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Outokumpu sees strong stainless steel demand continuing

·2-min read
FILE PHOTO: Outokumpu logo is seen at the company's head office in Helsinki

By Essi Lehto

HELSINKI (Reuters) - Shares in Finnish stainless steel maker Outokumpu fell 5.6% to 5.46 euros on Thursday after the company beat expectations in second-quarter core earnings but warned deliveries were likely to fall by up to 10% in the third quarter.

Instead of demand decreasing in the second half due to the seasonal nature of Outokumpu's industry, Chief Executive Heikki Malinen sees demand for stainless steel and ferrochrome continuing to be strong and delivery volumes falling only due to planned maintenance.

"The 0 to 10% drop in volumes boils down to what our need for shutdowns will be," Malinen told Reuters and added that Outokumpu has already seen customers starting negotiations on deliveries for 2022.

Analyst Petri Gostowski from Inderes said the drop in share price could mean shareholders were reacting to the expected seasonal change in the business.

"Some investors are bringing home the wins and estimating the market drivers will not be as favourable in the second half," Gostowski said.

Outokumpu posted an April-June operating profit of 163 million euros ($193 million) versus a loss of 16 million a year earlier and topped the 143.4 million expected by seven analysts, data from Refinitiv Eikon showed.

The good result was aided by higher stainless steel and ferrochrome prices, the company said.

Stainless steel deliveries rose to 626,000 tonnes from 523,000 tonnes a year earlier as demand recovered from the coronavirus pandemic.

Sales rose 31.9% to 1.87 billion euros.

Malinen said Outokumpu was producing as much ferrochrome as possible in its three smelter furnaces in northern Finland but added that "we are pretty much at capacity".

Ferrochrome production was stable from the first quarter at 131,000 tonnes but sold at higher prices and sales were up 28% at 155 million euros.

Outokumpu has been focusing on cutting costs and reducing risk since publishing a new strategy last November.

The company said it would cut costs to increase earnings before interest, taxes, depreciation and amortisation by 200 million euros by the end of 2022.

Malinen said Outokumpu had achieved 123 million euros of that target in the first half of 2021.

($1 = 0.8449 euros)

(Reporting by Essi Lehto; editing by Jason Neely and David Evans)

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