Stainless producer Aperam reports strongest Q4 profit in three years, positive Q1 outlook

London — A strong product mix in Brazil and tight cost control brought stainless and specialty steelmaker Aperam the best Q4 EBITDA since its 2017 peak result, with Q1 higher shipments and prices in Europe now giving a positive outlook, CEO Timoteo Di Maulo said Feb. 10, reporting the company's 4Q 2020 results.

With mills in Brazil and Europe, Aperam said its Q4 EBITDA of Eur159 million ($193 million) including a net exceptional gain of Eur50 million, jumped up from Eur65 million in Q3 2020, as prices and volumes improved, with sales volumes up 7% on-quarter to 431,000 mt, and sales revenue up 9% to EUR916 million.

"The combined benefits of a strong mix in Brazil, tight cost control and some economic improvement in Europe enabled us to achieve the best fourth-quarter result since the 2017 peak despite still challenging market conditions," Di Maulo said.

Brazilian demand recovered strongly in Q4 amid restocking, he said.

Further market improvement is expected.

"Q1 2021 shipments are expected at a higher level quarter on quarter," Di Maulo told analysts on a results call.

EBITDA will be slightly higher and while the first quarter is typically a seasonal trough in Brazil and there may be softer demand in Alloys, the company sees both higher prices and volumes in Europe, according to the CEO.

The Q1 demand outlook remains positive for the "bright spot" of automotive and transport sectors, following a normalization of production in the sector in Q4 2020, Di Maulo said. In consumer goods, demand is strong with a stable outlook while construction sector demand is slightly lower, with a soft pipeline that could impact the first half of the year, he said.

EU import penetration slumped on AD probe

Stainless imports fell to below 20% market penetration in Europe (down 77% on-year), considered positive for the steelmaker, which is awaiting a decision in late April or early May from the European Commission on an antidumping investigation which has been underway on cold-rolled stainless products from Indonesia and India, Di Maulo said.

The CEO said that even if antidumping duties are imposed on these products, European Union steelmakers, as represented by steelmakers' association Eurofer, are in favor of the EU retaining an import safeguards system for as long as the US' Section 232 import tariffs remain in force.

Still, 2020 was extremely challenging due to COVID-19, and actions taken have helped to improve the company, the CEO said. Steel shipments of 1.67 million mt in 2020 were 6.1% lower than those of 2019 while EBITDA of Eur343 million was down from Eur357 million the previous year. Net income of Eur175 million in 2020 nonetheless compared favorably to 2019's Eur148 million.

"While the coming months will remain challenging we are confident that our actions will aid in restoring a historical normal level (of results)" Di Maulo said.

Aperam has the lowest cost position in its market area in Europe and is continuing with its 'Leadership Journey' cost-reduction program, the CEO said. It started Phase 4 of the Journey last month and expects to make gains of Eur150 million by the end of 2023 under this program. This will involve the development of its Gueugnon mill in France towards production of specialty steel.

To advance its sustainability goals, the company has doubled its internal carbon price for project and planning purposes to Eur60/mt, Di Maulo said. The company's operations in Brazil are based on charcoal, which emits less carbon than coal usage. It plans to be carbon-neutral by 2050 and believes it can achieve this with a capex-light approach, the CEO said.