* Debt-to-equity ratio rises
* Pushes back closure of plant in Bochum, Germany
* Shares fall 2 percent
(Adds news on German plant)
By Ritsuko Ando
HELSINKI, Feb 13 Finnish stainless steel maker
Outokumpu reported a higher debt ratio on Thursday,
raising concerns over its financing costs and the slow pace of
restructuring in response to weak European demand.
Outokumpu trimmed its underlying operating loss by more than
expected in the fourth quarter of 2013 and said it expects the
loss to shrink again in the first three months of this year due
to an uptick in demand and some improvement in prices.
However, even with signs of a pickup, analysts estimate
Europe's stainless steel makers still have overcapacity of
around 25 percent.
Capacity cuts have been slow to materialise as producers
balk at redundancy costs and the market share losses they must
accept in the short term.
Outokumpu said on Thursday it was pushing back the closure
of a plant in Bochum, Germany, from this year to 2016 at the
earliest due to customer commitments and costs of moving
production elsewhere. It also deciding against shutting down
mills in Nyby, Sweden and Dahlerbruck, Germany.
"There is a lot of pressure on the company to improve the
profitability of its operations," said Inderes analyst Antti
Viljakainen. "They tried to cut costs and I believe they had
some success, of course. But they need more of a turnaround,
Outokumpu's debt-to-equity ratio was 188 percent at the end
of 2013, compared with 171 percent three months earlier and much
higher than peers, raising the risk it could find it harder to
obtain finance in the future.
Many other European industrial companies have debt-to-equity
ratios well below 80 percent, with Swedish high-strength steel
maker SSAB at 69 percent.
Outokumpu shares closed 2 percent lower at 0.40 euros.
Analysts said a planned 650 million euro rights issue, which was
announced in November and is expected within the next few
months, may not be enough to strengthen the company's balance
Although operating cash flow rose to 223 million euros ($303
million) from 43 million, that was mainly due to inventory cuts
and the company forecast it would consume cash in this quarter.
Outokumpu is still struggling to turn a profit from its
acquisition in 2012 of ThyssenKrupp's Inoxum unit.
Regulators forced it to sell a mill in Terni, Italy, as a
condition for approving the Inoxum deal. In December it
announced it would sell the mill and an alloy unit back to
ThyssenKrupp - a move regulators approved this week.
Chief Executive Mika Seitovirta said meeting regulatory
requirements had been a drain on the company.
"The Terni remedy requirement did not only tie up our time
and resources, but also significantly hampered the ramp-up of
the Calvert stainless steel mill in Alabama, USA," he said.
He said however that the Inoxum deal was likely to yield
more cost savings in the future.
In the fourth quarter, Outokumpu cut quarterly underlying
operating losses to 90 million euros from 169 million in the
same quarter last year. Analysts on average expected a loss of
122 million, according to a Reuters poll.
Outokumpu said it will discontinue operations in Kloster,
Sweden, because it was loss making despite cost cuts begun in
2011. The plant, with 170 employees, produced about 18,000
tonnes of stainless steel in 2013.
"Continued high level of Asian imports into Europe, high
pricing pressure and sluggish economic outlook in Europe mean
that we need to take further actions to drive down our costs,"
($1 = 0.7359 euros)
(Additional reporting by Tom Kackenhoff in Dusseldorf; Editing
by Erica Billingham)