2009-10-22 08:00:00 CEST
2009-10-22 08:07:59 CEST
REGULATED INFORMATION
Outokumpu Oyj - Interim report (Q1 and Q3)
Outokumpu's third quarter 2009 interim report - Financial performance on improving trend in weak markets
INTERIM REPORT
October 22, 2009 at 9.00 am EET
Third quarter 2009 highlights
- Operating loss EUR 65 million (II/2009: EUR -94 million),
underlying operational result EUR -82 million (II/2009: EUR -94
million)
- Stainless steel deliveries at 238 000 tons (II/2009: 268 000 tons)
- Cash flow slightly negative, balance sheet continues to be strong
(gearing 41%)
- Uncertainty about short-term demand for stainless steel, no major
improvement in underlying demand
- Several investment projects completed, decision not to proceed with
the Avesta melt-shop expansion project
Group key figures
III/09 II/09 III/08 2008
Sales EUR million 587 617 1 270 5 474
Operating profit EUR million -65 -94 -66 -63
Non-recurring items
in operating profit EUR million -15 - -66 -83
Profit before taxes EUR million -81 -105 -82 -134
Non-recurring items
in financial income
and expenses EUR million - - - -21
Net profit for the period
from continuing
operations EUR million -55 -85 -73 -110
Net profit for the period EUR million -56 -87 -74 -189
Earnings per share
from continuing
operations EUR -0.30 -0.47 -0.41 -0.61
Earnings per share EUR -0.31 -0.48 -0.41 -1.05
Return on capital
employed % -7.6 -11.1 -6.3 -1.6
Net cash generated fromoperating activities EUR million -12 23 242 656
Capital expenditure,
continuing operations EUR million 55 45 317 544
Net interest-bearing debt
at end of period EUR million 1 014 926 1 096 1 072
Debt-to-equity ratio at
end of period % 41.4 37.1 35.0 38.4
Stainless steel
deliveries 1 000 tons 238 268 323 1 423
Stainless steel
base price 1) EUR/ton 1 307 1 117 1 143 1 185
Personnel at the
end of period,
continuing operations 7 699 7 985 8 711 8 471
1) Stainless steel: CRU - German base price (2 mm cold rolled 304
sheet).
SHORT-TERM OUTLOOK
Uncertainty in stainless steel markets continues. In the third
quarter there was minor restocking by distributors due to rising raw
material prices. There is however no major improvement in underlying
demand for stainless. Inventory levels at distributors in Europe are
estimated as still being below normal. Volatility in the nickel price
is having an impact on the purchasing behaviour of distributors in
the short-term, making them hesitant about building inventories.
Delivery times are fairly normal and Outokumpu is currently selling
standard grades for deliveries in December. Deliveries of stainless
steel in the fourth quarter are expected to be at the same level as
in the second quarter (268 000 tons). Compared to the average for the
third quarter, Outokumpu's average base prices for all flat products
in the fourth quarter are expected to increase by 50-100 EUR/t. There
is currently temporary pressure on prices but Outokumpu expects
prices to remain rather stable during the remaining of the fourth
quarter.
Outokumpu's underlying operational result in the fourth quarter is
expected to improve from the third quarter as a result of increased
base prices, improved delivery volumes and tight cost management.
With current metal prices, raw-material related inventory gains are
expected to be at the same level as in the third quarter, which might
take the operating profit close to break-even. The main risks of
fourth-quarter financial performance are connected with delivery
volumes.
CEO Juha Rantanen:"Stainless steel markets have not seen any major improvement.
Underlying demand continues to be weak and the purchasing behavior of
steel distributors is very much driven by short-term developments in
nickel price. Outokumpu's delivery volumes in the third quarter were
low. On a positive note, our financial performance is on an improving
trend and both prices and volumes are expected to increase in the
fourth quarter. Our priorities in the current market are to balance
short-term cost and cash flow management with longer term strategy
implementation. We have not given up our ambition of reaching
break-even operating profit towards the end of the year."
The attachments present the Management analysis for the third quarter
2009 operating result and the Interim review by the Board of
Directors for January-September 2009, the accounts and notes to the
interim accounts. This report is unaudited.
For further information, please contact:
Päivi Lindqvist, SVP - Communications and IR
tel. +358 9 421 2432, mobile +358 40 708 5351
paivi.lindqvist@outokumpu.com
Ingela Ulfves, VP - Investor Relations and Financial Communications
tel. +358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com
Esa Lager, CFO
tel. + 358 9 421 2516
esa.lager@outokumpu.com
News conference and live webcast today at 1.00 pm EET
A combined news conference, conference call and live webcast
concerning the third-quarter 2009 results will be held on October 22,
2009 at 1.00 pm EET (12.00 pm CET, 6.00 am US EST, 11.00 am UK time)
at Hotel Kämp, conference room Akseli Gallen-Kallela, address
Pohjoisesplanadi 29, 00100 Helsinki, Finland.
To participate via a conference call, please dial in 5-10 minutes
before the beginning of the event:
UK +44 20 3043 2436
US & Canada +1 866 458 4087
Sweden +46 8 505 598 53
Password Outokumpu
The news conference can be viewed live via Internet at
www.outokumpu.com.
Stock exchange release and presentation material will be available
before the news conference at www.outokumpu.com/Investors.
An on-demand webcast of the news conference will be available at
www.outokumpu.com as of October 22, 2009 at around 3.00 pm EET.
OUTOKUMPU OYJ
Outokumpu is a global leader in stainless steel. Our vision is to be
the undisputed number one in stainless, with success based on
operational excellence. Customers in a wide range of industries use
our stainless steel and services worldwide. Being fully recyclable,
maintenance-free, as well as very strong and durable material,
stainless steel is one of the key building blocks for sustainable
future. Outokumpu operates in some 30 countries and employs some 8
000 people. The Group's head office is located in Espoo, Finland.
Outokumpu has been listed on the NASDAQ OMX Helsinki since 1988.
www.outokumpu.com
MANAGEMENT ANALYSIS - THIRD QUARTER OPERATING RESULT
Group key figures
EUR million I/08 II/08 III/08 IV/08 2008
Sales
General Stainless 1 304 1 222 933 687 4 147
Specialty Stainless 786 778 630 512 2 705
Other operations 64 63 69 62 258
Intra-group sales -465 -514 -362 -295 -1 636
The Group 1 689 1 549 1 270 966 5 474
Operating profit
General Stainless 81 125 -35 -177 -6
Specialty Stainless 42 44 -63 -123 -101
Other operations -20 4 29 25 38
Intra-group items -3 1 3 4 6
The Group 100 174 -66 -271 -63
EUR million I/09 II/09 III/09
Sales
General Stainless 476 501 496
Specialty Stainless 371 278 258
Other operations 66 58 56
Intra-group sales -233 -220 -224
The Group 679 617 587
Operating profit
General Stainless -157 -52 -38
Specialty Stainless -82 -37 -21
Other operations -12 -5 -4
Intra-group items 2 0 -3
The Group -249 -94 -65
Stainless steel
deliveries
1 000 tons I/08 II/08 III/08 IV/08 2008
Cold rolled 228 192 177 141 739
White hot strip 120 94 64 51 330
Quarto plate 33 35 27 25 120
Tubular products 19 19 16 16 70
Long products 15 15 15 11 55
Semi-finished
products 34 35 25 16 109
Total deliveries 449 391 323 261 1 423
1 000 tons I/09 II/09 III/09
Cold rolled 133 145 124
White hot strip 59 69 66
Quarto plate 19 18 14
Tubular products 16 13 12
Long products 10 9 11
Semi-finished
products 10 14 12
Total deliveries 247 268 238
Market prices and
exchange rates
I/08 II/08 III/08 IV/08 2008
Market prices 1)
Stainless steel
Base price EUR/t 1 243 1 307 1 143 1 045 1 185
Alloy surcharge EUR/t 1 702 1 888 1 582 1 293 1 616
Transaction price EUR/t 2 945 3 195 2 725 2 338 2 801
Nickel USD/t 28 957 25 682 18 961 10 843 21 111
EUR/t 19 335 16 440 12 599 8 227 14 353
Ferrochrome
(Cr-content) USD/lb 1.21 1.92 2.05 1.85 1.76
EUR/kg 1.78 2.71 3.00 3.09 2.63
Molybdenum USD/lb 33.81 33.40 33.75 17.29 29.56 EUR/kg 49.77 47.14 49.45 28.92 44.31
Recycled steel USD/t 393 565 465 181 401
EUR/t 262 361 309 138 273
Exchange rates
EUR/USD 1.498 1.562 1.505 1.318 1.471
EUR/SEK 9.400 9.352 9.474 10.234 9.615
EUR/GBP 0.757 0.793 0.795 0.839 0.796
I/09 II/09 III/09
Market prices 1)
Stainless steel
Base price EUR/t 925 1 117 1 307
Alloy surcharge EUR/t 893 634 923
Transaction price EUR/t 1 818 1 751 2 229
Nickel USD/t 10 471 12 920 17 700
EUR/t 8 036 9 478 12 375
Ferrochrome
(Cr-content) USD/lb 0.79 0.69 0.89
EUR/kg 1.34 1.12 1.37
Molybdenum USD/lb 9.15 9.41 15.36
EUR/kg 15.49 15.22 23.67
Recycled steel USD/t 207 199 236
EUR/t 159 146 165
Exchange rates
EUR/USD 1.303 1.363 1.430
EUR/SEK 10.941 10.781 10.424
EUR/GBP 0.909 0.879 0.872
1) Sources of market prices:
Stainless steel: CRU - German base price, alloy surcharge and
transaction price (2 mm cold rolled 304 sheet), estimates for
deliveries during the period.
Nickel: London Metal Exchange (LME) cash quotation
Ferrochrome: Metal Bulletin - Quarterly contract price,
Ferrochrome lumpy chrome charge, basis 52% chrome
Molybdenum: Metal Bulletin - Molybdenum oxide - Europe
Recycled steel: Metal Bulletin - Steel scrap HMS 1&2 fob Rotterdam
Slight recovery in demand and further increases in prices in the
third quarter
In the third quarter, global market conditions for stainless steel
experienced a moderate improvement. European and global apparent
consumption of flat products is estimated to have increased by 7%
from the previous quarter. Compared to the third quarter of 2008,
apparent consumption is estimated to have fallen by 22% in Europe and
by 7% globally but was up by almost 35% in China. Third-quarter
production of stainless steel is estimated to have risen by 18% in
Europe and by 13% globally from the second quarter of 2009. Compared
to the third quarter of 2008, production of stainless is estimated to
have been down by 10% in Europe but to have grown by 6% globally,
with the increase in China being 47%.
According to CRU, the average base price for 2mm cold rolled 304
stainless steel sheet in Germany increased to 1 307 EUR/ton in the
third quarter (II/2009: 1 117 EUR/ton). As a consequence of rising
metal prices, the alloy surcharge increased in the third quarter and
was on average 923 EUR/ton (II/2009: 634 EUR/ton). The average
transaction price during the quarter was 2 229 EUR/ton (II/2009: 1
751 EUR/ton). The price difference between Europe and Asia widened
during the review period. (CRU)
Among the alloying elements, markets for nickel continued to improve
in the third quarter as a result of higher stainless steel
production. Demand for nickel increased, mainly in China, and was up
by 13% compared to the previous quarter. Supplies of nickel market
were constrained as a result of production difficulties and strikes,
and production in the third quarter was down by 12% compared to the
second quarter. The nickel price rose from a level of 16 000 at the
beginning of July to 21 000 USD/ton in mid-August and then fell back
to a level of 17 000 USD/ton by the end of the September. The average
nickel price in the quarter was 17 700 USD/ton (II/2009: 12 920
USD/ton). In October 2009, the price of nickel has been in the range
17 200 - 19 400 USD/ton. Demand for ferrochrome also continued to
improve, especially in China, and global production increased in the
third quarter. The quarterly contract price for ferrochrome in the
third quarter was 0.89 USD/lb (II/2009: 0.69 USD/lb) and has
preliminarily been settled at 1.03 USD/lb for the fourth quarter. The
price of molybdenum rose markedly and averaged 15.36 USD/lb (II/2009:
9.41 USD/lb) in the review period. The price of recycled steel was
236 USD/ton in the third quarter (II/2009: 199 USD/ton).
Smaller operating loss with lower delivery volumes
Group sales in the third quarter totalled EUR 587 million (II/2009:
EUR 617 million). Deliveries of stainless steel were down by 11% and
totalled 238 000 tons (II/2009: 268 000 tons). Capacity utilization
in the third quarter was 50-55%. The main causes of the decline in
delivery volumes were temporary production constraints, annual
maintenance breaks and seasonality of demand resulting from the
European holiday season.
Operating loss in the third quarter totalled EUR 65 million (II/2009:
EUR -94 million). This includes some EUR 32 million of raw
material-related inventory gains (II/2009: no major gains/ losses),
mainly resulting from the increase in the nickel price. Operating
loss also includes EUR 15 million of non-recurring costs related to
write-downs resulting from the decision not to proceed with the
melt-shop investment in Avesta, Sweden. Consequently, underlying
operational loss improved to EUR 82 million (II/2009: EUR -94
million). However, lower delivery volumes partly offset the impact of
higher base prices. Outokumpu's realized average base prices for flat
products in the third quarter increased by 130 EUR/ton but were lower
than the base prices reported by CRU for German 304 sheet.
The Outokumpu cost-saving programmes, initiated in December 2008, are
proceeding according to plan. Outokumpu estimates that fixed-cost
savings achieved in 2009 will total EUR 150 million.
Return on capital employed in the third quarter was -7.6% (II/2009:
-11.1%). Earnings per share totalled EUR -0.31 (II/2009: EUR -0.48).
Outokumpu's gearing at the end of the third quarter was higher than
in the previous quarter but continued to be at the good level of
41.4% (June 30, 2009: 37.1%), well below the target of below 75%. net
interest-bearing debt totalled EUR 1 014 million (June 30, 2009: EUR
926 million) at the end of the third quarter.
Net cash from operating activities was slightly negative, at EUR -12
million (II/2009: EUR 23 million positive). Even though raw material
prices were higher, EUR 55 million of cash was released from working
capital.
Capital expenditure in the third quarter totalled EUR 55 million
(II/2009: EUR 45 million).
Sales by General Stainless in the third quarter totalled EUR 496
million (II/2009: EUR 501 million), and deliveries totalled 221 000
tons (II/2009: 248 000 tons). Operating loss was EUR 38 million
(II/2009: EUR -52 million) of which the Tornio Works posted a loss of
EUR 44 million (II/2009: EUR -33 million). The majority of the raw
material-related inventory gains of EUR 32 million were posted by
General Stainless.
Sales by Specialty Stainless in the third quarter totalled EUR 258
million (II/2009: EUR 278 million), and deliveries totalled 75 000
tons (II/2009: 82 000 tons). Operating loss was EUR 21 million
(II/2009: EUR -37 million).
Other operations posted an operating loss of EUR 4 million (II/2009:
EUR -5 million) in the third quarter.
Personnel adjustments
In late June, Outokumpu announced that it would be increasing its
production capability as the order intake for deliveries after the
summer holiday season period was showing some degree of recovery. In
Tornio in Finland, production was started at the idled melt-shop and
working shifts on steel production lines were increased at the
beginning of September. Some 700 employees who had been laid off on a
temporary basis were therefore called back one month earlier than
planned. In August, Outokumpu announced that the remaining part-time
temporary layoffs at Tornio Works (about 900 employees in maintenance
and support functions) would end at the end of September. Currently,
Outokumpu's production capability is 60-70% of total capacity and the
Group is adjusting its production according to demand.
The fixed-period temporary layoffs for some 250 employees at the Kemi
Mine and Ferrochrome Works have ended as planned and ferrochrome
production began at the beginning of October.
In Sweden, most of the temporary layoffs have been terminated by the
end of September. Since the beginning of this year, some 430 jobs in
total have been permanently reduced in Sweden.
Investment projects
Outokumpu has completed the expansion of its stock and processing
capacity at the Group's service center in Willich, Germany. Based on
an investment decision in 2007, this project consisted of expanding
the site area, doubling the size of the service center building and
installing new cut-to-length and slitting lines. The annual capacity
of the service center has been increased from 60 000 tons to 125 000
tons. The investment totalled EUR 27 million.
In Degerfors in Sweden, the building of a new dispatch hall with
fully-automated storage and integrated packaging and dispatch
facilities was completed at the end of September. In Nyby in Sweden,
the investment to double annual production capacity in special grades
from 34 000 tons to more than 70 000 tons has been finalized. A new
grinding line with an automated intermediate storage and an entry
section to the annealing and pickling line was taken into operation
at the beginning of October. These investments totalled some EUR 65
million.
In December 2008, Outokumpu decided to postpone almost its entire
investment program for at least 12 months. Continuation of any
project is subject to a separate decision based on an updated
feasibility study. Announced in September 2007, the investment at
Avesta in Sweden, to expand melt-shop capacity from 500 000 tons to
750 000 tons, will not proceed in the foreseeable future as there is
no need for additional melting capacity in the medium-term.
Write-downs of EUR 15 million connected with this investment have
been booked in the third quarter operating loss. As originally
planned, this investment would have totalled to some EUR 200 million.
Further decisions regarding other postponed investments will be made
by the end of 2010.
INTERIM REVIEW BY THE BOARD OF DIRECTORS - JANUARY-SEPTEMBER 2009
(Unaudited)
Weak stainless steel markets with lower prices for stainless steel
During the first nine months of 2009, demand for stainless steel was
weak and all producers restricted their production. During the first
six months of 2009 demand was also reduced by distributors'
destocking activity. As the destocking came to an end during the
summer, purchasing activity among distributors recovered somewhat
because of increasing metal prices and restricted output. Apparent
consumption of stainless is estimated to have declined by 38% in
Europe and by 22% globally compared to I-III/2008 but to have
increased by 10% in China. Compared to the same period in 2008,
production in I-III 2009 is estimated to have been down by 34% in
Europe and by 17% globally, but to have increased by 17% in China.
The average German base price for 2mm 304 cold rolled sheet was 1 116
EUR/ton in I-III/2009, 9% lower than in I-III/2008. The transaction
price for stainless steel averaged 1 933 EUR/ton in I-III/2009, 35%
lower than in I-III/2008. (CRU)
During the review period, prices of most alloying materials were
clearly at lower levels than in the corresponding period in the
previous year. During the first nine months of 2009, the nickel price
averaged 13 697 USD/ton (I-III/2008: 24 533 USD/ton) and fluctuated
in the range 9 400 - 21 000 USD/ton. The average quarterly contract
price for ferrochrome was 0.79 USD/lb (I-III/2008: 1.73 USD/lb)
during the first nine months. The average price of molybdenum was
11.31 USD/lb (I-III/2008: 33.66 USD/lb). The price of recycled steel
averaged 214 USD/ton in the first nine months of 2009 (I-III/2008:
474 USD/ton).
Significant operating loss and low delivery volumes due to very weak
demand
Group sales in the first nine months of 2009 were down by 58% to EUR
1 883 million (I-III/2008: EUR 4 508 million) due to lower
transaction prices and reduced delivery volumes. Stainless steel
deliveries totalled 753 000 tons (I-III/2008: 1 163 000 tons), down
by 35%. Outokumpu cut production heavily and operated at 55-60%
capacity utilization in I-III/2009.
Operating loss for the first nine months of 2009 totalled EUR 409
million (I-III/2008: EUR 208 million profit). The primary causes were
low delivery volumes, low base prices and raw-material related
inventory losses of some EUR 78 million (I-III/2008: losses of some
EUR 140 million). Operating loss included non-recurring costs of EUR
20 million related to provisions for permanent layoffs and
write-downs in Sweden. Operating profit in I-III/2008 included EUR 66
million of non-recurring provisions and underlying operational result
in I-III/2009 was at loss of EUR 311 million (I-III/2008: EUR 60
million profit). Loss before taxes totalled EUR 438 million
(I-III/2008: EUR 165 million profit).
Net financial income and expenses in the first nine months of 2009
totalled EUR -21 million (I-III/2008: EUR -42 million excluding
non-recurring items). In I-III/2008, an impairment loss of EUR 12
million was booked in Other financial expenses due to the decline in
the share price of Belvedere Resources Ltd, classified as
available-for-sale financial asset.
Net loss for the review period from continuing operations totalled
EUR 328 million (I-III/2008: EUR 118 million profit). Earnings per
share totalled EUR -1.82 (I-III/2008: EUR 0.25) and earnings per
share from continuing operations EUR -1.81 (I-III/2008: EUR 0.65).
The return on capital employed for I-III/2009 was -14.9% (I-III/2008:
6.6%).
Net cash generated from operating activities totalled EUR 312 million
(I-III/2008: EUR 451 million) as a result of the release of working
capital due to declining metal prices and an effective reduction in
inventory levels throughout the supply chain. Net interest-bearing
debt totalled EUR 1 014 million at the end of September (September
30, 2008: EUR 1 096 million). Outokumpu's gearing at the end of
September was 41.4% (September 30, 2008: 35.0%).
Capital expenditure
Capital expenditure including maintenance totalled EUR 163 million in
I-III/2009. The largest investments were related to the replacement
of the No. 2 annealing and pickling line in Tornio, expansion of the
service center in Willich, Germany, establishing of a service center
in China and the doubling of production capacity in special grades at
Nyby, Sweden. Total capital expenditure by the Group in 2009 is
estimated to be below EUR 250 million.
In December 2008, Outokumpu decided to postpone almost its entire
investment program for at least 12 months. Continuation of any
project is subject to a separate decision based on an updated
feasibility study. Announced in September 2007, the investment to
expand melting capacity at Avesta in Sweden, will not be continued in
the foreseeable future as there is no need for additional melting
capacity in the medium-term. Further decisions on other postponed
investments will be made by the end of 2010.
Risks and uncertainties
Outokumpu operates in accordance with the risk management policy
approved by its Board of Directors. This policy defines the
objectives, approaches and areas of responsibility in risk
management. Risks and uncertainties may, if they materialize, have a
substantial impact on earnings and cash flows. Key risks are assessed
and updated on a regular basis.
Important strategic and business risks include structural
overcapacity in stainless steel production, competition in stainless
steel markets and Euro-centricity. To mitigate risks related to
structural overcapacity and fierce competition in stainless steel
markets, Outokumpu aims to maintain the cost efficiency of its
operations, broaden the Group's product offering and increase sales
to end-users by, for example, developing distribution channels. This
strategy is supported by the Group Sales and Marketing function,
which ensures that customers are served in an optimal way. To
mitigate any possible impacts of Euro-centricity, Outokumpu is also
aiming to grow outside Europe.
Operational risks arise as a consequence of inadequate or failed
internal processes, employee actions, systematic or other events such
as natural catastrophes, misconduct or crime. Key operational risks
include a major fire or accident, variations in production
performance, failures in project implementation and the inability to
work according to a one-company approach. These risks are mitigated
through insurances and a variety of preventive or corrective actions
and initiatives. To minimize damage to property and business
interruptions that could be caused by fire at some of the Group's
major production sites, Outokumpu has implemented systematic fire and
security audit programmes.
Financial risks include market price, credit, liquidity and
refinancing risks. The Group's liquidity position has remained strong
despite recent increases in the prices of alloying metals. To secure
the necessary liquidity, Outokumpu signed a three-year revolving
credit facility of EUR 900 million in June 2009 to replace the
previous five-year facility of EUR 1 billion. As a consequence of the
global economic crisis, credit losses related to sales have increased
somewhat, but much of these losses are covered by credit insurance. A
weak Swedish krona has been beneficial for the Group because of the
significant quantity of krona-denominated fixed and variable costs.
Changes in the price of nickel and the value of the US dollar may
have a significant impact on Group earnings, cash flows and the
balance sheet. Outokumpu is also exposed to changes in interest
rates, credit risk related to a certain loan receivable and risks
related to equity security prices. Liquidity and refinancing risks
are taken into account in capital management decisions and, when
necessary, in making investment and other business decisions.
Environment, health and safety
Emissions to air and discharges to water remained within permitted
limits and the breaches that occurred were temporary, were identified
and caused only minimal environmental impact. Outokumpu is not a
party in any significant juridical or administrative proceeding
concerning environmental issues, nor is it aware of any realised
environmental risks that could have a material adverse effect on the
Group's financial position.
Carbon dioxide emissions under EU Emission Trading Scheme were at a
very low level during the first nine months of 2009 due to reduced
levels of production, approximately 367 000 tons (I-III/2008: 630 000
tons). Outokumpu estimates that total emissions in 2009 will be below
600 000 tons (2008: 871 000 tons). Outokumpu's carbon dioxide
allowances in the UK, Sweden and Finland are expected to be
sufficient for the Group's planned production.
Occupational safety continues to be a major focus area within the
Group and Outokumpu has a separate safety function responsible for
safety management and development. In I-III/2009, the lost-time
injury rate (i.e. lost-time accidents per million working hours) was
six (I-III/2008: nine). In 2009, the target is less than five. No
severe accidents have been reported in 2009.
Corporate Responsibility
In March 2009, Outokumpu was selected as a member of the Kempen/SNS
Smaller Europe SRI Universe, a concept launched by Kempen Capital
Management. Membership is only offered to companies with the very
highest standards and codes of practice in three areas: business
ethics, human resources and the environment.
In September, the results of the annual review carried out for the
Dow Jones World and Dow Jones STOXX Sustainability indexes by the
Sustainable Asset Management Group (SAM) were published. Outokumpu
retained its membership in both indices and received the highest
possible score in two sustainability criteria: environmental
reporting and occupational health and safety.
Personnel
The Group's continuing operations employed an average of 8 047 people
during January-September 2009 (I-III/2008: 8 529). At the end of
September, Outokumpu had 7 699 employees (September 30, 2008: 8 711).
Class actions regarding the sold fabricated copper products business
The fabricated copper products business sold in 2005, comprised,
among others, Outokumpu Copper (USA), Inc. This company has been
served with one individual damage claim for ACR Tubes under US
antitrust laws. Outokumpu believes that the allegations in this case
are groundless and will defend itself in any proceedings. In
connection with the transaction to sell the fabricated copper
products business to Nordic Capital, Outokumpu has agreed to
indemnify and hold harmless Nordic Capital with respect to this
claim.
Copper tube cartel investigation
In 2003, the European Commission issued its judgment on Outokumpu's
participation in a European price-fixing and market-sharing cartel
regarding copper air-conditioning tubes during 1988-2001. A fine of
EUR 18 million was imposed on the Group. In 2004, Outokumpu lodged an
appeal with the Court of First Instance for Europe regarding the
basis for the calculation and the level of the fine. According to
decision issued by this court in May 2009, the amount of the fine
remains unchanged.
In the cartel investigation concerning sanitary copper tubes, the
European Commission issued its judgement in September 2004 and
imposed a fine of EUR 36 million to Outokumpu Group due to
participation in cartel activities. Outokumpu lodged an appeal with
the Court of First Instance for Europe in 2004 regarding the level of
the fine. In August 2009, Outokumpu paid the fine of EUR 36 million
in advance. The final decision from the Court of First Instance
concerning the sanitary tubes is expected to be made during the
fourth quarter of 2009.
Interest totalling EUR 9 million has been paid for both of these
cases. In 2003, Outokumpu booked provisions for both of these fines.
Outokumpu exited the copper fabrication business by divesting a major
part of the business in 2005 and the remainder in April 2008.
Customs investigation of exports to Russia by Outokumpu Tornio Works
In March 2007, Finnish Customs authorities initiated a criminal
investigation into the Group's Tornio Works' export practices to
Russia. It was suspected that a forwarding agency based in
south-eastern Finland had prepared defective and/or forged invoices
regarding the export of stainless steel to Russia. The preliminary
investigation focused on possible complicity by Outokumpu Tornio
Works in the preparation of defective and/or forged invoices by the
forwarding agent.
In June 2009, the Finnish Customs completed its preliminary
investigation and forwarded the matter for consideration of possible
charges to the prosecuting authorities. According to initial
estimates, the process of considering possible charges will be
completed by the end of 2009.
Immediately after the Finnish Customs authorities began their
investigations in 2007, Outokumpu initiated its own investigation
into the trade practices connected with stainless steel exports from
Tornio to Russia. In June 2007, after carrying out its own
investigation, a leading Finnish law firm Roschier Attorneys Ltd.
concluded that it had not found evidence that any employees of Tornio
Works or the Group had committed any of the crimes alleged by the
Finnish Customs.
Roschier has subsequently, at Outokumpu's request, examined the
preliminary investigation material produced by the Finnish Customs'
and concluded that it contains no evidence that any Outokumpu
employees committed forgery or the accounting offences alleged by the
Finnish Customs. Outokumpu's Auditor, KPMG Oy Ab, has also stated
that suspicions related to the making of false financial statements
are groundless.
Outokumpu has stated that neither the Group nor its personnel have
committed any of the crimes alleged by the Finnish Customs.
Organizational changes and appointments
Mr Pekka Erkkilä, EVP - General Stainless, took over management of
the Tornio Works in addition to his current duties with effect from
September 15, 2009.
Mr Andrea Gatti, former EVP - Group Sales and Marketing at Outokumpu,
assumed the role of Corporate Vice President outside the Executive
Committee from February 24, 2009. He is working on strategic
corporate projects and reports to Karri Kaitue, Deputy CEO. Mr
Gatti's duties have been assumed by Bo Annvik, EVP - Specialty
Stainless for an interim period.
Shares and shareholders
According to the Nordic Central Securities Depository, Outokumpu's
largest shareholders by group at the end of the third quarter were
Finnish corporations (34.35%), foreign investors (30.10%), Finnish
public sector institutions (16.02%), Finnish private households
(12.05%), Finnish financial and insurance institutions (5.08%), and
Finnish non-profit organizations (2.41%). The list of largest
shareholders is updated regularly on Outokumpu's Internet pages:
www.outokumpu.com/Investors
Shareholders that have more than 5% of the shares and votes in
Outokumpu Oyj are Solidium Oy (owned by the State of Finland)
(31.01%) and the Finnish Social Insurance Institution (8.05%).
At the end of September 2009, Outokumpu's closing share price was EUR
12.86 (III/2008: EUR 11.06). The average share price during the first
nine months of 2009 was EUR 11.26 (I-III/2008: EUR 22.65) with EUR
15.67 (I-III/2008: EUR 33.99) as the highest traded price and EUR
7.72 (I-III/2008: EUR 10.42) as the lowest. At the end of September
2009, the market capitalization of Outokumpu Oyj shares was EUR 2 327
million (September 30, 2008: EUR 1 993 million). Share turnover of
Group shares on the Nasdaq OMX Helsinki exchange during the first
nine months of 2009 amounted to 279.6 million (I-III/2008: 382.8
million). The total value of Group shares traded during the first
nine months of 2009 was EUR 3 149.4 million (I-III/2008: EUR 8 671.0
million).
Outokumpu's fully paid-up share capital at the end of September 2009
totalled EUR 309.4 million and consisted of 182 004 266 shares.
Excluding treasury shares, the number of shares outstanding at the
end of the third quarter was 180 963 378.
Annual General Meeting 2009
The Annual General Meeting (AGM) approved a dividend of EUR 0.50 per
share for 2008. Dividends totalling EUR 90 million were paid on April
3, 2009.
The AGM authorized the Board of Directors to decide to repurchase the
Group's own shares and to issue shares and grant special rights
entitling to shares. These authorizations are valid 12 months or
until the next AGM, but no longer than May 31, 2010. To date, the
authorizations have not been used.
The AGM decided on the number of the Board members, including the
Chairman and Vice Chairman, to be eight. Members of the Outokumpu
Board of Directors are: Evert Henkes, Ole Johansson (Chairman), Jarmo
Kilpelä, Victoire de Margerie, Anna Nilsson-Ehle, Jussi Pesonen,
Leena Saarinen and Anssi Soila (Vice Chairman).
SHORT-TERM OUTLOOK
Uncertainty in stainless steel markets continues. In the third
quarter there was minor restocking by distributors due to rising raw
material prices. There is however no major improvement in underlying
demand for stainless. Inventory levels at distributors in Europe are
estimated as still being below normal. Volatility in the nickel price
is having an impact on the purchasing behaviour of distributors in
the short-term, making them hesitant about building inventories.
Delivery times are fairly normal and Outokumpu is currently selling
standard grades for deliveries in December. Deliveries of stainless
steel in the fourth quarter are expected to be at the same level as
in the second quarter (268 000 tons). Compared to the average for the
third quarter, Outokumpu's average base prices for all flat products
in the fourth quarter are expected to increase by 50-100 EUR/t. There
is currently temporary pressure on prices but Outokumpu expects
prices to remain rather stable during the remaining of the fourth
quarter.
Outokumpu's underlying operational result in the fourth quarter is
expected to improve from the third quarter as a result of increased
base prices, improved delivery volumes and tight cost management.
With current metal prices, raw-material related inventory gains are
expected to be at the same level as in the third quarter, which might
take the operating profit close to break-even. The main risks of
fourth-quarter financial performance are connected with delivery
volumes.
In Espoo, October 22, 2009
Board of Directors
CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
Income statement
Jan- Jan- July- July- Jan-
Sept Sept Sept Sept Dec
EUR million 2009 2008 2009 2008 2008
Continuing operations:
Sales 1 883 4 508 587 1 270 5 474
Other operating income 17 20 16 25 57
Costs and expenses -2 284 -4 285 -652 -1 329 -5 552
Other operating expenses -25 -35 -16 -31 -42
Operating profit -409 208 -65 -66 -63
Share of results in
associated companies -8 -1 -6 -2 -2
Financial income and expenses
Interest income 13 15 4 5 20
Interest expenses -29 -53 -6 -20 -74
Market price gains and losses -4 -1 -3 1 -2
Other financial income 4 11 0 0 11
Other financial expenses -5 -14 -5 0 -24
Profit before taxes -438 165 -81 -82 -134
Income taxes 110 -47 26 9 24
Net profit for the period
from continuing operations -328 118 -55 -73 -110
Discontinued operations:
Net profit for the period
from discontinued operations -3 -73 -1 -1 -79
Net profit for the period -330 45 -56 -74 -189
Attributable to:
Owners of the parent -329 45 -55 -74 -189
Non-controlling interests -1 - -0 - -0
Earnings per share for profit
attributable to the owners of
the parent:
Earnings per share, EUR -1.82 0.25 -0.31 -0.41 -1.05
Diluted earnings per share, EUR -1.82 0.25 -0.31 -0.41 -1.04
Earnings per share from continuing
operations attributable to
the owners of the parent:
Earnings per share, EUR -1.81 0.65 -0.30 -0.41 -0.61
Earnings per share from
discontinued
operations attributable to
the owners of the parent:
Earnings per share, EUR -0.01 -0.41 -0,00 -0.01 -0.44
Statement of other comprehensive
income
Jan- Jan- July- July- Jan-
Sept Sept Sept Sept Dec
EUR million 2009 2008 2009 2008 2008
Net profit for the period -330 45 -56 -74 -189
Other comprehensive income:
Exchange differences on
translating foreign operations 26 -26 -6 3 -75
Available-for-sale financial assets
Fair value changes during
Fair value changes during the
period 25 -8 8 -18 -37
Reclassification adjustments
from equity to profit - 5 - 0 5
Income tax relating to
available-for-sale financial
assets -9 3 -1 5 8
Cash flow hedges
Fair value changes during the
period 20 -16 18 -17 -65
Reclassification adjustments
from equity to profit - -5 - -3 -5
Income tax relating to cash flow
hedges -5 5 -5 5 18
Net investment hedges
Fair value changes during the
period 1 4 -0 3 13
Income tax relating to
net investment hedges -0 -1 0 -1 -3
Share of other comprehensive income
of associated companies 9 - -9 - -
Other comprehensive income for the
period,
net of tax 66 -38 5 -22 -140
Total comprehensive income for the
period -264 7 -51 -96 -329
Attributable to:
Owners of the parent -263 7 -51 -96 -329
Non-controlling interests -1 - -0 - -0
Statement of financial position
Sept 30 Sept 30 Dec 31
EUR million 2009 2008 2008
ASSETS
Non-current assets
Intangible assets 572 567 584
Property, plant and equipment 2 066 2 023 2 027
Investments in associated companies 1) 160 160 156
Available-for-sale financial assets 1) 98 112 67
Derivative financial instruments 1) 5 22 9
Deferred tax assets 20 29 37
Trade and other receivables
Interest-bearing 1) 126 133 132
Non interest-bearing 60 60 55
Total non-current assets 3 108 3 106 3 067
Current assets
Inventories 937 1 602 1 204
Available-for-sale financial assets 1) 9 9 8
Derivative financial instruments 1) 27 82 92
Trade and other receivables
Interest-bearing 1) 36 18 25
Non interest-bearing 472 1 037 701
Cash and cash equivalents 1) 210 107 224
Total current assets 1 691 2 855 2 252
Receivables related to assets held for sale
1) 16 27 22
TOTAL ASSETS 4 815 5 988 5 341
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the Company
Share capital 309 308 308
Premium fund 705 702 702
Other reserves 36 55 -13
Retained earnings 1 723 2 021 1 984
Net profit for the financial year -329 45 -189
2 445 3 132 2 794
Non-controlling interests 0 - 1
Total equity 2 446 3 132 2 795
Non-current liabilities
Long-term debt 1) 959 1 117 1 170
Derivative financial instruments 1) 44 20 48
Deferred tax liabilities 110 250 216
Pension obligations 65 61 64
Provisions 29 34 28
Trade and other payables 1 2 2
Total non-current liabilities 1 208 1 484 1 529
Current liabilities
Current debt 1) 638 562 501
Derivative financial instruments 1) 46 33 54
Income tax liabilities 4 52 5
Provisions 25 60 48
Trade and other payables
Interest-bearing 1) 6 26 26
Non interest-bearing 434 630 378
Total current liabilities 1 154 1 364 1 012
Liabilities related to assets held for sale 1) 8 8 6
TOTAL EQUITY AND LIABILITIES 4 815 5 988 5 341
1) Included in net interest-bearing debt.
Consolidated statement
of changes in
equity
Attributable to the owners of the parent
Fair
Share Unregister- Share Other value
capital ed share premium reserves reserves
EUR million capital fund
Equity on
December 31, 2007 308 - 701 16 57
Total
comprehensive
income for the
period - - - - -17
Dividends - - - - -
Share-based
payments - - - - -
Share options
exercised 0 - 1 - -
Equity on
September 30, 2008 308 - 702 16 40
Equity on
December 31, 2008 308 - 702 15 -28
Total
comprehensive
income for the
period - - - - 47
Transfers within
equity - - - 2 -
Dividends - - - - -
Share-based
payments - - - - -
Share options
exercised 1 - 3 - -
Equity on
September 30, 2009 309 - 705 17 19
Attributable to the owners of the parent
Treasury Cumulative Retained Non- Total
shares translation earnings controlling equity
EUR million differences interests
Equity on
December 31, 2007 -27 -82 2 364 - 3 337
Total
comprehensive
income for the
period - -21 45 - 7
Dividends - - -216 - -216
Share-based
payments - - 3 - 3
Share options
exercised - - - - 1
Equity on
September 30, 2008 -27 -103 2 196 - 3 132
Equity on
December 31, 2008 -27 -138 1 961 1 2 795
Total
comprehensive
income for the
period - 19 -329 -1 -264
Transfers within
equity - - -2 - -
Dividends - - -90 - -90
Share-based
payments 2 - -1 - 1
Share options
exercised - - - - 4
Equity on
September 30, 2009 -25 -119 1 539 0 2 446
Condensed statement of cash flows
Jan- Jan- July- July- Jan-
Sept Sept Sept Sept Dec
EUR million 2009 2008 2009 2008 2008
Net profit for the period -330 45 -56 -74 -189
Adjustments
Depreciation and amortization 156 152 52 52 206
Impairments 17 24 15 7 36
Other adjustments -216 220 -64 74 321
Change in working capital 702 97 55 192 370
Dividends received 3 12 0 2 12
Interests received 4 5 0 1 5
Interests paid -49 -53 -15 -15 -76
Income taxes paid 26 -50 1 3 -30
Net cash from
operating activities 312 451 -12 242 656
Purchases of assets -175 -200 -56 -95 -325
Purchase of subsidiaries - -197 - -197 -204
Proceeds from the sale of subsidiaries - 49 - - 49
Proceeds from the sale
of other assets 12 9 5 6 31
Net cash from other
investing activities 0 0 0 0 0
Net cash from
investing activities -163 -340 -51 -286 -449
Cash flow before
financing activities 149 112 -62 -44 207
Share options exercised 4 1 - 0 1
Borrowings of long-term debt 59 164 - 164 341
Repayment of long-term debt -308 -198 -25 -53 -236
Change in current debt 170 162 79 -37 47
Dividends paid -90 -216 - - -216
Proceeds from the sale
of other financial assets 0 0 0 0 0
Other financing cash flow 1 -2 -0 0 -1
Net cash from
financing activities -165 -89 54 73 -64
Net change in cash
and cash equivalents -16 22 -8 30 143
Cash and cash equivalents at
the beginning of the period 224 86 218 77 86
Foreign exchange rate effect 2 -1 1 -0 -5
Net change in cash
and cash equivalents -16 22 -8 30 143
Cash and cash equivalents
at the end of the period 210 107 210 107 224
Key figures
Jan-Sept Jan-Sept Jan-Dec
EUR million 2009 2008 2008
Sales 1 883 4 508 5 474
Operating profit -409 208 -63
Operating profit margin, % -21.7 4.6 -1.2
Return on capital employed, % -14.9 6.6 -1.6
Return on equity, % -16.8 1.8 -6.2
Return on equity, continuing operations, % -16.7 4.9 -3.6
Capital employed at end of period 3 459 4 228 3 867
Net interest-bearing
debt at end of period 1 014 1 096 1 072
Equity-to-assets ratio
at end of period, % 50.8 52.3 52.4
Debt-to-equity ratio at end of period, % 41.4 35.0 38.4
Earnings per share, EUR -1.82 0.25 -1.05
Earnings per share from
continuing operations, EUR -1.81 0.65 -0.61
Earnings per share from
discontinued operations, EUR -0.01 -0.41 -0.44
Average number of shares
outstanding, in thousands 1) 180 779 180 169 180 185
Fully diluted earnings per share, EUR -1.82 0.25 -1.04
Fully diluted average number
of shares, in thousands 1) 180 907 181 109 180 995
Equity per share at end
of period, EUR 13.51 17.38 15.50
Number of shares outstanding
at end of period,in thousands 1) 180 963 180 228 180 233
Capital expenditure,
continuing operations 163 415 544
Depreciation,
continuing operations 156 152 206
Average personnel for the
period, continuing operations 8 047 8 529 8 551
1) The number of own shares repurchased is excluded.
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This interim financial report is prepared in accordance with IAS 34
(Interim Financial Reporting). Mainly the same accounting policies
and methods of computation have been followed in the interim
financial statements as in the annual financial statements for 2008.
Outokumpu has applied the IFRS 8 - Operating segments as of January
1, 2009. According to IFRS 8, segment information should be based on
management's internal reporting structure and accounting principles.
As disclosed in the financial statement for 2008, Outokumpu's segment
information has already been based on management reporting structure
and therefore the operating segments are the same as they were
previously, General Stainless and Specialty Stainless. Outokumpu has
also applied amended standard IAS 1 - Presentation of financial
statements as of January 1, 2009, which has changed the presentation
of income statement and statement of changes in equity. These changes
have impacted the presentation of financial statements.
Use of estimates
The preparation of the financial statements in accordance with IFRS
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, as well as the disclosure
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income and expenses during
the reporting period. Accounting estimates are employed in the
financial statements to determine reported amounts, including the
realizability of certain assets, the useful lives of tangible and
intangible assets, income taxes, provisions, pension obligations,
impairment of goodwill and other items. Although these estimates are
based on management's best knowledge of current events and actions,
actual results may differ from the estimates.
Shares and share capital
The total number of Outokumpu Oyj shares was 182 004 266 and the
share capital amounted to EUR 309.4 million on September 30, 2009.
Outokumpu Oyj held 1 040 888 treasury shares on September 30, 2009.
This corresponded to 0.6% of the share capital and the total voting
rights of the Company on September 30, 2009.
Outokumpu has a stock option program for management (2003 option
program). The stock options have been allocated as part of the
Group's incentive programs to key personnel of Outokumpu. The option
program has three parts 2003A, 2003B and 2003C. On September 30, 2009
a total of 650 881 Outokumpu Oyj shares had been subscribed for on
the basis of 2003A stock option program, a total of 82 830 Outokumpu
Oyj shares on the basis of 2003B stock option program and a total of
20 000 Outokumpu Oyj shares on the basis of 2003C stock option
program. Share subscription period with the Outokumpu stock options
2003A ended on March 1, 2009. An aggregate maximum of 945 990 shares
can be subscribed with the remaining 2003B stock options and 80 500
shares with the remaining 2003C stock options. In accordance with the
terms and conditions of the option program, the dividend adjusted
share price for a stock option 2003B was EUR 9.81 and for stock
option 2003C EUR 10.44 on September 30, 2009. As a result of the
share subscriptions with the 2003 stock options, Outokumpu Oyj's
share capital may be increased by a maximum of EUR 1 745 033 and the
number of shares by a maximum of 1 026 490 shares. This corresponds
to 0.6% of the Company's shares and voting rights.
Outokumpu has also two share-based incentive programs for years
2006-2010 and 2009-2013 as part of the key employee incentive and
commitment system of the Company.
The first earning period for 2006-2010 incentive program was ended on
December 31, 2008. Based on the achievement of the targets, the Board
confirmed that the participants would receive 50% of the maximum
number of shares. Altogether 177 715 shares were distributed to 125
persons in March 2009. Outokumpu used its treasury shares for the
reward payment, which means that the total number of shares of the
company did not change.
On February 3, 2009, the Board of Directors of Outokumpu approved the
second share-based incentive plan to be offered to the key management
of Outokumpu for years 2009-2013. The Program will last five years,
comprising three earning periods of three calendar years each. The
earning periods commence on January 1, 2009, January 1, 2010 and
January 1, 2011. The Board approves the number of participants, final
allocations and performance criteria separately for each earning
period. For earning period 2009-2011, the Board approved 139
employees to be in the scope of the Program. The amount of reward
will be determined and paid to the participants on the basis of the
achievement of performance targets after the financial statements of
the last year of earning period have been prepared. The rewards to be
paid on the basis of the program will correspond to a maximum of 1
500 000 Outokumpu shares. No new shares will be issued in connection
with the program and therefore the incentive plan will have no
diluting effect.
If persons covered by both share-based incentive programs were to
receive the number of shares in accordance with the maximum reward,
currently a total of 911 430 shares, their shareholding obtained via
the program would amount to 0.5% of the Company's shares and voting
rights.
The detailed information of the 2003 option program and of the
share-based incentive programs can be found in the annual report of
Outokumpu and from Outokumpu's Internet site www.outokumpu.com.
Non-current assets held for sale and discontinued operations
Outokumpu Brass produces brass rods for applications in the
construction, electrical and automotive industries. The brass rod
plant is located in Drünen in the Netherlands and the unit also has a
50% stake in a brass rod company in Gusum, Sweden. Outokumpu Brass
employs some 150 employees. The assets and liabilities of brass rod
business are presented as held for sale. Outokumpu intends to divest
the brass rod business.
Specification of non-current
assets held for sale
and discontinued operations
Income statement
Jan-Sept Jan-Sept Jan-Dec
EUR million 2009 2008 2008
Sales 23 254 267
Expenses -22 -252 -269
Operating profit 0 1 -2
Net financial items -1 -3 -4
Profit before taxes -1 -1 -6
Taxes 0 -1 -0
Profit after taxes -1 -2 -6
Impairment loss recognized
on the fair valuation of the
Outokumpu Copper Tube and Brass
division's assets and liabilities -2 -6 -6
Loss on the sale of copper tube
business - -66 -66
Taxes - - -
After-tax result from the
disposal and impairment loss -2 -72 -73
Non-controlling interests - - -
Net profit for the period
from discontinued operations -3 -73 -79
Statement of financial position
Sept 30 Sept 30 Dec 31
EUR million 2009 2008 2008
Assets
Intangible and tangible assets 2 2 2
Other non-current assets 2 3 3
Inventories 7 13 9
Other current non
interest-bearing assets 5 9 8
16 27 22
Liabilities
Provisions 2 1 2
Other non-current non
interest-bearing liabilities 1 1 1
Trade payables 4 5 2
Other current non
interest-bearing liabilities 1 0 1
8 8 6
Cash flows
Jan-Sept Jan-Sept Jan-Dec
EUR million 2009 2008 2008
Operating cash flows 7 -8 -8
Investing cash flows -2 -14 -16
Financing cash flows -4 17 19
Total cash flows 0 -5 -5
Major non-recurring items
in operating profit
Jan-Sept Jan-Sept Jan-Dec
EUR million 2009 2008 2008
Write-down of Avesta
melt-shop investment -15 - -
Redundancy provisions -5 - -17
Thin Strip restructuring in Britain - -66 -66
-20 -66 -83
Major non-recurring items in
financial income and expenses
Jan-Sept Jan-Sept Jan-Dec
EUR million 2009 2008 2008
Impairment of Belvedere shares - -12 -21
- -12 -21
Income taxes
Jan-Sept Jan-Sept Jan-Dec
EUR million 2009 2008 2008
Current taxes -4 -42 -6
Deferred taxes 114 -4 30
110 -47 24
Property, plant and equipment
Jan 1 - Jan 1 - Jan 1 -
Sept 30 Sept 30 Dec 31
EUR million 2009 2008 2008
Historical cost at the
beginning of the period 4 021 3 984 3 984
Translation differences 66 -53 -190
Additions 165 189 301
Acquisition of subsidiaries - 44 36
Disposals -14 -92 -108
Reclassifications -2 -2 -2
Historical cost at
the end of the period 4 235 4 070 4 021
Accumulated depreciation at
the beginning of the period -1 994 -2 004 -2 004
Translation differences -35 32 115
Disposals 11 65 83
Reclassifications 0 0 -0
Depreciation -137 -141 -188
Accumulated depreciation at
the end of the period -2 169 -2 047 -1 994
Carrying value at
the end of the period 2 066 2 023 2 027
Carrying value at the
beginning of the period 2 027 1 980 1 980
Commitments
Sept 30 Sept 30 Dec 31
EUR million 2009 2008 2008
Mortgages and pledges
Mortgages on land 186 121 189
Other pledges 1 0 5
Guarantees
On behalf of subsidiaries
for commercial commitments 22 52 55
On behalf of associated companies
for financing 5 5 5
Other commitments 54 59 59
Minimum future lease payments
on operating leases 61 50 59
Group's off-balance sheet investment commitments totaled EUR 81
million
on September 30, 2009 (September 30, 2008: EUR 231 million,
Dec 31, 2008: EUR 93 million).
Related party transactions
Transactions and balances
with associated companies
Sept 30 Sept 30 Dec 31
EUR million 2009 2008 2008
Sales 0 0 0
Purchases -5 -8 -13
Financial income and expenses 0 2 2
Loans and other receivables 7 9 7
Trade and other receivables 1 0 0
Fair values and nominal
amounts of
derivative
instruments
Sept 30 Sept 30 Sept 30 Dec 31 Sept 30 Dec 31
2009 2009 2009 2008 2009 2008
Positive Negative Net Net
fair fair fair fair Nominal Nominal
EUR million value value value value amounts amounts
Currency and
interest
rate derivatives
Currency forwards 16 59 -43 0 1 581 1 920
Interest rate
swaps - 2 -2 2 199 200
Cross-currency
swaps 4 12 -8 7 213 46
Currency options,
bought 3 - 3 - 51 -
Currency options,
sold - 0 -0 - 53 -
Number Number
of of
shares, shares,
million million
Stock options
Belvedere
Resources Ltd. - - - 0 - 3.7
Tons Tons
Metal derivatives
Forward and
futures
nickel contracts - 0 -0 -0 92 4 729
Nickel options,
bought 6 - 6 14 11 520 16 758
Nickel options,
sold - 4 -4 -14 11 520 11 478
Forward and
futures
copper contracts 0 0 0 -0 1 175 4 925
Forward and
futures
zinc contracts 0 0 0 -0 500 1 025
Emission allowance
derivatives 2 0 2 1 558 000 270 000
TWh TWh
Electricity
derivatives 1 13 -12 -11 0.7 1.3
32 90 -58 -1
Segment information
General Stainless
EUR million I/08 II/08 III/08 IV/08 2008
Sales 1 304 1 222 933 687 4 147
of which Tornio Works 905 833 567 396 2 701
Operating profit 81 125 -35 -177 -6
of which Tornio Works 67 114 -22 -93 66
Operating capital at
the end of period 2 722 2 671 2 820 2 663 2 663
Average personnel
for the period 3 578 4 000 4 163 3 989 3 933
Deliveries of main
products (1 000 tons)
Cold rolled 196 162 151 121 628
White hot strip 102 85 58 51 297
Semi-finished products 100 113 76 51 340
Total deliveries
of the division 398 359 285 223 1 265
EUR million I/09 II/09 III/09
Sales 476 501 496
of which Tornio Works 270 300 303
Operating profit -157 -52 -38
of which Tornio Works -129 -33 -44
Operating capital at
the end of period 2 390 2 379 2 355
Average personnel
for the period 3 917 3 848 3 820
Deliveries of main
products (1 000 tons)
Cold rolled 114 132 112
White hot strip 57 64 64
Semi-finished products 39 51 45
Total deliveries
of the division 210 248 221
Specialty Stainless
EUR million I/08 II/08 III/08 IV/08 2008
Sales 786 778 630 512 2 705
Operating profit 42 44 -63 -123 -101
Operating capital at
the end of period 1 430 1 449 1 378 1 174 1 174
Average personnel
for the period 4 115 4 096 4 192 4 103 4 127
Deliveries of main
products (1 000 tons)
Cold rolled 46 44 35 29 154
White hot strip 45 40 31 27 142
Quarto plate 35 37 28 27 126
Tubular products 19 18 14 15 66
Long products 14 14 14 10 52
Total deliveries
of the division 161 153 121 106 541
EUR million I/09 II/09 III/09
Sales 371 278 258
Operating profit -82 -37 -21
Operating capital at
the end of period 1 007 906 965
Average personnel
for the period 3 892 3 656 3 433
Deliveries of main
products (1 000 tons)
Cold rolled 25 19 19
White hot strip 23 25 21
Quarto plate 20 19 15
Tubular products 14 12 10
Long products 9 8 10
Total deliveries
of the division 92 82 75
Other operations
EUR million I/08 II/08 III/08 IV/08 2008
Sales 64 63 69 62 258
Operating profit -20 4 29 25 38
Operating capital at
the end of period -20 283 266 214 214
Average personnel
for the period 447 487 507 525 492
EUR million I/09 II/09 III/09
Sales 66 58 56
Operating profit -12 -5 -4
Operating capital at
the end of period 108 252 233
Average personnel
for the period 527 526 521
Income statement by quarter
EUR million I/08 II/08 III/08 IV/08 2008
Continuing operations:
Sales
General Stainless 1 304 1 222 933 687 4 147
of which intersegment sales 284 337 216 157 993
Specialty Stainless 786 778 630 512 2 705
of which intersegment sales 124 120 85 78 407
Other operations 64 63 69 62 258
of which intersegment sales 57 57 61 61 235
Intra-group sales -465 -514 -362 -295 -1 636
Total sales 1 689 1 549 1 270 966 5 474
Operating profit
General Stainless 81 125 -35 -177 -6
Specialty Stainless 42 44 -63 -123 -101
Other operations -20 4 29 25 38
Intra-group items -3 1 3 4 6
Total operating profit 100 174 -66 -271 -63
Share of results
in associated companies 0 1 -2 -1 -2
Financial income and expenses -20 -8 -14 -26 -69
Profit before taxes 80 166 -82 -298 -134
Income taxes -19 -36 9 71 24
Net profit for the period
from continuing operations 61 130 -73 -228 -110
Net profit for the period
from discontinued
operations 2 -74 -1 -5 -79
Net profit for the period 63 56 -74 -233 -189
Attributable to:
The owners of the parent 63 56 -74 -233 -189
Non-controlling interests - - - -0 -0
EUR million I/09 II/09 III/09
Continuing operations:
Sales
General Stainless 476 501 496
of which intersegment sales 97 100 107
Specialty Stainless 371 278 258
of which intersegment sales 75 67 64
Other operations 66 58 56
of which intersegment sales 5 52 52
Intra-group sales -233 -220 -224
Total sales 679 617 587
Operating profit
General Stainless -157 -52 -38
Specialty Stainless -82 -37 -21
Other operations -12 -5 -4
Intra-group items 2 0 -3
Total operating profit -249 -94 -65
Share of results
in associated companies -3 -0 -6
Financial income and expenses 0 -11 -11
Profit before taxes -252 -105 -81
Income taxes 64 20 26
Net profit for the period
from continuing operations -188 -85 -55
Net profit for the period
from discontinued
operations 0 -2 -1
Net profit for the period -187 -87 -56
Attributable to:
The owners of the parent -187 -87 -55
Non-controlling interests -0 -0 -0
Major non-recurring
items in operating profit
EUR million I/08 II/08 III/08 IV/08 2008
Specialty Stainless
Write-down of Avesta
melt-shop investment - - - - -
Redundancy provisions - - - -17 -17
Thin Strip restructuring
in Britain - - -66 - -66
- - -66 -17 -83
EUR million I/09 II/09 III/09
Specialty Stainless
Impairment of Avesta
meltshop investment - - -15
Redundancy provisions -5 - -
Thin Strip restructuring
in Britain - - -
-5 - -15
Major non-recurring items in
financial income and expenses
EUR million I/08 II/08 III/08 IV/08 2008
Impairment of Belvedere shares -12 - - -9 -21
-12 - - -9 -21
EUR million I/09 II/09 III/09
Impairment of Belvedere shares - - -
- - -
Key figures by quarter
EUR million I/08 II/08 III/08 IV/08
Operating profit margin, % 5.9 11.2 -5.2 -28.1
Return on capital employed, % 10.0 17.2 -6.3 -26.8
Return on equity, % 7.7 7.0 -9.3 -31.5
Return on equity,
continuing operations, % 7.5 16.3 -9.2 -30.8
Capital employed at end of period 3 899 4 166 4 228 3 867
Net interest-bearing
debt at end of period 737 939 1 096 1 072
Equity-to-assets ratio
at end of period, % 53.2 54.8 52.3 52.4
Debt-to-equity ratio
at end of period, % 23.3 29.1 35.0 38.4
Earnings per share, EUR 0.35 0.31 -0.41 -1.30
Earnings per share from
continuing operations, EUR 0.34 0.72 -0.41 -1.27
Earnings per share from
discontinued operations, EUR 0.01 -0.41 -0.01 -0.03
Average number of shares
outstanding, in thousands 1) 180 112 180 172 180 223 180 231
Equity per share
at end of period, EUR 17.56 17.91 17.38 15.50
Number of shares outstanding
at end of period, in thousands 1) 180 127 180 222 180 228 180 233
Capital expenditure,
continuing operations 41 56 317 129
Depreciation, continuing operations 50 50 52 54
Average personnel for the period,
continuing operations 8 140 8 583 8 862 8 617
EUR million I/09 II/09 III/09
Operating profit margin, % -36.7 -15.3 -11.1
Return on capital employed, % -27.5 -11.1 -7.6
Return on equity, % -28.0 -13.8 -9.0
Return on equity,
continuing operations, % -28.1 -13.5 -8.9
Capital employed at end of period 3 376 3 423 3 459
Net interest-bearing
debt at end of period 825 926 1 014
Equity-to-assets ratio
at end of period, % 51.3 52.2 50.8
Debt-to-equity ratio
at end of period, % 32.3 37.1 41.4
Earnings per share, EUR -1.04 -0.48 -0.31
Earnings per share from
continuing operations, EUR -1.04 -0.47 -0.30
Earnings per share from
discontinued operations, EUR 0.00 -0.01 -0.00
Average number of shares
outstanding, in thousands 1) 180 413 180 955 180 963
Equity per share
at end of period, EUR 14.09 13.79 13.51
Number of shares outstanding
at end of period, in thousands 1) 180 953 180 963 180 963
Capital expenditure,
continuing operations 62 45 55
Depreciation, continuing operations 52 52 52
Average personnel for the period,
continuing operations 8 336 8 031 7 774
1) The number of own shares repurchased is excluded.
Definitions of key financial figures
Total equity + net interest-bearing
Capital employed = debt
Operating capital = Capital employed + net tax liability
Return on equity = Net profit for the financial period × 100
Total equity (average for the period)
Return on capital = Operating profit × 100
employed (ROCE) Capital employed (average for the period)
Net interest- Total interest-bearing debt
bearing debt = - total interest-bearing assets
Equity-to-assets ratio = Total equity × 100
Total assets - advances received
Debt-to-equity ratio = Net interest-bearing debt × 100
Total equity
Net profit for the financial period
attributable to the owners of the
Earnings per share = parent
Adjusted average number
of shares during the period
Equity attributable to
Equity per share = the owners of the parent
Adjusted number of shares
at the end of the period
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