www.ruukkigroup.fi/In_English/Investors.iw3
Ruukki is a growing, integrated chrome producer supplying specialist products to the expanding steel and stainless steel industries. The Group is focused on utilising its experience and technological advantages to deliver profitable and sustainable growth. The Company is listed on the NASDAQ OMX Helsinki (RUG1V) and the Main Market of the London Stock exchange (RKKI).
The Group’s chrome operations are split into two businesses: Speciality Alloys, which consists of the Turkish mining operation TMS and the German processing plant, EWW, and FerroAlloys in southern Africa, which consists of the Stellite mining operation, the Mecklenburg mine development project and the alloy processing plant, Mogale, all in South Africa and the mine development project Waylox in Zimbabwe.
Ruukki exports raw chrome ore directly to China and sells a diverse range of chrome products, through its centralised sales and marketing arm RCS, internationally to customers operating in the stainless steel and steel sectors, including the automotive, aerospace and power generation industries.
Ruukki Group boss says a solid balance sheet is key to success in difficult times
The financial strength of Ruukki Group (LON:RKKI) has enabled it to weather an unpredictable period for the ferro-chrome market better than many of its competitors, chief executive Thomas Hoyer told Proactive Investors.
“We have a strong balance sheet, which means we are not being forced to sell (our products) at any price,” Hoyer said, referring to the fact the group has around €80 million in the bank.
“The inventory of finished goods is higher than normal. But as the market turns – even for a short time – those who have products, and can ship them very quickly, can make the best margin.”
Hoyer’s comments followed the publication of Ruukki’s second quarter results, which gave a rather cautious assessment of pricing of and demand for ferro-chrome products.
The three months were the first for Ruukki as a pure-play chrome producer after the disposal of the company’s pallet’s business and sawmills.
“It has been a very challenging environment,” Hoyer admitted.
Ruukki’s speciality business, based in Turkey and Germany, and which makes products used in the aerospace, nuclear power plant and the oil and gas industries, has performed solidly against a backdrop of fluctuating prices.
The Mogale operation in South Africa, which produces mainstream chrome products, has been affected by the reduction in ferro-chrome prices and subdued demand from China, the engine room of world economic growth.
“Our speciality business must be one of the better performing chrome assets in the world now,” Hoyer said.
“Mogale products are much more standard than the speciality products and therefore subject to the price fluctuations in the market.
“The reduction in ferro-chrome price and the impact of reduced demand from China led to us having increased inventories.”
Earlier, Ruukki posted second-quarter earnings before interest, tax and depreciation of €1.6 million – a rise of 173 per cent - on sales of €44.5 million.
Production for the three months ended June 30 more than doubled to 92,849 tonnes.
It ranks as a resilient performance under the circumstances. Indeed, many rivals are feeling the pinch, creating opportunities for the acquisitive chrome specialist.
“We are one of the very few active buyers on the market,” Hoyer revealed.
“We are not looking for a big bang acquisition. We are looking at multiple small opportunities – with the balance sheet we have, we can do a number of them.”
The exit from timber and housebuilding marks the first stage of Ruukki’s transformation as it focuses on becoming an integrated and growing miner and smelter.
It already owns a speciality operation based in Germany and Turkey, which makes tailor-made products used in the aerospace, nuclear power plant and the oil and gas industries.
And while this is a steady, high-margin operation, it is also a niche concern with limited scope for serious expansion.
However the foundation stones have been laid for an altogether more impressive business that is focused on South Africa.
In 2009 it paid around £180 million for Mogale Alloys, a smelter of ferrochrome, silico manganese and stainless steel alloy, and followed this at the end of last year with the purchase of AIM-listed Chromex, owner of the Stellite mine in the Transvaal Basin.
It currently has four furnaces: two submerged arc and two direct current, with plans for another two DC furnaces, which are 30 per cent more efficient than traditional arc furnaces.
More impressively it is planning to produce its own power, which means it won’t have to rely on the local generator Eskom for its electricity supply and will be able to control the cost of one of its key inputs.
It has signed a memorandum of understanding with Chinese firm Metallurgical Group, and the 300 megawatt plant could be up and running in 2015.
The company’s leading shareholder is Danko Koncar, the ex-owner of Samancor, the world’s third largest ferroalloys company.
He is part of a formidable team, which includes non-executive directors Philip Baum, the former head of ferrous metals at Anglo-American and Chris Pointon, who managed BHP Billiton’s stainless steel business for 15 years.
Along with former PWC partner Barry Rourke, who is the senior non-exec, this is the sort of heavyweight board that wouldn’t look out of place in the FTSE 100, or the upper echelons of the 250 at least.
