year. The primary factors driving this negative outlook include:
1. Weaker-than-expected stainless steel market conditions in Europe, where demand for stainless steel has been more sluggish than anticipated.
2. A longer-than-planned annual maintenance shutdown at the Tornio steel production site in Finland, which has led to reduced output and efficiency during this period.
3. The negative inventory value impact, a situation where the market prices of materials have fluctuated unfavorably, affecting the company's stock and operations.
Outokumpu has indicated that its stainless steel deliveries in the fourth quarter of 2024 are expected to decrease by 0-10% compared to the third quarter. The company notes that deliveries will likely be closer to the lower end of this range, further reflecting the difficult market conditions.
Despite previous guidance suggesting stability or slight growth in its stainless steel deliveries, the combination of the weak market and the extended maintenance period at Tornio has caused a significant reduction in volumes. This impact is expected to be reflected in the company’s fourth-quarter financial results.
Outokumpu's profit warning points to several key operational and market factors contributing to its revised financial outlook:
1. Weak Stainless Steel Demand: The stainless steel market in Europe has not performed as expected, and customer demand has been below projections. Lower demand for stainless steel typically leads to price pressures, which can affect margins.
2. Tornio Site Shutdown: The annual maintenance break at the Tornio site, one of Outokumpu's major production facilities in Finland, has lasted longer than planned. While maintenance is necessary for operational efficiency, extended shutdowns reduce the company’s ability to produce and deliver steel, thus impacting revenues and EBITDA.
3. Inventory Value Impact: The company has also been negatively impacted by inventory value adjustments, which can occur when the value of stored steel declines due to market fluctuations. Such impacts are often difficult to predict and can exacerbate financial losses during downturns in the market.
While the company’s fourth-quarter results may not meet expectations, Outokumpu has maintained a strong commitment to sustainability. The company has been recognized for its sustainability leadership and efforts to reduce carbon emissions. Despite the short-term challenges, Outokumpu continues to focus on its long-term goals of carbon reduction, sustainable production methods, and innovative manufacturing processes.
The company is actively working to address these operational challenges and stabilize its performance in the coming quarters. Outokumpu remains focused on its science-based climate targets, aiming to reduce its carbon emission intensity by 42% by 2030, a goal that is integral to its broader strategy of green transition and environmental responsibility.
Outokumpu’s full-year 2024 results are scheduled to be published on February 13, 2025. This will provide a clearer picture of the company’s financial performance for the year and offer insights into how it plans to navigate the current market challenges. Investors and stakeholders will be looking closely at these results for further guidance on the company’s financial health and its sustainability performance.
Despite the expected decline in Q4 results, Outokumpu’s broader strategy remains focused on strengthening its position in the global stainless steel market while pursuing its environmental objectives. The company is actively managing its operational risks and is committed to enhancing transparency in its financial and sustainability reporting.
As Outokumpu addresses these short-term challenges, its long-term growth prospects will largely depend on the recovery of the stainless steel market and the company’s ability to meet its sustainability targets while maintaining operational efficiency.
