Results Business Year 2010


- Acerinox Group achieves in 2010 a result after taxes and minorities of 123 million euros, improving by 352 million euros the figure registered in 2009.

- The EBITDA generated in the year, 390 million euros, improves by 555 million euros with regard to the previous year.

- In a very complex economic environment, the company consolidates its competitive leadership in the industry, being the sole Western producer to register profits continuously in the last six quarters.

- These results prove the success of the Strategic Plan, the improvements achieved by the Excellence Plan 2009-2010 and the savings obtained by the Adjustment Plan 2009.

- The financial strength of Acerinox Group allows to keep the investments agreed in the Strategic Plan and to refund the Shareholder without having increase the debt.

- After the Excellence Plan 2009-2010 success, the Board of Directors has approved a second Excellence Plan 2011-2012, which will bring recurrent savings of 90 million euros yearly.

- After three years of worldwide stainless steel production recession, it is confirmed the recovery of the sector. The company is optimistic in face of the coming months.




Summary of year 2010

The stainless steel market has corrected three consecutive years of cuts, with the world production increase of 24.5% in 2010, returning to the historical accumulated growth rate (5.9% yearly in the last 60 years) . No other metal has ever had a similar behaviour.

It has been a year of recovery and inventory replenishment, although it has been featured by the raw material prices oscillations and the uncertainty in the international financial markets, which have caused mini-cycles of replenishment/realization of inventories. Despite this, as of 31st December the level of inventories in all the markets keeps reasonable levels.

Likewise, there are big differences among the three main geographical areas: demand recovery in the Asian market, lower recovery in Europe affected by overcapacity, and higher strength in the North American market.

All of these circumstances have made it particularly tough for the industry to consistently register operating profits. For this reason, Acerinox results can be considered outstanding, after three consecutive quarters with positive results, with net sales amounting to 4,500 million euros (+50%), EBIDTA totalling 390 million euros and with results after taxes and minorities amounting to 123 million euros.




In the whole of the year, Acerinox worked with a melting historical capacity lower than 80%, which makes the achieved results very worthy, proving the success of the Excellent Plan 2009-2010, which has allowed to improve the competitiveness in the three factories. As of 31st December 2010 the referred Plan has completed on regular bases 73% of the planned targets (97 million euros) and the forecasted savings are also consistently being obtained.

These improvements and the advantages of our production geographical diversification have led Acerinox Group to a profitability level which becomes a reference for the rest of the industry.

The Group financial strength is to be highlighted since it has allowed to keep the investments, to face the raw materials price increases and to increase the activity, without increasing the debt in the year.

Raw materials

· Nickel

During 2010 prices have risen by 32.4% to close the year at 24,960 USD/Mt. During the year there were three very different phases: a rise from 18,855 USD/Mt at the beginning of January extended to 27,600 USD/Mt in April. After there was a slump in the nickel quotation at LME, as a result of the tensions lashing the Stock Exchanges, which resulted in a price fall to 17,955 USD/Mt on June.

Since the, the nickel has been slowing but continuously rising until the end of the year.





From the world production figures we can gather that 2010 has clearly been a year of recovery and inventory replenishment. The stainless steel market behaviour, as in the rest basic materials, has showed three very different phases along the year.

The first phase have been featured by the trust and consumption increase. The second one, in the second quarter, due to the lack of trust in the financial markets liquidity with worldwide repercussions. This fact, feedback by the raw material prices and alloy surcharges plunge, resulted in a slump of the stainless steel market and the beginning of a new stage of inventory reductions.

This situation affected the five continents in view of the lower activity of the Summer months. A demand recovery was expected, which became manifest in the United States but not in Europe where the consumption was slowed down by the lack of liquidity of the financial system.

· Europe

During the first months of the year, the higher activity together with the prospects of the alloy surcharges increases, resulted in a rise of demand and the beginning of inventory replenishment process.

This fact also led to an increase of base prices, which extended until the end of May, which turned the second quarter into the best of the year.

The already mentioned falls of the nickel price and the general trust in May, and the prospect of the July allow surcharge fall, resulted in a new collapse for the stainless steel market, which extended beyond the Summer.

The fears in face of the liquidity lack and the need to reduce the working capital to minimum levels, kept the activity low until the end of the year.




The behaviour of the automobile sector and consumer goods are to be pointed out for its positive behaviour.

· America

This market evolution followed a trend very similar to the European market until September, when the higher strength of the American market become apparent.

Since September until the end of the year demand has been strong, allowing the inventory replenishment, although at reasonable levels, but lower than in the years previous to the crisis.

In 2010 the flat products apparent consumption grew by 32.3% with regard to 2009.

Prices have been strong, although the difference, particularly with the Asian prices, have prevented higher increases.



· Asia

In 2010 the stainless steel demand in Asia has followed the same trend as in the United States, but with lower prices and higher volatility. According our estimations, the inventories are low in this continent at the end of the year.

China is to be pointed out because for the first time in history has become a stainless steel net exporter, but this trend does not prevent us from selling in a market where there is a real demand of products of high added value.

Chinese production amounted to 11.2 million Mt, 27.8% than in 2009, according to CSSC (China Special Steel Enterprises Association). The whole production of the Chinese producers is already 37% of the world output.





In such a difficult year as 2010, Acerinox Group production has matched the market demands and the established plans to reduce inventories.

The geographical diversification of our manufacturing assets and the wide commercial network in the five continents, have played an essential role, taking full advantage of the demand improvements where they were taking place.




In this context, Acerinox Group has had a positive behaviour, increasing Its melting production by 14%, the cold rolling output by 20.5% and the long products output by 51% with regard to year 2009. The increase would have been higher if there had not been gas supply cuts in our South African factory, which have affected its annual productions.





The Group net sales, 4,500 million euros, is 50.3% higher than the invoiced figure of 2009, and involves a trend change with regard to the two previous years.




The geographical distribution of the consolidated Group net sales proves again the advantages of our global presence, with integrated production in three continents, which will become tour when Bahru Stainless Factory will be completed, and with commercial presence all over the world. This year, for the first time in our history, America is the first market of Acerinox Group, with 44.4% share of our total sales, increasing by 9% with regard to 2009.




The year EBITDA, 390 million euros, confirms the change of trend against years 2008 and 2009 and proves our conviction of considering 2010 as a transitional year. It improves by 550 million euros with regard to 2009.




Results before taxes and minorities total 192.5 million euros. All of these improvements give proof of the successful Strategic Plan and the improvement achieved by the Excellence Plan 2009-2010 in such a difficult economic environment, and also for the costs savings attained.




Acerinox Group results after taxes and minorities amount to 122.7 million euros. This result is particularly satisfactory due to the troubles of the year, not only as a result of the adverse economic conditions but also of the difficulties typical of the stainless steel sector.




The Group competitiveness and in particular the geographical diversification and our capacity to get advantage of the areas with best behaviour, allow us to consider this result as excellent. No other producer in the Western world has managed to register profits in the last six quarters.










The net financial debt at the end of the year amounts to 1,083.6 million euros, virtually the same as the previous year, despite the high investments carried out and the higher manufacturing and commercial activity and the higher prices for the raw materials. The gearing has been reduced in five points, remaining in 56.3%. Two thirds of the total debt is long term, which allows us to be optimistic regarding the liquidity to tackle with a strong market recovery and the increase of the raw materials prices.




The book value per share, 7.72 euros, increases by 9.8%, showing the substantial improvements of 2010 results.

The ratio “net financial debt/EBITDA” is 2.8 times and lower that the ratio achieved in 2008 of 3.1 times. It widely complies with the convenants agreed for our long term financing.




The gearing, 56.3%, decreases with regard to the gearing registered in 2009, 61.3%. Nevertheless, an investment volume has been kept according to the development of our Strategic Plan, consolidating the total retribution paid to our shareholders (0.45 euros per share, as in year 2009), having financed the activity increase and the rises of the raw material prices during the year. The net financial debt, 1,083.6 million euros, slightly increases by 0.8% if compared with the previous year (1,074.5 million euros).

The working capital evolution is still satisfactory, and despite the higher levels of activity, it have only been increased in 75 million euros.  




The cash flows statements confirms the Group capacity to generate a cash flow in operating activities (355.5 million euros), enough not only to cover the investments (234.2 million euros) but also to return the shareholders with the same amounts as in the previous years.


Acerinox staff has increased by 58 persons during the year, mainly due to the new 77 employees in Bahru Stainless to the start up of the finishing and cold rolling facilities. In the rest of the Group the staff has been matching the existing needs, as a result of the Adjustment Plan implemented due to the international economic recession.



It is to be highlighted the effort made by the Group to keep its staff adjusted despite the increase of activity, higher investments and the geographical diversification of our facilities.


Annual return to shareholders 2010 

In contrast with most of the companies listed in Ibex-35 index, Acerinox kept in 2010 unchanged its return to shareholders: 0.45 euros per share. The usual interim dividends of January and April, and the complementary one of July, were replaced by a single payment on the the 5th July for an amount of 0.35 euros per share on account to voluntary reserves. In October, as in previous years, an issue premium refund was done for an amount of 0.10 euros per share.  



Annual return to shareholders in 2011

Acerinox Board of Directors, in its meeting held on the 16th December 2010, agreed a payment of a first dividend on account of year 2010 to be effective on the 5th January 2011 for an amount of 0.10 euros gross per share.

A second dividend on account of year 2010 will be paid to the shareholders on the 5th April 2011 for an amount of 0.10 euros per share.

Excellence Plan 2009-2010

In February 2009 the “Excellence Plan 2009-2010” was launched. It consisted of ten chapters including improvements in quality and processes, inventory management, cost reductions and profiting from the synergies among the factories and service centres. The results from this Plan implementation were estimated in recurrent savings of 133 million euros annually from the third year.

This plan is a result of an intense benchmarking program among the Group companies, which share the best practices in each of them to improve the processes in all the supply chain and ambitious but realistic targets were set, because each of them have already been achieved in any of the factories.

Acerinox Group geographical diversification, with three integrated factories of similar size and structure in three different continents, offers a unique chance in the sector to carry out these comparative exercises. The exchanges of technical information among the experts of the different sections of all the factories, are the perfect frame to reach a continuous improvement of the quality, processes, efficiency and control of costs.

As or 31st December 2010, after 22 months of the plan application, 73% of the aimed targets had been attained (97 million euros) and the forecasted savings are being made on a regular bases.

Excellence Plan 2011-2012

The Board of Directors have approved the second Excellence Plan including our more ambitious aims and new operation areas.

From the third year the result will be recurrent savings of 90 euros yearly.

Strategic Plan

· Investments

Acerinox Group has kept the Strategic Plan of investments in the last years, despite the world economic recession and the difficult sector situation.

In the period 2008-2010 investments for 790 million euros have been carried out, which will allow not only improve efficiency but also take the best advantage from the market recovery and from our global presence.

During the year, 217 million euros have been invested. The 71% of the investments have been devoted to the construction of Johor Bahru factory.



   · Senior Management

The Plan of the Management Team renewal has been completed with the appointment of the Chief Executive officer, Managing Director and Commercial Director. It is included in Acerinox Strategic Plan to keep the accumulated experience by means of controlled succession plans based on the internal promotions.

Acerinox S.A. Board of Directors, in its meeting held on the 27th July 2010, agreed to appoint Mr. Bernardo Velázquez Herreros, previous Managing Director of the Group, as Chief Executive Officer, replacing Mr. Rafael Naranjo Olmedo (Seville, 1944) who keeps the position of Chairman of the Board of Directors.

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

This appointment follows the Good Governance recommendations aimed to separate the positions of Chairman and Chief Executive Officer.

In the Executive Committee held on the 28th September 2010, Mr. Antonio Fernández Pacheco was appointed Acerinox, S.A. Managing Director, and Mr. Oswald Wolfe Gómez, as Commercial Director replacing Mr. José Riestra Pita (Madrid, 1946) who becomes Assistant to the Chairman. These appointments were effective on the 1st October 2010.

Mr. Antonio Fernández Pacheco (Madrid, 1951) joined Acerinox in year 1977 and until now he was holding the position of Chief Executive Officer of North American Stainless. His replacement, Cristobal Fuentes (Madrid, 1956) was the former director of NAS factory.

Mr. Oswald Wolfe Gómez (Madrid, 1960) joined Acerinox in 1984 and was holding the position of Deputy Commercial Director of the company.

Bahru Stainless

During 2010 the investment plan has being implemented. The total of the approved investments amounts to 680 million USD.

The First Investment Phase (370 million USD) will be completed with the start up of the cold rolling mill in the Summer of 2011. It is progressing according to schedule and it is forecasted to have a yearly production capacity in this phase of 240,000 Mt.

In December 2010 Bahru Stainless began its activities with the finishing shop coming onto stream.

In Acerinox Board of Directors meeting on 27th July 2010 the second investment phase for Bahru Stainless was approved. In this phase, which start up is scheduled for the first quarter 2013, the production capacity will be increased to 400,000 Mt yearly. Likewise, Bahru Stainless will get specialized in special grades, thin gauges and products with higher added value. The equipment for this second phase have already been awarded.

This investment, for an amount of 1,000 million Malaysian ringgits (310 million USD) , includes a cold rolling mill (ZM2), a cold annealing and pickling line (AP2), auxiliary lines, laboratory and an electric substation, which will feed in the future the electric furnaces when they come into operation.

Commercial development

During 2010 the Group distribution network has further expanded, according to the Strategic Plan aimed to improve the production assignations in the factories and increase our presence in the areas where we were already operating.

In this sense, in Europe, the new warehouse in Bologna (Italy) started its operation. In Warsaw (Poland) the installation of two cutting lines, CS and Slitter, are almost completed. In Pinto (Spain) the construction of the new facilities has already started. They will replace and unify in a single place the Service Centre and the warehouse which are located in different places.

In America the format cutting lines were completed in Monterrey (Mexico) and Pennsylvania (USA). In the latter, the slitter line was also put onto stream. It has been agreed to set up a new service centre in Barranquilla (Colombia) with two local distributors.

In Asia, at the beginning of the year, the warehouse in Penang (Malaysia) began its operations. It will work together with the two existing warehouses in this country, in Johor and Kuala Lumpur. The representation office of Yakarta (Indonesia) was also opened during the year.

The Group commercial network currently has 1,335 employees, distributed in the five continents, 22 service centres with 60 processing lines and also 32 warehouses and 18 commercial offices.


The demand recovery, sustained from the year end, and the increase of the alloy surcharges are favouring the orders entry and allowing us to increase the capacity utilization during the first quarter 2011, which makes us feel optimistic for the first quarter results, which will significantly improve the figures achieved in the last quarter 2010.

The inventory level in the market will allow to consolidate better price levels.

We are still missing the increase of the capital goods, which will allow us to consider this crisis period to be over.

With the start up of the cold rolling mill in Bahru Stainless in Summer, the productions of the other factories will increase to supply the new Asian factory of Acerinox Group with hot rolled coils.

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