Results 1st Half 2010


- IN THE FIRST HALF OF THE YEAR ACERINOX REGISTERS A RESULT AFTER TAXES AND MINORITIES OF 81 MILLION EUROS. THE SECOND QUARTER PROFIT IS POSITIONED IN THE SAME LEVEL PREVIOUS TO THE CRISIS

- THE DEMAND RECOVERY OF THE SECOND QUARTER HAS ALLOWED TO INCREASE PRODUCTION LEVELS

- PROVISIONS TO ADJUST INVENTORIES TO NET REALIZABLE VALUE FOR 21 MILLION EUROS HAVE BEEN CARRIED OUT TO CORRECT THEIR VALUE ACCORDING TO THE CURRENT NICKEL PRICES

- THE SECOND INVESTMENT PHASE FOR BAHRU STAINLESS, THE FACTORY UNDER CONSTRUCTION IN MALAYSIA, HAS BEEN APPROVED

- THE BOARD OF DIRECTORS HAS APPOINTED THE CURRENT MANAGING DIRECTOR, MR. BERNARDO VELAZQUEZ HERREROS AS CHIEF EXECUTIVE OFFICER OF ACERINOX, S.A. MR. RAFAEL NARANJO OLMEDO CONTINUES AS CHAIRMAN OF THE COMPANY    

noticia_0104_1_ingles
noticia_0104_2_ingles

 

Raw Materials

The nickel price followed the increase taken place in the first quarter of the year, to reach a maximum half-yearly level of 27,598 USD/Mt on the 16th April.  Since then ¡t began to go down to reach a quarterly minimum of 17,983 USD/Mt on the 8th June, to finish the quarter at levels of around 19,500 USD/Mt.

 

noticia_0104_3_ingles

 

Ferrochrome price follows the upward trend started in the third quarter 2009, almost doubling its price (+97%). In the second quarter the ferrochrome quotation has reached 1.36 USD/Lb, 36% higher than in the previous quarter. 

  

noticia_0104_4_ingles

 

Markets

In the first half of the year the stainless steel market was featured by the demand strength on global basis, which allowed  increases of the base prices and also to affect the price increase of the raw materials until May. 

Europe

From the month of April base prices rose and also the alloy surcharges have increased since the beginning of the year. 

 

noticia_0104_5_ingles

 

America

The American market continuously improved due to the demand recovery and the replenishment of the still low inventory levels in the stockists. 

The price increases announced by North American Stainless and other producers have been progressively consolidating.
 

noticia_0104_6_ingles

 

NAS leadership in the NAFTA market goes on strengthening, which allow us to take part with more intensity in the good run of the North American market.
 
Asia

The Asian market was the first one to react and the strength shown by the emerging economies of the area together with the maintenance of the Chinese consumption reactivated demand and allowed price improvement in the whole area.
 

noticia_0104_7_ingles

 

Production

 

noticia_0104_8_ingles

 

In the first half of 2010 the melting production amounted to 1.1 million Mt, which is 41% higher than in the first half of 2009.

The competitive advantages of Acerinox Group are strengthened by the higher use of its production capacity. 
 

noticia_0104_9_ingles

 

Results

The intermediate financial statements of the first half 2010 were prepared according to the International Rules of Financial Information, NIC 34, and have been reviewed by the external auditors.

The profits after taxes and minorities registered in the first half 2010, 81 million euros, show the clear improvement in the market conditions and in Acerinox Group competitiveness and productivity, specially in the second quarter of the year (71 million euros).


Profit and Loss Account of Acerinox Consolidated Group

  

noticia_0104_10_ingles

 

The correction of nickel prices in May has determined decreases in the alloy surcharges for July and August.  Provisions to adjust inventories to net realizable value have been carried out for an amount of 20.6 million euros. 

The EBITDA  of the first half 2010 amounts to 233 million euros, which against the negative EBITDA of the first half of 2009, -282 million euros, reflects the significant improvement of margins in this period. 

Net sales of the period amount to 2,172 million euros, increasing by 68.1% with regard to the invoiced figure of 2009 like period, as a result of the above mentioned market improvements.

 

noticia_0104_11_ingles

 

In the sales geographical distribution the percentage increase of the American market is to be highlighted due to the higher economic activity in this area.

 

noticia_0104_12_ingles
noticia_0104_13_ingles

 

Condensed Balance Sheet of Acerinox Consolidated Group

 

noticia_0104_14_ingles
noticia_0104_15_ingles

 

Among the balance magnitudes the increase of inventories is to be emphasized (470 million euros) as a result of the higher activity of the period and of the continuous price increases of the raw materials until April. Consequently, the working capital has increased in 270 million euros. 

The Group financial net debt, 1,121 million euros, is 4.3% higher. 

The whole of credit lines in force as of 30th June amounts to 2,001 million euros.
 

noticia_0104_16_ingles

  

 

noticia_0104_17_ingles

  

The higher market activity, the raw materials price increases and the global presence of the Group, with warehouses and service centers in all significant consumption areas worldwide, cause higher financing needs of the working capital in an expansion cycle as the one carried out in the first half 2010.
 
For this reason the cash flow of the operating activities generated, 97.4 million euros, is lower than the figure obtained in 2009 like period, which was achieved during the market plunge and production cuts in force.

Nevertheless, the Group financial strength allows to keep the forecasted investments included in the Strategic Plan and also to carry out as scheduled   the second investments phase in Malaysia, Bahru Stainless, as it will be explained below.

 
Refund to the shareholder

The General Shareholders Meeting held on the 8th June 2010 approved the refund of 0.35 euros per share, paid on the 5th July 2010 and also the issue premium refund of 0.10 euros per share to be paid in October 2010.  The total refund to the shareholders in the year will be 0.45 euros per share, the same amount which was paid in years 2007, 2008 and 2009.


Financial risk management

In the second half of the year Acerinox Group faces the same risks mentioned in the last approved annual accounts. Its management policies, also mentioned in the referred report, have not changed.

The management of the financial risks referred to the exchange currencies, prices and credit is stable and is adapted to that explained in the Annual Accounts approved for year 2009. 

Regarding the liquidity risk, Acerinox Group has increased its financial lines to 2,001 million euros.  The total debt as of 30th June amounts to 1,121 euros.

In view of the financial crisis, Acerinox Group has decided to increase its long term financing, which has been increased in 124 million euros (+23%), achieving a total of 667 million euros, from which 400 million euros have an expiry date longer than six years.  

Regarding the risk of the interest rate, Acerinox Group has hedged the interest rates of the biggest part of its long term debt.  A total of 475 million euros of the long term debt, most of it with an expiry date longer than six years, have been swapped to a fix annual interest rate of 3.55%.


Outlook

The price decrease of the raw materials taken place in May has led to decreases in the alloy surcharges for July and August. This fact together with the seasonal slowdown has reduced the order entry and consequently productions in the Summer months have been adapted to this demand spot situation.  All this will result in a lower activity in the third quarter which will lead  to quarterly results lower than those achieved in the second quarter. Notwithstanding, it will be the fifth consecutive quarter with profits despite the effects of international financial crisis.

The price nickel stabilization around 19,500 USD/Mt from May to July will determine a stabilization in the alloy surcharges for September and October. 

This fact together with the low inventories level in the market, make us expect a demand recovery from September in all the markets.

Investor & Analyst’s Day

On September 16th will be held an Investor & Analyst’s Day in our factory in Kentucky (North American Stainless). This event will be structured in a plant tour and several presentations from the senior management of Acerinox Group.


Bahru Stainless (Malaysia)

PHASE I

The construction of the new factory in Malaysia, Bahru Stainless, advances according to schedule in its first investment phase.  All the production lines are already contracted and under way. We expect that the finishing mill will start up at the end of 2010 and the cold rolling mill will began its productions, with an output capacity of 240,000 Mt yearly, in the second quarter 2011. 


PHASE II

Acerinox Board of Directors, in its meeting held today, has approved the second investments phase in Bahru Stainless. This phase, which start up is expected in the first quarter 2013, will involve increasing the production capacity up to 400,000 Mt per year. Likewise, Bahru Stainless will specialize in special grades and fine thickness, which are products with higher added value. 

The investment for a total amount of 1,000 million Malaysian ringgits (251 million euros) includes a cold rolling mill (ZM2), a cold annealing and pickling line (AP2), auxiliary lines, a laboratory and an electric sub-station, which will supply the electric furnaces when they begin to operate in the future.

 
SENIOR MANAGEMENT

Acerinox, S.A. Board of Directors, in is meeting held today, 27th July 2010, has resolved to appoint Chief Executive Officer, Mr. Bernardo Velázquez Herreros, the current Managing Director of the Company, replacing Mr. Rafael Naranjo Olmedo (Seville, 1944) who continues as Chairman of Acerinox, S.A. Board of Directors.

Bernardo Velázquez, Industrial Engineer (Madrid, 1964), joined Acerinox in 1990. In 2005 he was appointed Planning Director and member of the Management Team.  In year 2008 he took the position of Managing Director of Acerinox Group. 

This appointment follows the recommendation of the Corporate Governance which tend to separate the positions of Chairman and Chief Executive Officer. Likewise, this is carried out according to the succession plan designed three years ago aimed to the continuity, stability and strengthening of the Senior Management.

 


Figures by companies
 

 


noticia_0104_18_ingles

 

Main economic and financial magnitudes