Rautaruukki the only Ruukki

A settlement has been reached between Rautaruukki (OMXH: RTKRS) and Ruukki Group (OMXH: RUG1V) over Ruukki trademark. The companies have agreed that Ruukki Group will change its name and Rautaruukki gains all the rights associated with the name and derivatives. A compensation will be made that Rautaruukki calls immaterial while Ruukki Group does not comment on the size of it and the companies will cover their own legal expenses. Ruukki Group will naturally suffer costs in updating its communication materials etc.

Nordic steel companies combined Q4 loss measured in hundreds of millions

European steel industry still heavily loss-making and Nordic steel companies aren’t faring a whole lot better. Their fourth quarter results were brutal and so far there has been little improvement in market conditions during Q1. Below is an illustration just how weak a market we are in. The numbers are from Q4 2012.

Outokumpu (OMXH: OUT1V)

Operating result -76 million

Net result -309 million

SSAB (OMX: SSAB A)

Operating result of -665 million SEK (-80 million €)

Loss after financial items of -842 million (-101M€)

Net result of -227 (-27M€)

Rautaruukki (OMXH: RTRKS)

Operating profit -58 million

Net result -56 million

Scana Industrier (OSE: SCI)

Operating result -99 million NOK (-13M€)

Net profit of -132 million NOK (-17.5M€)

Now granted some of these numbers contain one-off items and at least the former three had positive operating cash flow. SSAB and Rautaruukki plan to pay a small dividend of 1 SEK and EUR 0.20 respectively. Out of the said companies SSAB has been making decent money in the United States as of late and New Outokumpu does begin to have a presence in other geographies as well but it is further away and Rautaruukki is even later to the party. Even still the Nordic industry is content to hear that EU might be considering protective measures and other types of support mainly due to companies to the south struggling even more.

Scana Industrier has nearly burned out its recent stock offering and looks to be in a bad shape. Outokumpu hinted it may have to tap into equity financing once more as well unless it finds other ways to strengthen balance sheet. It updated on the much anticipated Terni mill sale couple weeks back, merely stating that numerous parties have expressed interest.

Komas and Ruukki Engineering combine

Numerous Finnish companies have said they aim to create a large cluster of engineering firms put together but the actual development has been slow. Mainly Capman (OMXH: CPMBV)-owned Komas has been among the most active in seeking industry consolidation. Now as it joins forces with Ruukki Engineering, a part of Rautaruukki (OMX: RTRKS), to form a new company called Fortaco, there will indeed be a player the size to be reckoned with. Komas contributes units that have annual sales of over 100 million and Ruukki’s ship in units with revenue above 150 million to be combined into a 2600 employee company with manufacturing units in Finland, Estonia, Poland, Slovakia and Hungary.

The companies view the assets put into the new company as very synergistic with little or no overlapping operations. Ruukki will receive 25 million Euros in cash and equity-linked securities worth around 81 million in the company corresponding to the asset values that the firm is providing on top of a 19% ownership portion in the new company. CapMan funds will own 66.5% and management + Komas Group's private owners will have the remaining 14.5%. Completion is subject to required approvals and is expected to close by December.

One of the usual desires nowadays is to move up the value chain. Fortaco’s offering will include final assembly of machines, operator cabins and welded and or machined components. With a more diverse customer base, the effect of business cycles should be somewhat mitigated as well. Around half of the sales come from Finnish units that employ a third of the personnel. The units in the new company from Komas side are: Sastamala, Kurikka, Parkano and Härmä in Finland, Janów Lubelski (Poland) and Narva (Estonia). Ruukki Engineering moves Kurikka, Sepänkylä and Kalajoki component units as well as Jászberény (Hungary), Wroclaw (Poland) and Holíč (Slovakia) units. Komas Jyväskylä does not move to Fortaco. Both stocks responded positively with an almost 5% advance on the news.

Rautaruukki cuts annual profit outlook

CEO Sakari Tamminen of Rautaruukki (OMX: RTRKS) now fears prolonged economic crisis in Europe and says uncertainty has increased world over. Comparable net sales of 740 million, comparable operating profit of 8 million and comparable EBIT of 0 and reported numbers of 742, -5 and -13 million achieved during Q2 2012 respectively were very disappointing. Operating cash flow turned negative. Orders received were likely the brightest spot in the report

Steel customers have adjusted their order behaviour and Rautaruukki cuts its annual profit outlook behind lower estimates from Nordic countries which are still vital for the group. Net sales are still estimated to grow by around 5 per cent but operating profit is estimated to be level (grow) with last year. Some investors have even been saying that the steel maker should have warned earlier. First quarter was already very weak but the company was betting on a large turnaround. Efficiency measures such as the closure of disastrous engineering operations in Shanghai and other unit-specific actions are under way.

Ruukki steel into Cristal Global smelter

Rautaruukki (OMX: RTRKS)will deliver 10 million Euros worth of steel structures for Outotec’s (OMX:OTE1V) ilmenite smelter project for Cristal Global in Jazan Economic City, Saudi Arabia, the company said on Friday. These include steel frame structures and wall and roof cladding for the smelter and casthouse. Ruukki will manufacture the structures at Bolintin Deal plant in Romania. The deliveries take place from late this year until next spring. On Thursday Ruukki said it had completed employer-employee negotiations in Finland resulting in workforce reduction of 48 people.

Disappoint report from Rautaruukki hurts steelmakers

Rautaruukki’s (OMX: RTRKS) comparable net sales grew by 4% and the order intake of 686 million Euros was also marginally higher than last year. These numbers alone certainly aren’t impressive but that operating profit turned negative at -15 million with result before taxes of -26 million was even more alarming. Reported numbers are very close to the comparable figures.

At least the company can note that the net cash flow of 54 million was on the plus side. Ruukki maintains 2012 guidance of 5 per cent revenue growth and improved operating profit. President & CEO Sakari Tamminen noted that uncertainty returned towards the end of the period particularly in China and in Southern Europe.

It should not be a surprise to anyone that Ruukki’s operations in China haven’t been performing well. The company has decided to discontinue cabins and components manufacturing in Shanghai and focuses engineering business in Europe. Steel business presence in China on the other hand will be increased and engineering business premises and machinery will be used for these activities. Ruukki is focusing on special steel strategy with wear-resistant and high-strength products.

Cost cutting measures will involve exiting unprofitable markets in ”Central Eastern Europe” construction. The company has identified 35 million Euros of potential savings in sales and marketing, financial and HR administration etc. support functions. It will now be seeking such savings more rigorously in construction side as well. We will be hearing more about upcoming measures within the next few weeks. The share was trading down for most of the day but surged to a small plus in the final hour of trading.

Nordic firms at Mining Vietnam have had a busy few days

Nordic companies taking part in Mining Vietnam 2012 held 7-9th March 2012 in International Center For Exhibition (ICE), Cultural Palace ,Hanoi either as the parent company or through a subsidiary include:

ABB (SIX: ABBN, OMX: ABB, NYSE: ABB)
FLSmidth (OMX: FLS)
Outotec (OMX: OTE1V)
Rautaruukki (OMX: RTRKS)

The event is the inaugural Vietnam edition of Allworld Exhibitions’ Mining Indonesia trade exhibition and conference. The mining industry in Vietnam is emerging and local firms and the like are seeking partners and contacts at the event. All of the Nordic companies listed above have had some large news to tell these past couple of days.

ABB could already show electrical equipment contract in Vietnam as Masan Resources ordered power and automation equipment for Nui Phao mine and surrounding infrastructure. The unique polymetallic mine under development is located some 80 kilometres from Hanoi in Dai Tu District of Thai Nguyen Province and has resources of tungsten, fluorspar, bismuth, copper and gold.

ABB’s technology was also used to save energy at the Jebel Ali refinery, which is the world’s largest stand alone sugar refinery in Dubai. Furthermore the company announced today that it received a 15 million USD subsea cable order for Humber Gateway wind farm offshore UK.

FLSmidth said today that it has received a 38 million USD copper mine supplies contract from former USSR region including one large SAG mill and and two of the world's largest ball mills. Yesterday the company said that the cartel penalty against its former subsidiary Silvallac S.A (later Trioplast Wittenheim) for European industrial packaging cartel from 1982 to 2001 was reduced by approximately 50% with FLSmidth’s liability reduced to just ove 15 million Euros.

There has not been much news about the Ludowici takeover battle in the last couple of days. Earlier the Australian Takeovers Panel said that FLSmidth had the right to increase its bid for Ludowici but it should have done so earlier, so it might need to compensate those Ludowici shareholders who sold shares from 23 January 2012 until 31 January 2012. Both Ludowici and Weir are also partaking in the conference.

There have been several large ownership changes in Outotec in the past couple of days. Finnish government’s investment arm Solidium flagged over 5% ownership today. Goldman Sachs flagged 5.37% holding the day before yesterday and then yesterday said that its stake had slid to 0.42% in a quick swing trade.

Today Outotec said it has signed an 80 million Euro sulphuric acid technology deal with Zambia-based mining company Kansanshi Mining plc. Outotec was selected to build world's largest metallurgical sulphuric acid plant downstream of a new copper smelter in Solwezi, North-Western Province, Zambia.

Rautaruukki’s CEO Sakari Tamminen told news agency Reuters yesterday that the company sees that a recovery in European steel prices is taking place in Q1 and that they expect to prices to continue to climb during Q2.

Rautaruukki: Weak final quarter of 2011, 2012 outlook positive

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.

Uncertainty over potential industrial action in Raahe Works

The Finnish Construction Trade Union and Rautaruukki's (OMXH: RTRKS) subcontractor Beroa Deutschland still have differing views on whether collective bargaining agreements have been followed to a tee. Rakennusliitto has been threatening with various industrial actions and Rautaruukki’s Union stewards are deciding today on their actions.

Rautaruukki's employees walk out

Finnish broadcasting company Yle reports that Rautaruukki’s (OMXH: RTRKS) employees in Raahe staged a walkout on Friday afternoon to protest against the working conditions of Polish workers working on a German subcontractor’s payroll. The subcontractor is working on modernization of blast furnace 2 at Raahe Steel Works. The industrial action by Rautaruukki’s employyes is supposed to last until Saturday morning.

Rautaruukki shows improvement

Finnish steel manufacturer and supplier Rautaruukki (OMX: RTRKS) showed clear improvement during second quarter of 2011. Order intake grew to 672 million Euro with net sales at 730 million. Comparable result margin before taxes was 8.5%. Second quarter EPS was 32 cents.

Rautaruukki has at times been valued ridiculously low but held up better than most in the financial crisis. Unlike its domestic rival Outokumpu, which has long suffered from poor management decisions and is now trying to rebound under a new CEO, Rautaruukki has been able to ride through tough times relatively unscathed under stable management. Right now you could not say Rautaruukki's stock, a claim to a cyclical firm after all, to be a particularly cheap at conventional valuations.

Special steel products and basic steel business showed good progress. Construction business returned to profit just barely but engineering unit still posted a loss. Ruukki maintains 2011 guidance of 25% net sales growth and clearly improved profit compared to 2010. It says that some uncertainty has arisen but general outlook is still favourable.