2013: 1st Quarter Results


Stainless Steel Market

In the first Quarter of 2013 the stainless steel market has experienced an improvement compared to the end of 2012. However, doubts about the economic recovery and the prudence on the market, have stopped the traditional restocking process of the first Quarter.

The continued downward trend in the nickel price hasn’t either encouraged distributors to make speculative purchases, and thus apparent consumption, prices and inventories remain low.

The European market is still not getting over, apparent consumption has declined in the first Quarter by 6.8%, and we keep not noticing clear signs of recovery in final demand. On the other hand, we hope that the long merger process between Outokumpu and Inoxum clears up, as well as the sale of the Italian plant, Terni, which is causing a lot of uncertainty in the Euro zone.

On the contrary, the situation in the American market, Acerinox’s first market, is very different and has grown by 9.2% in the first two months of the year. However, imports pressure is hindering the expected price increases.

In Asia, we couldn´t detected a great deceleration before the Chinese New Year celebration, nor we did perceive an increased activity at the end of it.


Production

Melting Shop production in Acerinox during the first Quarter of the year, 586,933 metric tones, is a 4.4% higher to that of the same period of the previous year.

Cold rolling production amounted to 365,581metric tons, which is a 3.6% lower to that of the first Quarter of 2012.

With these levels of production we have increased the use of the Group´s capacity up to 88%.


Results

The 2013 first Quarter results show a change of trend from the previous two Quarters. Despite the apathy market already described, the Group has offset the weakness of prices with significant cost reductions.

The results are better than the three previous Quarters, if well significantly lower than the first Quarter of 2012, which was characterized by a strong restocking of inventories.

Net sales, 1,035 million euro, have fallen by 15.8%, as a result of the combined effect of the reduction of tons sold and lower stainless steel prices.
 

The Nickel weakness shown in the month of March has made it necessary to make inventories adjustment at the end of the Quarter of 17.2 million euros.

The EBITDA for the Quarter, 68.3 million euros, is 29% lower than the first Quarter of the previous year, although personnel and operating expenses have decreased by 10 million euros over the period.

Depreciation and financial expenses have also declined resulting in a profit before taxes of 23 million euros, which improves in 55 million euros from the fourth Quarter of 2012 and 69 million euros from the third Quarter.

The geographical distribution of the Group’s income reflects the progressive increase in sales of our Asian factory, Bahru Stainless.
 

Despite the increase in working capital and investments, net financial debt is still under control at 789 million euros.

The highest levels of capacity utilization and the bigger needs of supply of semi-products to Bahru Stainless, have led to an increase in inventories of 87 million euros. Clients amount to 72 million euros.

However, the extension of the period of payment to suppliers is partially offsetting this effect and will be also increased in the coming months.
 
The Group maintains credit lines of over 2,000 million euros and has increased in this Quarter its long-term lines by offsetting debt amortization in the first Quarter, enabling us to face our investments, dividends, and any other increase in activity.

 
Bahru Stainless

The ZM2 of Bahru Stainless is already operating and the AP2 testing has begun, annealing and pickling lines of thin thickness and products of higher added value.

The quality levels achieved are being recognized by customers and are reaching production and sales levels in line with forecasts.


General Shareholders Meeting

The Board of Directors’, at its yesterday’s meeting, has approved the General Shareholders Meeting for next June 5, 2013, in its second round. It will be held in the “Mutua Madrileña” Building (Pº de la Castellana, 33 - Madrid).


Return to Shareholders

The Board of Directors’, at its meeting held yesterday, has decided to propose to the General Shareholders Meeting, a retribution of 0.45 euros per share, continuing with the traditional policy of keeping the shareholder remuneration in difficult times.

On this occasion, and to give more options, it has been decided to propose to the General Shareholders Meeting the scrip dividend formula, letting the shareholder decide between cash or new shares.

The financial strength and the confidence in the project allow us to continue with our Strategic Plan.


Outlook

The lack of visibility keeps being the most characteristic factor at the moment. The second Quarter will maintain the keynote of this first one, not letting us confirm the favorable expectations predicted by some sectorial analysts for the second Semester.

However, the good situation of Acerinox added to the results obtained in productivity and efficiency, allow us to be optimistic once the macro-economic situation improves.


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