2012-02-09 08:00:00 CET
2012-02-09 08:01:12 CET
BIRTINGARSKYLDAR UPPLÝSNINGAR
Outotec Oyj - Financial Statement Release
Outotec's Financial Statements Review January-December 2011
OUTOTEC OYJ FINANCIAL STATEMENTS REVIEW FEBRUARY 9, 2012 AT 9.00
AM
FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2011
Record-breaking year
Board of Directors' dividend proposal: EUR 0.85 per share
Reporting period January-December 2011 in brief (2010):
* Order intake: EUR 2,005.4 million (EUR 1,394.7 million), +44%
* Order backlog: EUR 1,985.1 million (EUR 1,393.1 million), +42%
* Sales: EUR 1,385.6 million (EUR 969.6 million), +43%
* Services sales: EUR 343.5 million (EUR 282.5 million), +22%
* Operating profit from business operations (excluding one-time items and
purchase price allocation (PPA) amortizations): EUR 121.5 million (EUR 74.7
million), +63%
* Operating profit: EUR 111.9 million (EUR 41.6 million), +169%
* Net cash flow from operating activities: EUR 247.0 million (EUR 87.5
million), +182%
* Earnings per share: EUR 1.75 (EUR 0.59), +197%
* ROI: 26.4% (9.2%); ROE: 20.9% (7.6%)
October-December 2011 in brief (2010):
* Order intake: EUR 327.0 million (EUR 356.6 million), -8%
* Sales: EUR 496.8 million (EUR 330.3 million), +50%
* Operating profit from business operations (excluding one-time items and PPA
amortizations): EUR 54.9 million (EUR 33.4 million), +64%
* Operating profit: EUR 48.9 million (EUR 28.1 million), +74%
* Net cash flow from operating activities: EUR 21.2 million (EUR -4.8 million)
Financial guidance for 2012
Based on strong order backlog at the end of 2011, market outlook and customer
tendering activity, management expects that in 2012:
* sales will grow to approximately EUR 1.7-1.9 billion, and
* operating profit margin from business operations will be approximately 9 -
10% (excluding one-time items and PPA amortizations).
The achievement of the guidance is subject to overall development of world
economy and financial markets, progress in projects in the order backlog,
exchange rates, product mix, timing of new orders, license fee income and
project completions.
President and CEO Pertti Korhonen:"2011 was a record year for Outotec. Growth in the emerging markets, coupled
with growing sustainability requirements, encouraged our customers to invest in
new technologies, capacity and services. Thanks to our leading technology
offering and successful sales activities we achieved all-time-high order intake.
Successful customer project execution and investments in Services business
increased our sales and profits to record-high level.
We made solid progress in implementing our strategy which was launched in 2010
which together with our new operational model led to strong growth. Despite
significant investments in developing our business operations, our profitability
continued to develop towards our long-term target. We further accelerated the
strong organic growth by acquiring four entities in 2011, the most significant
one was the renewable energy technology business located in the USA. I am very
excited about the market opportunities this technology has globally.
Despite the macro-economic uncertainties, our business outlook for 2012 is
solid. Our high order backlog offers us a good starting point. Outotec's
flexible business model based on extensive use of partnering and outsourcing and
our strong balance sheet help us adapt to potential changes in market
conditions. Targeting sales growth and steadily improving profitability, our
focus in 2012 will be on order intake, scalability of operations and supply
chain management. With our strong balance sheet, we will also continue to make
acquisitions based on our strategy."
Summary of key figures Q4 Q4 Q1-Q4 Q1-Q4
2011 2010 2011 2010
--------------------------------------------------------------------------------
Sales, EUR million 496.8 330.3 1,385.6 969.6
Gross margin, % 23.9 26.9 24.0 26.2
Operating profit from business operations, EUR 54.9 33.4 121.5 74.7
million
Operating profit from business operations, % 11.0 10.1 8.8 7.7
Operating profit, EUR million 48.9 28.1 111.9 41.6
Operating profit margin, % 9.9 8.5 8.1 4.3
Profit before taxes, EUR million 50.8 25.0 113.3 37.1
Net cash from operating activities, EUR million 21.2 -4.8 247.0 87.5
Net interest-bearing debt at the end of period, -339.1 -200.9 -339.1 -200.9
EUR million
Gearing at the end of period, % -84.9 -56.2 -84.9 -56.2
Working capital at the end of period, EUR -270.3 -113.5 -270.3 -113.5
million
Return on investment, % 44.4 26.7 26.4 9.2
Return on equity, % 39.4 21.4 20.9 7.6
Order backlog at the end of period, EUR million 1,985.1 1,393.1 1,985.1 1,393.1
Order intake, EUR million 327.0 356.6 2,005.4 1,394.7
Personnel, average for the period 3,806 3,124 3,516 3,151
Earnings per share, EUR 0.81 0.40 1.75 0.59
Dividend per share, EUR - - 0.85* 0.75
--------------------------------------------------------------------------------
*) Board of Directors proposal for dividend per
share
FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2011
OPERATING ENVIRONMENT
The overall market activity was very strong in 2011. The mining and metals
industry investments were supported by a positive long-term outlook for metals
demand and good metals prices. Customers' production capacity utilization rates
were high which increased especially the demand for spare parts and services.
Markets in South America, Australia, Europe and the Middle East continued to be
robust, and towards the second half of the year, activity also picked up in the
CIS and China. In terms of metals, the strongest demand was in copper, gold and
iron technologies. In addition, significant alumina, aluminum and ferrochrome
technology orders were received. The market for sulfuric acid and gas cleaning
technologies also remained healthy, due to smelter investments, relocation of
production capacity and high metals production levels in general.
In most of Outotec's technology areas, the workload was high due to intensive
sales and delivery activity. In order to increase the capacity in line with
business growth company hired new professionals and opened a new office in Ghana
to strengthen its global marketing and delivery network in the rapidly growing
markets. Delivery times in certain areas of the subcontractor network lengthened
but had no impact on delivery and remained well below the levels of the last up-
cycle. In addition to minerals and metals processing solutions, the demand for
alternative energy, industrial water treatment and environmental solutions grew.
The competitive landscape remained relatively unchanged. Higher demand and raw
material prices as well as wage inflation led to moderate price increases.
Acquisitions strengthened Outotec's technology offering portfolio in 2011
particularly in the Energy, Light Metals and Environmental Solutions business
area, but also in filtration technologies and Services business.
The financial market remained operational in 2011 despite the turbulences in the
eurozone, and financing was available for mining and metals projects. Mining
companies' strong cash flows and balance sheets supported their financing of new
investments. Tightening environmental regulations were reflected in increasing
demand for Outotec's sustainable technology solutions and prolonged approval
times of environmental permits.
ORDER INTAKE
Order intake in 2011, including plant, technology and equipment deliveries as
well as services, increased by 44% from 2010 and totaled EUR 2,005.4 million
(2010: EUR 1,394.7 million). Orders from EMEA (Europe including the CIS, Middle
East and Africa) represented 49%, Americas 33% and Asia Pacific 18% of the total
order intake. The top three countries in terms of order intake were Russia,
Brazil and Australia which together accounted for 39% of the total order intake.
The orders received in the fourth quarter of 2011 totaled EUR 327.0 million
(Q4/2010: EUR 356.6 million).
Major new orders in the fourth quarter:
* technology package for tailings thickening for LKAB iron ore mine, Sweden
(some millions of euros);
* greenfield copper production plant for Guangxi Jinchuan Non-Ferrous Metals
Company, China (over EUR 30 million);
* new copper-molybdenum concentrator for Quadra FNX Mining, Chile (EUR 26
million of which the majority booked in Q3 order intake with a small part
being booked in Q4);
* gold pressure oxidation technology for Petropavlovsk Group, Russia (EUR 34
million of which the majority was booked in Q4 order intake and a small part
in Q3); and
* new ferrochrome plant for TISCO, China (value not disclosed but deliveries
with similar scope are typically worth of some tens of millions of euros).
Major new orders in the third quarter:
* concentrator technology for Petropavlovsk Group's gold mine, Russia (EUR 25
million);
* alumina calcination technology for Ma'aden Bauxite Aluminium Company, Saudi
Arabia (EUR 62 million, of which roughly EUR 50 million booked in Q3 order
intake);
* copper concentrator technology for ZAO Miheevsky, Russia (EUR 60 million);
* gas cleaning and sulfuric acid technology for Almalyk Mining & Metallurgical
Company, Uzbekistan (EUR 30 million);
* aluminum smelter technology for Emirates Aluminium, Abu Dhabi (EUR 100
million);
* copper concentrator technology for Codelco, Chile (EUR 24 million, half of
which was booked in Q2 and the rest in Q3 order intake);
* magnetic separation solution for London Mining Plc's iron ore project,
Sierra Leone (over EUR 10 million);
* iron ore pelletizing plant for NLMK Novolipetsk Metallurgisk Kombinat,
Russia (EUR 150 million); and
* ferrochrome plant for Mintal Group, China (value not disclosed but
deliveries with similar scope are typically worth of some tens of millions
of euros).
Major new orders in the second quarter:
* gold recovery technology for Petropavlovsk Group's Pokrovskiy mine, Russia
(value not disclosed but deliveries with similar scope are typically worth
of some tens of millions of euros);
* copper flash smelting technology for National Iranian Copper Industries
Company, Iran (EUR 61 million); and
* iron ore pelletizing plant for Samarco Mineração, Brazil (EUR 200 million).
Major new orders in the first quarter:
* copper flash smelting furnace and related services for RTB Bor, Serbia (EUR
60 million);
* oil shale preparation plant for Eesti Energia, Estonia (EUR 20 million);
* effluent treatment plant for Codelco, Chile (EUR 18 million); and
* key process technologies and services for a copper/gold concentrator for
Sandfire Resources, Australia (EUR 15 million).
ORDER BACKLOG
The order backlog at the end of 2011 was EUR 1,985.1 million, which is 42%
higher than at the previous year-end (December 31, 2010: EUR 1,393.1 million).
At the end of 2011, Outotec had 36 projects with an order backlog value in
excess of EUR 10 million, accounting for 67% of the total backlog. Based on the
quarter-end project evaluation, management estimates that roughly 68%
(approximately EUR 1,350 million) of the year-end backlog value will be
delivered in 2012 and the rest in 2013 and beyond. At the end of 2011, the
suspended projects in the order backlog were approximately EUR 5 million
(December 31, 2010: EUR 50 million). Roughly 4% of the projects in Outotec's
current backlog are from mining companies who are developing their first
processing plants.
SALES AND FINANCIAL RESULT
Outotec's sales in 2011 totaled EUR 1,385.6 million (2010: EUR 969.6 million), a
43% increase from 2010. Sales growth resulted from a strong opening backlog for
2011, continued strong order intake in 2011 and good execution in plant,
technology and equipment deliveries as well as services. Exchange rates did not
have material effect on sales. Sales for the fourth quarter of 2011 totaled EUR
496.8 million (Q4/2010: EUR 330.3 million) which was 50% higher than in the
comparison period, demonstrating good project execution and the scalability of
Outotec's operating model.
Services business area sales, which are included in the sales figures of the
three reporting segments, grew 22% from 2010 and totaled EUR 343.5 million in
2011 (2010: EUR 282.5 million), accounting for 25% of Outotec's sales (2010:
29%). Services sales in the fourth quarter of 2011 totaled EUR 109.1 million
(Q4/2010: EUR 100.5 million). The target is to grow Services sales to an annual
level of EUR 500 million by the end of 2015.
Operating profit from business operations in 2011 was EUR 121.5 million (2010:
EUR 74.7 million), up 63% and representing 8.8% of sales (2010: 7.7%). The
increase from the comparison period resulted from higher sales, license fee
income, good project execution and related provision releases. In addition,
unrealized and realized exchange gains related to currency forward contracts
increased profitability by EUR 1.7 million (2010: unrealized and realized
exchange gain of EUR 1.9 million). Operating profit for 2011 was EUR 111.9
million (2010: EUR 41.6 million), up 169% from 2010. In 2011, the total impact
of PPA amortizations was EUR 4.9 million (2010: EUR 9.4 million) and one-time
costs EUR 4.7 million (2010: EUR 26.5 million). One-time costs were related to
the re-organization of businesses and acquisition costs.
Operating profit from business operations in the fourth quarter of 2011 was EUR
54.9 million (Q4/2010: EUR 33.4 million), representing 11.0% of sales (Q4/2010:
10.1%) and showing an increase of 64% from the comparison period. Operating
profit in the fourth quarter of 2011 was EUR 48.9 million (Q4/2010: EUR 28.1
million), up 74% from the comparison period. Improvement was mainly due to
higher sales volume. Sales and operating profit tend to accrue towards the year-
end.
Fixed costs in 2011 were EUR 217.7 million (2010: EUR 188.5 million). The
increase was primarily due to investments in developing and deploying Outotec's
global operational model, such as common business processes and IT systems,
personnel increases in Services business, higher selling, marketing, R&D and
administration costs as well as bonuses and costs related to the long-term
share-based incentive program. Profit before taxes in 2011 increased by 206% and
was EUR 113.3 million (2010: EUR 37.1 million). It included a net finance income
of EUR 1.4 million (2010: net finance expense EUR -4.5 million). The increase
was primarily due to higher interest income. Net profit for the reporting period
was EUR 79.3 million (2010: EUR 26.7 million). Taxes totaled EUR 34.0 million
(2010: EUR 10.4 million). Earnings per share were EUR 1.75 (2010: EUR 0.59),
representing 197% increase. Earnings per share in the comparison period of 2010
were impacted by the one-time costs related to the company's cost savings
program.
Outotec's return on equity for the reporting period was 20.9% (2010: 7.6%), and
return on investment was 26.4% (2010: 9.2%). Profitability improvement and
decreased PPA amortizations improved 2011 return on equity and return on
investment compared to 2010.
Sales and Operating Profit by Segment Q4 Q4 Q1-Q4 Q1-Q4
EUR million 2011 2010 2011 2010
--------------------------------------------------------------------------
Sales
Non-ferrous Solutions 358.8 223.9 947.6 623.3
Ferrous Solutions 74.8 43.2 221.1 131.5
Energy, Light Metals and Environmental Solutions 70.9 65.3 236.1 222.8
Unallocated items*) and intra-group sales -7.7 -2.2 -19.2 -8.0
--------------------------------------------------------------------------
Total 496.8 330.3 1,385.6 969.6
Operating profit
Non-ferrous Solutions 52.4 23.2 107.7 26.1
Ferrous Solutions -0.6 8.2 6.7 11.3
Energy, Light Metals and Environmental Solutions 3.6 11.4 23.8 26.8
Unallocated**) and intra-group items -6.5 -14.7 -26.3 -22.6
--------------------------------------------------------------------------
Total 48.9 28.1 111.9 41.6
*) Unallocated items primarily include invoicing of group management and
administrative services.
**) Unallocated items primarily include group management and administrative
services.
Non-ferrous Solutions
Sales in the Non-ferrous Solutions business area in 2011 increased 52% over the
comparison period and totaled EUR 947.6 million (2010: EUR 623.3 million). The
increase in sales was due to a strong opening order backlog, continued strong
order intake, growth in Services business sales and good progress in project
execution during 2011. Operating profit from business operations was EUR 113.1
million, 11.9% of sales (2010: EUR 50.6 million, 8.1% of sales) and operating
profit was EUR 107.7 million, 11.4% of sales (2010: EUR 26.1 million, 4.2% of
sales). The unrealized and realized exchange loss related to currency forward
contracts decreased profitability by EUR 1.3 million (2010: unrealized and
realized loss of EUR 0.8 million). The increase in operating profit was due to a
higher sales volume and license fee income. Sales in the fourth quarter of 2011
were EUR 358.8 million (Q4/2010: EUR 223.9 million). Operating profit from
business operations in the fourth quarter of 2011 was EUR 54.5 million (Q4/2010:
EUR 24.0 million) and operating profit was EUR 52.4 million (Q4/2010: EUR 23.2
million). The unrealized and realized exchange losses related to currency
forward contracts in the fourth quarter of 2011 decreased profitability by EUR
2.4 million (Q4/2010: unrealized and realized loss of EUR 1.4 million).
Ferrous Solutions
Sales in the Ferrous Solutions business area in 2011 totaled EUR 221.1 million
(2010: EUR 131.5 million). The 68% increase in sales compared to 2010 was due to
the execution of long-term projects from the backlog and new orders received in
2011. The operating profit from business operations was EUR 9.8 million, 4.4% of
sales (2010: EUR 12.6 million, 9.5% of sales) and operating profit was EUR 6.7
million, 3.1% of sales (2010: EUR 11.3 million, 8.6% of sales). Operating profit
in 2011 was impacted by fewer large project completions in 2011 compared to
2010, higher expenses related to sales, marketing and development of operational
model supporting business growth. Fourth quarter of 2011 sales were EUR 74.8
million (Q4/2010: EUR 43.2 million). Operating profit from business operations
in the fourth quarter of 2011was EUR 2.5 million (Q4/2010: EUR 8.2 million) and
operating profit was EUR -0.6 million (Q4/2010: EUR 8.2 million).
Energy, Light Metals and Environmental Solutions
Sales in the Energy, Light Metals and Environmental Solutions business area in
2011 totaled EUR 236.1 million (2010: EUR 222.8 million), up 6% from the
comparison period. Operating profit from business operations for 2011 was EUR
25.8 million, 10.9% of sales (2010: EUR 28.9 million, 13.0% of sales) and
operating profit was EUR 23.8 million, 10.1% of sales (2010: EUR 26.8 million,
12.0% of sales). Operating profit in 2011 was affected by fewer large long-term
project completions compared to 2010. The unrealized and realized exchange gains
related to currency forward contracts improved profitability by EUR 2.9 million
(2010: unrealized and realized gain of EUR 2.2 million). Fourth quarter of 2011
sales were EUR 70.9 million (Q4/2010: EUR 65.3 million). Operating profit from
business operations in the fourth quarter of 2011 was EUR 5.2 million (Q4/2010:
EUR 11.5 million) and operating profit was EUR 3.6 million (Q4/2010: EUR 11.4
million). The unrealized and realized exchange gains related to currency forward
contracts in the fourth quarter of 2011 increased profitability by EUR 1.5
million (Q4/2010: unrealized and realized gain of EUR 0.5 million).
Sales by Destination, % 2011 2010
---------------------------------
EMEA (incl. CIS) 44 38
Asia Pacific 25 28
Americas 31 34
---------------------------------
Total 100 100
Sales by Metals, % 2011 2010
-----------------------------------------------------------
Copper 33 25
Iron 15 12
Aluminum 5 7
Ferroalloys 4 3
Precious metals 10 11
Zinc 3 5
Nickel 6 7
Other metals 8 6
Sulfuric acid 5 8
Other (incl. energy, water and chemical industry) 11 16
-----------------------------------------------------------
Total 100 100
BALANCE SHEET, FINANCING AND CASH FLOW
The consolidated balance sheet total was EUR 1,421.4 million at the end of 2011
(December 31, 2010: EUR 1,068.0 million).The equity to shareholders of the
parent company was EUR 398.4 million (December 31, 2010: EUR 356.7 million),
representing EUR 8.75 (December 31, 2010: EUR 7.87) per share.
The net cash flow from operating activities in the reporting period was at EUR
247.0 million (2010: EUR 87.5 million). The increase was due to advance and
milestone payments and operating profit from business operations. Gearing
further improved over the comparison period and was -84.9% (December 31, 2010:
-56.2%).
Outotec's working capital amounted to EUR -270.3 million at the end of 2011
(December 31, 2010: EUR -113.5 million). Working capital developed positively
due to advance payments and milestone payments related to projects under
execution and new orders received.
At the end of 2011, Outotec's cash and cash equivalents totaled EUR 402.5
million (December 31, 2010: EUR 280.3 million). The cash and cash equivalents
was affected by the dividend payment of EUR 34.3 million (EUR 0.75 per share) in
April 2011 (April 2010: EUR 32.0 million). Acquisition related payments,
deducted by acquired company's cash and cash equivalents, were EUR 34.5 million.
The company invests its excess cash in short-term money market instruments such
as bank deposits and corporate commercial certificates of deposit.
Outotec's financing structure continued to strengthen and liquidity was good.
Net interest-bearing debt at the end of the reporting period was EUR -339.1
million (December 31, 2010: EUR -200.9 million). The advance and milestone
payments received at the end of the reporting period totaled EUR 399.0 million
(December 31, 2010: EUR 198.7 million), representing an increase of 101% from
the comparison period. Outotec's equity-to-assets ratio was 39.1% (December
31, 2010: 41.2%). The company's capital expenditure in 2011 was EUR 98.3 million
(2010: EUR 96.7 million) including acquisitions of EUR 58.4 million as well as
investments in IT-systems, R&D related equipment and intellectual property
rights.
At the end of 2011, guarantees for commercial commitments, including advance
payment guarantees issued by the parent and other Group companies were EUR
477.1 million (December 31, 2010: EUR 308.1 million).
On December 14, 2011 Outotec signed a EUR 100 million bilateral loan facility.
The purpose of the facility is to provide financing for acquisitions and general
corporate initiatives. Repayment period for the loan is five years.
CORPORATE STRUCTURE
Outotec completed four acquisitions in 2011. At the end of 2011 goodwill
generated through acquisitions amounted to approximately EUR 181.3 million
(2010: EUR 148.5 million). Increase in goodwill is due to Energy Products of
Idaho and Kiln Services Australia acquisitions.
Energy Products of Idaho
The acquisition of Energy Products of Idaho (EPI), USA was closed in December
2011. The acquisition strengthens Outotec's portfolio of energy and
environmental technologies. EPI is a leading company in the area of biomass and
waste materials combustion and has delivered over 100 renewable energy
solutions. The acquisition is expected to increase Outotec's annual sales by EUR
60-90 million, including synergies from a stronger combined sales and service
network. The number of EPI personnel was 72 at the year-end. EPI's solutions can
be marketed through Outotec's global network and various services can be offered
to EPI's large existing base of installed technology. Additionally, Outotec's
capability for turnkey projects further complements EPI's offerings and serves
as a platform for growing Outotec's energy and environmental technology business
in the US market. EPI technologies complement Outotec's fluidized bed technology
platform and strengthen Outotec's energy business. EPI's proprietary fuel
thermal oxidation and gasification technologies recover energy from various
biomass and wastes such as fresh and used wood, agricultural waste, demolition
waste, manure, waste paper, paper sludge, oil sludge, municipal waste and many
other materials. EPI focuses on medium scale plants with a combustion capacity
of up to 100 MW.
Kiln Services Australia
The acquisition of Kiln Services Australia Pty Ltd was completed in December
2011. The acquisition expands Outotec's service offerings and complements
Outotec's portfolio of shutdown services to the mining, metals processing and
refractory industries. The acquired business is based on specialized robotic
refractory demolition equipment and related know how. The annual sales of the
acquired business have been a few million euros in recent years. Outotec aims to
double its sales in the Australian and South East Asian Pacific market over the
next three years.
In the reporting period Outotec also acquired new technologies to supplement its
portfolio; the vertical pressure filter (VPF) technology used in alumina
refining and its intellectual property rights from Australian Process Technology
Pty Ltd (April 2011) and technologies, trademarks and patents for extracting
phosphorus fertilizer from ash from ASH DEC Umwelt AG (February 2011).
RESEARCH AND TECHNOLOGY DEVELOPMENT
In 2011, Outotec's research and technology development expenses totaled EUR
33.5 million (2010: EUR 28.5 million), representing 2.4% of sales (2010: 2.9%).
Outotec filed 41 new priority applications (2010: 50), and 326 new national
patents were granted (2010: 287).
In December, Outotec launched a two-stage partial roasting process to purify
contaminated copper and gold concentrates as a pre-treatment to actual
extraction processes. Outotec has also established a new continuous pilot plant
at the company's research center in Germany to test customer concentrates with
the new process. During the tests it is possible to collect reliable data
necessary for industrial process scale-up.
In November, Outotec and PE International (Germany), started cooperation to
develop a new software interface for evaluating metals production sustainability
and life cycles. The new interface, which will be based on PE International's
GaBi 5 and Outotec's HSC Chemistry® software, will markedly facilitate the
determining the Best Available Technology (BAT) from several alternatives. It
will support users in their product and material selection by providing
information of the environmental impacts of both new and existing processes
using a life cycle perspective. This will help to lower the environmental
footprint of production facilities.
In August, Outotec announced that it had agreed to collaborate with the Ministry
of Minerals Resources and Energy of Mongolia (MME) to support MME in its
development of Mongolia's mining and metallurgical industry utilizing country's
vast mineral resources using the most sustainable approaches possible.
SUSTAINABILITY
In October 2011, the Carbon Disclosure Project announced that for the third
consecutive year Outotec would be featured in CDP's Nordic Carbon Disclosure
Leadership Index.
In June 2011, Outotec published its first sustainability report, describing the
company's approach to sustainability and disclosing its performance in 2010 as
well as providing future targets. The report conforms to Application Level B+ of
the Global Reporting Initiative, as confirmed by the GRI and is third-party
assured by Ecobio Ltd. In November Outotec's report was awarded an honorable
mention in a national competition evaluating the corporate responsibility
reporting of Finnish companies.
PERSONNEL
At the end of 2011, Outotec had a total of 3,883 employees (December
31, 2010: 3,130). The increase was primarily due to personnel recruited for
project implementation and service delivery as well as strengthening the
presence in emerging markets. In addition, acquisitions increased the personnel
in 2011. Outotec had on average 3,516 employees (2010: 3,151). The average
number of personnel grew by 366 over the comparison period, which supports
overall business growth objectives. Temporary personnel accounted for
approximately 9% (2010: 8%) of the total number of employees.
Distribution of Personnel by Area Dec 31, Dec 31, change
2011 2010 %
--------------------------------------------------------
EMEA (including CIS) 2,327 1,945 19.6
Americas 972 759 28.1
Asia Pacific 584 426 37.2
--------------------------------------------------------
Total 3,883 3,130 24.1
At the end of the reporting period, the company had, in addition to its own
personnel, approximately 620 (December 31, 2010: 328) full-time equivalent,
contracted professionals working in project execution. The number of contracted
workers at any given time changes with the active project mix and project
commissioning, local legislation and regulations as well as seasonal
fluctuations.
In 2011, salaries and other employee benefits totaled EUR 284.4 million (2010:
EUR 224.4 million). The increase from the comparison period was due to personnel
increases, wage inflation, wage increases, bonuses and share-based incentive
programs.
CHANGES IN TOP MANAGEMENT
In August, Outotec announced the appointments of two new members to its
executive board: Mr. Robin Lindahl (M.Sc. Econ.) as Executive Vice President -
Market Operations and Mr. Kari Knuutila (Dr. Tech.), Chief Technology Officer.
Appointments have been effective since October 1, 2011.
Outotec Executive Board:
Pertti Korhonen, President and CEO
Jari Rosendal, President, Non-ferrous Solutions business area
Pekka Erkkilä, President, Ferrous Solutions business area
Peter Weber, President, Energy, Light Metals and Environmental Solutions
business area
Kalle Härkki, President, Services business area
Robin Lindahl, Executive Vice President - Market Operations (as of October
1, 2011)
Michael Frei, Senior Vice President - Supply
Kari Knuutila, Chief Technology Officer (as of October 1, 2011)
Tapio Niskanen, Senior Vice President - Business Infrastructure
Mikko Puolakka, Chief Financial Officer
Ari Jokilaakso, Senior Vice President - Human Capital
Mika Saariaho, Chief Strategy Officer
Minna Aila, Senior Vice President, Communications and Corporate Responsibility
(as of March 1, 2012)
SHARE-BASED INCENTIVE PROGRAMS AND EXECUTIVE BOARD SHARE OWNERSHIP PLAN
Share-based Incentive Program 2010-2012
Outotec's board of directors decided on April 23, 2010 to adopt a share-based
incentive program for the company's key personnel. The program incorporates
three earning periods: calendar years 2010, 2011 and 2012. The board of
directors determines the amount of the maximum reward for each individual, the
earning criteria and the targets established for them separately on an annual
basis. The maximum value of the rewards for the entire program equals
approximately 1,000,000 shares, including a cash payment which equals income
taxes.
Earning period 2010
The reward paid to 68 individuals was determined by reaching the targets set by
the board of directors for cost savings, order intake and earnings per share.
The total reward for the 2010 earning period was EUR 9.8 million with 138,144
shares allocated and EUR 6.1 million paid in cash to cover income taxes.
Earning period 2011
The board of directors approved (March 1, 2011) 94 individuals for the program's
2011 earning period and set targets for order intake, earning per share and
sales growth. The maximum total reward for 2011 earning period, depending on
achievement of set targets, is 172,257 allocated Outotec shares and cash to
cover income taxes.
Executive Board share ownership plan
In 2010, Outotec's board of directors determined a new share ownership plan
directed to the members of the Outotec executive board. As part of the plan, the
executive board members established Outotec Management Oy (incentive plan for
executive board members) company, whose entire share capital is owned by them.
Executive board members invested their own funds into Outotec Management Oy to
finance the purchase of Outotec shares. In addition the purchase of Outotec
shares to Outotec Management Oy was financed by an interest-bearing loan at the
maximum amount of EUR 4,980,000 which Outotec's board of directors granted to
Outotec Management Oy. At the end of 2011 the executive board members held
0.44% of Outotec shares through the company.
Outotec has consolidated Outotec Management Oy into the Group's balance sheet.
At the end of 2011, Outotec Management Oy held 199,747 (February
9, 2012: 199,747) Outotec shares which have been accounted as treasury shares in
Outotec's balance sheet.
SHARES AND SHARE CAPITAL
Outotec's shares are listed on the NASDAQ OMX Helsinki (OTE1V). At the end of
2011, Outotec's share capital was EUR 17,186,442.52 consisting of 45,780,373
shares. Each share entitles its holder to one vote at the company's general
shareholder meetings.
The annual general meeting in 2011 authorized Outotec's board of directors to
determine the repurchasing of company's own shares, and to issue new shares. The
maximum number of shares related to both authorizations is 4,578,037.
Authorizations are in force until the next annual general meeting. The board has
not executed its authorizations per February 9, 2012.
TRADING, MARKET CAPITALIZATION AND SHAREHOLDERS
In 2011, the volume-weighted average price for a share in the company was EUR
35.21; the highest quotation for a share was EUR 46.78 and the lowest EUR
23.86. The trading of Outotec shares in 2011 exceeded 81 million shares, with a
total value of over EUR 2,884 million. At the end of 2011, Outotec's market
capitalization was EUR 1,666 million and the last quotation for a share was EUR
36.40. At the end of 2011, the company did not hold any treasury shares for
trading purposes.
On November 8, 2011 holding of Tamares Nordic Investments B.V. in shares of
Outotec Oyj has exceeded 5% and was 2,356,519 shares which represented 5.15% of
the share capital and votes in the company (January 31, 2012: 2,503,919 shares,
5.47%).
Outotec has an agreement with a third-party service provider concerning
administration and hedging of the share-based incentive program for key
personnel. These shares are accounted as treasury shares in Outotec's
consolidated balance sheet. At the end of 2011, the amount of these treasury
shares was 194,390. There has been no purchases of Outotec shares based on this
agreement in 2011.
Outotec has consolidated Outotec Management Oy into the Group's balance sheet.
At the end of the reporting period, Outotec Management Oy held 199,747 (February
9, 2012: 199,747) Outotec shares which have been accounted as treasury shares in
Outotec's balance sheet.
At the end of 2011, Outotec had 13,921 shareholders. Shares held in 17 nominee
registers accounted for 54.2% and Finnish households held 11.3% of all Outotec
shares.
EVENTS AFTER THE REPORTING PERIOD
On January 26, 2012 Outotec announced the appointment of Ms Minna Aila, Master
of Laws, as Senior Vice President - Communications and Corporate Responsibility
and a member of the executive board as of March 1, 2012.
SHORT-TERM RISKS AND UNCERTAINTIES
Risks related to the global operating environment
Outotec's global business operations are subject to various political, economic
and social conditions. Turbulence in financial and banking markets and the
potential escalation of sovereign debt crisis may have a severe negative impact
on the outlook of the global economy. Conditions may rapidly change and create
delays and changes in order placement and execution as well as in the
availability and conditions of project financing for mining companies.
Risks related to Outotec's business
As part of the overall project delivery, Outotec often gives performance
guarantees and takes liabilities for the warranty period defects. According to
standard practice, all unfinished projects are regularly evaluated and
provisions for performance guarantees and warranty period guarantees are
updated. Based on the risk reviews done in 2011, there were no material changes
in total project risk provisions. Projects in order backlog may contain risks
related to delivery, quality, functionality or costs. Such risks are reviewed at
regular intervals and project provisions are updated accordingly. Outotec may
operate in politically instable countries where potential economic sanctions may
have an adverse effect on Outotec's business operations. In such cases, Outotec
aims to mitigate project contract risks through advance and milestone payments
as well as gradual booking of orders in backlog according to actual project
progress.
Global economic uncertainty may reduce the demand for Outotec's products and
services. Volatility in sales may affect the operating profit margin since the
measures to adjust the fixed costs may become effective with a delay. Outotec's
gross margin fluctuates according to product mix and timing. Particularly orders
which include license fees may have a major impact on the gross margin. Changes
in labor costs, especially when operating in high inflationary countries, as
well as changes in raw materials and subcontracting prices and component
availability can affect Outotec's profitability. Outotec hedges these risks
mostly contractually.
The nature of international project business, different interpretations of
international and local tax rules and regulations may cause additional direct or
indirect taxes for Outotec thus reducing the company's net result.
Acquisitions are an integral part of Outotec's growth strategy. There is a risk
that the estimated synergy benefits will not materialize as planned. Goodwill
may be generated through acquisitions. Company conducts goodwill impairment
tests annually.
Outotec is involved in a few arbitral and court proceedings. Management expects
that these cases and their outcomes will have no material effect on Outotec's
financial result.
Financial risks
There is a risk that customers and suppliers may experience financial
difficulties and a lack of financing may result in project and payment delays or
bankruptcies, which can also result in losses for Outotec. These risks are
reduced by advance and milestone payments as well as letters of credit or other
trade finance instruments. In the reporting period, there were no material
credit losses related to payments by Outotec's counter-parties and at the end of
2011, all receivables were reviewed and credit loss provisions were updated.
Outotec's business model is primarily based on customer advance and milestone
payments and on-demand guarantees issued by Outotec's relationship banks.
Changes in advance payments received due to changes in business volume have an
impact on the company's liquidity. Exposure to on-demand guarantees has remained
normal. Cash held by the company is primarily invested in short-term bank
deposits and in Finnish corporate short-term certificates of deposit. More than
half of Outotec's total cash flow is denominated in euros. The rest is divided
among various currencies, including the Australian dollar, US dollar, Brazilian
real, Canadian dollar, and South African rand. The weight of any given currency
in new projects can substantially fluctuate, but most cash-flow-related risks
are hedged in the short- and long-term. In the short-term, currency fluctuations
may create volatility in the operating profit. The forecasted and probable cash
flows are selectively hedged and are always subject to separate decisions and
risk analysis. Natural hedging is used as widely as possible and the remaining
open foreign exchange exposures related to committed cash flows are fully hedged
using forward agreements. The cost of hedging is taken into account in project
pricing.
MARKET OUTLOOK
The long-term outlook for metals demand continues to be solid since the current
production capacity and ongoing investments into new capacity are not sufficient
to fulfill the future metals demand. GDP growth and the growing middle class in
the emerging markets are driving the rise in the metals demand and hence the
need for investments in new capacity and refurbishments. In addition, industry-
specific trends such as declining ore grades, scarcity of water, higher energy
prices, global relocation of production and stricter environmental regulations
increase the need for modern technology. According to the large mining
companies' announcements, they will further increase their CAPEX in 2012.
Investments are supported by the long-term metals demand growth projections. In
addition, both short- and long-term metal price estimates continue to support
further investments. In the short-term, high spot prices also support high
capacity utilization rates and thus push the demand for spare parts and after-
market services. In certain markets such as Australia and Chile, there is a lack
of industry expert resources. In addition, there are signs of lengthening
delivery times in certain areas of the subcontractor network, yet still
remaining well below the levels of the last up-cycle. Outotec's global supply
network includes thousands of partners and because of its scalability it enables
flexible delivery capacity.
Customer negotiation activity continues and the number of new sales order
prospects remains high in several market areas such as China, the CIS, India,
Sub-Saharan Africa and South America. Project financing is available especially
for companies with strong balance sheets and investments in good projects in the
emerging countries. However, complex financing structures and tougher
environmental requirements continue to lengthen the overall decision-making
process especially in larger investments.
Non-ferrous Solutions
The strong activity in the non-ferrous technology market is expected to continue
in several geographic areas: Southeast Asia, Sub-Saharan Africa, the CIS, South-
America and the Middle East. Gold, copper, silver and platinum group metals
projects continue to be developed supported by the high demand and good metal
prices. Lateritic nickel projects are in development as well. Investments in new
mines and concentrators are progressing well. In addition, investment activity
in the downstream metals refining technologies continues. Competition for new
projects remains tight; however, there are no material changes to the
competitive landscape. The Non-ferrous Solutions business area's deliveries
include technology and service solutions ranging from spare parts to equipment
to entire plants.
Ferrous Solutions
The demand for iron ore and ferroalloy technologies continues to be solid.
China, India, the Middle East and South Africa are particularly active in
developing their infrastructure and utilizing their large natural resource base
while time investing in technologies which comply with tighter environmental and
energy efficiency requirements. There are several iron ore processing plant
expansions and new investments under development particularly in Brazil and
India. In addition, the depletion of lump ore deposits is driving sinter and
pellet plant investments in India. The competitive landscape remains unchanged
but varies depending on the market and technology area. Deliveries in the
Ferrous Solutions business area are primarily large, turnkey projects and
fluctuations in sales and profit recognition based on the timing and completion
level of a particular project are inherent in this type of business.
Energy, Light Metals and Environmental Solutions
Concerns about global warming, rising oil prices and the depletion of oil
reserves increase the demand for technologies suitable for alternative sources
of energy, such as oil shale, oil sands and biomass. The world's recoverable oil
shale and oil sand resources have been estimated to be approximately ten times
greater than those of conventional oil reserves, with large deposits found in
the US, Canada, Brazil, China, Jordan, Russia and Estonia.
The demand for aluminum is also growing. Consequently, aluminum and thus bauxite
and alumina projects are expected to materialize. The Middle East is leveraging
its advantageous energy position by building new smelters and refining capacity.
Outotec provides key solutions to the alumina refining process and is a vital
partner to the aluminum industry.
The business area's environmental solutions include sulfuric acid plants as well
as applications for gas cleaning, heat recovery systems and industrial water
treatment. The outlook for the sulfuric acid technology market remains positive
due to numerous hydrometallurgical copper plants which require sulfuric acid in
leaching processes. In addition, sulfuric acid plants are needed in
pyrometallurgical process to recover sulfur dioxide from the process in order to
minimize emissions to the environment. The sulfuric acid market is also driven
by increasing demands from the fertilizer industry. In addition to sulfuric acid
plants, any metallurgical process requires off-gas cleaning and effluent and
water treatment technologies to reduce its environmental impact.
New opportunities in environmental technologies, such as materials recycling,
renewable energy solutions and waste management as well as industrial water
treatment, are steadily increasing. The acquired technologies Energy Products of
Idaho (December 2011) and Ash Dec (January 2011), further strengthen the
business area's portfolio.
Services
Outotec's Services business is driven by a life cycle service concept and
capacity utilization rates. In addition to operational and CAPEX spares,
Outotec's life cycle services offering include debottlenecking and capacity
enhancements, modernizations, upgrading of existing operations as well as
operate and maintain services. Customers' need for spare parts, services and
modernizations are expected to further increase due to re-commissioning of
production lines and higher capacity utilization rates. Outotec's penetration in
the installed base is still relatively low offering a good potential for further
service business expansion. Kiln Services Australia (December 2011) was acquired
to expand the global shut down service capabilities in South East Asia Pacific
region. Outotec continues to seek further acquisition opportunities in order to
expand the service offering globally.
FINANCIAL GUIDANCE FOR 2012
Based on strong order backlog at the end of 2011, market outlook and customer
tendering activity, management expects that in 2012:
* sales will grow to approximately EUR 1.7-1.9 billion, and
* operating profit margin from business operations will be approximately 9 -
10% (excluding one-time items and PPA amortizations).
The achievement of the guidance is subject to overall development of world
economy and financial markets, progress in projects in the order backlog,
exchange rates, product mix, timing of new orders, license fee income and
project completions.
FINANCIAL REPORTING SCHEDULE IN 2012
* Interim Report for January-March 2012: Thursday, April 26, 2012
* Interim Report for January-June 2012: Friday, July 27, 2012
* Interim Report for January-September 2012: Thursday, October 25, 2012
ANNUAL GENERAL MEETING 2012
Annual General Meeting 2012 is scheduled for Friday, March 23, 2012 in Helsinki,
Finland. Detailed information about the AGM is available at www.outotec.com.
Outotec's Financial Statements 2011 will be published in week 8, 2012.
FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2011 BRIEFING
Date: Thursday, February 9, 2012
Time: 2.00 pm (Finnish time)
Venue: Hotel Scandic Simonkenttä, Simonkatu 9, Helsinki
JOINING VIA WEBCAST
You may follow the briefing via a live webcast at www.outotec.com. The webcast
will be recorded and published on Outotec's website for on demand viewing.
JOINING VIA TELECONFERENCE
You may also join the briefing by telephone. To register as a participant for
the teleconference and Q&A session, please dial 5 to 10 minutes before the
beginning of the event:
FI/UK: +44 20 7162 0025
US/CANADA: +1 877 491 0064
Password: 911141
In addition, an instant replay service of the conference call will be available
for three days until February 12, 2012 midnight using the following numbers:
FI/UK: +44 20 7031 4064
US: +1 888 365 0240
Access code: 911141
The contact information is gathered for registration purposes only and is not
used for commercial purposes.
Espoo, February 9, 2012
Outotec Oyj
Board of Directors
For further information, please contact:
Outotec Oyj
Pertti Korhonen, President and CEO
tel. +358 20 529 211
Mikko Puolakka, CFO
tel. +358 20 529 2002
Rita Uotila, Vice President - Investor Relations
tel. +358 20 529 2003, mobile +358 400 954141
Eila Paatela, Director - Corporate Communications
tel. +358 20 529 2004, mobile +358 400 817198
Format for e-mail addresses: firstname.lastname@outotec.com
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Consolidated Statement of Comprehensive Income Q4 Q4 Q1-Q4 Q1-Q4
EUR million 2011 2010 2011 2010
--------------------------------------------------------------------------------
Sales 496.8 330.3 1,385.6 969.6
Cost of sales -378.0 -241.3 -1,053.1 -715.7
--------------------------------------------------------------------------------
Gross profit 118.7 88.9 332.5 253.9
Other income 1.0 1.0 3.9 7.1
Selling and marketing expenses -23.3 -23.3 -86.4 -85.0
Administrative expenses -30.5 -23.4 -97.7 -75.1
Research and development expenses -10.8 -7.8 -33.5 -28.5
Other expenses -6.3 -7.2 -6.7 -30.6
Share of results of associated companies 0.1 -0.1 -0.0 -0.3
--------------------------------------------------------------------------------
Operating profit 48.9 28.1 111.9 41.6
Finance income and expenses
Interest income and expenses 1.9 -0.3 6.0 1.5
Market price gains and losses 1.1 -0.7 -0.3 -1.7
Other finance income and expenses -1.2 -2.1 -4.4 -4.4
--------------------------------------------------------------------------------
Net finance income 1.9 -3.1 1.4 -4.5
Profit before income taxes 50.8 25.0 113.3 37.1
Income tax expenses -13.8 -6.7 -34.0 -10.4
--------------------------------------------------------------------------------
Profit for the period 37.0 18.3 79.3 26.7
--------------------------------------------------------------------------------
Other comprehensive income
Exchange differences on translating foreign 11.7 10.5 -3.9 25.5
operations
Cash flow hedges -1.9 0.1 -4.3 0.9
Income tax relating to cash flow hedges 0.6 0.0 1.3 -0.2
Available for sale financial assets -0.1 0.1 -0.2 0.3
Income tax relating to available for sale - 0.0 - 0.0
financial assets
--------------------------------------------------------------------------------
Other comprehensive income for the period 10.3 10.6 -7.2 26.5
Total comprehensive income for the period 47.3 29.0 72.1 53.1
--------------------------------------------------------------------------------
Profit for the period attributable to:
Equity holders of the parent company 37.0 18.3 79.3 26.7
Non-controlling interest - - - -
Total comprehensive income for the period attributable
to:
Equity holders of the parent company 47.3 29.0 72.1 53.1
Non-controlling interest - - - -
Earnings per share for profit attributable to the
equity
holders of the parent company:
Basic earnings per share, EUR 0.81 0.40 1.75 0.59
Diluted earnings per share, EUR 0.81 0.40 1.75 0.59
All figures in the tables have been rounded and consequently the sum of
individual figures may deviate from the sum presented. Key figures have been
calculated using exact figures.
Condensed Consolidated Statement of Financial Position December 31, December 31,
EUR million 2011 2010
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 286.8 223.8
Property, plant and equipment 62.5 52.7
Deferred tax asset 47.3 37.8
Non-current financial assets
Interest-bearing 2.4 2.5
Non interest-bearing 2.5 2.3
--------------------------------------------------------------------------------
Total non-current assets 401.5 319.0
Current assets
Inventories *) 148.6 101.0
Current financial assets
Interest-bearing 0.7 0.5
Non interest-bearing 468.1 367.2
Cash and cash equivalents 402.5 280.3
--------------------------------------------------------------------------------
Total current assets 1,019.9 748.9
TOTAL ASSETS 1,421.4 1,068.0
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the 398.4 356.7
parent company
Non-controlling interest 1.1 1.0
--------------------------------------------------------------------------------
Total equity 399.5 357.7
Non-current liabilities
Interest-bearing 47.6 56.6
Non interest-bearing 107.0 98.1
--------------------------------------------------------------------------------
Total non-current liabilities 154.6 154.7
Current liabilities
Interest-bearing 18.9 25.7
Non interest-bearing
Advances received **) 399.0 198.7
Other non interest-bearing liabilities 449.4 331.1
--------------------------------------------------------------------------------
Total current liabilities 867.3 555.5
Total liabilities 1,021.9 710.2
TOTAL EQUITY AND LIABILITIES 1,421.4 1,068.0
--------------------------------------------------------------------------------
*) Of which advances paid for inventories amounted to EUR 43.5 million on
December 31, 2011 (December 31, 2010: EUR 17.9 million).
**) Gross advances received before percentage of completion revenue recognition
amounted to EUR 1,462.3 million on December 31, 2011 (December 31, 2010: EUR
1,042.1 million).
Condensed Consolidated Statement of Cash Flows Q1-Q4 Q1-Q4
EUR million 2011 2010
----------------------------------------------------------------------------
Cash flows from operating activities
Profit for the period 79.3 26.7
Adjustments for
Depreciation and amortization 19.4 19.0
Other adjustments 28.6 28.1
Decrease in working capital 134.4 41.0
Interest received 8.0 5.2
Interest paid -2.0 -0.9
Income tax paid -20.8 -31.6
----------------------------------------------------------------------------
Net cash from operating activities 247.0 87.5
Purchases of assets -34.4 -16.8
Acquisition of subsidiaries and business operations, net of cash -34.5 -41.1
Acquisition of shares in associated companies -0.1 -0.2
Proceeds from disposal of subsidiaries 0.0 0.8
Proceeds from sale of assets 1.4 5.2
Change in other investing activities -0.1 -
----------------------------------------------------------------------------
Net cash used in investing activities -67.7 -52.1
Cash flow before financing activities 179.3 35.3
Repayments of non-current debt -11.5 -17.3
Borrowings of non-current debt - 30.0
Decrease in current debt -4.9 -17.7
Increase in current debt 0.0 11.4
Related party net investment to Outotec Oyj shares *) -0.2 -4.1
Dividends paid -34.3 -32.0
Change in other financing activities 0.4 0.4
----------------------------------------------------------------------------
Net cash used in financing activities -50.6 -29.4
Net change in cash and cash equivalents 128.8 5.9
Cash and cash equivalents at the beginning of the period 280.3 258.5
Foreign exchange rate effect on cash and cash equivalents -6.6 15.9
Net change in cash and cash equivalents 128.8 5.9
----------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 402.5 280.3
----------------------------------------------------------------------------
*) Consolidation of Outotec Management Oy (incentive plan for Outotec executive
board members). At the end of the reporting period, Outotec Management Oy held
199,747 (December 31, 2010: 191,211) Outotec shares which have been accounted as
treasury shares in Outotec's consolidated statement of financial position.
Consolidated Statement of Changes in Equity
A = Share capital
B = Share premium fund
C = Other reserves
D = Fair value reserves
E = Treasury shares
F = Reserve for invested non-restricted equity
G = Cumulative translation differences
H = Retained earnings
I = Non-controlling interest
J = Total equity
Consolidated Statement of Changes in Equity
------------------------------------------------
Attributable to the equity holders of the
parent company
------------------------------------------------
EUR million A B C D E F G H I J
--------------------------------------------------------------------------------
Equity at January
1, 2010 16.8 20.2 0.3 1.1 -4.6 63.4 3.5 214.3 27.4 342.4
--------------------------------------------------------------------------------
Dividends paid - - - - - - - -32.0 - -32.0
Share Issue 0.4 - - - - 24.3 - - - 24.7
Management incentive
plan for Outotec
Executive Board *) - - - - -5.2 - - - 1.0 -4.1
Share-based
compensation - - - - - - - 0.7 - 0.7
Total comprehensive
income for the period - - - 1.0 - - 25.5 26.7 - 53.1
Non-controlling
interest related to
Larox Group
acquisition - - - - - - - - -27.4 -27.4
Other changes - - 0.1 - - - - 0.3 - 0.4
--------------------------------------------------------------------------------
Equity at December
31, 2010 17.2 20.2 0.4 2.1 -9.7 87.7 29.0 210.0 1.0 357.7
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Equity at January
1, 2011 17.2 20.2 0.4 2.1 -9.7 87.7 29.0 210.0 1.0 357.7
--------------------------------------------------------------------------------
Dividends paid - - - - - - - -34.3 - -34.3
Management incentive
plan for Outotec
Executive Board *) - - - - -0.3 - - - 0.1 -0.2
Share-based
compensation - - - - 2.4 - - 0.9 - 3.3
Total comprehensive
income for the period - - - -3.2 - - -3.9 79.3 - 72.1
Other changes - - 0.0 - - - - 0.7 - 0.7
--------------------------------------------------------------------------------
Equity at December
31, 2011 17.2 20.2 0.4 -1.2 -7.5 87.7 25.1 256.5 1.1 399.5
--------------------------------------------------------------------------------
*) Consolidation of Outotec Management Oy (incentive plan for Outotec executive
board members). At the end of the reporting period, Outotec Management Oy held
199,747 (December 31, 2010: 191,211) Outotec shares which have been accounted as
treasury shares in Outotec's consolidated statement of financial position.
Key figures Q4 Q4 Q1-Q4 Q1-Q4
2011 2010 2011 2010
--------------------------------------------------------------------------------
Sales, EUR million 496.8 330.3 1 385.6 969.6
Gross margin, % 23.9 26.9 24.0 26.2
Operating profit, EUR million 48.9 28.1 111.9 41.6
Operating profit margin, % 9.9 8.5 8.1 4.3
Profit before taxes, EUR million 50.8 25.0 113.3 37.1
Profit before taxes in relation to sales, % 10.2 7.6 8.2 3.8
Net cash from operating activities, EUR million 21.2 -4.8 247.0 87.5
Net interest-bearing debt at the end of period, -339.1 -200.9 -339.1 -200.9
EUR million
Gearing at the end of period, % -84.9 -56.2 -84.9 -56.2
Equity-to-assets ratio at the end of period, % 39.1 41.2 39.1 41.2
Working capital at the end of period, EUR -270.3 -113.5 -270.3 -113.5
million
Capital expenditure, EUR million 75.0 9.8 98.3 96.7
Capital expenditure in relation to sales, % 15.1 3.0 7.1 10.0
Return on investment, % 44.4 26.7 26.4 9.2
Return on equity, % 39.4 21.4 20.9 7.6
Order backlog at the end of period, EUR million 1,985.1 1,393.1 1,985.1 1,393.1
Order intake, EUR million 327.0 356.6 2,005.4 1,394.7
Personnel, average for the period 3,806 3,124 3,516 3,151
Profit for the period in relation to sales, % 7.4 5.6 5.7 2.8
Research and development expenses, EUR million 10.8 7.8 33.5 28.5
Research and development expenses in relation to 2.2 2.4 2.4 2.9
sales, %
Earnings per share, EUR 0.81 0.40 1.75 0.59
Equity per share, EUR 8.75 7.87 8.75 7.87
Dividend per share, EUR - - 0.85* 0.75
--------------------------------------------------------------------------------
*) Board of Directors proposal for dividend per
share
NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME AND FINANCIAL POSITION
Outotec has applied the following revised or new standards and interpretations
since the beginning of 2011, which does not have material impact on the Group's
financial statements:
* IAS 24 Related Party Disclosures.
* IAS 32 Financial Instruments: Presentation: Classification of Rights Issues.
* IFRIC 14 - Prepayments of a Minimum Funding Requirement (an interpretation
of IAS 19).
* IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.
The following new standards and interpretations have been published, but are not
effective in 2011, nor has Outotec early adapted them. These changes are not
expected to have material impact on Outotec's figures.
* IAS 19 - Employee benefits. The amendment will eliminate the corridor
approach and will recognize all actuarial gains and losses in OCI as they
occur; to immediately recognize all past service costs; and to replace
interest cost and expected return on plan assets with a net interest amount
that is calculated by applying the discount rate to the net defined benefit
liability (asset). The group has yet to assess the full impact of the
amendment.
* IFRS 9 - Financial instruments. The standard addresses, the classification,
measurement and recognition of financial assets and financial liabilities.
The two parts of the IFRS 9 were issued in November 2009 and October 2010.
It replaces parts of IAS 39 which relate to the classification and
measurement of financial instruments. IFRS 9 requires financial assets to be
classified into two measurement categories: those measured as at fair value
and those measured at amortized cost. The determination is made at initial
recognition. The classification depends on the entity's business model for
managing its financial instruments and the contractual cash flow
characteristics of the instrument. The main change regarding the financial
liabilities is that, in cases where the fair value option is taken for
financial liabilities, the part of a fair value change due to an entity's
own credit risk is recorded in other comprehensive income rather than the
income statement, unless this creates an accounting mismatch. Outotec has
yet to assess IFRS 9's full impact and intends to adopt IFRS 9 wholly no
later than the accounting period beginning on or after January,1 2015.
* IFRS 10 - Consolidated financial statements. The new standard of
Consolidated financial statements' builds on existing principles by
identifying the concept of control as the determining factor as to whether
an entity should be included within the consolidated financial statements of
the parent company. The standard provides additional guidance to assist in
the determination of control where this is difficult to assess. IFRS 10 is
not expected to have material impact on Outotec's financial statements.
* IFRS 12 - Disclosures of interests in other entities. The standard includes
the disclosure requirements for all forms of interests in other entities,
including joint arrangements, associates, special purpose vehicles and other
off balance sheet vehicles. Outotec has yet to assess IFRS 12's full impact
and intends to adopt IFRS 12 no later than the accounting period beginning
on or after January 1, 2013.
* IFRS 13 - Fair value measurement. The standard provides a precise definition
of fair value and a single source of fair value measurement and disclosure
requirements for use across IFRSs. Outotec has yet to assess IFRS13's full
impact and intends to adopt IFRS 13 during the accounting period beginning
on or after January 1, 2013, the latest.
Use of estimates
IFRS requires management to make estimates and assumptions which 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 realisability of certain assets, the useful
lives of tangible and intangible assets, income taxes, provisions, pension
obligations and impairment of goodwill. These estimates are based on
management's best knowledge of current events and actions; however, it is
possible that the actual results may differ from the estimates used in the
financial statements.
Major Non-Recurring Items in Operating Profit Q1-Q4 Q1-Q4
EUR million 2011 2010
--------------------------------------------------------------------------------
One-time costs related to reorganization of business -3.7 -26.5
One-time income related to reorganization of business 1.1 -
Net effect from acquisition costs and revaluation of Ausmelt Ltd. - 2.2
shares
Gains on disposal of subsidiary shares - 0.6
Costs related to acquisitions -2.0 -
--------------------------------------------------------------------------------
Income Tax Expenses Q1-Q4 Q1-Q4
EUR million 2011 2010
-------------------------------------
Current taxes -33.5 -30.9
Deferred taxes -0.5 20.5
-------------------------------------
Total income tax expenses -34.0 -10.4
Property, Plant and Equipment December 31, December 31,
EUR million 2011 2010
--------------------------------------------------------------------------------
Historical cost at the beginning of the period 128.9 117.8
Translation differences -0.5 4.5
Additions 17.9 10.7
Disposals -4.5 -3.6
Acquired subsidiaries 3.5 1.6
Reclassifications -0.6 -2.0
--------------------------------------------------------------------------------
Historical cost at the end of the period 144.8 128.9
Accumulated depreciation and impairment at the -76.2 -65.7
beginning of the period
Translation differences 0.2 -2.6
Disposals 3.4 2.2
Reclassifications -0.3 1.9
Impairment during the period - -2.4
Depreciation during the period -9.5 -9.6
--------------------------------------------------------------------------------
Accumulated depreciation and impairment at the end of -82.2 -76.2
the period
Carrying value at the end of the period 62.5 52.7
--------------------------------------------------------------------------------
Commitments and Contingent Liabilities December 31, December 31,
EUR million 2011 2010
---------------------------------------------------------------------------
Pledges and mortgages 0.0 0.6
Guarantees for commercial commitments 209.1 184.7
Minimum future lease payments on operating leases 161.8 70.5
---------------------------------------------------------------------------
The pledges and mortgages are used to secure credit facilities in Outotec
(Shanghai) Co. Ltd.
The above value of commercial guarantees does not include advance payment
guarantees issued by the parent or other group companies. The total amount of
guarantees for financing issued by group companies amounted to EUR 25.8 million
on December 31, 2011 (December 31, 2010: EUR 36.5 million) and for commercial
guarantees including advance payment guarantees EUR 477.1 million on December
31, 2011 (December 31, 2010: EUR 308.1 million).
Derivative Instruments
Currency Forwards December 31, December 31,
EUR million 2011 2010
------------------------------------------------
Fair values, net -9.6*) -1.3 **)
Nominal values 545.4 444.4
------------------------------------------------
*) of which EUR -3.6 million designated as cash flow hedges.
**) of which EUR 0.0 million designated as cash flow hedges.
Related Party Transactions
Balances with Key Management
----------------------------
Outotec's board of directors granted to Outotec Management Oy an interest-
bearing loan at the maximum amount of EUR 5.0 million to finance the acquisition
of Outotec shares. The amount of the outstanding loan was EUR 4.3 million on
December 31, 2011. (December 31, 2010: EUR 4.1 million)
Transactions and Balances with Associated Companies Q1-Q4 Q1-Q4
EUR million 2011 2010
---------------------------------------------------------------
Sales 0.0 0.1
Other income 0.6 -
Purchases -0.3 -0.7
Trade and other receivables 0.3 0.4
Current liabilities 0.6 0.2
Loan receivables 0.6 0.2
---------------------------------------------------------------
Business Combinations
------------------------------------------
Acquisition of Energy Products of Idaho LP
On December 30, 2011 Outotec acquired all interests in Energy Products of Idaho
Limited Partnership (referred to as 'EPI') in Coeur d'Alene, the United States.
EPI is a leading company in the area of biomass and difficult waste materials
combustion and has delivered over 100 renewable energy solutions.
The acquisition price consists of two components: a fixed cash element of EUR
46.4 million and estimated earn-out payment of EUR 8.8 million (EUR 25 million
at maximum) based on EPI's financial performance in 2012 and 2013. Acquisition
related transaction costs of EUR 1.6 million have been expensed in 2011 and are
reported in other operating expenses.
The following purchase price allocation is preliminary and will be finalized
during 2012. The purchase price has been allocated to intangible assets such as
technologies, trademark and customer relationships. The goodwill is mainly based
on experienced personnel of EPI and on the synergy benefits. These synergy
benefits are partly from combining EPI and Outotec sales and service networks.
EUR million Fair values recorded on Carrying amounts prior to
acquisition acquisition
--------------------------------------------------------------------------------
Intangible assets 21.9 0.3
Property, plant and 1.2 0.7
equipment
Inventories 0.2 0.2
Trade and other 6.6 6.8
receivables
Cash and cash equivalents 12.4 12.4
--------------------------------------------------------------------------------
Total assets 42.4 20.3
Trade and other payables 17.2 17.0
--------------------------------------------------------------------------------
Total liabilities 17.2 17.0
Net assets 25.2 3.3
Acquisition cost 55.2
--------------------------------------------------------------------------------
Goodwill*) 30.0
Cash and cash equivalents 12.4
in subsidiary acquired
Acquisition cost paid in 46.4
cash at December 31, 2011
Exchange differences -2.4
--------------------------------------------------------------------------------
Cash flow effect at 31.6
December 31, 2011
Acquisition cost as 8.8
liability December
31, 2011
*) Goodwill EUR 30.0 million is deductible for tax purposes
Other acquired businesses
Outotec has strengthened its service offerings in South East Asia Pacific by
acquiring a furnace refractory demolition business of Kiln Services Australia
Pty Ltd. The acquisition was completed on December 9, 2011.
This acquisition supports Outotec's strategy to expand its service offerings and
complements Outotec's portfolio of shutdown services to the mining, metals
processing and refractory industries. The acquired business is based on
specialized robotic refractory demolition equipment and related expertise. Kiln
Services Australia is based in Perth and has service centers in both Adelaide
and Tasmania.
Effect of acquired business combinations on Outotec Group's sales and profit for
the period in 2011
Outotec's sales for January 1, 2011- December 31, 2011 would have been EUR
1,426.3 million and profit for the period EUR 79.3 million if the acquisition of
Energy Products of Idaho LP and Kiln Services Australia Pty Ltd. would have been
completed on January 1, 2011.
Segments' Sales and Operating Profit by Quarters
EUR million Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11
--------------------------------------------------------------------------------
Sales
Non-ferrous Solutions 113.5 141.3 144.6 223.9 162.0 191.4 235.5 358.8
Ferrous Solutions 20.0 32.9 35.5 43.2 43.6 42.6 60.0 74.8
Energy, Light Metals and
Environmental Solutions 54.6 52.6 50.3 65.3 46.1 57.7 61.4 70.9
Unallocated items *) and intra-
group sales -1.0 -3.0 -1.8 -2.2 -4.1 -3.4 -4.1 -7.7
--------------------------------------------------------------------------------
Total 187.0 223.8 228.5 330.3 247.5 288.4 352.8 496.8
Operating profit
Non-ferrous Solutions -15.4 4.8 13.5 23.2 18.1 12.6 24.6 52.4
Ferrous Solutions -2.5 1.4 4.2 8.2 3.2 -1.9 6.0 -0.6
Energy, Light Metals and
Environmental Solutions 10.0 1.9 3.5 11.4 3.3 5.2 11.7 3.6
Unallocated **) and intra-group
items -2.2 -2.6 -3.1 -14.7 -5.7 -5.0 -9.1 -6.5
--------------------------------------------------------------------------------
Total -10.1 5.5 18.1 28.1 19.0 10.9 33.2 48.9
*) Unallocated items primarily include invoicing of group management and
administrative services.
**) Unallocated items primarily include group management and administrative
services.
Definitions for Key Financial Figures
--------------------------------------------------------------------------------
Net interest-bearing debt = Interest-bearing debt - interest-
bearing assets
Gearing = Net interest-bearing debt × 100
----------------------------------------
Total equity
Equity-to-assets ratio = Total equity × 100
----------------------------------------
Total assets - advances received
Return on investment = Operating profit + finance income × 100
----------------------------------------
Total assets - non interest-bearing
debt (average for the period)
Return on equity = Profit for the period × 100
----------------------------------------
Total equity (average for the period)
Research and development expenses = Research and development expenses in
the statement of comprehensive income
(including expenses covered by grants
received)
Earnings per share = Profit for the period attributable to
the equity holders of the parent
company
----------------------------------------
Average number of shares during the
period, as adjusted for stock split
Dividend per share = Dividend for the financial year
----------------------------------------
Number of shares at the end of the
period, as adjusted for stock split
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