2007-07-25 08:01:51 CEST
2007-07-25 08:01:51 CEST
REGULATED INFORMATION
Outotec Oyj - Half Year financial report
Outotec Oyj - January-June 2007 Interim Report
OUTOTEC OYJ STOCK EXCHANGE RELEASE JULY 25, 2007 AT 9:00 am
Outotec Oyj - January-June 2007 Interim Report
Profitable growth continued
Q1-Q2/2007 (2006 corresponding figures in parentheses):
- Sales: EUR 438.8 million (EUR 320.9 million)
- Operating profit: EUR 37.1 million (EUR 14.1 million)
- Profit before taxes: EUR 39.9 million (EUR 15.6 million)
- Earnings per share: EUR 0.64 (EUR 0.21)
- Order intake: EUR 660.9 million (EUR 425.9 million)
- Order backlog at the end of the period: EUR 1,110.8 million (EUR
693.8 million)
- Net cash flow from operating activities: EUR 22.3 million (EUR 0.6
million)
Q2/2007 (2006 corresponding figures in parentheses):
- Sales: EUR 227.1 million (EUR 176.8 million)
- Operating profit: EUR 23.4 million (EUR 10.0 million)
- Profit before taxes: EUR 24.6 million (EUR 10.3 million)
- Order intake: EUR 492.9 million (EUR 240.4 million)
CEO Tapani Järvinen:"Outotec's market situation remained favorable in the second quarter,
resulting in strong growth in orders received. We signed our largest
ever contract, amounting to EUR 270 million, with Ma'aden in Saudi
Arabia and won several other large orders. As a result, our order
backlog exceeded a billion euros for the first time. I am pleased
also with the solid development in profitability. Our efficient
global network, together with good project implementation skills, is
delivering results. At the moment, we see no signs of slowing in the
global demand for metals, which is the underlying driver in our
markets, and thanks to our broad technology portfolio our position is
strong."
Summary of key figures
Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
2007 2006 2007 2006 LTM*) 2006
Sales, EUR million 227.1 176.8 438.8 320.9 858.3 740.4
Gross margin, % 21.9 19.3 20.5 19.3 21.1 20.7
Operating profit, EUR
million 23.4 10.0 37.1 14.1 74.6 51.6
Operating profit in
relation to sales, % 10.3 5.7 8.5 4.4 8.7 7.0
Profit before taxes,
EUR million 24.6 10.3 39.9 15.6 80.9 56.6
Net cash from operating
activities, EUR million 1.2 3.8 22.3 0.6 89.5 67.8
Net interest-bearing
debt at end of period,
EUR million -176.3 -108.5 -176.3 -108.5 -176.3 -170.0
Gearing at end of
period, % -110.3 -93.4 -110.3 -93.4 -110.3 -118.0
Return on investment, % 64.0 37.3 54.8 29.7 59.0 45.4
Return on equity, % 42.6 16.0 35.6 15.3 40.2 29.1
Order backlog at end of
period, EUR million 1,110.8 693.8 1,110.8 693.8 1,110.8 866.4
Order intake, EUR
million 492.9 240.4 660.9 425.9 1,267.2 1,032.2
Average number of
personnel for the
period 1,990 1,854 1,925 1,829 1,873 1,825
Earnings per share, EUR 0.40 0.11 0.64 0.21 1.32 0.88
*Last twelve months.
OUTLOOK FOR 2007
The mining and metals industry remains robust, and the underlying
imbalance in supply and demand of metals encourages the industry to
invest in both greenfield plants and expansions. Good financial
performance, coupled with strong order backlog in the first half of
2007, provides a solid base for the remainder of the year. Outotec's
management is confident that the company has the resources and
capacity to meet the growth expected for 2007.
Following the record high order intake, the strong order backlog, and
the good financial result in the first half of the year, the Outotec
management expects that:
- full-year 2007 sales will moderately exceed 1 billion euros;
- operating profit is expected to grow significantly from 2006 and
operating profit margin in the second half of 2007 will be on, or
above, the level of the first half of the year, subject to the timing
of project completions and mix of the new orders received; and
- the closing order backlog for 2007 will clearly exceed that of
closing backlog in 2006.
REVIEW OF THE BOARD OF DIRECTORS
MARKETS
The economies in most of Outotec's geographical market areas
developed strongly during the reporting period. Positive market
sentiment prevailed also in the second quarter, and there are no
signs in the global mining and metals industry that would indicate a
decline in the capital investment activity.
Because of the continuing robust market conditions and demand for
metals, the trend for mining and metal companies is to fast-track the
decision-making process for greenfield plants and brownfield
production expansions.
New Prospects further increased within the mining and metals industry
because of the strong cash position of the companies involved. These
companies have initiated mostly iron ore, aluminum, copper, nickel,
and zinc projects. Also, other process industries were more active in
the second quarter.
ORDER INTAKE
Orders received by Outotec increased notably during the reporting
period, totaling EUR 660.9 million (Q1-Q2/2006: EUR 425.9 million),
up 55% from the previous year's corresponding figure. Both the strong
market and an extensive product portfolio contributed to the growth.
Orders received in the second quarter totaled EUR 492.9 million
(Q2/2006: EUR 240.4 million). The largest single order in Outotec's
history, worth EUR 270 million, was received in the second quarter,
for delivery of three sulfuric acid plants for fertilizer project of
the Saudi Arabian Mining Company (Ma'aden). This project is a good
example of how Outotec's technologies can be used outside the
traditional mining and metals industry, in other process industries.
In addition, the project strengthens Outotec's position in the Middle
East.
Major new orders in the second quarter of 2007 included:
- grinding technology for Mirabela Nickel of Australia, for the Santa
Rita nickel sulfide project in Bahia State, Brazil;
- grinding technology for Adanac Molybdenum of Canada for the Ruby
Creek molybdenum project in British Columbia, Canada;
- grinding technology for Shalkiya Zinc for the Shalkiya zinc-lead
project in Kazakhstan;
- a second gas cleaning plant for the new 208 MW Bluewaters Power
Station for IHI Engineering in Australia;
- design and expansion of heavy mineral sands processing plants for
Sierra Rutile Ltd., a subsidiary of Titanium Resources Group Ltd. in
Sierra Leone, Western Africa;
- two turntable anode vibrocompactors for Gansu Hualu Aluminum Co.
Ltd. in Gansu Province, China;
- two sow casting systems for Henan Wanji Aluminum Co. Ltd. in China;
- one vibrocompactor to Qingtongxia Qingxin Fangyuan Carbon Co. Ltd,
which belongs for Qingtongxia Aluminum Group Co. Ltd. in Ningxia
Province, China;
- a second chromite pellet plant for Kazchrome's Donskoy chrome mine
in Kazakhstan. The new pellet plant, in combination with Outotec's
earlier delivery of a similar plant in 2005, will be the world's
largest production unit for chromite pellets (EUR 40 million);
- the world's largest sulfuric acid plant delivery, to Ma'aden, (EUR
270 million);
- two alumina calciners for ZAO Komi Aluminium's Sosnogorsk Alumina
Refinery in the Republic of Komi, Russia (EUR 20 million).
Major new orders in the first quarter of 2007 included:
- silver refinery equipment for the JSC Krasnoyarsk Non-Ferrous
Metals Plant in Russia;
- a complete thickening circuit for Boddington Gold Mine in
Australia;
- a zinc plant expansion with new, environmentally advanced leaching
technology for Hunan Zhuye Torch Metals Co. Ltd. in China (EUR 30
million);
- modernization of a Flash Smelting production line for Norilsk
Nickel's Nadezha metallurgical plant in Russia (EUR 16 million);
this project was in the backlog already at year-end 2006, due to the
effectiveness of the contract;
- three TankCell®-300 flotation cells for OceanaGold's Macraes
operation in New Zealand;
- a gas cleaning plant for the new 208 MW Bluewaters Power Station
for IHI Engineering in Australia;
- KALDO precious metals technology for Tongling Nonferrous Metals
(Group) Inc. in China;
- a copper converter and gas handling technology for Engineering
Dobersek GmbH's new copper smelter of Kazzinc in Kazakhstan.
ORDER BACKLOG
The order backlog at the end of the second quarter of 2007 came to
EUR 1,110.8 million (June 30, 2006: EUR 693.8 million). The value of
the order backlog grew by 60% compared to the previous year's
corresponding figure. The order backlog was further strengthened from
the strong year-end level by the company's record high order intake
in the reporting period.
At the end of the second quarter of 2007, the order backlog included
20 projects with a value in excess of EUR 10 million, accounting for
60% of the total backlog. Due to the timing of the projects, the
fluctuations in quarterly order intake and backlog do not in
themselves represent the overall market conditions, and they indicate
no trend change. According to the management's estimate, some 50% of
the current backlog will be delivered in 2007, and the rest in 2008,
2009, and beyond.
SALES AND FINANCIAL RESULT
Outotec's sales in the reporting period totaled EUR 438.8 million
(Q1-Q2/2006: EUR 320.9 million), up 37% from 2006. All divisions
contributed to the organic growth of the company. After sales
business, which is included in the divisional sales figures,
contributed EUR 33.0 million (Q1-Q2/2006: EUR 25.5 million) to the
sales. Sales for the second quarter totaled EUR 227.1 million
(Q2/2006: EUR 176.8 million), up 28% from the 2006 level.
The operating profit for the reporting period improved significantly
compared to the same period in 2006 and stood at EUR 37.1 million
(Q1-Q2/2006: EUR 14.1 million), representing 8.5% of sales
(Q1-Q2/2006: 4.4%).
For the second quarter of 2007, the operating profit was EUR 23.4
million (Q2/2006: EUR 10.0 million), and the corresponding profit
margin was 10.3% (Q2/2006: 5.7%).
The positive profit development during the reporting period was
attributable to the growth in sales, better product mix, good project
execution and releases of project provisions.
The operating profit improved further in the second quarter because
of the impact of license fee income and successful project
completions. Profitability improved somewhat also because of the fair
valuation of the unrealized currency hedging contracts between the
euro and the U.S. dollar.
Outotec's fixed costs in the reporting period were slightly higher
than in 2006. The increase in administration costs came from the
change in Outotec's company status to listed company on October 10,
2006, and subsequent strengthening of some management and support
functions and the finalization of the project for information
technology separation from the former parent company. Research and
technology development expenses were somewhat higher during the
reporting period than in 2006.
Outotec's profit before taxes for the reporting period was EUR 39.9
million (Q1-Q2/2006: EUR 15.6 million). The profit before taxes was
impacted by the net interest income from the advances received from
several projects. Net profit for the reporting period was EUR 27.0
million (Q1-Q2/2006: EUR 8.7 million). Earnings per share were EUR
0.64 (Q1-Q2/2006: EUR 0.21).
Outotec's return on equity for the reporting period was 35.6%
(Q1-Q2/2006: 15.3%), and return on investment was 54.8% (Q1-Q2/2006:
29.7%).
Sales and operating profit by segment
Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2007 2006 2007 2006 2006
Sales
Minerals Processing 64.6 57.4 119.7 93.8 256.6
Base Metals 64.5 50.6 124.6 95.5 192.3
Metals Processing 100.9 67.5 198.4 130.4 292.2
Other Businesses 8.9 8.1 15.6 14.7 32.6
Unallocated items*) and
intra-group sales -11.7 -6.8 -19.5 -13.5 -33.2
Total 227.1 176.8 438.8 320.9 740.4
Operating profit
Minerals Processing 3.3 -1.9 5.3 -5.6 12.7
Base Metals 13.2 7.1 22.5 12.7 23.6
Metals Processing 10.5 6.1 15.1 10.2 21.2
Other Businesses 0.6 0.2 0.6 -0.3 0.3
Unallocated **) and
intra-group items -4.1 -1.5 -6.5 -2.9 -6.1
Total 23.4 10.0 37.1 14.1 51.6
*) Unallocated items primarily include invoicing of internal
management and administrative services.
**) Unallocated items primarily include management and administrative
services and share of the result of associated companies.
Minerals Processing
The Minerals Processing division's sales in the reporting period
totaled EUR 119.7 million (Q1-Q2/2006: EUR 93.8 million). Operating
profit was EUR 5.3 million, showing a significant increase from the
previous year's level (Q1-Q2/2006: EUR -5.6 million).
The improvement in the division's operating profit resulted from the
growth in sales, the product mix, and efficiency in project
implementation. In the corresponding period of 2006, the Minerals
Processing division experienced some additional costs related to the
finalizing of a large project. Profit generation for the Minerals
Processing division is typically weaker in the first half of the year
and stronger in the second half due to the seasonality within a
fiscal year.
Base Metals
Sales for the Base Metals division came to EUR 124.6 million
(Q1-Q2/2006: EUR 95.5 million). The operating profit was EUR 22.5
million (Q1-Q2/2006: EUR 12.7 million). The growth in sales and the
number of proprietary technology deliveries significantly improved
the profitability. In addition, some license fee income and the
completion of three long-term projects had a favorable impact on the
operating profit. Division's all major projects proceeded on
schedule.
Metals Processing
The Metals Processing division's sales grew significantly, to EUR
198.4 million (Q1-Q2/2006: EUR 130.4 million). The growth came from
the large project base at the beginning of the year. The operating
profit for the reporting period was EUR 15.1 million (Q1-Q2/2006: EUR
10.2 million). Profitability development favorably during the
reporting period because of the growth in volume and successful
project deliveries.
BALANCE SHEET, FINANCING, AND CASH FLOW
Net cash flow from operating activities for the reporting period was
good, at EUR 22.3 million (Q1-Q2/2006: EUR 0.6 million). Despite the
strong growth and the fact that capital was tied up in project
deliveries, inventories, and receivables, a significant improvement
in net cash flow from operating activities was achieved from 2006.
The parent company paid EUR 14.7 million in dividends in April 2007.
During the second quarter of 2007, the working capital increased
somewhat due to the implementation of several large projects and
financing of activities. New orders in the second quarter and the
related advances received from customers improved the financing of
the divisions' projects. Liquidity at the end of the reporting period
was good, amounting to EUR 176.6 million (June 30, 2006: EUR 111.4
million).
The balance sheet remained strong. Net interest-bearing debt on June
30, 2007, was EUR
-176.3 million (June 30, 2006: EUR -108.5 million). The advances
received at the end of the reporting period totaled EUR 189.3 million
(June 30, 2006: EUR 124.2 million). Outotec's gearing at the end of
the reporting period was -110.3% (June 30, 2006:
-93.4%), and the equity-to-assets ratio was 39.8% (June 30, 2006:
40.9%).
The company's capital expenditure during the reporting period was EUR
7.0 million (Q1-Q2/2006: EUR 3.8 million), which consisted mainly of
replacements for machines, separation from the former parent company
in terms of primary information technology, and investments in
intellectual property rights (IPRs).
Guarantees for commercial commitments, including advance payment
guarantees issued by the parent and other Group companies, came to
EUR 273.7 million at the end of the reporting period, increasing from
the previous year's level along with business growth (June 30, 2006:
EUR 167.1 million).
RESEARCH AND TECHNOLOGY DEVELOPMENT
Research and technology development (RTD) is a corporate function of
Outotec and key to retaining competitive advantage and ascertaining
the future success and development of the company. The RTD function
focuses on improving and developing existing technologies in
collaboration with the business divisions as well as on coordinating
development activities and commercializing new technologies.
Outotec's research and technology development expenses for the
reporting period totaled EUR 10.3 million (Q1-Q2/2006: EUR 8.5
million), representing 2.3% of sales (Q1-Q2/2006: 2.7%). Outotec
filed 16 new priority patent applications, and 121 new national
patents were granted during the reporting period.
In June 2007, Outotec strengthened its halide technology know-how, on
which the HydroCopper® process is based, by entering into a
collaboration agreement in the field of chloride hydrometallurgy with
Intec Ltd. of Australia. Under the agreement, Intec makes available
to Outotec its globally patented mixed halide technology, which
enhances the recovery of gold and other precious metals from mineral
ores and concentrates.
Outotec commercialized two new products during the first quarter of
2007. First, Outotec signed an agreement with the leading Chinese
zinc producer, Hunan Zhuye Torch Metals Co. Ltd., on the design and
delivery of a zinc plant expansion with new environmentally advanced
leaching technology. Secondly, Outotec agreed to deliver three
TankCell®-300 flotation cells to OceanaGold's Macraes operation in
New Zealand. The TankCell®-300, with an active capacity of over 300
m3, is the largest mechanical flotation cell in the world.
In the first quarter, Outotec complemented its technologies by
acquiring the Chena® (Chemistry Navigator) trademark from the Finnish
company Liqum. The technology acquisition will further improve
Outotec's competitiveness in the fields of minerals processing and
hydrometallurgical process solutions. Chena® technology is a patented
technique for improving the efficiency of production processes.
Outotec's research centers in Pori and Frankfurt were active in
carrying out in-house development and implementation projects as well
as test-work for customers.
PERSONNEL
At the end of the reporting period, Outotec had a total of 2,042
employees (June 30, 2006: 1,889). Over the same period, Outotec had
an average of 1,925 employees (Q1-Q2/2006: 1,829). The number of
personnel increased by 245 from the year-end 2006 figure due to
business growth and the accompanying active recruitment. Temporary
employees accounted for some 15% of the total number of employees.
Distribution of personnel by country
June 30, 2007 June 30, 2006 change %
Finland 848 773 9.7
Germany 301 347* -13.3
Rest of Europe 210 197 6.6
Americas 369 323 14.2
Australia 212 159 33.3
Rest of the world 102 90 13.3
Total 2,042 1,889 8.1
*Reporting method in Germany included also subcontractors.
In addition to the personnel on Outotec's own payroll, the company
has an international network of subcontractors for engineering and
manufacturing work. The contracted employees accounted for some 20%
of the company's own employees in the reporting period.
SHARE-BASED INCENTIVE PROGRAM FOR KEY PERSONNEL
On March 23, 2007, Outotec published a share-based incentive program.
The purpose of the incentive program is to obtain key employees'
commitment and to encourage them in achieving the company's financial
targets, as well as to increase the company's shareholder value. Some
20 key employees are participants in the two-year share-based
incentive program. The earnings period started on January 1, 2007 and
ends on December 31, 2008.
The reward paid to the key personnel is determined by the achievement
of the targets set for the development of the company's net profit
and order backlog. The reward is paid in shares and as a cash payment
(which roughly covers income taxes payable for the reward). The
shares will be allocated to the key personnel in the spring of 2009.
The maximum reward of the incentive program is EUR 6.7 million.
SHARES AND SHARE CAPITAL
Outotec's shares were entered into the Finnish Book-Entry Securities
System on September 22, 2006. The company's share capital is EUR 16.8
million, consisting of 42.0 million shares. The counter-book value of
the shares is EUR 0.40 per share. Each share entitles its holder to
one vote at general meetings of shareholders of the company. At the
end of the reporting period, the company did not own any own shares.
TRADING AND MARKET CAPITALIZATION
Outotec's shares are listed on the OMX Nordic Exchange Helsinki
(OTE1V). In the reporting period, the highest quotation for the
company's share was EUR 41.50 and the lowest EUR 19.25. The trading
of Outotec's shares during the reporting period exceeded 73.7 million
shares, with a total value of approximately EUR 2,140 million. On
April 27, 2007, the former parent company, Outokumpu Oyj, sold its
remaining stake, 12%, in Outotec Oyj. On June 30, 2007, Outotec's
market capitalization was EUR 1,717 million.
RESOLUTIONS OF THE ANNUAL GENERAL MEETING 2007
The Outokumpu Technology Oyj's Annual General Meeting (AGM) was held
on April 2, 2007, in Espoo, Finland. The AGM approved the parent
company's and the group's Financial Statements, and discharged the
members of the Board of Directors and the CEO from liability for the
2006 financial year. The AGM decided that a dividend of EUR 0.35 per
share be paid for the financial year that ended on December 31, 2006.
The dividend record date was April 5, 2007, and the dividends
(totaling EUR 14.7 million) were paid on April 17, 2007.
The AGM decided that the number of Board members, including Chairman
and Vice Chairman, should be five (5). Mr. Carl-Gustaf Bergström, Mr.
Karri Kaitue, Mr. Hannu Linnoinen, Mr. Anssi Soila and Mr. Risto
Virrankoski were re-elected as members of the Board of Directors for
the term expiring at the end of the next AGM. The AGM re-elected Mr.
Risto Virrankoski as the Chairman and Mr. Karri Kaitue as the Vice
Chairman of the Board of Directors.
The AGM confirmed the monthly remunerations paid to the Board members
as follows: Chairman EUR 3,000, Vice Chairman EUR 2,500, and other
Board members EUR 2,000, and in addition a meeting remuneration of
EUR 500 per meeting for each Board member.
KPMG Oy Ab, Authorized Public Accountants, was re-elected as the
company's auditor, with Mauri Palvi as auditor in charge. The fees
for the auditor are paid according to invoice.
Amendment to the Articles of Association and company's business name
The AGM approved the amendments to the Articles of Association,
including the change of the company's business name, to Outotec Oyj.
The change of business name became effective on April 24, 2007. Other
amendments include the technical revision of the company's line of
business and the election procedure of the Vice Chairman of the
Board, and other amendments of a technical nature.
BOARD'S AUTHORIZATIONS
The AGM authorized the Board of Directors to resolve upon issues of
shares as follows:
- The authorization includes the right to issue new shares,
distribute own shares held by the company, and the right to issue
special rights referred to in Chapter 10, Section 1 of the Companies
Act. This authorization to the Board of Directors does not, however,
entitle the Board of Directors to issue share option rights as an
incentive to the personnel.
- The total number of new shares to be issued and own shares held by
the company to be distributed under the authorization may not exceed
4,200,000 shares.
- The Board of Directors is entitled to decide on the terms of the
share issue, such as the grounds for determining the subscription
price of the shares and the final subscription price as well as the
approval of the subscriptions, the allocation of the issued new
shares, and the final amount of issued shares.
The authorization shall be in force until the end of the next AGM.
The Annual General Meeting authorized the Board of Directors to
resolve upon the repurchase of the company's own shares as follows:
- The company may repurchase the maximum number of 4,200,000 shares
using free equity and deviating from the shareholders' pre-emptive
rights to the shares, provided that the number of own shares held by
the company will not exceed ten (10) percent of all shares of the
company.
- The shares are to be repurchased in public trading at the OMX
Nordic Exchange Helsinki at the price established in the trading at
the time of acquisition.
The authorization shall be in force until the end of the next AGM.
The authorizations have not been exercised by July 25, 2007.
SHORT-TERM RISKS AND UNCERTAINTIES
Project risks related to projects in both the offering and
implementation phases were evaluated monthly and quarterly, depending
on the size of the projects, and no short-term business risks are
expected to materialize.
The contents of the project risk matrix covered all projects with a
value of over EUR 1 million and those factors influencing Outotec's
sales, profits, cash flow, and quality, as well as the availability
of resources and technology. In projects including new commercialized
products and new areas of application of Outotec products, the risks
were evaluated in their own category. Once the potential risks had
been qualified, and quantified, the necessary provisions were
reserved.
More than half of Outotec's total cash flow comes in as euros, and
the rest is divided among various currencies, mainly U.S. dollars,
Brazilian reals, and Australian dollars. However, depending on the
new projects, the weight of any given currency can change materially,
but almost all cash flow risks associated with firm commitments are
hedged in the short- and long-term. The forecast and probable cash
flows are hedged selectively and are always based on separate
decisions and separate risk analysis.
The worth of USD-denominated orders grew during the reporting period,
especially due to the Ma'aden contract. Since Outotec's policy is to
operatively hedge contract-related committed cash flows, the amount
of hedging has grown correspondingly and changes in the unrealized
gains and losses of currency forwards has caused increased volatility
in the operating profit. During 2007, Outotec will estimate the
possibility to apply hedge accounting in accordance with IAS 39 to
some of its projects. At the same time, the U.S. dollar is a
relatively minor base currency for Outotec companies and does not
play a major role in the Outotec translation risk.
Because of the continuing robust global market conditions, the
company may experience some challenges in certain regions in
recruiting skilled and experienced personnel.
EVENTS AFTER THE REPORTING PERIOD
Outotec Oyj's Board of Directors and Tapani Järvinen, the CEO of the
company, agreed on July 25, 2007 that the current CEO contract is to
be amended so that it will be effective until the end of 2009, and
thereafter until further notice.
In July, Outotec was awarded a contract by Companhia Brasileira de
Aluminio S.A. (CBA) for the supply of an alumina calcination plant in
Aluminio (SP), Brazil. The contract value exceeds EUR 40 million.
On July 2, 2007 Outotec began trading in the Large Cap segment of the
OMX Nordic Exchange Helsinki Oy.
OUTLOOK FOR 2007
The mining and metals industry remains robust, and the underlying
imbalance in supply and demand of metals encourages the industry to
invest in both greenfield plants and expansions. Good financial
performance, coupled with strong order backlog in the first half of
2007, provides a solid base for the remainder of the year. Outotec's
management is confident that the company has the resources and
capacity to meet the growth expected for 2007.
Following the record high order intake, the strong order backlog, and
the good financial result in the first half of the year, the Outotec
management expects that:
- full-year 2007 sales will moderately exceed 1 billion euros;
- operating profit is expected to grow significantly from 2006 and
operating profit margin in the second half of 2007 will be on, or
above, the level of the first half of the year, subject to the timing
of project completions and mix of the new orders received; and
- the closing order backlog for 2007 will clearly exceed that of
closing backlog in 2006.
FINANCIAL REPORTING IN 2007
Outotec will publish the Interim Report for the third quarter of 2007
on Thursday, October 25, 2007.
Espoo, July 25, 2007
Outotec Oyj
Board of Directors
For further information, please contact:
Outotec Oyj
Tapani Järvinen, CEO
tel. +358 20 529211
Vesa-Pekka Takala, CFO
tel. +358 20 529211, mobile +358 40 5700074
Eila Paatela, Vice President - Corporate Communications
tel. +358 20 5292004, mobile +358 400 817198
Rita Uotila, Vice President - Investor Relations
tel. +358 20 5292003, mobile +358 400 954141
Format for e-mail addresses: firstname.lastname(at)outotec.com
BRIEFING FOR ANALYSTS AND MEDIA
A briefing, in which CEO Tapani Järvinen and CFO Vesa-Pekka Takala
will present the interim report, will be held in Helsinki, Finland.
Date: Wednesday, July 25, 2007
Time: 3.00pm (EET)
Venue: Hotel Marski's Meeting room Carl, Mannerheimintie 10
JOINING VIA AUDIO WEBCAST
You may follow the briefing via a live audio webcast at
www.outotec.com/Presentations. Please, click in and register
approximately 5-10 minutes before the briefing.
JOINING VIA TELECONFERENCE
You may also join the briefing by telephone. To register as a
participant in the teleconference, please dial in 5-10 minutes before
the beginning of the event:
FI/U.K.: +44 20 7162 0025
U.S./CANADA: +1 334 323 6201
Password: Outotec
In addition, an instant replay service of the conference call will be
available until July 28 at midnight, at the following numbers:
FI/U.K.: +44 20 7031 4064
U.S./CANADA: +1 954 334 0342
Access code: 759754
The contact information is gathered for registration purposes only
and is not used for commercial purposes.
DISTRIBUTION:
OMX Nordic Exchange Helsinki
Main media
www.outotec.com
Income statement
Q2 Q2 Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2007 2006 2007 2006 2006
Sales 227.1 176.8 438.8 320.9 740.4
Cost of sales -177.3 -142.6 -348.8 -258.9 -587.5
Gross margin 49.8 34.2 90.0 62.1 153.0
Other operating income 2.6 0.9 2.8 1.4 3.7
Selling and marketing
expenses -11.4 -11.3 -22.7 -23.1 -46.1
Administrative
expenses -11.4 -7.7 -21.6 -15.8 -35.0
Research and
development expenses -5.2 -4.3 -10.3 -8.5 -19.2
Other operating
expenses -0.5 -1.5 -0.5 -1.6 -3.8
Share of results of
associated companies -0.4 -0.2 -0.7 -0.4 -1.1
Operating profit 23.4 10.0 37.1 14.1 51.6
Financial income and
expenses
Interest income and
expenses 2.8 1.6 5.4 3.7 9.3
Market price gains and
losses -0.7 -0.8 -0.4 -1.4 -1.4
Other financial income
and expenses -1.0 -0.5 -2.2 -0.8 -2.9
Total financial income
and expenses 1.1 0.3 2.8 1.5 5.0
Profit before taxes 24.6 10.3 39.9 15.6 56.6
Income taxes -7.8 -5.8 -12.8 -7.0 -19.6
Net profit for the
period 16.8 4.6 27.0 8.7 37.0
Attributable to:
Equity holders of the
Company 16.8 4.6 27.1 8.7 37.1
Minority interest -0.0 -0.0 -0.0 -0.0 -0.0
Earnings per share for profit attributable to the equity
holders of the Company:
Earnings per share,
EUR 0.40 0.11 0.64 0.21 0.88
Diluted earnings per
share, EUR 0.40 0.11 0.64 0.21 0.88
All figures in the tables have been rounded; consequently, the sum of
individual figures may deviate from the sum presented. Key figures
have been calculated using exact figures.
Condensed balance sheet
June 30 June 30 Dec 31
EUR million 2007 2006 2006
ASSETS
Non-current assets
Intangible assets 75.5 73.3 72.7
Property, plant and equipment 25.8 29.1 26.7
Non-current financial assets
Interest-bearing 1.7 0.9 1.1
Non interest-bearing 12.7 16.2 13.0
Total non-current assets 115.7 119.5 113.5
Current assets
Inventories *) 108.8 38.6 84.4
Current financial assets
Interest-bearing 1.0 0.5 1.0
Non interest-bearing 187.4 131.6 214.7
Cash and cash equivalents 178.6 117.8 171.4
Total current assets 475.8 288.5 471.4
TOTAL ASSETS 591.5 408.0 584.9
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity
holders of the Company 159.9 116.1 144.0
Minority interest 0.0 0.0 0.0
Total equity 159.9 116.1 144.1
Non-current liabilities
Interest-bearing 2.0 3.8 2.2
Non interest-bearing 39.1 36.4 35.6
Total non-current liabilities 41.2 40.3 37.8
Current liabilities
Interest-bearing 3.0 6.8 1.2
Non interest-bearing **) 387.5 244.8 401.7
Total current liabilities 390.5 251.6 403.0
TOTAL EQUITY AND LIABILITIES 591.5 408.0 584.9
*) Of which advances paid for inventories amounted to EUR 51.2
million on June 30, 2007 (EUR 10.8 million on June 30, 2006, and EUR
30.0 million on December 31, 2006).
**) Of which advances received amounted to EUR 189.3 million on June
30, 2007 (EUR 124.2 million on June 30, 2006, and EUR 194.8 million
on December 31, 2006).
Statement of changes in equity
A=share capital, B=premium fund, C=other reserves, D=fair value
reserves, E=cumulative translation differences, F=retained earnings,
G=minority interest, H=total equity
Attributable to the equity holders of the
EUR million Company
A B C D E F G H
Equity on Jan 1,
2006 16.8 20.2 0.1 0.0 9.3 64.2 0.1 110.7
Change in
translation
differences - - - - -3.2 - 0.0 -3.2
Items recognized
directly in
equity - - - - -3.2 - 0.0 -3.2
Net profit for
the period - - - - - 8.7 -0.0 8.7
Total recognized
income and
expenses - - - - -3.2 8.7 -0.0 5.4
Management stock
option program:
value of
received
services - - - - - 0.0 - 0.0
Equity on June
30, 2006 16.8 20.2 0.1 0.0 6.0 72.9 0.0 116.1
Equity on Jan 1,
2007 16.8 20.2 0.1 - 5.8 101.1 0.0 144.1
Change in
translation
differences - - - - 3.5 - 0.0 3.5
Items recognized
directly in
equity - - - - 3.5 - 0.0 3.5
Net profit for
the period - - - - - 27.1 -0.0 27.0
Total recognized
income and
expenses - - - - 3.5 27.1 -0.0 30.5
Dividends paid - - - - - -14.7 - -14.7
Equity on June
30, 2007 16.8 20.2 0.1 - 9.3 113.5 0.0 159.9
Condensed statement of cash flows
Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2007 2006 2006
Cash flow from operating activities
Net profit for the period 27.0 8.7 37.0
Adjustments for
Depreciation and amortization 5.3 5.1 10.1
Impairments - 1.5 3.3
Other adjustments 8.3 3.6 10.9
Decrease (+) / increase (-) in working capital -16.5 -18.3 12.4
Interest received 5.0 4.3 9.8
Interest paid -0.1 -0.6 -0.4
Income tax paid -6.6 -3.7 -15.3
Net cash from operating activities 22.3 0.6 67.8
Purchases of assets -7.0 -3.3 -8.0
Proceeds from sale of assets 0.1 0.0 0.3
Change in other investing activities -0.8 -0.1 -0.3
Net cash from investing activities -7.7 -3.4 -8.0
Cash flow before financing activities 14.6 -2.9 59.8
Repayments of long-term debt -0.2 -2.4 -0.4
Increase (+) / decrease (-) in current debt 1.8 3.2 -4.8
Dividends paid -14.7 - -
Change in other financing activities -0.1 -0.9 -0.9
Net cash from financing activities -13.2 -0.1 -6.1
Net change in cash and cash equivalents 1.4 -2.9 53.6
Cash and cash equivalents at the beginning of the
period 171.4 126.3 126.3
Foreign exchange rate effect on cash and cash
equivalents 5.8 -5.7 -8.6
Net change in cash and cash equivalents 1.4 -2.9 53.6
Cash and cash equivalents at the end of the period 178.6 117.8 171.4
Key figures
Q2 Q2 Q1-Q2 Q1-Q2 LTM Q1-Q4
2007 2006 2007 2006 **) 2006
Sales, EUR million 227.1 176.8 438.8 320.9 858.3 740.4
Gross margin, % 21.9 19.3 20.5 19.3 21.1 20.7
Operating profit,
EUR million 23.4 10.0 37.1 14.1 74.6 51.6
Operating profit in
relation to sales,
% 10.3 5.7 8.5 4.4 8.7 7.0
Profit before
taxes, EUR million 24.6 10.3 39.9 15.6 80.9 56.6
Profit before taxes
in relation to
sales, % 10.8 5.8 9.1 4.9 9.4 7.6
Net cash from
operating
activities, EUR
million 1.2 3.8 22.3 0.6 89.5 67.8
Net
interest-bearing
debt at the end of
period, EUR million -176.3 -108.5 -176.3 -108.5 -176.3 -170.0
Gearing at the end
of period, % -110.3 -93.4 -110.3 -93.4 -110.3 -118.0
Equity-to-assets
ratio at the end of
period, % 39.8 40.9 39.8 40.9 39.8 36.9
Capital
expenditure, EUR
million 2.4 2.1 7.0 3.8 11.2 8.0
Capital expenditure
in relation to
sales, % 1.1 1.2 1.6 1.2 1.3 1.1
Return on
investment, % 64.0 37.3 54.8 29.7 59.0 45.4
Return on equity, % 42.6 16.0 35.6 15.3 40.2 29.1
Order backlog at
the end of period,
EUR million 1,110.8 693.8 1,110.8 693.8 1,110.8 866.4
Order intake, EUR
million 492.9 240.4 660.9 425.9 1,267.2 1,032.2
Average number of
personnel for the
period 1,990 1,854 1,925 1,829 1,873 1,825
Net profit for the
period in relation
to sales, % 7.4 2.6 6.2 2.7 6.5 5.0
Research and
development
expenses, EUR
million 5.2 4.3 10.3 8.5 21.0 19.2
Research and
development
expenses in
relation to sales,
% 2.3 2.4 2.3 2.7 2.4 2.6
Earnings per share,
EUR *) 0.40 0.11 0.64 0.21 1.32 0.88
Equity per share,
EUR *) 3.81 2.76 3.81 2.76 3.81 3.43
Dividend per share,
EUR - - - - 0.35 0.35
*) Outotec Oyj shares were split on August 10, 2006 from 8.4 million
to 42.0 million shares, following which the counter-book value of a
share is EUR 0.40. Earnings per share and equity per share have been
calculated with 42.0 million shares.
**) Last twelve months.
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
The interim financial statements are prepared in accordance with IAS
34 Interim Financial Reporting in keeping with the accounting
policies and methods applied in the recent annual financial
statements. These interim financial statements are unaudited.
The comparison figures for 2006 are based on combined financial
statements, which have been prepared such that the business structure
and combined financial information of Outotec fairly present the
result of operations, cash flows, and financial position of Outotec's
current operations.
Use of estimates
Preparation of the financial statements in accordance with IFRS
requires that the management make estimates and assumptions that
affect the reported amounts of assets and liabilities, as well as the
disclosure of contingent assets and liabilities on 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 the amounts reported, including the
realizability of certain assets, the useful lives of tangible and
intangible assets, amounts of income taxes, provisions, pension
obligations, impairment of goodwill, and other items. Although these
estimates are based on the management's best knowledge of current
events and actions, actual results may differ from the estimates.
Adoption of new and amended standards and interpretations
Outotec has adopted the following new standards, revisions of
standards and interpretations of their respective effective dates.
- IFRS 7 Financial instruments: Disclosures (effective date January
1, 2007)and
- Amendment to IAS 1 - Presentation of Financial Statements: Capital
Disclosures (effective date January 1, 2007).
The adoption of these new standards will mainly have impact on the
disclosure information on the 2007 financial statements.
- IFRIC 8 - Scope of IFRS 2 (effective date May 1, 2006)
- IFRIC 9 - Reassessment of Embedded Derivatives (effective date June
1, 2006) and
- IFRIC 10 Interim Financial Reporting and Impairment (effective date
November 1, 2006).
The adoption of these interpretations will have no impact on the 2007
financial statements.
Outotec will estimate the impact on information disclosure for the
following standard in 2007:
IFRS 8 Operating Segments (effective date January 1, 2009); the
standard has not yet been approved to be applied in the EU.
Major non-recurring items in operating profit for the period
Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2007 2006 2006
One-time expenses related to the listing - - -1.3
Income taxes
Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2007 2006 2006
Current taxes -10.8 -6.0 -17.9
Deferred taxes -2.1 -1.0 -1.7
Total income taxes -12.8 -7.0 -19.6
Property, plant and equipment
June 30 June 30 Dec 31
EUR million 2007 2006 2006
Historical cost at the beginning of the period 77.4 76.2 76.2
Translation differences 1.0 -1.2 -1.7
Additions 2.3 2.8 5.2
Disposals -0.3 -0.1 -2.6
Reclassifications - - 0.0
Historical cost at the end of the period 80.5 77.7 77.4
Accumulated depreciation and impairment at the
beginning of the period -50.7 -45.7 -45.7
Translation differences -0.6 0.7 0.6
Disposals 0.1 0.1 2.3
Reclassifications - - 0.0
Depreciation during the period -3.5 -3.8 -7.0
Impairment during the period - - -1.0
Accumulated depreciation and impairment at the
end of the period -54.7 -48.6 -50.7
Carrying value at the end of the period 25.8 29.1 26.7
Commitments and contingent
liabilities
June 30 June 30 Dec 31
EUR million 2007 2006 2006
Pledges 30.1 2.1 27.8
Guarantees for commercial
commitments 147.8 77.2 121.3
Minimum future lease payments
on operating leases 48.0 19.6 51.2
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 5.5 million on June 30, 2007 (on June 30,
2006: EUR 4.7 million and on December 31, 2006: EUR 0.4 million) and
for commercial guarantees including advance payment guarantees EUR
273.7 million on June 30, 2007 (on June 30, 2006: EUR 167.1 million
and on December 31, 2006: EUR 259.4 million).
Derivative instruments
Currency forwards
June 30 June 30 Dec 31
EUR million 2007 2006 2006
Net fair values 4.4 0.5 2.0
Contract amounts 355 84 103
Related-party transactions
Transactions and balances with associated companies
Q1-Q2 Q1-Q2 Q1-Q4
EUR million 2007 2006 2006
Sales 1.3 0.0 0.3
Financial income and expenses 0.1 0.0 0.1
Loan receivables 1.9 0.6 1.3
Trade and other receivables 1.0 0.0 0.9
Current liabilities - - 2.2
Sales and operating profit by quarters
EUR million Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07
Sales
Minerals
Processing 46.0 49.6 69.8 36.4 57.4 67.5 95.3 55.2 64.6
Base Metals 35.6 39.6 64.2 44.9 50.6 43.3 53.4 60.1 64.5
Metals
Processing 68.2 44.6 70.2 62.9 67.5 71.0 90.8 97.5 100.9
Other
Businesses 9.8 5.9 10.5 6.6 8.1 6.0 11.9 6.7 8.9
Unallocated
items*) and
intra-group
sales -8.2 -6.5 -8.3 -6.7 -6.8 -7.9 -11.9 -7.8 -11.7
Total 151.4 133.1 206.4 144.2 176.8 179.9 239.6 211.7 227.1
Operating
profit
Minerals
Processing 1.4 2.3 4.6 -3.7 -1.9 5.2 13.1 1.9 3.3
Base Metals 1.4 1.2 12.7 5.6 7.1 4.1 6.7 9.4 13.2
Metals
Processing 2.1 2.9 6.1 4.1 6.1 5.6 5.3 4.7 10.5
Other
Businesses 0.5 -0.1 -0.1 -0.5 0.2 -0.3 1.0 0.0 0.6
Unallocated
items **) -1.2 -0.7 -1.1 -1.5 -1.5 -0.2 -3.0 -2.4 -4.1
Total 4.2 5.5 22.2 4.1 10.0 14.5 23.0 13.6 23.4
*) Unallocated items primarily include invoicing for internal
management and administrative services.
**) Unallocated items primarily include management and administrative
services and share of result of associated companies.
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 + financial income × 100
Total assets - non interest-bearing
debt (average for the period)
Return on equity = Net profit for the period × 100
Total equity (average for the
period)
Research and development = Research and development expenses
costs in the income statement
(including expenses covered by
grants received)
Earnings per share = Net profit for the financial period
attributable to the equity holders
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
OFFICIAL FINANCIAL REPORTING LANGUAGE
Outotec publishes all financial reports in Finnish and English
(U.S.). Because of the international nature of the business, the
official and approved version is prepared in English and translated
into Finnish.
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