UPDATE 2-Outokumpu loss widens ahead of Inoxum acquisition

Wed Oct 24, 2012 4:57am EDT

* Q3 operating loss 89 mln euros, market expected 51.8 mln

* CEO sees savings from Inoxum sooner than expected

HELSINKI Oct 24 (Reuters) - Finnish stainless steel maker Outokumpu reported a deeper-than-expected third quarter operating loss on Wednesday and forecast more weakness ahead.

Its chief executive, however, sought to reassure investors by saying that costs savings from its purchase of rival Inoxum would come quicker than originally planned and that the unit would allow it to become less dependent on Europe.

Outokumpu plans to acquire ThyssenKrupp's Inoxum unit to counter weak stainless steel demand in Europe as well as growing competition from Asia, although it must sell its prized Terni mill in Italy to gain regulatory approval for the deal.

The company's third-quarter operating loss expanded to 89 million euros ($115.4 million) from 53 million a year earlier due to weakening global demand and lower nickel prices. Analysts on average expected 51.8 million euros in a Reuters poll.

"There is a lack of investments and growth in Europe," Chief Executive Mika Seitovirta told Reuters.

Outokumpu said it expects no recovery in steel demand in the months ahead, forecasting deliveries in the current quarter to be flat or slightly higher and its underlying operating loss to be unchanged at best compared with the third quarter.

The bleak outlook was in line with similarly weak reports from peers such as POSCO, AK Steel Holding Corp and Rautaruukki.

The planned divestment of the Terni mill, one of the most advanced in Europe, have raised doubts over the deal.

But Seitovirta said that buying the Inoxum unit was still a good move, saying the combined company would achieve a planned 200 million euros in cost savings sooner than previously planned.

"We will reach over 50 percent of the synergy savings by the end of 2014," Seitovirta said. The company previously forecast it would achieve 45 percent of the savings by end-2014.

He also said the company was currently too dependent on Europe, and that Inoxum would help bolster its presence in the United States and China.

The company expects the deal close by the end of the year.

Shares in Outokumpu were 1.7 percent lower at 0.68 euros by 0829 GMT.

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