May 7, 2019 / 7:09 AM / 5 months ago

UPDATE 1-Outokumpu Q1 profit hit by rising costs, high inventory

(Adds outlook, details, shares)

HELSINKI, May 7 (Reuters) - Outokumpu, one of the largest stainless steel makers in the world, reported a sharp fall in January-March profits, hit by rising input costs and high inventory levels at its distributors.

The company said the drop would have been worse if the European Union had not imposed new curbs on steel imports in February.

In the first quarter, Outokumpu’s adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 59 percent to 54 million euros ($60.5 million), missing analysts’ average forecast of 66.2 million in a Reuters survey, but within the range of estimates.

Outokumpu said the EU’s permanent safeguards, introduced in February, had proven to be effective.

“Cold-rolled imports to Europe have come back to the levels before the introduction of steel tariffs. However, the full market recovery will take some time as the overall economic uncertainty is adversely influencing demand and volumes,” Chief Executive Roeland Baan said.

Outokumpu said it expects its stainless steel deliveries in the second quarter to remain at the same level as the 621,000 tonnes in the first, but forecast second-quarter adjusted EBITDA to improve on the preceding quarter.

The company’s Americas’ business area - covering North and South America - made a loss in the first quarter, hurt by high inventories of expensive raw materials, and on May 1 Outokumpu said it was replacing the head of the unit.

“These inventories have now been consumed and we expect the Americas’ profitability to improve supported by the new leadership and revamped commercial and supply chain processes,” Baan said in a statement.

Outokumpu’s largest competitors include China’s Tsingshan and TISCO, Spain’s Acerinox and Luxembourg-based Aperam .

Shares in Outokumpu opened 5 percent lower. ($1 = 0.8921 euros) (Reporting by Tarmo Virki and Anne Kauranen Editing by Andrew Heavens and Louise Heavens)

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