Outokumpu, a Finnish manufacturer of stainless steel, has operations in Finland, Sweden, Germany, the USA, and Mexico, with its headquarters in Helsinki. With 8,500 employees, the company is a key player in the industry.
Kati ter Horst recently took over as CEO of Outokumpu, bringing her experience as the former EMEA chief of Belgian flow technology conglomerate Aliaxis. She also served on Outokumpu’s board. The Finnish government, through Solidium, is the company’s largest shareholder, owning 16% of its shares.
Outokumpu’s main products are used in construction, automotive, appliance, and oil and gas industries. Nearly half of its sales go through steel distributors, who then sell to similar end customers as Outokumpu does directly.
The company’s business is divided into three main areas:
– Europe: Leading stainless steel production in Europe with facilities in Finland, Sweden, and Germany. Outokumpu’s cost leadership in Europe is due to its integrated value chain and low electricity prices in Finland and Sweden.
– Americas: Stainless steel production in the USA and Mexico, making Outokumpu the second-largest player in North America.
– Ferrochrome: Production of ferrochrome in Torneå, a vital input for stainless steel production. The company’s own chrome mine in nearby Kemi supplies the chrome, with most used internally and the rest sold externally.
Outokumpu’s electric arc furnaces are virtually emission-free, although they require scrap rather than iron ore as their raw material. The company has seen significant fluctuations in profitability but has implemented measures to enhance its earnings capacity and stability.
The company has reduced its net debt in recent years and aims to allocate cash flow towards dividends and new expansion initiatives. Outokumpu anticipates benefiting from EU’s Carbon Border Adjustment Mechanism (CBAM) starting in 2026, which will increase steel imports’ costs to the EU.
Compared to its peers in the industry, Outokumpu presents an attractive valuation with potential upside. While facing risks related to market conditions and debt levels, the company’s focus on cost leadership, environmental sustainability, and advanced products positions it for future growth.
In conclusion, Outokumpu’s strategic initiatives and financial stability make it a compelling investment opportunity, especially when compared to its competitors like SSAB. The company’s strong fundamentals and growth prospects offer investors a promising outlook in the stainless steel sector.