Outokumpu Oyj - Company Announcement

Outokumpu's operating profit in the fourth quarter lower than expected, actions taken to improve profitability, investment program postponed

STOCK EXCHANGE RELEASE
December 11, 2008 at 9.00 a.m.

Stainless steel demand has weakened further and Outokumpu's fourth
quarter performance will be below earlier indications. The company is
taking actions to prepare for a period of possible prolonged demand
weakness and will now prioritize profitability improvement and cash
generation in the short-term. In order to secure cost efficiency,
both fixed and variable costs are addressed. In this respect also
personnel reductions are anticipated both on a permanent and on
temporary basis.

Outokumpu decided to review its investment program in October. Based
on the review, the investment program is postponed almost entirely to
maximize cash flow and maintain balance sheet flexibility in 2009.

CEO Juha Rantanen comments:"Outokumpu is well positioned to face the current turmoil due to our
strong balance sheet and good liquidity position. However, the market
situation has deteriorated much faster than we anticipated still in
October due to the financial crisis as experienced by our customers.
The visibility into 2009 is very poor, but we have to assume that
things may not improve. Thus we are now taking these strong actions
to improve cash flow and profitability. Unfortunately, we cannot
avoid considering personnel reductions in this context.

At the same time, we remain committed to our strategy. We want to
sell more to end-use and project customers, we want to have a stable
relationship with distributors, and we want to increase the sales of
special products and ferritics. Although we will postpone many of the
related investments, we have currently enough available production
capacity to continue in our strategic direction."
Fourth quarter outlook revised

The stainless steel demand is currently very weak. All end-user
segments have reduced their purchases as companies postpone their
investments and the construction activity is low. Distributors seek
to minimize cash use and reduce their inventories. Due to further
decline in raw material prices distributors are still postponing
their purchases in expectation of lower prices. As a result Outokumpu
is revising its fourth quarter outlook as follows:

- Delivery volumes are expected to fall to around 250 000 tons
(previously expected at the same level or slightly above the 323 000
tons in the third quarter)
- Prices have continued to decline in the fourth quarter. Currently
the German 2mm cold rolled 304 stainless steel sheet base price is
around 1000 EUR/t. (previously prices were expected to stabilize with
no further price erosion, CRU estimated base price for October at 1
080 EUR/t.)
- Underlying operational result is expected to be negative in the
order of EUR 50 million (previously slightly positive)
- Raw material-related inventory losses are expected to be in the
order of EUR 150 million at current raw material prices. These
include timing losses and net-realizable value write-downs due to the
further declined prices of nickel, molybdenum and recycled steel
(previously EUR 50-100 million of nickel-related inventory losses).
- Operating profit is expected to be negative (no change)
- Substantial release of working capital will result in continuing
strong cash flow from operations (no change)
Actions taken to improve profitability
As a result of the current outlook for world economy, the company is
preparing for a scenario where the market is not improving in 2009.
Thus Outokumpu is forced to take actions to adjust its operations to
delivery volumes that are clearly below the company's production
capacity and stainless steel prices that are lower than the long-term
average levels.

Outokumpu's current action plans will reduce its annual fixed costs
by at least EUR 50 million in 2009. The aim is to achieve these cost
savings through personnel reductions and general cost saving
programs. The main actions are the following:

A number of short-term measures to save costs and adjust to lower
production volumes were agreed at the Tornio plant at the beginning
of December. If the market situation continues to be difficult,
Outokumpu will take additional actions in Tornio to lower the cost
level.

Further, due to the low order load and the necessity to save costs
Outokumpu will start negotiations with personnel representatives with
the aim to reduce about 450 jobs in the company's Swedish production
sites.

Outokumpu will also start negotiations with personnel representatives
to reduce costs in the head office functions in respective countries.
The negotiations will be held according to local legislation in each
country and may lead to permanent or temporary layoffs. The number of
Outokumpu's employees in head office functions globally is some 350.

Also in Outokumpu's other units, cost saving measures might lead to
further reductions of personnel.

Outokumpu is committed to support its personnel in this process in a
responsible way. The support will be based on common global
principles and include mainly local actions in each country. Personal
assistance and coaching will be available.

Investment program postponed

Outokumpu decided to review its investment program in October as a
result of the global financial crisis and suddenly weakening
stainless steel demand. Based on the analysis Outokumpu has decided
to postpone its 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. All of these
investments continue to have strong strategic rational.

Outokumpu's target to balance the product mix by selling more value
added special products and ferritic (non-nickel) grades can be
achieved in the coming years by higher utilization of current
capacity and product mix changes. Consequently, the investments in
high-purity ferritic and bright-annealing in Tornio, Finland, special
grades in Avesta, Sweden and quarto plate in Degerfors, Sweden are
postponed. The investment to expand quarto plate production capacity
in New Castle (IN), the US, will be proceeding according to plan.

Outokumpu's strategy is also to increase the share of end-user and
project sales, which is supported by investments in the company's own
service center network. Due to the synergy benefits from the
acquisition of the Italian independent distributor, SoGePar, the
investment program in service centers in Europe has been streamlined
and optimized. Only the investment in the service center in Willich,
Germany will proceed according to plan. All other service center
investments in Poland, France and Southern Germany are reduced in
scope or postponed for the time being.

The service center investment in India is postponed due to the
ongoing antidumping investigation into stainless steel imports by
Indian government. The plate service center in China will be
proceeding according to plan.

Contrary to the initial scope of the investment project review, also
the investment to double the ferrochrome production capacity in
Tornio is postponed until further notice due to the weak market
outlook of stainless steel, current oversupply and declined price
level for ferrochrome.

As a result of the investment project review a total of some EUR 1.5
billion of capital expenditure is postponed. For 2009, Outokumpu now
estimates capital expenditure of EUR 300 million instead of the
originally planned EUR 850 million. Most of the spending in 2009 is
related to expansion projects that are close to being finalized and
some mandatory parts of the recently started projects. EUR 100
million of the capital expenditure in 2009 is maintenance related.
Conference call for investors and analysts

A conference call for analysts and investors hosted by CEO Juha
Rantanen and Deputy CEO Karri Kaitue will be held today at 1.00 pm
EET.

To follow the presentation during the conference call, please click
on the link:

http://wcc.webeventservices.com/view/wl/r.htm?e=128601&s=1&k=CD3FBA37AD507E650A739658E715363C&cb=genesys

To participate at the conference call, please dial one of the
following numbers 5-10 minutes before the conference:

In Finland: +358 9 2313 9201
In the UK: +44 207 162 0077
In the US: +1 334 323 6201

The conference call presentation will also be available on
www.outokumpu.com >> Investors.

For further information, please contact:

Juha Rantanen, CEO, tel. +358 9 421 3111
Karri Kaitue, Deputy CEO, tel. +358 9 421 5506

CEO Juha Rantanen will be available for interviews, please contact
Anna Vuolanen, VP - Media Relations, tel. +358 40 705 5734, for the
interviews.

OUTOKUMPU OYJ
Corporate Management

Ingela Ulfves
Vice President - Investor Relations and Financial Communications
tel. + 358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com
www.outokumpu.com

Attachments:

ENG_Release_DEC11122008.pdf