Kardemir's 2024 Financial Results: Navigating Loss Amid Growth in Production
Kardemir Karabuk Demir Celik Sanayi ve Ticaret A.S. (Kardemir), a major player in the Turkish steel industry, has disclosed its financial and operational results for 2024. Despite positive growth in its steel and pig iron production, the company faced a sharp financial decline, reflecting the tough market conditions and rising costs that have affected steel producers globally.
The steelmaker reported a net loss of TRY 3.03 billion ($83.04 million) for 2024, a stark contrast to the net profit of TRY 2.29 billion in the previous year. The company also registered an operating loss of TRY 1.06 billion ($29.05 million), showing improvement compared to the previous year’s operating loss of TRY 4.39 billion. These figures indicate the significant challenges faced by Kardemir, despite a relatively better performance in terms of steel production.
Key Financial Metrics for 2024
• Net Loss:
In 2024, Kardemir recorded a net loss of TRY 3.03 billion ($83.04 million), compared to the net profit of TRY 2.29 billion in 2023. This marks a significant decline of around 231% year-on-year, reflecting the financial strains caused by lower sales revenue and increasing production costs.
• Operating Loss:
The company’s operating loss in 2024 was TRY 1.06 billion ($29.05 million), which shows an improvement from the previous year’s operating loss of TRY 4.39 billion. This suggests that while Kardemir still faced operational difficulties, its efforts to manage costs and improve efficiency have yielded some positive results.
• Sales Revenue:
Kardemir’s sales revenue in 2024 decreased by 24.2% year-on-year, amounting to TRY 56.49 billion ($1.54 billion). The decline in sales revenue reflects the ongoing market difficulties, including lower steel prices and rising input costs, that have put pressure on Kardemir’s top-line growth.
• EBITDA:
The company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) decreased by 9.3% year-on-year to TRY 4.31 billion ($118.13 million). The decrease in EBITDA mirrors the decline in revenue and ongoing challenges with cost management and market competition.
Production Performance in 2024
Despite facing financial losses, Kardemir reported growth in its production of crude steel and pig iron, showing the company’s capability to maintain output levels even in a tough market environment.
• Crude Steel Production:
Kardemir produced 2.51 million metric tons (mt) of crude steel in 2024, reflecting a 4.8% increase compared to the previous year. This growth highlights Kardemir’s ability to increase steel production, even amid declining demand and challenging market conditions.
• Pig Iron Production:
The company’s pig iron production reached 2.3 million metric tons (mt), marking a 5.6% increase year-on-year. Pig iron, a key raw material for steel production, plays a crucial role in Kardemir's overall production capacity, and the rise in production is a positive sign for the company’s long-term operations.
• Sales Volume:
While production increased, total sales decreased by 4.4% year-on-year, totaling 2.26 million metric tons (mt). The reduction in sales volume despite higher production indicates that Kardemir faced challenges in selling its steel at profitable prices, likely due to fluctuating demand or oversupply in the market.
Challenges Faced by Kardemir in 2024
Kardemir's financial report for 2024 underlines a number of challenges that significantly impacted its profitability:
• Lower Steel Prices:
The decline in steel prices has been a critical factor in Kardemir’s lower revenue. Despite increasing production, the company faced difficulties in selling at profitable prices, leading to reduced overall sales revenue.
• Inflation and Rising Costs:
As with many other companies in the steel industry, Kardemir faced rising raw material costs, energy prices, and inflationary pressures. These increased operational costs were difficult to offset, leading to a significant decline in profitability.
• Market Volatility:
The Turkish steel market, along with the global market, faced volatility in demand and prices. Geopolitical tensions, fluctuating raw material costs, and supply chain disruptions have all contributed to creating an unpredictable market environment for steel producers like Kardemir.
Future Outlook and Strategic Plans
Despite the challenges faced in 2024, Kardemir is focusing on strategic plans for the future:
• Improving Efficiency:
The company is taking steps to improve its operational efficiency and reduce costs. This includes investments in automation and upgrading production processes to keep up with changing market demands and improve profitability.
• Market Diversification:
Kardemir aims to diversify its product portfolio, particularly by increasing the production and sales of high-value steel products. Expanding into higher-margin products such as specialized steel for automotive and construction sectors could provide a more stable revenue stream in the future.
• Sustainability and Innovation:
Kardemir is also committed to sustainability in its operations. The company plans to invest in green technologies to reduce carbon emissions and improve energy efficiency, which could potentially offer long-term cost savings and align with global trends towards environmental responsibility.
Key Takeaways:
• Net Loss: Kardemir recorded a net loss of TRY 3.03 billion ($83.04 million) in 2024, compared to a net profit of TRY 2.29 billion in 2023.
• Operating Loss Improvement: The company’s operating loss decreased to TRY 1.06 billion ($29.05 million) in 2024, a notable improvement from the TRY 4.39 billion loss in 2023.
• Sales Revenue Decline: Sales revenue dropped by 24.2% year-on-year to TRY 56.49 billion ($1.54 billion).
• EBITDA Decrease: EBITDA decreased by 9.3% year-on-year to TRY 4.31 billion ($118.13 million).
• Production Increase: Crude steel production rose by 4.8%, totaling 2.51 million metric tons (mt), and pig iron production increased by 5.6% to 2.3 million metric tons (mt).
• Sales Volume Decline: Despite increased production, sales volume dropped by 4.4%, reaching 2.26 million metric tons (mt).
• Cost Pressures: Rising costs, inflation, and lower steel prices impacted profit margins.
• Strategic Investments: Kardemir plans to invest in higher-value steel products and improve operational efficiency moving forward.
