The shares fell as much as 3.7 percent to 39.5 euro cents, the lowest since at least February 1990, and were at 40.5 euro cents at 4:43 p.m. The third-quarter net loss was 238 million euros ($322 million) compared with the 186.6 million-euro loss average estimate of nine analysts surveyed by Bloomberg.
Outokumpu has slumped more than 80 percent in five years as European steelmakers struggle with too many furnaces and imports from Asia amid declining local demand. The company forecast its fourth-quarter underlying earnings before interest and taxes will be at about the same level or “slightly” worse compared with the third quarter.
“The guidance was surprisingly weak,” Mikael Doepel, an analyst Svenska Handelsbanken AB, said by phone. “I’d have also expected some news on the divestments at this point. The steel industry is very cyclical. The company can’t survive in this environment with indebtedness this high.”
Outokumpu’s indebtedness and losses have raised concerns that the Espoo, Finland-based company may have to sell assets or new shares. Net interest-bearing debts decreased by 60 million euros from the previous quarter to 2.98 billion euros.
The company’s operating cash flow reached 124 million euros in the third quarter, compared with a 160 million-euro negative figure in the previous quarter. This was “a clear positive” driven by working capital reduction in results otherwise “unsatisfactory,” Chief Executive Officer Mika Seitovirta said in a statement.
Outokumpu seeks a 300 million-euro reduction in net working capital by the end of 2014 through measures including inventory cutbacks. The company also targets 450 million euros in annual savings by 2017 and said last month it will cut 1,000 additional jobs and close a melt shop in Bochum, Germany next year, two years earlier than planned.
The company will shift to daily alloy surcharges for European distributors from the current monthly pricing model starting next year, it said today.
Outokumpu continues to be the lowest-rated European steel producer behind SSAB AB (SSABA), with more than half of the analysts recommending clients cut holdings. The largest shareholders of the company are ThyssenKrupp and Solidium Oy, the equity-asset manager of the Finnish state, who hold more than half of its shares combined.
Outokumpu completed its 2.7 billion-euro purchase of ThyssenKrupp’s Inoxum stainless-steel unit last year. To allay European Commission concerns that the deal might allow the companies to raise prices of cold-rolled steel products, Outokumpu agreed to divest the Terni mill in Italy.
Talks with the EC in the quarter didn’t result in changes to that requirement, and Outokumpu seeks to complete the Terni plant sale by year-end. Similarly, it is in talks with buyer candidates on its high-performance alloy VDM unit and seeks to complete the review by year-end.
“It seems clear that the sale of Terni and VDM won’t be enough to fix the balance sheet,” Doepel said. “The risk for a new share issue is high. It’ll be interesting to see what the company will come up with toward the end of the year.”
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