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Outokumpu narrows Q2 loss to €20M, sees 'flat' Q3 sales

Second-quarter losses at Finnish stainless steel groupOutokumpu Oyjnarrowed to €20 million from €41 million in the first quarter despite a fall intopline revenue, due to "vigorous cost control," the company said July26.

Sales in the quarter totaled €1.38 billion, down slightlyfrom the first quarter, marking a steep fall from the €1.69 billion booked inthe second quarter of 2015.

The loss per share was 5 cents, down from 10 cents in thefirst quarter.

Despite the drop in sales, second-quarter EBITDA rose to €62million from €46 million in the first quarter, as the group focused oncontrolling costs and boosting efficiencies, CEO Roeland Baan said, noting thatthe company cut variable costs in its U.S. division by 14% during the secondquarter, while working capital across all business areas fell to €117 millionin the first half of the year.

Costs also fell by €15 million in Europe, the company's coregeographic region, where profitability has been declining.

Head count across the company fell to 10,645, down from11,665 in the second quarter of 2015.  

Outokumpu stock trading in Helsinki jumped as much as 8.8%following the results.

Weak ferrochrome prices and an increase in raw materialprices weighed on results, Baan said.

Its European division led the decline as profitability inthe business unit fell to €29 million from €42 million, he added.

Baan contrasted the lackluster result in Europe with thesituation in the U.S., where Outokumpu's total deliveries rose to a record 177,000tonnes of stainless steel out of total group sales in the quarter of 629,000tonnes.

Baan said the company's priorities now included cuttingdebt. At the end of the second quarter, Outokumpu had net debt of €1.49billion, down from €1.55 billion in the prior quarter and €2.12 billion at theend of the year-ago period.

The mixed second-quarter result is expected to continuelater this year as higher expected deliveries in the U.S. are offset by theexpected seasonal fall in demand in Europe, leading to "flat deliveryvolumes" in the third quarter. Ferrochrome output will fallby some 30% in the third quarter because of major maintenance work at itsbiggest smelter.