Outokumpu Oyj, the Finnish steelmaker that bought ThyssenKrupp AG’s Inoxum unit last year, raised job cuts planned in Europe by 40 percent to 3,500 on overcapacity.
“These measures are necessary to achieve turnaround in this difficult environment,” Chief Executive Officer Mika Seitovirta said in a statement. The “announcement introduces a solid industrial plan to turn Outokumpu back to profitability.”
European steelmakers are struggling with excess supply as imports from Asia worsen a supply glut amid waning demand from automakers and builders. ThyssenKrupp agreed last month to cut 1,300 jobs and reduce weekly hours at its European steel unit.
Outokumpu plans to save 100 million euros ($135 million) a year on top of previous reductions, it said today. Measures include closing a melt shop in Bochum, Germany, next year, two years earlier than planned. It will also shut service centers and reduce Finnish annealing and pickling capacity by 200,000 metric tons and German cold rolling as much as 350,000 tons.
“This shows that the management is actively working to improve the situation,” Kari Jaervinen, managing director at Finnish state equity investor Solidium Oy, said today. Solidium is Outokumpu’s largest shareholder with 21.8 percent. “It’s good that such decisions are tackled with determination.”
The company jumped as much as 8.3 percent, the biggest intraday gain since May 10, and was up 1.9 percent at 50.7 euro cents by 3:55 p.m. in Helsinki. It’s down 36 percent this year.
Outokumpu’s indebtedness and losses have raised concerns that the Espoo, Finland-based company may have to sell assets or new shares. The steelmaker’s second-quarter net loss was 249 million euros, bringing net debt to 3 billion euros.
The company is the least-loved stock among its peers. The company has the lowest analyst ratings among European steel producers, with more than half recommending clients sell.