Outokumpu uses solid cash flow in Q2 to cut net debt to €1.24 billion

By Devika Patel

Knoxville, Tenn., July 25 – Outokumpu Oyj management used the company’s “very healthy” cash flow in the second quarter to pay off debt, reducing net debt to €1.24 billion.

The company has strong liquidity reserves and has also reduced its leverage ratio to 1.8x, while taking care of upcoming maturities so that nothing big is due until 2019.

“We achieved a very healthy cash flow of €150 million, which allowed us to reduce our net debt to about €1.24 billion,” president and chief executive officer Roeland Baan said on the company’s second quarter earnings conference call on Tuesday.

Another executive weighed in on the debt reduction as well.

“The operating cash flow at €150 million was robust and the net debt has come down by over €250 million versus the same period last year, now at the lowest level it has been for many, many years,” chief financial officer Christoph de la Camp said on the call.

De la Camp also noted that the company’s leverage metrics have been reduced as well, falling to 1.8x.

“[Our net debt] has continued to come down,

“The leverage continues to fall dramatically.

“We are now solidly below 2x, at a level of 1.8x,” de la Camp said.

Some of the debt reduction was in the form of a reduction in the company’s €250 million senior secured notes due 2021.

“We redeemed €25 million of the €250 million senior secured notes that are due in 2021,” de la Camp said.

The top financial executive also noted that the company refinanced some maturities, and has no significant repayments until 2019, consisting of a bond and revolving credit facilities.

“The maturity on our debt is also no longer an issue,” de la Camp said.

“We’ve worked through all of the longer-term facilities to 2017 and refinanced them.

“The facilities are short-term commercial paper, have little maturities coming up in 2018, with a big repayment in 2019.

“That’s a bond on one hand and revolving credit facilities that need to be renewed in the course of that year,” he said.

In addition, the company has strong liquidity.

“Our overall liquidity reserves continue to be very strong,” de la Camp said.

“[We have] €289 million of cash in the bank and very large standby facilities in that we have a liquidity reserve of over €1 billion,” de la Camp said.

Cash and cash equivalents increased “significantly,” de la Camp said, through the quarter and was €289 million at the end of the quarter.

Adjusted EBITDA was €199 million.

Net debt decreased by €137 million to a new low of €1.24 billion.

“Reducing net debt continues to be one of our main priorities,” the company said in a press release.

“We are confident that we can achieve our net debt target of less than €1.1 billion by the end of 2017,” the release said.

On May 10, Outokumpu issued a redemption notice for €25 million of its €250 million 7¼% senior secured notes due 2021.

The notes were redeemed on June 16 at a redemption price of 103 plus accrued interest.

As a result of the partial redemption, the new outstanding principal amount is €900 for each €1,000 of notes, and the total outstanding amount has been reduced to €225 million.

The redemption had no impact on Outokumpu’s net debt or gearing.

The company is an Espoo, Finland-based stainless steel producer.

© 2015 Prospect News.
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