Ruukki's Hoyer says ferrochrome volatility is decreasing
Ruukki (LON:RKKI) today upgraded its outlook for the remainder of the year as it said the previously volatile ferrochrome market is stabilising.
It said full-year revenues are now expected to be in-line with last year.
This marks a notable turnaround after it warned of uncertain conditions in the first quarter of the year.
In a conference call today chief executive Thomas Hoyer said: "The recent volatility in ferrochrome prices has been huge, but when you look at realised prices in the physical market this volatility is decreasing," he said.
"It seems that the market is finding a bottom in terms of pricing, though it is still a weak market. And we are looking forward with slightly more positivity."
He stressed, however, that the seasonally-affected third quarter is always weaker than the rest of the year.
And unlike other ferrochrome producers, Ruukki is not expecting, or banking on, a significant rally in prices the fourth quarter.
Essentially the reasons behind today's improved outlook comes down to better visibility and a belief that the remainder of the year won't be as volatile or as poor as last year - when demand failed to pick up follow the summertime lull in Europe.
Hoyer explained that Ruukki's operations are currently focussed on the production of speciality alloys, which have more stable niche markets.
As such he says Ruukki's operations are mainly being driven by demand for specific alloys, and production is being guided by the group's sales team.
Ruukki reported revenues in the first six months of 2012 of €78 million versus €79.3 million in the first half of last year, while earnings increased to €6.7 million compared with €5.1 million in the corresponding period of 2011.
In the second quarter of this year production decreased by 20.1 percent to 74,181 tonnes tonnes, mainly due to the shut-down of two of the four furnaces of the Mogale alloys plant in South Africa in response to power constraints in the country and an electricity buyback programme by power group Eskom.
Ruukki's cash flow from operations was much improved at 13.5 million, compared with minus €5.8 million in the same period of last year, and at the end of the year it had €45 million.
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