Rautaruukki (OMX: RTRKS) had a difficult ending for a year that began full of promise. The company did however put a positive spin on the results, with improved cash flow, 1% higher order intake compared to Q4 2010 and 12% higher comparable net sales posted first in highlights. Fourth quarter comparable operating profit was -EUR 40 million and comparable result before taxes 50 million in the red. Full year net profit is still +22 million on the heels of a strong H1.
Dividend is being cut by 1/6 to 50 cents a share. Gearing ratio is now precisely at the long-term target of 60%, which is down sequentially but up year-on-year. Steel industry capacity utilization in Europe during Q4 was somewhere in the 75% region. Rautaruukki’s 80% is also considered low and many of the orders taken particularly late last summer weren’t very profitable.
Rautaruukki is relatively confident heading into 2012. The company expects 5% net sales growth and higher comparable operating profit than the 56 million in 2011. Improvement is expected particularly in construction business. Engineering business profit outlook is also good excluding Chinese operations and ”one individual project” (Kvaerner’s offshore wind farm project in the North Sea). Ruukki’s Shanghai unit has been constantly loss making. Furthermore the company has noticed a clear decrease in demand for special steel in China due to regulatory actions by the state.
The new investments in 2012 will be around 100 million, which is well below consolidated annual depreciation. The company has kept fixed cost base on par with 2009 levels despite increasing sales but sees much more work to do in regrds to cost competitiveness. The stock opened deep in the red but buoyant sentiment and focus on the future outlook helped the share to end the day with a 3% gain.
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