Outokumpu Oyj - Company Announcement

Outokumpu introduces new industrial plan in Europe to improve financial performance

OUTOKUMPU OYJ
STOCK EXCHANGE RELEASE
October 1, 2013 at 11.00 am EET


Outokumpu announced today plans for further structural changes in its European
operations aimed at improving its financial performance and efficiency, and
ultimately returning the company to profitability. 

While Outokumpu has already implemented significant cost savings as a result of
the merger between Outokumpu and Inoxum at the end of 2012, the company's cost
structure continues to be unsustainably high in the current market environment. 

Stainless steel market has remained challenging during 2013, mainly driven by
the continued economic weakness in Europe and the global overcapacity in the
industry. Outokumpu has continued to be heavily loss making in 2013, with a net
debt of 3.0 billion euros at the end of June 2013. Industry overcapacity and
imports from Asia continue to put pressure on prices and profitability and
there are no signs of a material improvement in the market environment. For
example, in Europe alone, there are more than 1,500,000 tonnes of overcapacity
in cold rolled production. In addition, as previously stated, the Terni remedy
requirement by the European Commission resulted in lower synergy potential than
originally planned. 

Therefore, Outokumpu is now introducing a new industrial plan and efficiency
measures for its operations in Europe. Specifically, the planned changes
include: 

  -- Acceleration of the Bochum melt shop closure in Germany to achieve more
     efficient production structure and higher capacity utilization rates.
  -- Reduction of annealing and pickling capacity by 200,000 tonnes in Finland
     and cold rolling capacity by 300,000-350,000 tonnes in Germany to increase
     capacity utilization and lower costs.
  -- Optimization of company's service center network by closing service centers
     in Barcelona, Spain and in Langenhagen, Germany.
  -- Further cost savings through leaner overhead and organization in all sites,
     functions and activities across the European operations.

Says CEO Mika Seitovirta: “Today's announcement introduces a solid industrial
plan to turn Outokumpu back to profitability. In our European coil business we
will have a two-pillar strategy: Tornio in Finland will be the cost leader in
high volume austenitic and ferritic standard grades with excellent cost
structure and high quality while our German operations will be the cold rolling
center for premium tailored materials for the most demanding end-customer
segments. We will reduce production capacity to increase utilization rates and
discontinue the least profitable sales. Furthermore, we will optimize our
service center network and streamline the organizational structure to drive
down further costs.” 

“While painful, these measures are necessary to achieve turnaround in this
difficult environment. Implementing these plans will significantly accelerate
our savings to reach 380 million euros already in 2015 and thereby
significantly improving our financial performance. With this plan, we will
ensure the continuation of stainless steel production in Europe and better job
security for the remaining more than 10,000 Outokumpu employees in Europe”,
Mika Seitovirta continued. 

The planned structural changes announced today are expected to result in up-to
1,000 additional job reductions in Europe, bringing the total planned global
reduction to 3,500 jobs. The industrial plan is expected to result in
additional savings of more than EUR 100 million and the overall savings
programs are expected to result in annual savings of EUR 300 million in 2014
and EUR 450 million in 2017. 

Planned changes in Germany

Outokumpu plans to close the Bochum, Germany melt shop during 2014 instead of
the originally planned end of 2016. A review of the economic viability shows
that the closure of Bochum would bring clearly higher cost savings compared to
any other viable scenario. The closure is expected to impact approximately 450
jobs in Bochum. 

In Benrath, the plan is to proceed with the NIFO (Nirosta Ferritic
Optimization) investment program according to original timeline which means
that Benrath production will be transferred to Krefeld and the Benrath site
will be closed by the end of 2015. In order to enable the production transfer
and strengthen Krefeld's role within the company, Outokumpu plans to invest EUR
100 million to the Krefeld site. The closure of Benrath is expected to impact
480 jobs. However, part of the Benrath workforce will be offered positions in
Krefeld and early retirement solutions will also be offered. 

Outokumpu will work closely with ThyssenKrupp who has committed to offer
alternative jobs to up-to 600 affected Outokumpu employees in Germany as part
of the original Inoxum transaction agreement. 

After the planned closures, Outokumpu Nirosta will consist of two efficient and
specialized high quality production sites, Krefeld and Dillenburg, with a
combined annual cold rolling capacity of 450,000-500,000 tonnes. Krefeld will
also have a central role in company's R&D strategy with focus on customer
driven innovation and new product applications. 

Due to the ongoing, separate strategic reviews, today's announcement excludes
the Dahlerbrück precision strip and VDM units. Decisions on the Dahlerbrück
unit will be made by the end of November 2013. The ongoing strategic review of
VDM unit is expected to be completed by the end of this year. 

As Germany is our biggest market and most of our employees work there it
continues to play central role for Outokumpu (currently Outokumpu employs
approximately 5,500 people in Germany). Also, Germany continues to have a vital
role in the company's production, R&D, sourcing and commercial strategy. 

Planned changes in Finland

According to the plan, majority of the current production in Bochum will be
transferred to Tornio by the end of 2014. In addition, company plans to take
out of use one annealing and pickling line (annual capacity 200,000 tons) in
Tornio to meet the current market demand. The plan is expected to impact up-to
100 people in Tornio, Finland and in Terneuzen, the Netherlands combined.
According to the planned structure, Tornio continues to have key role in
Outokumpu's melting, austenitic cold rolling and R&D strategy. Today's
announcement will not impact the company's ferrochrome operations in Tornio or
the chromite mine operations in Kemi. 

Operations in Sweden

In the planned production structure Avesta has an important role in Outokumpu's
melting and special grades strategy and is key site for specialty grades R&D.
The earlier announced strategic review of the cold rolling operations in
Kloster and Nyby is proceeding according to planned timeline and company
expects to make decisions by the end of 2013. Today's announcements do not have
any impact on the Degerfors quarto plate and long products operations that have
a key role in Outokumpu's specialty business. 

Negotiations with employee representatives to start immediately

Outokumpu will start negotiations with employee representatives on the planned
measures immediately in full respect of local legislation and practices and
upon consultation with the competent bodies of the unions and employee
representatives. 

Conference call today on October 1, 2013 at 11.00 am CET/12.00 am EET

Outokumpu arranges conference call for media representatives, analysts and
investors today, October 1, 2013 at 11.00 am CET/12.00 pm EET. Please dial in
5-10 minutes before the beginning of the event: 

Finland: +358 9 5424 7159
Germany: +49 69 2222 3198
Sweden: +46 8 505 96 328
UK: +44 20 7950 6551
US and Canada: +1 210 795 1143
Passcode: 8319994

To access the presentation materials online, please join the net conference at
https://e-meetings.verizonbusiness.com/nc/join/. Please enter conference number
PB7835052 and passcode 8319994 to access the net conference. 

To access the net conference, please note that you may also use the direct link
https://e-meetings.verizonbusiness.com/nc/join.php?i=PB7835052&p=8319994&t=c. 

Replay of the conference call can be accessed later on at
http://www.outokumpu.com/en/investors/IR-events/webcasts/. 

For further information:

Investors: Johanna Henttonen, tel. +358 9 421 3804 or +358 40 530 0778

Media: Saara Tahvanainen, tel. +358 40 589 0223

Outokumpu Group




Outokumpu is the global leader in stainless steel and high performance alloys.
We create advanced materials that are efficient, long lasting and recyclable -
thus building a world that lasts forever. Stainless steel, invented a century
ago, is an ideal material to create lasting solutions in demanding applications
from cutlery to bridges, energy and medical equipment: it is 100% recyclable,
corrosion-resistant, maintenance-free, durable and hygienic. Outokumpu employs
more than 15 000 professionals in more than 40 countries, with headquarters in
Espoo, Finland and shares listed in the NASDAQ OMX Helsinki. www.outokumpu.com

Attachments:

EMEA Industrial plan SER 01102013 ENG.pdf