2009-02-03 12:00:00 CET
2009-02-04 14:56:27 CET
REGULATED INFORMATION
Outokumpu Oyj - Financial Statement Release
Outokumpu Annual Accounts bulletin 2008 - operating loss in difficult market conditions
STOCK EXCHANGE
RELEASE
February 3, 2009 at 13.00 p.m.
Year 2008 highlights
- Operating profit was EUR -63 million, underlying operational result
was some EUR 305 million positive (2007: EUR 800 million)
- Strong operating cash flow of EUR 656 million (2007: EUR 676
million), gearing 38%
- Excellence programs delivering benefits of some EUR 86 million in
2008 (2007: EUR 45 million)
- The Board of Directors is proposing a dividend of EUR 0.50 per
share (2007: EUR 1.20)
Fourth quarter 2008 highlights
- Operating profit of EUR -271 million including raw material-related
inventory losses of about EUR 185 million, underlying operational
result some EUR -69 million (III/08: EUR 60 million)
- Stainless steel deliveries at 261 000 tons as a result of weak
demand and significant production cuts
- Good operating cash flow at EUR 205 million
- Decision to postpone investments of some EUR 1.5 billion for at
least 12 months
- Group-wide cost saving actions taken, targeting fixed cost savings
in the range of EUR 100 million in 2009
Group key figures
IV/08 III/08 IV/07 2008 2007
Sales EUR million 966 1 270 1 465 5 474 6 913
Operating profit EUR million -271 -66 15 -63 589
Non-recurring items
in operating profit EUR million -17 -66 - -83 14
Profit before taxes EUR million -298 -82 7 -134 798
Non-recurring items
in financial income
and expenses EUR million -9 - - -21 252
Net profit for the period
from continuing operations EUR million -228 -73 7 -110 660
Net profit for the period EUR million -233 -74 -16 -189 641
Earnings per share
from continuing operations EUR -1.27 -0.41 0.04 -0.61 3.63
Earnings per share EUR -1.30 -0.41 -0.09 -1.05 3.52
Return on capital employed % -26.8 -6.3 1.4 -1.6 13.9
Net cash generated from
operating activities EUR million 205 242 299 656 676
Capital expenditure,
continuing operations EUR million 129 317 43 544 190
Net interest-bearing debt
at end of period EUR million 1 072 1 096 788 1 072 788
Debt-to-equity ratio at
end of period % 38.4 35.0 23.6 38.4 23.6
Stainless steel deliveries 1 000 tons 261 323 352 1 423 1 419
Stainless steel
base price 1) EUR/ton 1 045 1 143 1 058 1 185 1 304
Personnel at the
end of period,
continuing operations 8 471 8 711 8 108 8 471 8 108
1) Stainless steel: CRU - German base price (2 mm cold rolled 304
sheet).
Please note: Between July - October 2007, European prices for
some
stainless grades were quoted on a transaction price basis,
therefore
base prices are the calculated value of transaction price minus
alloy
surcharge for this time period (CRU).
SHORT-TERM OUTLOOK
Visibility regarding the stainless steel markets is currently very
short. The deepening of the global financial crisis has a clear
impact on stainless steel demand, and Outokumpu expects stainless
markets to remain very weak in the first quarter of 2009. Base prices
have declined further in early 2009. Current order intake represents
about 50 percent of the Group's full production capacity.
For the first quarter of 2009, Outokumpu's operating profit continues
to be significantly negative due to the low base price level, low
delivery volumes and raw material-related inventory losses that
mainly result from the decline in the ferrochrome price. However,
Outokumpu's financial and liquidity position remains strong.
CEO Juha Rantanen:"In late 2008, the global financial crisis hit the stainless
steel
markets with speed and power. As we did not reach our profitability
target, we cannot be satisfied with our financial performance in
2008. Actions have been taken to decrease working capital, postpone
investments and reduce costs. Unfortunately, this also means that
personnel adjustments are necessary. A challenging year lies ahead,
but we are prepared to take decisive action and move quickly, when
this is called for. Maximizing cash flow remains high on our agenda."
The attachments present the Management analysis of the fourth quarter
2008 operating result and a summary of the Review by the Board of
Directors for January-December 2008 as well as extracts from the
financial statements. All full year figures are audited.
For further information, please contact:
Päivi Lindqvist, SVP - Communications and IR
tel. +358 9 421 2432, mobile +358 40 708 5351
paivi.lindqvist@outokumpu.com
Ingela Ulfves, VP - Investor Relations and Financial Communications
tel. +358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com
Esa Lager, CFO
tel +358 9 421 2516
esa.lager@outokumpu.com
News conference and live webcast today at 3.00 pm
A combined news conference, conference call and live webcast
concerning the 2008 annual
accounts will be held on February 3, 2009 at 3.00 pm Finnish time
(8.00 am US EST,
1.00 pm UK time, 2.00 pm CET) at Hotel Kämp, Akseli Gallen-Kallela
conference room,
Pohjoisesplanadi 29, 00100 Helsinki, Finland.
To participate via a conference call, please dial in 5-10 minutes
before the beginning of the
event:
UK: +44 20 3043 2436
US & Canada: +1 866 458 40 87
Sweden: +46 8 505 598 53
Password: Outokumpu
The news conference can be viewed live via Internet at
www.outokumpu.com.
Stock exchange release and presentation material will be available
before the news
conference at www.outokumpu.com / Investors.
An on-demand webcast of the news conference will be available at
www.outokumpu.com as of February 3, 2009 at around 6.00 pm.
OUTOKUMPU OYJ
Corporate Management
Ingela Ulfves
VP - Investor Relations and Financial Communications
tel. + 358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com
www.outokumpu.com
MANAGEMENT ANALYSIS - FOURTH QUARTER 2008 OPERATING RESULT
Group key figures
EUR million I/07 II/07 III/07 IV/07 2007
Sales
General Stainless 1 700 1 670 879 1 073 5 321
Specialty Stainless 1 003 1 028 687 738 3 456
Other operations 64 63 53 57 237
Intra-group sales -638 -669 -391 -403 -2 101
The Group 2 129 2 092 1 227 1 465 6 913
Operating profit
General Stainless 245 188 -224 11 220
Specialty Stainless 182 196 -51 9 337
Other operations 1 19 8 -6 21
Intra-group items -4 2 11 2 11
The Group 424 406 -256 15 589
EUR million I/08 II/08 III/08 IV/08 2008
Sales
General Stainless 1 304 1 222 933 687 4 147
Specialty Stainless 786 778 630 512 2 705
Other operations 64 63 69 62 258
Intra-group sales -465 -514 -362 -295 -1 636
The Group 1 689 1 549 1 270 966 5 474
Operating profit
General Stainless 81 125 -35 -177 -6
Specialty Stainless 42 44 -63 -123 -101
Other operations -20 4 29 25 38
Intra-group items -3 1 3 4 6
The Group 100 174 -66 -271 -63
Stainless steel
deliveries
1 000 tons I/07 II/07 III/07 IV/07 2007
Cold rolled 220 186 117 180 703
White hot strip 94 94 49 78 314
Quarto plate 39 41 30 36 146
Tubular products 20 17 13 15 65
Long products 16 15 10 12 54
Semi-finished
products 40 46 21 31 137
Total deliveries 430 399 238 352 1 419
1 000 tons I/08 II/08 III/08 IV/08 2008
Cold rolled 228 192 177 141 739
White hot strip 120 94 64 51 330
Quarto plate 33 35 27 25 120
Tubular products 19 19 16 16 70
Long products 15 15 15 11 55
Semi-finished
products 34 35 25 16 109
Total deliveries 449 391 323 261 1 423
Market prices and
exchange rates
I/07 II/07 III/07 IV/07 2007
Market prices 1)
Stainless steel
Base price EUR/t 1 930 1 518 710 1 058 1 304
Alloy surcharge EUR/t 2 277 2 913 2 967 1 939 2 524
Transaction price EUR/t 4 207 4 432 3 677 2 997 3 828
Nickel USD/t 41 440 48 055 30 205 29 219 37 230
EUR/t 31 619 35 646 21 983 20 175 27 161
Ferrochrome
(Cr-content) USD/lb 0.77 0.82 1.00 1.05 0.91
EUR/kg 1.30 1.34 1.60 1.60 1.46
Molybdenum USD/lb 26.69 30.97 31.97 32.66 30.57
EUR/kg 44.90 50.65 51.30 49.71 49.17
Recycled steel USD/t 278 287 271 283 280
EUR/t 212 213 197 195 204
Exchange rates
EUR/USD 1.311 1.348 1.374 1.448 1.371
EUR/SEK 9.189 9.257 9.264 9.288 9.250
EUR/GBP 0.671 0.679 0.680 0.708 0.684
I/08 II/08 III/08 IV/08 2008
Market prices 1)
Stainless steel
Base price EUR/t 1 243 1 307 1 143 1 045 1 185
Alloy surcharge EUR/t 1 702 1 888 1 582 1 293 1 616
Transaction price EUR/t 2 945 3 195 2 725 2 338 2 801
Nickel USD/t 28 957 25 682 18 961 10 843 21 111
EUR/t 19 335 16 440 12 599 8 227 14 353
Ferrochrome
(Cr-content) USD/lb 1.21 1.92 2.05 1.85 1.76
EUR/kg 1.78 2.71 3.00 3.09 2.63
Molybdenum USD/lb 33.81 33.40 33.75 17.29 29.56
EUR/kg 49.77 47.14 49.45 28.92 44.31
Recycled steel USD/t 393 565 465 181 401
EUR/t 262 361 309 138 273
Exchange rates
EUR/USD 1.498 1.562 1.505 1.318 1.471
EUR/SEK 9.400 9.352 9.474 10.234 9.615
EUR/GBP 0.757 0.793 0.795 0.839 0.796
1) Sources of market prices:
Stainless steel: CRU - German base price, alloy surcharge and
transaction price (2 mm cold rolled 304 sheet), estimates for
deliveries during the period.
Please note: Between July-October 2007, European prices for some
stainless grades were quoted on a transaction price basis,
therefore base prices are the calculated value of transaction
price minus alloy surcharge for this time period (CRU).
Nickel: London Metal Exchange (LME) cash quotation
Ferrochrome: Metal Bulletin - Quarterly contract price
Ferrochrome lumpy chrome charge, basis 52% chrome
Molybdenum: Metal Bulletin - Molybdenum oxide - Europe
Recycled steel: Metal Bulletin - Steel scrap HMS 1&2 fob Rotterdam
Further weakening stainless steel markets with declining metal prices
Global demand for stainless steel continued to weaken dramatically
during the fourth quarter of 2008 and markets remained oversupplied.
The whole business environment was affected by the significant
weakening of financial markets. Compared to the seasonally weak third
quarter 2008, apparent consumption of stainless steel in the fourth
quarter is estimated to have fallen by 27% globally and by 24% in
Europe. Due to the sudden and very significant drop in demand in the
last quarter, all stainless producers cut production levels. Global
melting production was cut by 28%, and production in Europe was 21%
down on the previous quarter. In addition to end-demand weakness, the
slowdown was also a result of the distribution sector postponing
purchases due to the falling nickel price. Tight credit conditions
resulting from general economic uncertainty also had an impact on the
overall demand situation. Demand softened in all end-use segments,
especially in construction and the automotive industry. Also
investment activity was adversely affected by the difficult global
financial situation.
The average base price for 2mm cold rolled 304 stainless steel sheet
in Germany in the fourth quarter declined to 1 045 EUR/ton (III/2008:
1 143 EUR/ton). As a result of the declining nickel price, the
average alloy surcharge for the fourth quarter fell to 1 293 EUR/ton
(III/2008: 1 582 EUR/ton). The average transaction price in the
period was 2 338 EUR/ton (III/2008: 2 725 EUR/ton). (CRU)
Prices of most alloying materials declined in the fourth quarter
compared to the third quarter. The nickel price fell from around 17
000 USD/ton to below 10 000 USD/ton. According to CRU, the very weak
demand for stainless steel resulted in a cutback of some 20% in
nickel production in the fourth quarter compared to the third
quarter. After the year-end, the nickel price has been 10 000 - 12
000 USD/t. Ferrochrome markets continued to be very oversupplied
during the last quarter as a result of weak demand for stainless
steel and global production was cut back significantly. The quarterly
contract price for ferrochrome for the fourth quarter was 1.85 USD/lb
(III/2008: 2.05 USD/lb). The quarterly contract price for the first
quarter of 2009 has preliminary been settled at 0.79 USD/lb. The
average price of molybdenum declined by some 49% to 17.29 USD/lb
(III/2008: 33.75 USD/lb). The price of recycled steel fell
dramatically from 465 USD/ton in the third quarter to 181 USD/ton in
the fourth quarter (a decline of 61%).
Operating profit turned negative in the fourth quarter of 2008
Group sales for the fourth quarter were down by 24% to EUR 966
million (III/2008: EUR 1 270 million). Deliveries totalled 261 000
tons, a decline by 19% compared to the preceding quarter. The
accelerating global financial crisis led to demand of stainless steel
from both distributors and end-users being clearly weaker towards the
end of the year and delivery volumes were some 55-60% of full
production capacity.
Operating profit in the fourth quarter totaled EUR -271 million
(III/2008: EUR -66 million) including some EUR 185 million (III/2008:
EUR 60 million) of raw material-related inventory losses, mainly
resulting from nickel and molybdenum. Excluding inventory losses and
non-recurring provisions, Outokumpu's underlying operational result
in the fourth quarter was EUR -69 million (III/2008: EUR 60 million).
Main reasons for this negative result were very low base prices and
extremely low delivery volumes. Net non-recurring costs of EUR 17
million, comprising provisions related to reductions in personnel
numbers in Sweden, are included in the fourth quarter operating loss
(III/2008: EUR 66 million for closure of Thin Strip business in
Sheffield).
Raw material-related inventory losses comprise losses related to
timing differences between the alloy surcharge and inventory turnover
and also write-downs on inventories. A small proportion of these
losses is related to products temporarily sold at a base price plus
forward alloy surcharge.
As a result of the weak demand for stainless steel and declining raw
material prices, delivery volumes in both the third and the fourth
quarter were low. Consequently, raw material and process inventory
turnover has slowed. The raw material tied up in inventory has been
and will be sold as part of deliveries with a lower value. To the
extent that the selling price of these deliveries is not expected to
cover corresponding total production costs, a write-down to net
realizable value was made at the end of the fourth quarter.
Return on capital employed was -26.8% (III/2008: -6.3%). Earnings per
share totaled EUR -1.30 (III/2008: EUR -0.41).
Net working capital declined by EUR 424 million to EUR 1 434 million
mainly as a result of lower raw material prices and reduced raw
material purchase. Consequently, net cash from operating activities
was strong at EUR 205 million (III/2008: EUR 242 million).
Sales by General Stainless totaled EUR 687 million (III/2008: EUR 933
million) in the fourth quarter, and deliveries were 22% lower than in
the third quarter at 223 000 tons (III/2008: 285 000 tons). Operating
profit totaled EUR -177 million (III/2008: EUR -35 million) of which
Tornio posted a EUR 93 million loss (III/2008: EUR -22 million).
Majority of the raw material-related inventory losses are related to
General Stainless.
Sales by Specialty Stainless totaled EUR 512 million (III/2008: EUR
630 million) in the fourth quarter, and deliveries were 12% lower
than in the third quarter at 106 000 tons (III/2008: 121 000 tons).
Operating profit totaled EUR -123 million (III/2008: EUR -63
million). The operating loss includes non-recurring costs of EUR 17
million that are related to personnel reductions in Sweden.
Operating profit in Other operations totaled EUR 25 million
(III/2008: EUR 29 million). This was mainly attributable to gains
from nickel and foreign currency derivatives.
Investment program postponed almost entirely
In October, Outokumpu decided to review its investment program
because of the global financial crisis and the sudden weakening in
stainless steel demand. In December, the decision was made to
postpone the Group's investment program almost entirely for at least
12 months. Continuing any of the projects would be subject to a
separate decision based on an updated feasibility study.
The investments in high-purity ferritic and bright-annealing in
Tornio, Finland, special grades in Avesta, Sweden and quarto plate in
Degerfors, Sweden have been postponed. The investment to expand
quarto plate production capacity at New Castle (IN), in the US, will
proceed according to plan. Synergy benefits resulting from the
acquisition of the SoGePar Group, an Italian independent distributor,
allowed the investment program in service centers in Europe to be
streamlined and optimized. Only the investment in the service center
in Willich, Germany, will proceed as planned. All other service
center investments in Europe (Poland, France and southern Germany)
have either been reduced in scope or postponed. The service center
investment in India has also been postponed. The plate service center
in China will however proceed as planned. The investment in doubling
ferrochrome production capacity in Tornio has also been postponed for
at least 12 months.
Postponed investments total some EUR 1.5 billion and capital
expenditure in 2009 is estimated to be some EUR 300 million (the
original plans EUR 850 million). Most spending in 2009 will be
related to expansion projects that are close to being finalized and
some mandatory components in started projects. EUR 100 million of the
Group's capital expenditure in 2009 is maintenance related.
Actions taken to adjust to the weak market for stainless steel
As a result of the impact of the global financial crisis on the
stainless steel market, Outokumpu started preparations for a scenario
in which the markets do not improve in 2009. Several cost reducing
actions were taken in the fourth quarter.
In November, Outokumpu began statutory negotiations on temporary
layoffs at the Tornio plant in Finland. These negotiations concerned
full or part-time layoffs of a total of 1 500 employees regarding
selected production lines, maintenance operations and some office
work. An agreement reached in December based on cost savings
resulting from cutting expensive weekend shifts, freezing the
production bonus system and a general cost-cutting program allowed
temporary layoffs to be avoided in the short term.
In December, Outokumpu began negotiations with personnel
representatives aimed at reducing some 450 jobs at the Group's
Swedish production sites. Negotiations with personnel representatives
to reduce costs at Outokumpu head office functions in different
countries were also initiated. The negotiations in Finland resulted
in about 20 job reductions and temporary lay-offs of two weeks for
all employees based at the Finnish head office. Outokumpu employs
some 350 people in head office functions globally, some 200 of them
in Finland.
Events after the review period
Due to the very weak stainless steel demand Outokumpu continues to
cut production and starts negotiations with personnel regarding
temporary and permanent layoffs in several of its operating
countries. The planned actions are expected to result in temporary
layoffs of over 2000 people and reduction of about 250 jobs.
At Tornio Works Outokumpu plans to temporarily cease its ferrochrome
production (the Kemi mine and Ferrochrome Works), temporarily idle
one of its melt-shops and reduce shifts at almost all steel
production lines. Due to these production cuts the company will start
new statutory negotiations on temporary layoffs at Tornio Works in
Finland. The negotiations concern about 2000 people, also office and
maintenance employees.
In OSTP (Outokumpu Stainless Tubular Products) the total of 150 job
reductions are planned in Sweden, Finland, Estonia and Canada. In
Finland the negotiations concern both temporary and permanent
layoffs.
In Outokumpu Group Sales & Marketing organization the target is to
reduce approximately 50 jobs with layoffs and voluntary arrangements.
Additionally about 80 employees are planned to be temporarily
laid-off.
In the UK approximately 90 jobs are planned to be reduced in the
coming months as a result of reduced shifts in the Sheffield
melt-shop and the cost-saving measures in Outokumpu's Alloy Steel
Rods (ASR) and the sales company's integration of the former SoGePar
activities into its Sheffield based operation.
Outokumpu is through its current actions - Group-wide general cost
saving programs and personnel reductions - targeting fixed cost
savings in the range of EUR 100 million in 2009.
SUMMARY OF THE REVIEW BY THE BOARD OF DIRECTORS FOR 2008
The global economic crisis hit the stainless steel industry, forcing
Outokumpu to take action
2008 was an exceptional year for the stainless steel industry in many
ways. It started with recovering demand and rising prices for
stainless steel. Towards the summer some softening in demand was
visible and demand for stainless weakened further as metal prices
started to fall. In the autumn, stainless steel markets were
significantly affected by the accelerating global financial crisis in
all end-use segments.
Outokumpu's strategy is aiming at achieving a more stable and
profitable business model by increasing the share of sales to
end-user and project customers as well as increasing the share of
value-added special products and non-nickel containing grades. The
very difficult market conditions in 2008 limited progress towards
these strategic targets. In late 2008, Outokumpu decided to postpone
almost its entire investment program that was designed to increase
production capacity for special grades and products and to expand the
Group's service center network. Steps that are less capital-intensive
will now be taken to implement the Group's strategy, with
profitability and cash flow given the priority in the short-term.
Several cost-cutting actions including personnel adjustments have
been taken.
Group sales for 2008 totaled EUR 5 474 million (down by 21% from the
previous year) and stainless steel deliveries totaled 1 423 000 tons,
almost the same level as in 2007. Operating profit totaled EUR -63
million (2007: EUR 589 million). Underlying operational result,
however, was EUR 305 million (2007: EUR 800 million). Net cash from
operating activities was strong at EUR 656 million (2007: EUR 676
million).
Return on capital employed was -1.6% and gearing was 38.4%. Although
Outokumpu's financial target of a return on capital employed higher
than 13% was not reached, the target for gearing of below 75% was
achieved. Earnings per share totaled EUR -1.05, and earnings per
share from continuing operations totaled EUR -0.61. The Board of
Directors is proposing to the Annual General Meeting 2009 that a
dividend of EUR 0.50 per share be paid for 2008 (2007: EUR 1.20).
Turbulence in stainless steel markets
Demand for stainless steel was at a good level during the first half
of 2008, but began to weaken in June as global economic growth
slowed. The nickel price began to decline in May, which resulted in
distributors postponing orders, and the collapse of the global
financial market in the autumn led to further weakening in stainless
steel demand. Following the seasonally low third quarter, demand
continued to weaken in the fourth quarter with both distributors and
end-use segments postponing purchases. Compared to 2007, apparent
consumption of stainless steel in 2008 is estimated to have decreased
by 4% in Europe and by 6% globally. The average German base price for
2mm 304 cold rolled sheet in 2008 was 1 185 EUR/ton, 9% lower than in
2007. The transaction price for stainless steel averaged 2 801
EUR/ton in 2008, 27% lower than the previous year because of the much
higher nickel price in 2007. (CRU)
Sales and deliveries
Sales
EUR million 2008 2007 2006
General Stainless 4 147 5 321 4 770
Specialty Stainless 2 705 3 456 2 723
Other operations 258 237 361
Intra-group sales -1 636 -2 101 -1 700
The Group 5 474 6 913 6 154
Stainless steel deliveries
1 000 tons 2008 2007 2006
Cold rolled 739 703 936
White hot strip 330 314 390
Quarto plate 120 146 162
Tubular products 70 65 74
Long products 55 54 59
Semi-finished products 109 137 195
Total deliveries 1 423 1 419 1 815
Group sales for 2008 declined to EUR 5 474 million (2007: EUR 6 913
million) due to lower transaction prices for stainless steel in 2008
and stainless steel deliveries totaled 1 423 000 tons, almost at the
same level as the previous year (2007: 1 419 000 tons). Sales by
General Stainless were down by 22%, sales by Specialty Stainless were
down by 22%.
The European share of Group sales was 78% in 2008 (2007: 73%). Asia
and the Americas accounted for 8% (2007: 12%) and 11% (2007: 12%),
respectively.
Operating profit
EUR million 2008 2007 2006
Operating profit
General Stainless -6 220 536
Specialty Stainless -101 337 338
Other operations 38 21 -35
Intra-group items 6 11 -15
Operating profit -63 589 824
Share of results in associated companies -2 4 8
Financial income and expenses -69 206 -48
Profit before taxes -134 798 784
Income taxes 24 -138 -178
Net profit, continuing operations -110 660 606
Net profit, discontinued operations -79 -18 357
Net profit for the financial year -189 641 963
Operating profit in relation to sales, % -1.2 8.5 13.4
Return on capital employed, % -1.6 13.9 20.7
Earnings per share from continuing operations, EUR -0.61 3.63 3.34
Earnings per share, EUR -1.05 3.52 5.31
Operating profit in 2008 totaled EUR -63 million (2007: EUR 589
million). In 2008, net non-recurring costs of some EUR 83 million
are included in the operating loss (EUR 66 million of provisions and
write-downs related to the closure of the thin strip business in
Sheffield and some EUR 17 million of provisions related to personnel
reductions mainly in Sweden). In 2007, operating profit included net
non-recurring gains of EUR 14 million (EUR 11 million of costs
related to restructuring at Thin Strip in the UK and EUR 25 million
gains on the sale of the Hitura mine in Finland). Raw
material-related inventory losses of some EUR 285 million are
included in the 2008 operating profit (2007: some EUR 230 million).
Underlying operational result for 2008 was some EUR 305 million
(2007: EUR 800 million). The primary reason for the decline in
operating profit was clearly lower base prices and somewhat higher
variable costs in 2008. In addition, there were less financial
benefits from optimising raw material use and pricing because of
clearly lower metal prices in 2008. Profit before taxes totaled EUR
-134 million (2007: EUR 798 million).
Excluding non-recurring items, net financial income and expenses in
2008 were EUR 47 million negative (2007: EUR 46 million negative). In
2008, an impairment loss of EUR 21 million (EUR 12 million in I/2008
and EUR 9 million in IV/2008) was booked in Other financial expenses
due to the decline in the share price of Belvedere Resources Ltd
which is classified as an available-for-sale financial asset.
Financial income in 2007 included a EUR 142 million non-recurring
gain from the sale of the remaining 12% holding in Outotec Oyj and a
EUR 110 million non-recurring gain from the Talvivaara transaction.
Net profit in 2008 totaled EUR -189 million (2007: EUR 641 million)
and the net profit from continuing operations totaled EUR -110
million (2007: EUR 660 million). The net loss includes a capital loss
of EUR 66 million from the sale of the Group's remaining copper tube
assets (Discontinued operations) to the Cupori Group in June 2008.
Earnings per share totaled EUR -1.05 (2007: EUR 3.52) and earnings
per share from continuing operations totaled EUR -0.61 (2007: EUR
3.63). Return on capital employed in 2008 was -1.6% (2007: 13.9%).
Capital structure
Key financial indicators on financial position
EUR million 2008 2007 2006
Net interest-bearing debt
Long-term debt 1 219 1 046 1 293
Current debt 581 464 685
Total interest-bearing debt 1 800 1 510 1 977
Interest-bearing assets -711 -589 -515
Net assets held for sale -16 -132 -162
Net interest-bearing debt 1 072 788 1 300
Shareholders' equity 2 794 3 337 3 054
Return on equity, % -6.2 20.0 37.5
Debt-to-equity ratio, % 38.4 23.6 42.3
Equity-to-assets ratio, % 52.4 56.5 47.9
Net cash generated from operating activities 656 676 -35
Net interest expenses 54 58 62
During 2008, Outokumpu's net interest-bearing debt increased by EUR
284 million and totaled EUR 1 072 million at the end of December
(December 31, 2007: EUR 788 million). Outokumpu's gearing at the end
of December was 38.4% (December 31, 2007: 23.6%), well below the
Group's target of below 75%. At the end of 2008, the Group's
equity-to-assets ratio stood at 52.4%. Most of Outokumpu's debt
maturities extend to the 2009-2013 period. The Group has committed
undrawn credit facilities totaling some EUR 1 billion.
Net cash generated from operating activities in 2008 was good and
totaled EUR 656 million (2007: EUR 676 million) through the release
of EUR 370 million from working capital mainly as a result of
declined metal prices. Cash and cash equivalents totaled EUR 224
million (2007: EUR 86 million) at the end of the year.
Capital expenditure
Capital expenditure
EUR million 2008 2007 2006
General Stainless 332 57 83
Specialty Stainless 170 69 95
Other operations 42 64 9
The Group 544 190 187
Depreciation 206 204 221
Capital expenditure totaled EUR 544 million. The largest investment
in 2008 was the acquisition of the Italian distributor SoGePar Group
for EUR 224 million. Other major investments during 2008 were the
replacement of the No. 2 annealing and pickling line in Tornio and
the started expansion in quarto plate production capacity.
Investment program
After moving to the next phase in its strategy in September 2007,
Outokumpu launched an investment program totaling some EUR 2 billion.
In October 2008, as a result of the global financial crisis and a
sudden weakening in stainless steel demand, Outokumpu decided to
review the program. In December, a decision was made to postpone the
investment program almost entirely for at least 12 months. Continuing
any of the projects would be subject to a separate decision based on
an updated feasibility study.
Investments worth some EUR 1.5 billion were postponed and capital
expenditure in 2009 is expected to total some EUR 300 million (the
original plans EUR 850 million). Most spending in 2009 will be
related to expansion projects that are close to being finalized and
some mandatory components in started projects. EUR 100 million of the
Group's capital expenditure in 2009 is maintenance related.
The investments in high-purity ferritic and bright-annealing in
Tornio, Finland, special grades in Avesta, Sweden and quarto plate in
Degerfors, Sweden have been postponed. The investment to expand
quarto plate production capacity at New Castle (IN), in the US, will
proceed according to plan. Synergy benefits resulting from the
acquisition of the SoGePar Group, an Italian independent distributor,
allowed the investment program in service centers in Europe to be
streamlined and optimized. Only the investment in the service center
in Willich, Germany, will proceed as planned. All other service
center investments in Europe (Poland, France and southern Germany)
have either been reduced in scope or postponed. The service center
investment in India has also been postponed. The plate service center
in China will however proceed as planned. The investment in doubling
ferrochrome production capacity at Tornio has also been postponed for
at least 12 months.
The EUR 90 million investment project, announced on February 1, 2007,
to replace the No. 2 annealing and pickling line in Tornio has been
completed. The old line was decommissioned in September. Ramp-up of
the new line started in December and full production capacity will be
available by the end of 2009. The shutdown and ramp-up of production
will not have a significant impact on the total capacity of the cold
rolling plant in 2008 or 2009. The new annealing and pickling line
has an annual capacity of 300 000 tons and is capable of producing
both austenitic and ferritic products with minimum set-up times.
In February, Outokumpu OSTP and the Saudi Arabian tube manufacturer
Armetal, a company in the Al-Hejailan Group, agreed to form Outokumpu
Armetal Stainless Pipe Co., Ltd., a 51/49 stainless steel tubular
joint venture located in Riyadh. The joint venture began operating on
October 1, 2008.
In June, Outokumpu announced an investment of some 10 million in Long
Products' finishing facilities in Sheffield in the UK. The new
equipment is scheduled to be operational in mid 2009. This investment
is creating an integrated manufacturing route for small bar and
rebar, complementing the existing melt shop and wire rod mill,
located in Sheffield.
Closure of the Thin Strip business in Sheffield
In September, Outokumpu announced its intention to close the Group's
thin strip business at Meadowhall in Sheffield in the UK. The
Meadowhall plant produces specialized, very thin forms of stainless
steel strip products and deliveries in 2007 totaled 12 000 tons.
Overcapacity in the stainless precision strip market has meant that
this business has been loss-making for several years. The closure is
part of performance improvement actions taken by Outokumpu to ensure
the Group's global competitiveness. Closure of the Sheffield Thin
Strip business is expected to take place in the first quarter of
2009. Transfer of the Group's precision strip business is proceeding
according to plan and part of the business has already been
transferred to the Outokumpu Kloster unit in Långshyttan, Sweden.
The closure will result in some 230 job losses at the Meadowhall site
and is expected to result in a reduction of EUR 16 million in annual
fixed costs from the second quarter of 2009 onwards. Write-downs and
provisions of EUR 66 million, of which EUR 28 million are cash, were
recorded in the third quarter of 2008.
Acquisitions and divestments
In April, Outokumpu signed an agreement to acquire the SoGePar Group,
an Italian distributor of stainless steel from the Borromeo family.
The transaction was completed at the end of July. The final
consideration was EUR 224 million in cash and EUR 87 million in debt.
The SoGePar Group was consolidated into Outokumpu's accounts with
effect from August 1, 2008.
The former SoGePar units consist of stainless steel service centers
in Castelleone in Italy and in Rotherham in the UK. It also has stock
operations in Italy, the UK, Belgium, Finland, France and Ireland, as
well as a commercial office in Germany and a representative office in
Turkey. Sales by the SoGePar Group in 2007 totaled EUR 560 million,
with an operating profit of EUR 44 million and deliveries totaling
134 000 tons.
In June, Outokumpu signed an agreement to acquire the operations of
Avesta Klippcenter AB in Avesta, Sweden. The transfer of ownership in
connection with this transaction took place on July 1, 2008.
Discontinued operations
In April, Outokumpu signed an agreement under which the Group's
remaining copper tube assets were sold to Cupori Group Oy. This
transaction was closed on June 3, 2008 and the total purchase price
was EUR 52 million. A capital loss of EUR 66 million was booked on
the transaction. Assets divested comprise the copper plumbing
installation and industrial tube manufacturing companies in Pori
(Finland), Zaratamo (Spain), Västerås (Sweden) and Liège (Belgium),
as well as copper tube sales companies in France, Germany and Italy.
In 2007, these businesses generated sales totaling EUR 510 million,
recorded a net loss of EUR 5 million and employed 730 people.
Operational Excellence programs
In 2007, the Operational Excellence programs, launched in 2005 and
originally comprising Production and Commercial Excellence, were
expanded to include Supply Chain Excellence. Targeted benefits have
been achieved in both 2007 and 2008. The target was to improve the
Group's performance by EUR 40 million in 2007 and by EUR 80 million
in 2008 compared to 2005. In 2008, the Production and Commercial
Excellence programs delivered benefits totaling some EUR 86 million
(EUR 25 million in 2006 and EUR 45 million in 2007). The benefit
target of EUR 200 million for 2009 from the programs (including
Supply Chain Excellence) will not be reached with the current market
outlook as benefits are highly depending on delivery volumes and raw
material prices. In the short-term, the Operational Excellence
program will focus on working capital reduction, raw material and
other cost saving-related projects instead of on capacity
enhancement. Outokumpu will continue the Excellence programs even
with a stronger effort and aims at reaching the targeted benefits but
with a delay.
Claims regarding the sold fabricated copper products business
The fabricated copper products business sold in 2005, comprised among
others Outokumpu Copper (USA), Inc. This company has been served with
one individual damage claim for ACR Tubes under US antitrust laws.
Outokumpu believes that the allegations in this case are groundless
and will defend itself in any proceeding. In connection with the
transaction to sell the fabricated copper products business to Nordic
Capital, Outokumpu has agreed to indemnify and hold harmless Nordic
Capital with respect to this claim.
Customs investigation of exports to Russia by Outokumpu Tornio Works
In March 2007, Finnish Customs authorities initiated a criminal
investigation into the Group's Tornio Works' export practices to
Russia. The preliminary investigation is connected with another
preliminary investigation concerning a forward agency based in
South-eastern Finland. It is suspected that defective and/or forged
invoices have been prepared at the forwarding agency as regards
export of stainless steel to Russia. The preliminary investigation is
focusing on possible complicity by Outokumpu Tornio Works in the
preparation of defective and/or forged invoices by the forwarding
agency in question. Directly after the Finnish Customs authorities
started their investigations, Outokumpu initiated its own
investigation into the trade practices connected with stainless steel
exports from Tornio to Russia. In June 2007, after carrying out its
investigation, a leading Finnish law firm Roschier Attorneys Ltd.,
concluded that it had not found evidence that any employees of Tornio
Works or the Company had committed any of the crimes alleged by the
Finnish Customs.
Risk management
Outokumpu operates in accordance with the risk management policy
approved by its Board of Directors. This policy defines the
objectives, approaches and areas of responsibility in risk
management. Risk management supports the Group's strategy and also
helps in defining a balanced risk profile from the perspective of
shareholders as well as other stakeholders such as customers,
suppliers, personnel and lenders. Outokumpu has defined risk as being
anything that could have an adverse impact on activities that the
company has undertaken to achieve its objectives. Risks can thus be
threats, uncertainties or lost opportunities relating to present or
future operations.
The Group's Executive Committee reviewed and updated key risks to the
Group at a workshop held during the second half of 2008. The results
of this review were presented to both the Audit Committee and to the
Board of Directors in the fourth quarter. In 2008, the realized, most
significant risks were related to structural issues in stainless
steel markets and to the global financial turmoil, which had an
impact on steel markets, the availability of finance and also on the
Group's ability to implement its planned investment projects. There
were no significant fires, other damage to property or business
interruption in 2008, which had a major impact on Outokumpu's
operations.
Strategic and business risks
The most important strategic and business risks to Outokumpu's
operations have been identified as structural overcapacity in
stainless steel production, competition in stainless steel markets
and Eurocentricity. New stainless steel production capacity being
built in China has led to overcapacity in cold rolled stainless
production. To mitigate risks related to structural overcapacity and
fierce competition in stainless steel markets, Outokumpu aims to
maintain the cost efficiency of its operations, broaden the Group's
product offering and increase sales to end-users by, for example,
developing distribution channels. This strategy is supported by the
Group's new organization which ensures that customers are served in
an optimal way. Eurocentricity in Group operations and sales is
considered a risk to Outokumpu's growth and success. To mitigate any
possible impacts, Outokumpu is also aiming to grow outside Europe.
Operational risks
Operational risks arise as a consequence of inadequate or failed
internal processes, employee actions, systematic or other events such
as natural catastrophes, misconduct or crime. Key operational risks
include a major fire or accident, variations in production
performance, failures in project implementation and the inability to
achieve a strong corporate culture and a one-company approach.
To minimize damage to property and business interruptions that could
be caused by fire at some of the Group's major production sites,
Outokumpu has systematic fire and security audit programs in place.
Part of this type of risk is covered by insurance. Some 40 security
and fire safety audits were carried out in 2008 with the Group's own
resources, often jointly with technical experts provided by our
insurers. A large part of the Group-wide instructions on security and
crisis management were reviewed and updated during the year.
While Outokumpu has been systematically developing the Group's
operational performance through excellence initiatives, risks
associated with excessive variations in performance between different
production processes can have a serious impact on the business.
Outokumpu is mitigating these types of risk by expanding its
Operational Excellence programs and building on strong Group-level
functions such as Supply Chain Management and Group Sales and
Marketing, thus enhancing strategy implementation.
Outokumpu's aim is to achieve a strong and unified corporate culture
throughout its organization. The approach for all personnel is the
creation of "One Outokumpu", but significant cultural change can take
time. The Group has taken some actions to strengthen leadership
skills and the sharing of common values to create a unified corporate
culture.
The Group's planned and announced major investment program was
postponed almost entirely because of the financial market turmoil and
the weakened stainless steel market at the end of the year. Some
investments such as service center expansion in Willich, Germany and
the establishment of a new plate service center in China are however
being finalized. In preparation for the years ahead, Outokumpu is
aiming to support the implementation of future investment projects
and manage risks related to the Group's project portfolio by further
developing our methods of project management.
Financial risks
Financial risks of the Group include exposure to market prices, the
ability to maintain adequate liquidity and exposure to the risk of
default. The most important financial risks are variations in the
price of nickel, variations in the exchange rate between the Swedish
krona and the euro, and the value of the US dollar. Outokumpu also
has significant exposure to equity and loan security prices. Part of
the Group's market risk is mitigated through the use of financial
derivative contracts. In 2008, Outokumpu changed its approach to the
management of nickel price risk and consequent hedging of nickel in
the supply chain led to a significant positive impact on earnings in
the second half of the year.
Liquidity and refinancing risks are taken into account in capital
management decisions and, when necessary, in making investment and
other business decisions. Outokumpu's aim is to mitigate a
significant proportion of the Group's credit risk through insurance
and other arrangements and in 2008 most commercial receivables were
either insured or secured in other ways. In addition to commercial
receivables, Outokumpu is exposed to credit risk in connection with
loan receivables, which may be subject to negative impact if the
turmoil in the financial markets continues. It is not typical for
loan receivables to be insured or otherwise secured.
Environment, Health and Safety
In the European Union, a new emissions trading period started in
2008. During this Kyoto-period 2008-2012 the scope of emissions
trading was extended to cover also Outokumpu's heat treatment
installations in Sweden and Sheffield melt shop in the UK. Outokumpu
will receive 1.3 million tons emission allowances annually until
2012, which is estimated to be enough for the current production
capacity within the Group's European production sites. Emission
trading is expected to continue after 2012 and Outokumpu follows the
development of the EU Climate and Energy package, and the renewal of
the Emissions Trading Scheme.
Mainly as a result of lower production volumes, the Group's carbon
dioxide emissions decreased in 2008 and totaled approximately 900 000
tons. Approximately 820 000 tons were covered by emissions trading
scope. During the year, the Group sold 1 022 000 tons of carbon
dioxide allowances for EUR 22 million euros.
Emissions to air and discharges to water-courses remained mostly
within permitted limits at Outokumpu sites, but some incidents took
place in 2008. Outokumpu is not a party in any significant juridical
or administrative proceeding concerning environmental issues, nor is
it aware of any environmental risks that could have an adverse
material effect on the Group's financial position.
Outokumpu's work on long-term development for improving material
efficiency was successful during 2008. Total amount of landfilled
waste decreased by 40% mainly due to excellent results in utilization
of by-products.
In 2008, the lost-time injury rate (i.e. lost-time accidents per
million working hours) improved to 9 (2007: 11), slightly above the
Group's 2008 annual target of less than 8.
Corporate Responsibility
In September, the results of the annual review carried out for the
Dow Jones Sustainability Indexes (DJSI) by the Sustainable Asset
Management Group (SAM) were published. Outokumpu retained its
position in the Pan-European Dow Jones STOXX Sustainability Index
(DJSI STOXX) and in the Dow Jones Sustainability World Index (DJSI
World). In January 2008, Outokumpu was given the title of "SAM 2008
Sector Mover" for having shown the greatest relative improvement in
its sustainability performance and for its outstanding achievements
in the area of sustainability. Outokumpu was also included in SAM's
Sustainability Yearbook 2009. Outokumpu also retained its position in
Storebrand SRI: "Best in Class: Environmental and Social
performance", ASPI Eurozone® index, and the Ethibel Sustainability
Indexes (ESI): Ethibel Excellence Europe and Global.
In the Carbon Disclosure Project (CDP), published in November,
Outokumpu's score was good at 61/100.
Outokumpu also received an award for being Finland's best corporate
responsibility reporter in 2008.
The year 2008 was named Outokumpu's corporate responsibility theme
year to raise the awareness of and the attitude towards environmental
and social responsibility issues among the Outokumpu personnel.
Concrete, measurable targets were set for both plants and offices to
improve energy and materials efficiency, reducing accidents and
improving the employees' well-being. There was a clear improvement in
all these areas. Targets set for Outokumpu sites were reached but in
the offices, with some exceptions, targets were not fully achieved.
Outokumpu has signed the ten principles of the United Nations Global
Compact to show its commitment to sustainability and corporate
citizenship. The principles cover human rights, labor standards,
protection of the environment and the prevention of corruption.
Outokumpu's corporate responsibility report - Outokumpu and our
environment 2008 - is based on the Global Reporting Initiative (GRI)
G3 guidelines. The report will be published together with the annual
report.
Research and Development
Group expenditure on research and development in 2008 totaled EUR 20
million or 0.4% of sales (2007: EUR 18 million and 0.3%). Outokumpu
has research centers in Tornio, Finland and in Avesta, Sweden. Some
process and technology development work is also carried out in
production units, and there are close links between R&D operations
and the Production Excellence program. The R&D function employed
almost 200 professionals in 2008. Outokumpu also conducts research in
collaboration with its customers, research institutes and
universities.
In 2008, the main focus was on the further development of new
low-nickel and nickel-free stainless steels, such as of reducing the
dependence of the steel price on volatile nickel prices. A lot of
effort has been put into developing duplex grades, which offer a good
combination of strength and corrosion resistance. The ideal
application for duplex grades is large, heavy-wall tanks, where
weight savings of up to 20% can be achieved. Customers have shown
growing interest in LDX 2101®, Outokumpu's own development of Lean
Duplex and license agreements on producing this grade were made with
some new partners. New applications for LDX 2101® are continually
being developed and the production technology has been improved.
Ferritics represent another opportunity to reduce the influence of
the nickel price on raw material costs. Optimum process parameters
and product properties for standard ferritic grades have been studied
intensively at production scale. The primary focus has been on
surface quality, formability and corrosion resistance. Four different
grades have been launched commercially and the volume sold are
increasing. These grades are mostly used for indoor applications, in
kitchen utensils, domestic appliances and the transportation sector.
Cr-Mn-Ni grades (200 series), a third opportunity to reduce the use
of nickel, also represent an interesting alternative in many
applications. The Group is now capable of producing and selling these
grades. The most common grade is 201, the chemistry of which has been
modified by Outokumpu. While the corrosion resistance of this grade
is almost equal to that of standard Cr-Ni austenitic 304, it has
higher strength.
In addition to new products and new applications for stainless steel,
the Group's R&D operations focus on innovative manufacturing
processes that reduce costs, result in lower emissions, shorten lead
times and improve quality levels. In application development, R&D
experts work in close co-operation with the Group's commercial
organization and provide advice for both sales personnel and
customers about product properties and material selection. They also
receive valuable direct feedback concerning customer needs that
serves as input for further product development activity.
The main subject of environmental research in 2008 was slag
utilization. Studies on the properties of different slag products and
the development of applications are continuing.
Personnel
Personnel
Dec. 31 2008 2007 2006
General Stainless 3 938 3 571 3 498
Specialty Stainless 4 006 4 099 4 200
Other operations 527 439 462
The Group 8 471 8 108 8 159
In 2008, the Group's continuing operations employed an average of 8
551 people (2007: 8 270) in some 30 countries. At the end of 2008,
the number of personnel employed by the Group was 8 471 (2007: 8
108). The net increase in the number of personnel employed in 2008
was 363 (2007: 51) and resulted from the acquisition of the SoGePar
Group and establishment of Outokumpu's new Group Sales and Marketing
function. Personnel expenses totaled EUR 520 million (2007: EUR 499
million).
Outokumpu's development programs, including management development
programs and the Production Excellence training program, continued
during 2008. Seven new graduates started the Stainless Pro graduate
program in September 2008.
Almost all Group employees participated in performance and
development dialogues in 2008.
The Outokumpu Personnel Forum held its 17th annual meeting in
Cremona, Italy. The Group Working Committee, a forum for continuous
dialogue between personnel and management, met seven times during
2008.
The fourth O'People personnel survey was conducted in 2008 as
follow-up to the survey carried out in 2007. The purpose was to
assess whether actions taken in 2008 had been successful. The results
indicated an improvement compared to 2007.
Organizational change and appointments
As part of the second phase in its strategy development, Outokumpu
realigned the organization into an integrated model that emphasizes
the 'one-company' approach to customers. The new organizational
structure became fully operational during 2008.
Outokumpu expanded its operations in the Middle East by opening a
sales company in Dubai, United Arab Emirates and will represent the
complete range of Outokumpu products and services.
Pii Kotilainen was appointed Executive Vice President - Human
Resources and member of the Group Executive Committee as of March 1,
2009. She joined Outokumpu on January 1, 2009 and reports to CEO Juha
Rantanen. Ms Kotilainen succeeds Timo Vuorio who will retire at the
end of April 2009.
Shares and shareholders
According to the Nordic Central Securities Depository, Outokumpu's
largest shareholders by group at the end of 2008 were Solidium Oy
(31.1%), foreign investors (33.8%), Finnish public sector
institutions (15.3%), Finnish private households (9.6%), Finnish
financial and insurance institutions (4.9%), Finnish corporations
(2.8%) and Finnish non-for-profit organizations (2.5%). In December
2008, The Finnish State transferred its 31.1% holding in Outokumpu to
its wholly-owned company Solidium Oy.
Shareholders that have more than 5% of the shares and votes in
Outokumpu Oyj are Solidium Oy (31.1%) and the Finnish Social
Insurance Institution (8.1%).
At the year-end, Outokumpu's closing share price was EUR 8.28 (2007:
EUR 21.21), down 61%. The average share price during the year was EUR
18.99 (2007: EUR 24.94) with EUR 33.99 (2007: EUR 31.65) as the
year's highest price and EUR 6.33 (2007: EUR 18.48) as the year's
lowest price. At the year-end, the market capitalization of Outokumpu
Oyj shares totaled EUR 1 502 million (2007: EUR 3 845 million). Share
turnover in 2008 was at almost the same level as it was in 2007, with
511.1 million (2007: 516.4 million) shares being traded on the Nasdaq
OMX Helsinki Ltd exchange. The total value of share turnover in 2008
was EUR 9 693 million (2007: EUR 12 882 million).
Outokumpu's fully paid share capital at the year-end totaled EUR
308.5 million and consisted of 181 451 883 shares. The average number
of shares outstanding during 2008 was 180 184 845.
Annual General Meeting 2008
The Annual General Meeting (AGM) on March 27, 2008 approved a
dividend of EUR 1.20 per share for 2007. Dividends totaling EUR 216
million were paid on April 8, 2008.
The AGM also authorized the Board of Directors to decide to
repurchase the Company's own shares as follows the maximum number of
shares to be repurchased is 18 000 000, currently representing 9.92%
of the Company's total number of registered shares. Based on earlier
authorizations, the Company currently holds 1 218 603 of its own
shares. The AGM authorized the Board of Directors to decide to issue
shares and grant special rights entitling to shares. The maximum
number of new shares to be issued through the share issue and/or by
granting special rights entitling to shares is 18 000 000, and, in
addition, the maximum number of treasury shares to be transferred is
18 000 000. The authorization includes the right to resolve upon a
directed share issue. These authorizations are valid until the next
Annual General Meeting, however no longer than May 31, 2009. To date
the authorizations have not been used.
The AGM decided on the number of the Board members, including the
Chairman and Vice Chairman, to be eight. Evert Henkes, Ole Johansson,
Victoire de Margerie, Anna Nilsson-Ehle, Leo Oksanen and Leena
Saarinen were re-elected as members to the Board of Directors, and
Jarmo Kilpelä and Anssi Soila were elected as new members. The Annual
General Meeting elected Ole Johansson as Chairman and Anssi Soila as
Vice Chairman of the Board. The AGM also resolved to form a
Shareholders' Nomination Committee to prepare proposals on the
composition and remuneration of the Board of Directors for
presentation to the next AGM.
KPMG Oy Ab, Authorized Public Accountants, was re-elected as the
Company's auditor for the term ending at the close of the next AGM.
At its first meeting, the Board of Directors of Outokumpu appointed
two permanent committees consisting of Board members. Leena Saarinen
(Chairman), Jarmo Kilpelä, Victoire de Margerie and Anssi Soila were
elected as members of the Board Audit Committee. Ole Johansson
(Chairman), Evert Henkes and Anna Nilsson-Ehle were elected as
members of the Board Nomination and Compensation Committee.
Shareholders' Nomination Committee
Outokumpu's Annual General Meeting of March 27, 2008 decided to
establish a Shareholders' Nomination Committee to prepare proposals
on the composition of the Board of Directors and director
remuneration for the following Annual General Meeting. The members
represent Outokumpu's four largest shareholders, registered in the
Finnish book-entry securities system as of November 3, 2008, which
accepted the assignment. The Shareholders' Nomination Committee of
Outokumpu consists of the following four shareholders: The Finnish
State (Jarmo Väisänen, Senior Financial Counsellor, Prime Minister's
Office), The Finnish Social Insurance Institution (Jorma Huuhtanen,
Director General), Ilmarinen Mutual Pension Insurance Company (Harri
Sailas, Chief Executive Officer) and the OP-Delta Fund (Reijo
Karhinen, Executive Chairman, OP-Pohjola Group). Jarmo Väisänen acts
as Chairman of the Committee. Ole Johansson, the Chairman of
Outokumpu's Board of Directors, serves as an expert member. The
Shareholders' Nomination Committee is required to submit its
proposals to the company's Board of Directors by February 2, 2009.
Events after the review period
Due to the very weak stainless steel demand Outokumpu continues to
cut production and starts negotiations with personnel regarding
temporary and permanent layoffs in several of its operating
countries. The planned actions are expected to result in temporary
layoffs of over 2000 people and reduction of about 250 jobs.
At Tornio Works Outokumpu plans to temporarily cease its ferrochrome
production (the Kemi mine and Ferrochrome Works), temporarily idle
one of its melt-shops and reduce shifts at almost all steel
production lines. Due to these production cuts the company will start
new statutory negotiations on temporary layoffs at Tornio Works in
Finland. The negotiations concern about 2000 people, also office and
maintenance employees.
In OSTP (Outokumpu Stainless Tubular Products) the total of 150 job
reductions are planned in Sweden, Finland, Estonia and Canada. In
Finland the negotiations concern both temporary and permanent
layoffs.
In Outokumpu Group Sales & Marketing organization the target is to
reduce approximately 50 jobs with layoffs and voluntary arrangements.
Additionally about 80 employees are planned to be temporarily
laid-off.
In the UK approximately 90 jobs are planned to be reduced in the
coming months as a result of reduced shifts in the Sheffield
melt-shop and the cost-saving measures in Outokumpu's Alloy Steel
Rods (ASR) and the sales company's integration of the former SoGePar
activities into its Sheffield based operation.
Outokumpu is through its current actions - Group-wide general cost
saving programs and personnel reductions - targeting fixed cost
savings in the range of EUR 100 million in 2009.
Short-term outlook
Visibility regarding the stainless steel markets is currently very
short. The deepening of the global financial crisis has a clear
impact on stainless steel demand, and Outokumpu expects stainless
markets to remain very weak in the first quarter of 2009. Base prices
have declined further in early 2009. Current order intake represents
about 50 percent of the Group's full production capacity.
For the first quarter of 2009, Outokumpu's operating profit continues
to be significantly negative due to the low base price level, low
delivery volumes and raw material-related inventory losses that
mainly result from the decline in the ferrochrome price. However,
Outokumpu's financial and liquidity position remains strong.
Board of Directors' proposal for profit distribution
In accordance with the Board of Directors' established dividend
policy, the payout ratio over a business cycle should be at least
one-third of the Group's profit for the period with the aim to have
stable annual payments to shareholders. In its annual dividend
proposal, the Board of Directors will, in addition to financial
results, take into consideration the Group's investment and
developing needs.
The Board of Directors is proposing to the Annual General Meeting to
be held on March 24, 2009 a dividend of EUR 0.50 per share to be paid
from the parent company's distributable funds on December 31, 2008
and that any remaining distributable funds be allocated to retained
earnings. The suggested dividend record date is March 27, 2009 and
the dividend will be paid on April 3, 2009.
According to the financial statements at December 31, 2008,
distributable funds of the parent company totaled EUR 924 million. No
material changes have taken place in the company's financial position
after the balance sheet date and the proposed dividend does not
compromise the company's financial standing.
In Espoo, February 3, 2009
Board of Directors
CONSOLIDATED FINANCIAL
STATEMENTS (all full year figures are audited)
income statement
Jan- Jan- Oct- Oct-
Dec Dec Dec Dec
EUR million 2008 2007 2008 2007
Continuing operations:
Sales 5 474 6 913 966 1 465
Other operating income 57 82 37 18
Costs and expenses -5 552 -6 364 -1 267 -1 447
Other operating expenses -42 -43 -8 -21
Operating profit -63 589 -271 15
Share of results in
associated companies -2 4 -1 -1
Financial income and expenses
Interest income 20 25 5 6
Interest expenses -74 -82 -21 -19
Market price gains and losses -2 0 -0 2
Other financial income 11 268 0 4
Other financial expenses -24 -5 -10 -1
Profit before taxes -134 798 -298 7
Income taxes 24 -138 71 -0
Net profit for the period
from continuing operations -110 660 -228 7
Discontinued operations:
Net profit for the period
from discontinued operations -79 -18 -5 -23
Net profit for the period -189 641 -233 -16
Attributable to:
Equity holders of the Company -189 638 -233 -16
Minority interest -0 4 -0 -0
Earnings per share
for profit attributable
to the equity
holders of the Company:
Earnings per share, EUR -1.05 3.52 -1.30 -0.09
Diluted earnings per share, EUR -1.04 3.50 -1.29 -0.09
Earnings per share from
continuing operations
attributable to the equity
holders of the Company:
Earnings per share, EUR -0.61 3.63 -1.27 0.04
Earnings per share from
discontinued operations
attributable to the equity
holders of the Company:
Earnings per share, EUR -0.44 -0.10 -0.03 -0.13
Condensed balance sheet
Dec 31 Dec 31
EUR million 2008 2007
ASSETS
Non-current assets
Intangible assets 584 475
Property, plant and equipment 2 027 1 980
Investments in associated companies 1) 156 163
Available-for-sale financial assets 1) 67 125
Derivative financial instruments 1) 9 37
Deferred tax assets 37 26
Trade and other receivables
Interest-bearing 1) 132 128
Non interest-bearing 55 51
Total non-current assets 3 067 2 986
Current assets
Inventories 1 204 1 630
Available-for-sale financial assets 1) 8 14
Derivative financial instruments 1) 92 26
Trade and other receivables
Interest-bearing 1) 25 10
Non interest-bearing 701 975
Cash and cash equivalents 1) 224 86
Total current assets 2 252 2 740
Receivables related to assets held for sale 1) 22 184
TOTAL ASSETS 5 341 5 910
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the Company
Share capital 308 308
Premium fund 702 701
Other reserves -13 72
Retained earnings 1 984 1 617
Net profit for the financial year -189 638
2 794 3 337
Minority interest 1 -
Total equity 2 795 3 337
Non-current liabilities
Long-term debt 1) 1 170 1 036
Derivative financial instruments 1) 48 10
Deferred tax liabilities 216 241
Pension obligations 64 58
Provisions 28 36
Trade and other payables 2 2
Total non-current liabilities 1 529 1 382
Current liabilities
Current debt 1) 501 420
Derivative financial instruments 1) 54 18
Income tax liabilities 5 22
Provisions 48 45
Trade and other payables
Interest-bearing 1) 26 26
Non interest-bearing 378 609
Total current liabilities 1 012 1 139
Liabilities related to assets held for sale 1) 6 52
TOTAL EQUITY AND LIABILITIES 5 341 5 910
1) Included in net interest-bearing debt.
Consolidated
statement
of changes in equity
Attributable to the equity
holders of the company
Share Unregister- Share Other Fair
capital ed share premium reserves value
EUR million capital fund reserves
Equity on December
31, 2006 308 0 701 11 144
Cash flow hedges, net
of tax - - - - 3
Fair value changes on
available-for-sale
financial assets, net
of tax - - - - 13
Available-for-sale
financial assets
recognized through
P&L - - - - -100
Net investment hedges - - - - -
Change in translation
differences - - - - -2
Items recognised
directly in equity - - - - -86
Net profit for the
period - - - - -
Total recognised
income and expenses - - - - -86
Transfers within
equity 0 -0 - 5 -
Dividends - - - - -
Treasury shares - - - - -
Share-based payments - - - - -
Share options
exercised 0 - 0 - -
Acquisition of
minority in OSTP - - - - -
Equity on December
31, 2007 308 - 701 16 57
Cash flow hedges, net
of tax - - - - -52
Fair value changes on
available-for-sale
financial assets, net
of tax - - - - -32
Available-for-sale
financial assets
recognized through
P&L - - - - 5
Net investment hedges - - - - -
Companies acquired - - - - -
Change in translation
differences - - - -0 -6
Items recognised
directly in equity - - - - -85
Net profit for the
period - - - - -
Total recognised
income and expenses - - - - -85
Transfers within
equity - - - 0 -
Dividends - - - - -
Share-based payments - - - - -
Share options
exercised 0 - 1 - -
Equity on December
31, 2008 308 - 702 15 -28
Attributable to the equity
holders of the Company
Treasury Cumulative Retained Minority Total
shares translation earnings interest equity
EUR million differences
Equity on December
31, 2006 -2 -35 1 927 17 3 071
Cash flow hedges, net
of tax - - - - 3
Fair value changes on
available-for-sale
financial assets, net
of tax - - - - 13
Available-for-sale
financial assets
recognized through
P&L - - - - -100
Net investment hedges - 3 - - 3
Change in translation
differences - -51 - 0 -53
Items recognised
directly in equity - -48 - 0 -134
Net profit for the
period - - 638 4 642
Total recognised
income and expenses - -48 638 4 508
Tranfers within
equity - - -5 - -
Dividends - - -199 - -199
Treasury shares -25 - - - -25
Share-based payments - - 3 - 3
Share options
exercised - - - - 0
Acquisition of
minority in OSTP - - - -21 -21
Equity on December
31, 2007 -27 -82 2 364 - 3 337
Cash flow hedges, net
of tax - - - - -52
Fair value changes on
available-for-sale
financial assets, net
of tax - - - - -32
Available-for-sale
financial assets
recognized through
P&L - - - - 5
Net investment hedges - 10 - - 10
Companies acquired - - - 1 1
Change in translation
differences - -66 - - -72
Items recognised
directly in equity - -56 - 1 -140
Net profit for the
period - - -189 -0 -189
Total recognised
income and expenses - -56 -189 1 -329
Tranfers within
equity - - -0 - -
Dividends - - -216 - -216
Share-based payments - - 2 - 2
Share options
exercised - - - - 1
Equity on December
31, 2008 -27 -138 1 961 1 2 795
Condensed statement of cash flows
Jan-Dec Jan-Dec
EUR million 2008 2007
Net profit for the period -189 641
Adjustments
Depreciation and amortization 206 204
Impairments 36 1
Loss on the sale of copper tube business 66 -
Gain on the sale
of Outotec shares - -142
Gain on the Talvivaara
transaction - -110
Other adjustments 255 199
Change in working capital 370 181
Dividends received 12 13
Interests received 5 10
Interests paid -76 -83
Income taxes paid -30 -239
Net cash from
operating activities 656 676
Purchases of assets -325 -163
Purchase of SoGePar shares -200 -
Purchase of other subsidiaries -4 -
Purchase of Talvivaara shares - -32
Acquisition of the minority in OSTP - -22
Proceeds from the sale of copper tube
business 49 -
Proceeds from the sale
of subsidiaries - 1
Proceeds from the sale
of other assets 31 15
Net cash from other
investing activities 0 4
Net cash from
investing activities -449 -197
Cash flow before
financing activities 207 479
Purchase of treasury shares - -25
Borrowings of long-term debt 341 151
Repayment of long-term debt -236 -388
Change in current debt 47 -180
Dividends paid -216 -199
Proceeds from the sale of Outotec shares - 158
Proceeds from the sale
of other financial assets 0 6
Other financing cash flow -1 1
Net cash from
financing activities -64 -477
Net change in cash
and cash equivalents 143 2
Cash and cash equivalents at
the beginning of the period 86 85
Foreign exchange rate effect -5 -1
Net change in cash
and cash equivalents 143 2
Cash and cash equivalents
at the end of the period 224 86
Key figures
Jan-Dec Jan-Dec
EUR million 2008 2007
Operating profit margin, % -1.2 8.5
Return on capital employed, % -1.6 13.9
Return on equity, % -6.2 20.0
Return on equity from
continuing operations, % -3.6 20.6
Capital employed at end of period 3 867 4 125
Net interest-bearing
debt at end of period 1 072 788
Equity-to-assets ratio
at end of period, % 52.4 56.5
Debt-to-equity ratio
at end of period, % 38.4 23.6
Earnings per share, EUR -1.05 3.52
Earnings per share from
continuing operations, EUR -0.61 3.63
Earnings per share from
discontinued operations, EUR -0.44 -0.10
Average number of shares
outstanding, in thousands 1) 180 185 180 922
Fully diluted earnings
per share, EUR -1.04 3.50
Fully diluted average number
of shares, in thousands 1) 181 190 181 920
Equity per share at end
of period, EUR 15.50 18.53
Number of shares outstanding
at end of period,
in thousands 1) 180 233 180 103
Capital expenditure,
continuing operations 544 190
Depreciation,
continuing operations 206 204
Average personnel for the
period, continuing operations 8 551 8 270
1) The number of own shares repurchased is excluded.
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This annual accounts bulletin is prepared in accordance with IAS 34
(Interim Financial Reporting). Mainly the same accounting policies
and methods of computation have been followed in the interim
financial statements as in the annual financial statements for 2007.
Inventories are stated at the lower of cost or net realizable value.
Outokumpu changed its calculation method for the cost of inventories
from first-in, first-out (FIFO) method to weighted average method in
2008. Also, Outokumpu adopted amended standard IAS 23 Borrowing Costs
in 2008. These changes have not had any material impact on the
interim financial statements.
Use of estimates
The preparation of the financial statements in accordance with IFRS
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, as well as the disclosure
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of income and expenses during
the reporting period. Accounting estimates are employed in the
financial statements to determine reported amounts, including the
realizability of certain assets, the useful lives of tangible and
intangible assets, income taxes, provisions, pension obligations,
impairment of goodwill and other items. Although these estimates are
based on management's best knowledge of current events and actions,
actual results may differ from the estimates.
Shares and share capital
The total number of Outokumpu Oyj shares was 181 451 883 and the
share capital amounted to EUR 308.5 million on December 31, 2008.
Outokumpu Oyj held 1 218 603 treasury shares on December 31, 2008.
This corresponded to 0.7% of the share capital and the total voting
rights of the Company on December 31, 2008.
Outokumpu has a stock option program for management (2003 option
program). The stock options have been allocated as part of the
Group's incentive programs to key personnel of Outokumpu. The option
program has three parts 2003A, 2003B and 2003C. On December 31, 2008
a total of 108 498 Outokumpu Oyj shares had been subscribed for on
the basis of 2003A stock option program and a total of 82 830
Outokumpu Oyj shares had been subscribed for on the basis of 2003B
stock option program. An aggregate maximum of 550 804 Outokumpu Oyj
shares can be subscribed for with the remaining 2003A stock options
and 945 990 with the remaining 2003B stock options. In accordance
with the terms and conditions of the option program, the dividend
adjusted share price for a stock option 2003A was EUR 7.25 and for
stock option 2003B EUR 10.31 on December 31, 2008. Trading with
Outokumpu Oyj's stock options 2003C commenced on the Main List of the
Nasdaq OMX Helsinki as of September 1, 2008. On December 31, 2008 a
total of 10 000 Outokumpu Oyj shares had been subscribed for on the
basis of 2003C stock option program. An aggregate maximum of 90 500
Outokumpu Oyj shares can be subscribed for with the remaining 2003C
stock options. In accordance with the terms and conditions of the
option program, the dividend adjusted share price for a stock option
was EUR 10.94 on December 31, 2008. The share subscription period for
the 2003C stock options is September 1, 2008 to March 1, 2011. As a
result of the share subscriptions with the 2003 stock options,
Outokumpu Oyj's share capital may be increased by a maximum of EUR 2
698 400 and the number of shares by a maximum of 1 587 294 shares.
This corresponds to 0.9% of the Company's shares and voting rights.
Outokumpu has also a share-based incentive program for years
2006-2010 as part of the key employee incentive and commitment system
of the Company. If persons covered by the program were to receive the
number of shares in accordance with the maximum reward, currently a
total of 823 760 shares, their shareholding obtained via the program
would amount to 0.5% of the Company's shares and voting rights.
The detailed information of the 2003 option program and of the
share-based incentive program for 2006-2010 can be found in the
annual report of Outokumpu.
Acquisitions
SoGePar
In July, Outokumpu acquired all the shares in SoGePar Group with
final purchase price of EUR 224 million. Outokumpu also took on debt
in the company with amount of EUR 87 million. SoGePar has been
consolidated into Outokumpu's accounts with effect from August 1,
2008.
SoGePar is an Italian distributor of stainless steel. It operates
stainless steel service centers in Castelleone in Italy and in
Rotherham in the UK. SoGePar also has stock operations in Italy, the
UK, Belgium, Finland, France and Ireland, as well as a commercial
office in Germany and a representative office in Turkey.
The purchase price has been allocated to the assets, liabilities and
contingent liabilities at their fair value. The purchase price has
been allocated to customer relationships, which are amortized during
their estimated lifetime of four years. The goodwill recognised on
the acquisition is attributable mainly to the skills and market
knowledge of the acquired business's work force and the synergies are
expected to be achieved from integrating the company into the Group's
existing sales and marketing organisation. Also synergy benefits are
expected when utilising Outokumpu's own production facilities to
supply material to the acquired units. The purchase price allocation
is provisional.
Between August 1 and December 31, 2008, SoGePar sales was EUR 143
million and result for the period was EUR 37 million negative.
Acquisitions
Preliminary purchase price allocation
EUR million
Purchase price 224
Acquisition related costs 4
Fair value of acquired assets and
liabilities -148
Goodwill 79
Acquired cash and cash equivalents -27
Cash impact of the acquisition 200
Acquired assets, liabilities and contingent liabilities
Seller's book
EUR million values Fair values
Non-current assets
Intangible assets 0 47
Property, plant and equipment 33 33
Non-current financial assets 11 11
Current assets
Inventories 168 168
Current financial assets
Interest-bearing 6 6
Non interest-bearing 156 156
Cash and cash equivalents 27 27
Non-current liabilities
Interest-bearing -25 -25
Non interest-bearing -21 -33
Current liabilities
Interest-bearing -95 -95
Non interest-bearing -147 -147
Total 114 148
Avesta Klippcenter
In July, Outokumpu acquired the operations of Avesta Klippcenter AB
in Avesta, Sweden. Avesta Klippcenter's main business is to process
stainless steel material from Outokumpu's mills in Sweden for
remelting in Avesta's melt shop. Through the acquisition Outokumpu's
raw material handling capacity will increase, and it will secure
competitive supply for the Avesta stainless steel melt shop. The
total consideration is some EUR 8 million. The purchase price
allocation is preliminary and is subject to finalization of the fair
valuation of the acquired assets. The preliminary assumption is that
the excess value will be allocated partly to intangible assets and
partly to property, plant and equipment. The company has been
consolidated into Outokumpu's accounts with effect from July 1, 2008.
Between July 1 and December 31, 2008, Avesta Klippcenter sales was
EUR 2 million and result for the period was EUR 1 million.
Outokumpu Armetal Stainless Pipe Co., Ltd
In February, Outokumpu OSTP and Saudi Arabian tube manufacturer
Armetal, a company in the Al-Hejailan Group, agreed to form Outokumpu
Armetal Stainless Pipe Co., Ltd, a 51/49 stainless steel tubular
joint venture located in Riyadh, Saudi Arabia. The joint venture
company was founded and has been consolidated into Outokumpu's
accounts with effect from October 1, 2008. Minority interest of 49%
is presented separately from the net profit and disclosed as a
separate item in the equity. Outokumpu has invested in the company
EUR 1 million as equity and granted loans amounting to EUR 7 million.
Based on the preliminary assumption, the excess value of the
acquisition of Armetal business will be allocated partly to
intangible assets. The purchase price allocation is preliminary.
If all the above mentioned acquisitions had occurred on January 1,
2008, management estimates that Outokumpu Group consolidated sales
for the period would have been EUR 5 718 million and consolidated
profit EUR -182 million. This estimate is based on the actual
transactions of the acquired companies with Outokumpu and third
parties.
Non-current assets held for sale and discontinued operations
In June, 2008 Outokumpu sold its remaining copper tube assets to
Cupori Group Oy. Outokumpu received EUR 52 million as consideration
of the sale. A capital loss of EUR 66 million was booked on the
transaction.
The assets sold comprise the copper plumbing installation and
industrial tube manufacturing companies in Pori in Finland, Zaratamo
in Spain, Västerås in Sweden and Liège in Belgium, as well as the
copper tube sales companies in France, Germany and Italy. In 2007,
these businesses generated sales of some EUR 510 million with a net
loss of some EUR 5 million with a number of personnel of some 730.
The remaining brass rod business produces brass rods for applications
in the construction, electrical and automotive industries. The brass
rod plant is located in Drünen in the Netherlands and the unit also
has a 50% stake in a brass rod company in Gusum, Sweden. Outokumpu
Brass employs some 170 employees. The assets and liabilities of brass
rod business are presented as held for sale. Outokumpu intends to
divest also the brass rod business.
Disputes and litigations
In April 2007, Outokumpu was served a Statement of Objection in which
it was alleged that a former Outokumpu subsidiary has been
participating in cartel activities at the turn of the century. The
investigations have been concluded and Outokumpu was fully released
from all allegations with respect to this case.
Specification of non-current
assets held for sale
and discontinued operations
Income statement
Jan-Dec Jan-Dec
EUR million 2008 2007
Sales 267 599
Expenses -269 -607
Operating profit -2 -8
Net financial items -4 -6
Profit before taxes -6 -15
Taxes -0 -1
Profit after taxes -6 -15
Impairment loss recognized
on the fair valuation of the
Outokumpu Copper Tube and Brass
division's assets and liabilities -6 -3
Loss on the sale of copper tube
business -66 -
Taxes - -
After-tax result from the
disposal and impairment loss -73 -3
Minority interest - -
Net profit for the period
from discontinued operations -79 -18
Balance sheet
Dec 31 Dec 31
EUR million 2008 2007
Assets
Intangible and tangible assets 2 6
Other non-current assets 3 4
Inventories 9 91
Other current non
interest-bearing assets 8 83
22 184
Liabilities
Provisions 2 4
Other non-current non
interest-bearing liabilities 1 5
Trade payables 2 32
Other current non
interest-bearing liabilities 1 11
6 52
Cash flows
Jan-Dec Jan-Dec
EUR million 2008 2007
Operating cash flows -8 18
Investing cash flows -16 -3
Financing cash flows 19 -19
Total cash flows -5 -4
Major non-recurring items
in operating profit
Jan-Dec Jan-Dec
EUR million 2008 2007
Thin Strip restructuring in Britain -66 -11
Redundancy provisions -17 -
Gain on the sale of
Hitura mine in Finland - 25
-83 14
Major non-recurring items in
financial income and expenses
Jan-Dec Jan-Dec
EUR million 2008 2007
Impairment of Belvedere shares -21 -
Gain on the sale
of Outotec shares - 142
Gain on the Talvivaara transaction - 110
-21 252
Income taxes
Jan-Dec Jan-Dec
EUR million 2008 2007
Current taxes -6 -107
Deferred taxes 30 -31
24 -138
Property, plant
and equipment
Jan 1, Jan 1,
2008 - 2007 -
Dec 31, Dec 31,
EUR million 2008 2007
Historical cost at the
beginning of the period 3 984 4 009
Translation differences -190 -76
Additions 301 137
Acquisition of subsidiaries 36 -
Disposal of subsidiaries - -20
Disposals -108 -67
Reclassifications -2 0
Historical cost at
the end of the period 4 021 3 984
Accumulated depreciation at
the beginning of the period -2 004 -1 939
Translation differences 115 47
Disposal of subsidiaries - 19
Disposals 83 56
Reclassifications -0 -0
Depreciation -188 -190
Impairments - 3
Accumulated depreciation at
the end of the period -1 994 -2 004
Carrying value at
the end of the period 2 027 1 980
Carrying value at the
beginning of the period 1 980 2 069
Commitments
Dec 31 Dec 31
EUR million 2008 2007
Mortgages and pledges
Mortgages on land 189 122
Other pledges 5 0
Guarantees
On behalf of subsidiaries
for commercial commitments 55 41
On behalf of associated companies
for financing 5 5
Other commitments 59 64
Minimum future lease
payments on
operating leases 52 56
Group's off-balance sheet investment commitments
totaled EUR 93 million on Dec 31, 2008 (Dec 31, 2007:
EUR 37 million). On July 3, 2008 Outokumpu signed a
deal with Vattenfall on electricity deliveries
amounting to around fifteen terawatt hours (TWh)
during a ten-year period in Finland and Sweden.
Related party transactions
Transactions and balances
with associated companies
Dec 31 Dec 31
EUR million 2008 2007
Sales 0 0
Purchases -13 -9
Financial income and expenses 2 2
Loans and other receivables 7 9
Trade and other receivables 0 0
Fair values and nominal
amounts of
derivative
instruments
Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31
2008 2008 2008 2007 2008 2007
Positive Negative Net Net
fair fair fair fair Nominal Nominal
EUR million value value value value amounts amounts
Currency and interest
rate derivatives
Currency forwards 69 68 0 8 1 920 1 992
Interest rate swaps 2 - 2 10 200 282
Cross-currency
swaps 7 - 7 - 46 -
Number Number
of of
shares, shares,
million million
Stock options
Belvedere Resources
Ltd. 0 - 0 3 3.7 3.7
Tons Tons
Metal derivatives
Forward and futures
nickel contracts 5 5 -0 0 4 729 3 114
Nickel options,
bought 14 - 14 0 16 758 24
Nickel options,
sold - 14 -14 - 11 478 -
Forward
molybdenum
contracts - - - -0 - 5
Forward and futures
copper contracts 2 2 -0 -2 4 925 11 775
Forward and futures
zinc contracts 0 0 -0 -0 1 025 1 100
Emission allowance
derivatives 1 - 1 0 270 000 80 000
TWh TWh
Electricity
derivatives 2 14 -11 16 1.3 2.3
101 103 -1 35
Segment information
General Stainless
EUR million I/07 II/07 III/07 IV/07 2007
Sales 1 700 1 670 879 1 073 5 321
of which Tornio Works 1 206 1 038 516 708 3 468
Operating profit 245 188 -224 11 220
of which Tornio Works 227 143 -195 3 178
Operating capital at
the end of period 3 047 3 007 2 789 2 607 2 607
Average personnel
for the period 3 506 3 794 3 807 3 549 3 682
Deliveries of main
products (1 000 tons)
Cold rolled 187 151 94 155 587
White hot strip 81 82 41 66 270
Semi-finished products 117 118 64 85 383
Total deliveries
of the division 386 350 198 305 1 240
EUR million I/08 II/08 III/08 IV/08 2008
Sales 1 304 1 222 933 687 4 147
of which Tornio Works 905 833 567 396 2 701
Operating profit 81 125 -35 -177 -6
of which Tornio Works 67 114 -22 -93 66
Operating capital at
the end of period 2 722 2 671 2 820 2 663 2 663
Average personnel
for the period 3 578 4 000 4 163 3 989 3 933
Deliveries of main
products (1 000 tons)
Cold rolled 196 162 151 121 628
White hot strip 102 85 58 51 297
Semi-finished products 100 113 76 51 340
Total deliveries
of the division 398 359 285 223 1 265
Specialty Stainless
EUR million I/07 II/07 III/07 IV/07 2007
Sales 1 003 1 028 687 738 3 456
Operating profit 182 196 -51 9 337
Operating capital at
the end of period 1 668 1 871 1 657 1 513 1 513
Average personnel
for the period 4 146 4 188 4 185 4 107 4 135
Deliveries of main
products (1 000 tons)
Cold rolled 51 52 33 38 174
White hot strip 43 38 23 31 135
Quarto plate 41 43 30 38 151
Tubular products 20 17 12 15 63
Long products 16 15 11 11 52
Total deliveries
of the division 170 164 109 133 574
EUR million I/08 II/08 III/08 IV/08 2008
Sales 786 778 630 512 2 705
Operating profit 42 44 -63 -123 -101
Operating capital at
the end of period 1 430 1 449 1 378 1 174 1 174
Average personnel
for the period 4 115 4 096 4 192 4 103 4 127
Deliveries of main
products (1 000 tons)
Cold rolled 46 44 35 29 154
White hot strip 45 40 31 27 142
Quarto plate 35 37 28 27 126
Tubular products 19 18 14 15 66
Long products 14 14 14 10 52
Total deliveries
of the division 161 153 121 106 541
Other operations
EUR million I/07 II/07 III/07 IV/07 2007
Sales 64 63 53 57 237
Operating profit 1 19 8 -6 21
Operating capital at
the end of period -125 101 184 236 236
Average personnel
for the period 477 459 424 431 453
EUR million I/08 II/08 III/08 IV/08 2008
Sales 64 63 69 62 258
Operating profit -20 4 29 25 38
Operating capital at
the end of period -20 283 266 214 214
Average personnel
for the period 447 487 507 525 492
Income statement by quarter
EUR million I/07 II/07 III/07 IV/07 2007
Continuing operations:
Sales
General Stainless 1 700 1 670 879 1 073 5 321
of which intersegment sales 421 430 230 234 1 315
Specialty Stainless 1 003 1 028 687 738 3 456
of which intersegment sales 169 193 119 124 605
Other operations 64 63 53 57 237
of which intersegment sales 48 45 43 45 181
Intra-group sales -638 -669 -391 -403 -2 101
Total sales 2 129 2 092 1 227 1 465 6 913
Operating profit
General Stainless 245 188 -224 11 220
Specialty Stainless 182 196 -51 9 337
Other operations 1 19 8 -6 21
Intra-group items -4 2 11 2 11
Total operating profit 424 406 -256 15 589
Share of results
in associated companies 2 4 -2 -1 4
Financial income and expenses -10 242 -19 -7 206
Profit before taxes 416 652 -277 7 798
Income taxes -105 -100 67 -0 -138
Net profit for the period
from continuing operations 311 553 -210 7 660
Net profit for the period
from discontinued
operations -4 12 -4 -23 -18
Net profit for the period 307 565 -214 -16 641
Attributable to:
Equity holders of the Company 305 563 -214 -16 638
Minority interest 2 2 -0 -0 4
EUR million I/08 II/08 III/08 IV/08 2008
Continuing operations:
Sales
General Stainless 1 304 1 222 933 687 4 147
of which intersegment sales 284 337 216 157 993
Specialty Stainless 786 778 630 512 2 705
of which intersegment sales 124 120 85 78 407
Other operations 64 63 69 62 258
of which intersegment sales 57 57 61 61 235
Intra-group sales -465 -514 -362 -295 -1 636
Total sales 1 689 1 549 1 270 966 5 474
Operating profit
General Stainless 81 125 -35 -177 -6
Specialty Stainless 42 44 -63 -123 -101
Other operations -20 4 29 25 38
Intra-group items -3 1 3 4 6
Total operating profit 100 174 -66 -271 -63
Share of results
in associated companies 0 1 -2 -1 -2
Financial income and expenses -20 -8 -14 -26 -69
Profit before taxes 80 166 -82 -298 -134
Income taxes -19 -36 9 71 24
Net profit for the period
from continuing operations 61 130 -73 -228 -110
Net profit for the period
from discontinued
operations 2 -74 -1 -5 -79
Net profit for the period 63 56 -74 -233 -189
Attributable to:
Equity holders of the Company 63 56 -74 -233 -189
Minority interest - - - -0 -0
Major non-recurring
items in operating profit
EUR million I/07 II/07 III/07 IV/07 2007
Specialty Stainless
Thin Strip restructuring
in Britain - - -11 - -11
Redundancy provisions - - - - -
Other operations
Gain on sale of
Hitura mine in Finland - 25 - - 25
- 25 -11 - 14
EUR million I/08 II/08 III/08 IV/08 2008
Specialty Stainless
Thin Strip restructuring
in Britain - - -66 - -66
Redundancy provisions - - - -17 -17
Other operations
Gain on sale of
Hitura mine in Finland - - - - -
- - -66 -17 -83
Major non-recurring items in
financial income and expenses
EUR million I/07 II/07 III/07 IV/07 2007
Impairment of Belvedere shares - - - - -
Gain on the sale of
Outotec shares - 142 - - 142
Gain on the Talvivaara
transaction - 110 - - 110
- 252 - - 252
EUR million I/08 II/08 III/08 IV/08 2008
Impairment of Belvedere shares -12 - - -9 -21
Gain on the sale of
Outotec shares - - - - -
Gain on the Talvivaara
transaction - - - - -
-12 - - -9 -21
Key figures by quarter
EUR million I/07 II/07 III/07 IV/07
Operating profit margin, % 19.9 19.4 -20.9 1.0
Return on capital employed, % 38.8 35.5 -22.3 1.4
Return on equity, % 39.3 66.2 -24.3 -2.0
Return on equity,
continuing operations, % 39.8 64.8 -23.9 0.8
Capital employed at end of
period 4 377 4 753 4 421 4 125
Net interest-bearing
debt at end of period 1 189 1 119 1 016 788
Equity-to-assets ratio
at end of period, % 47.2 50.9 54.6 56.5
Debt-to-equity ratio
at end of period, % 37.3 30.8 29.8 23.6
Earnings per share, EUR 1.69 3.11 -1.19 -0.09
Earnings per share from
continuing operations, EUR 1.71 3.04 -1.17 0.04
Earnings per share from
discontinued operations, EUR -0.02 0.07 -0.02 -0.13
Average number of shares
outstanding, in thousands 1) 181 067 181 082 181 084 180 680
Equity per share
at end of period, EUR 17.51 20.07 18.81 18.53
Number of shares outstanding
at end of period, in thousands
1) 181 082 181 082 181 084 180 103
Capital expenditure,
continuing operations 25 75 47 43
Depreciation, continuing
operations 51 50 51 52
Average personnel for the
period,
continuing operations 8 129 8 441 8 416 8 086
EUR million I/08 II/08 III/08 IV/08
Operating profit margin, % 5.9 11.2 -5.2 -28.1
Return on capital employed, % 10.0 17.2 -6.3 -26.8
Return on equity, % 7.7 7.0 -9.3 -31.5
Return on equity,
continuing operations, % 7.5 16.3 -9.2 -30.8
Capital employed at end of
period 3 899 4 166 4 228 3 867
Net interest-bearing
debt at end of period 737 939 1 096 1 072
Equity-to-assets ratio
at end of period, % 53.2 54.8 52.3 52.4
Debt-to-equity ratio
at end of period, % 23.3 29.1 35.0 38.4
Earnings per share, EUR 0.35 0.31 -0.41 -1.30
Earnings per share from
continuing operations, EUR 0.34 0.72 -0.41 -1.27
Earnings per share from
discontinued operations, EUR 0.01 -0.41 -0.01 -0.03
Average number of shares
outstanding, in thousands 1) 180 112 180 172 180 223 180 231
Equity per share
at end of period, EUR 17.56 17.91 17.38 15.50
Number of shares outstanding
at end of period, in thousands
1) 180 127 180 222 180 228 180 233
Capital expenditure,
continuing operations 41 56 317 129
Depreciation, continuing
operations 50 50 52 54
Average personnel for the
period,
continuing operations 8 140 8 583 8 862 8 617
1) The number of own shares repurchased is
excluded.
Definitions of key
figures
Total equity + net interest-bearing
Capital employed = debt
Capital employed + net tax
Operating capital = liability
Return on equity = Net profit for the financial year × 100
Total equity (average for the
period)
Return on capital = Operating profit × 100
employed (ROCE) Capital employed (average for the period)
Net interest- Total interest-bearing debt
bearing debt = - total interest-bearing assets
Equity-to-assets ratio = Total equity × 100
Total assets - advances received
Debt-to-equity ratio = Net interest-bearing debt × 100
Total equity
Net profit for the financial year
Earnings per share = attributable to the equity holders
Adjusted average number
of shares during the period
Equity attributable to
Equity per share = the equity holders
Adjusted number of shares
at the end of the period
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