2010-10-21 08:00:00 CEST
2010-10-21 08:00:48 CEST
REGULATED INFORMATION
Outokumpu Oyj - Interim report (Q1 and Q3)
Outokumpu's third quarter 2010 - seasonally lower demand resulted in a loss-making quarter
INTERIM REPORT
October 21, 2010 9.00 am EET
Third-quarter 2010 highlights
- Operating loss EUR 49 million (II/2010: EUR 71 million profit) including some
EUR 39 million of raw material-related losses (II/2010: EUR 55 million gains),
underlying operational result some EUR -10 million (II/2010: EUR 16 million).
- EBITDA EUR 13 million (II/2010: EUR 128 million), operative cash flow turned
positive in September but was EUR -112 million for the quarter (II/2010: EUR
-314 million) due to higher metal prices and increased inventory levels.
- Annual maintenance breaks at Group sites and normal seasonality reduced
delivery volumes, which totalled 307 000 tonnes (II/2010: 339 000 tonnes).
- Strategic priorities adjusted, vision and strategic direction remain
unchanged.
Group key figures
III/10 II/10 III/09 2009
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Sales EUR million 999 1 110 587 2 611
Operating profit EUR million -49 71 -65 -438
EBITDA EUR million 13 128 2 -212
Non-recurring items
in operating profit EUR million - - -15 -20
Profit before taxes EUR million -88 63 -81 -474
Net profit for the period
from continuing operations EUR million -55 43 -55 -332
Net profit for the period EUR million -56 44 -56 -336
Earnings per share
from continuing operations EUR -0.30 0.24 -0.30 -1.83
Earnings per share EUR -0.31 0.24 -0.31 -1.86
Return on capital employed % -4.6 7.2 -7.6 -11.7
Net cash generated from
operating activities 1) EUR million -112 -314 -10 198
Capital expenditure,
continuing operations EUR million 40 40 55 245
Net interest-bearing debt
at end of period EUR million 1 818 1 683 1 014 1 183
Debt-to-equity ratio at
end of period % 74.4 67.6 41.4 48.2
Stainless steel deliveries 1 000 tonnes 307 339 238 1 030
Stainless steel
base price 2) EUR/tonne 1 245 1 317 1 307 1 161
Personnel at the
end of period,
continuing operations 7 887 8 617 7 699 7 606
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1) Cash flows presented for continuing operations.
2) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
SHORT-TERM OUTLOOK
Some pick-up in demand for standard grades has occurred after the summer period
in Europe. The increasing price of nickel has also had a positive effect
primarily on distributors' buying behaviour. Distributors' inventory levels are
estimated to be close to normal levels. Demand for special grades and products
however continues to be softer and no clear recovery among investment-driven
end-use segments has taken place.
Lead times on mill-deliveries are still normal at 6-8 weeks. Outokumpu's
deliveries of stainless steel in the fourth quarter are expected to improve
compared to the third quarter and be close to volumes in the second quarter
(339 000 tonnes). Outokumpu's average base price for all flat products is
expected to decline by up to 50 EUR/tonne compared to the third quarter due to
weaker geographic and product mix. Comparable market and product specific base
prices are however expected to be relatively unchanged in the fourth quarter.
The weaker US dollar and stronger Swedish krona will have a negative impact on
Outokumpu's profitability.
Outokumpu's underlying operational result*) in the fourth quarter is expected to
be around break-even. At current metal prices, raw material-related timing gains
amounting to some tens of millions of euros are expected in the fourth quarter
as a result of the increase in metal prices after the summer. Subject to metal
price and currency developments, cash flow (before investments) is expected to
be positive in the fourth quarter as a consequence of reduced inventories.
*) Underlying operational result= Operating profit without raw material-related
inventory gains / losses and non-recurring items.
CEO Juha Rantanen:"Outokumpu's third-quarter loss is mainly a result of the seasonal decline in
delivery volumes. We'll get back on the improving profit trend as we foresee
better results in the fourth quarter compared to the third quarter this year and
the fourth quarter a year ago. Underlying demand for standard grades continues
to be satisfactory while the expected recovery in demand from investment-driven
industries has not materialised yet. Customers are hesitant to make investment
decisions due to overall macroeconomic uncertainty. This is the main reason why
we are still operating at only 75% of our capacity. The recent currency
fluctuations are also having a negative impact on our performance and overall
market sentiment.
We are confident, however, of the attractiveness of the stainless industry.
Several global trends are supporting the long-term growth of stainless markets.
Outokumpu is uniquely positioned to capture these opportunities due to Tornio's
cost competitiveness and our capabilities in the specialties products. The
recently revised strategy provides concrete plans on how we will improve the
profitability for the Group."
The attachments present the Management Analysis for the third-quarter operating
result and the Interim Review by the Board of Directors for January-September
2010, the accounts and notes to the interim accounts. This report is unaudited.
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 1.00 pm
A combined news conference, conference call and live webcast concerning the
third-quarter 2010 results will be held on October 21, 2010 at 1.00 pm EET
(12.00 pm CET, 6.00 am US EST, 11.00 am UK time) at Hotel Kämp, conference room
Akseli Gallen-Kallela, address 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 4087
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 atwww.outokumpu.com/Investors.
An on-demand webcast of the news conference will be available at
www.outokumpu.com as of October 21, 2010 at around 3.00 pm.
OUTOKUMPU OYJ
Corporate Management
MANAGEMENT ANALYSIS - THIRD-QUARTER OPERATING RESULT
Group key figures
EUR million I/09 II/09 III/09 IV/09 2009
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Sales
General Stainless 476 501 496 592 2 065
Specialty Stainless 371 278 258 332 1 239
Other operations 66 58 56 62 243
Intra-group sales -233 -220 -224 -259 -935
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The Group 679 617 587 728 2 611
Operating profit
General Stainless -157 -52 -38 -12 -259
Specialty Stainless -82 -37 -21 -10 -149
Other operations -12 -5 -4 -9 -31
Intra-group items 2 0 -3 2 1
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The Group -249 -94 -65 -29 -438
EUR million I/10 II/10 III/10
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Sales
General Stainless 754 962 860
Specialty Stainless 367 469 397
Other operations 89 86 85
Intra-group sales -295 -407 -342
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The Group 916 1 110 999
Operating profit
General Stainless -2 75 -52
Specialty Stainless -21 22 -14
Other operations 2 -15 10
Intra-group items -1 -10 8
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The Group -22 71 -49
Stainless steel
deliveries
1 000 tonnes I/09 II/09 III/09 IV/09 2009
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Cold rolled 133 145 124 143 545
White hot strip 59 69 66 69 263
Quarto plate 19 18 14 16 67
Tubular products 16 13 12 12 53
Long products 10 9 11 10 40
Semi-finished
products 10 14 12 27 63
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Total deliveries 247 268 238 277 1 030
1 000 tonnes I/10 II/10 III/10
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Cold rolled 171 182 167
White hot strip 82 75 69
Quarto plate 21 21 20
Tubular products 13 14 12
Long products 13 15 15
Semi-finished
products 33 32 24
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Total deliveries 333 339 307
Market prices and
exchange rates
I/09 II/09 III/09 IV/09 2009
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Market prices 1)
Stainless steel
Base price EUR/t 925 1 117 1 307 1 297 1 161
Alloy surcharge EUR/t 893 634 923 1 049 875
Transaction price EUR/t 1 818 1 751 2 229 2 346 2 036
Nickel USD/t 10 471 12 920 17 700 17 528 14 655
EUR/t 8 036 9 478 12 375 11 860 10 507
Ferrochrome
(Cr-content) USD/lb 0.79 0.69 0.89 1.03 0.85
EUR/kg 1.34 1.12 1.37 1.54 1.34
Molybdenum USD/lb 9.15 9.41 15.36 11.76 11.42
EUR/kg 15.49 15.22 23.67 17.54 18.05
Recycled steel USD/t 207.00 199.00 236.00 250.00 223.00
EUR/t 159.00 146.00 165.00 169.00 160.00
Exchange rates
EUR/USD 1.303 1.363 1.430 1.478 1.395
EUR/SEK 10.941 10.781 10.424 10.351 10.619
EUR/GBP 0.909 0.879 0.872 0.905 0.891
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I/10 II/10 III/10
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Market prices 1)
Stainless steel
Base price EUR/t 1 235 1 317 1 245
Alloy surcharge EUR/t 1 094 1 701 1 621
Transaction price EUR/t 2 329 3 018 2 866
Nickel USD/t 19 959 22 476 21 191
EUR/t 14 433 17 686 16 415
Ferrochrome
(Cr-content) USD/lb 1.01 1.36 1.30
EUR/kg 1.61 2.36 2.22
Molybdenum USD/lb 16.19 16.45 15.15
EUR/kg 25.81 28.53 25.86
Recycled steel USD/t 323 346 346
EUR/t 234 272 268
Exchange rates
EUR/USD 1.383 1.271 1.291
EUR/SEK 9.946 9.631 9.380
EUR/GBP 0.888 0.852 0.833
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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.
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
Seasonality impacted stainless steel consumption in Europe
In the third quarter, global demand for stainless steel softened and apparent
consumption is estimated to have been down by 13% compared to the second
quarter. In Europe, demand was impacted by normal seasonality and was down by
20%. In China, apparent consumption also declined and was down by 13% compared
to the previous quarter. Compared to the second quarter, production was down by
14% globally: down by 29% in Europe and by 10% in China. The main reasons for
lower production were the declined nickel price impacting overall demand and the
holiday season in Europe.
The average base price for 2mm cold rolled 304 stainless steel sheet in Germany
decreased by 5% and totalled 1 245 EUR/tonne in the third quarter (II/2010:
1 317 EUR/tonne). The alloy surcharge decreased and was 1 621 EUR/tonne
(II/2010: 1 701 EUR/tonne) as part of the increase in metal prices was offset by
the weakening US dollar. The average transaction price during the third quarter
was consequently 2 866 EUR/tonne (II/2010: 3 018 EUR/tonne). The price
difference between Europe and Asia widened during the period and there was a
clear increase in volumes imported into Europe, especially from Asian producers.
(CRU)
Among alloying metals, the price of nickel was on a rising trend in the third
quarter. At the beginning of the third quarter it was at the level of 19 000
USD/tonne, by the end of the quarter it had increased to the level of 23 500
USD/tonne. In the third quarter, the average nickel price was 21 191 USD/tonne
(II/2010: 22 476 USD/tonne). The nickel price declined from its year-high level
of 26-27 000 USD/tonne in the second quarter. Ferrochrome markets were close to
balance. The quarterly contract price for ferrochrome in the third quarter was
1.30 USD/lb (II/2010: 1.36 USD/lb) and has preliminarily been settled unchanged
at 1.30 USD/lb for the fourth quarter. The average price of molybdenum decreased
to 15.15 USD/lb in the third quarter (II/2010: 16.45 USD/lb) while the price of
recycled steel was unchanged and averaged 346 USD/tonne (II/2010: 346
USD/tonne).
Profitability deteriorated in the seasonally soft quarter
Group sales in the third quarter totalled EUR 999 million (II/2010: EUR 1 110
million). Deliveries of stainless steel declined to 307 000 tonnes (II/2010:
339 000 tonnes). The main causes of lower delivery volumes were the Group's
annual maintenance breaks and normal seasonality in the European holiday season.
Operating loss in the third quarter totalled EUR 49 million (II/2010: profit of
EUR 71 million). This figure includes some EUR 39 million of raw material-
related inventory losses (II/2010: some EUR 55 million gains) resulting from
declined metal prices. Consequently, the underlying loss totalled EUR 10 million
(II/2010: profit of EUR 16 million). The main causes of the weaker result were
lower delivery volumes and a slightly weaker geographic mix. Outokumpu's average
base prices for flat products realised in the third quarter were close to the
level in the second quarter but somewhat below the base prices reported by CRU
for German 304 sheet.
Return on capital employed in the third quarter was -4.6% (II/2010: 7.2%).
Earnings per share totalled EUR -0.31 (II/2010: EUR 0.24).
Interest expenses have increased due to higher amount of net debt and increased
proportion of fixed rate financing in the loan portfolio. Changes in exchange
rates typically cause variation in financial income and expenses and in the
third quarter these changes led to clearly higher financial expenses due to
major volatility particularly in the US dollar and the Swedish krona, both being
important to the Group.
Net cash from operating activities in continuing operations remained negative in
the third quarter and amounted to EUR -112 million (II/2010: EUR -314 million).
Primary reasons for the negative cash flow were increased metal prices during
the third quarter and higher than normal inventory levels. In the second
quarter, inventory levels had intentionally been increased to compensate for
lost production during the Group's annual maintenance breaks. In the third
quarter, EUR 71 million of cash was tied up in working capital. In September,
after the maintenance breaks, inventories began to decline and cash flow turned
positive.
Outokumpu's gearing was 74.4% at the end of the third quarter (June
30, 2010: 67.6%), close to the Group's target maximum level of 75%. Net-interest
bearing debt increased by EUR 135 million and amounted to EUR 1 818 million
(II/2010: EUR 1 683 million) at the end of the third quarter.
Capital expenditure totalled EUR 40 million (II/2010: EUR 40 million) in the
third quarter.
Sales by General Stainless in the third quarter totalled EUR 860 million
(II/2010: EUR 962 million), deliveries declined to 282 000 tonnes (II/2010:
309 000 tonnes). General Stainless posted an operating loss of EUR 52 million
(II/2010: profit of EUR 75 million) of which Tornio Works' operating loss
totalled EUR 36 million (II/2010: profit of EUR 63 million). Tornio Works'
operating loss was adversely affected by negative internal hedging result.
Sales by Specialty Stainless in the third quarter totalled EUR 397 million
(II/2010: EUR 469 million) and deliveries declined to 98 000 tonnes (II/2010:
119 000 tonnes). Operating loss totalled EUR 14 million (II/2010: profit of EUR
22 million).
Other operations posted an operating profit of EUR 10 million (II/2010: EUR -15
million) in the third quarter, mainly due to positive internal hedging result.
Investment projects
The investment project to increase quarto plate production capability and
capacity in New Castle, Indiana, in the USA was completed in August 2010. This
EUR 45 million investment increases the annual production capacity at this
production site by 20 000 tonnes to 70 000 tonnes.
Announced in June 2010, the investment of EUR 104 million to increase quarto
plate production capability and capacity in Degerfors in Sweden is in its
initial face. Annual production capacity at Degerfors will be increased by
40 000 tonnes to 150 000 tonnes. Completion of this investment will increase the
Group's annual quarto plate production capacity to some 220 000 tonnes.
Also announced in June 2010, the EUR 440 million investment project to double
ferrochrome production capacity at Tornio in Finland is proceeding according to
plan. The project organisation has been established and the first phase of
construction work has begun. Detailed planning for the project is currently
ongoing.
INTERIM REVIEW BY THE BOARD OF DIRECTORS - JANUARY-SEPTEMBER 2010
Improving demand for stainless steel in 2010
Stainless steel markets began to recover from the beginning of 2010, with demand
- especially for standard grades - improving. In May, markets softened, the
nickel price started declining and distributors began to destock. After the
summer break in Europe, demand recovered again. Compared to the first nine
months of 2009, apparent consumption of stainless steel is estimated to have
increased by 21% globally and by 33% in Europe. In China, the increase is
estimated to have been 6%. The average German base price for 2mm cold rolled
304 stainless steel sheet in the first nine months of 2010 was 1 266 EUR/tonne
(I-III/2009: 1 116 EUR/tonne) and the average transaction price was EUR 2 738
EUR/tonne (I-III/2009: 1 933 EUR/tonne). (CRU)
During the first nine months of 2010, the nickel price averaged 21 209 USD/tonne
(I-III/2009: 13 697 USD/tonne) and the average contract price for ferrochrome
was 1.22 USD/lb (I-III/2009: 0.79 USD/lb). The average price of molybdenum
during the first nine months of 2010 was 15.93 USD/lb (I-III/2009: 11.31 USD/lb)
and of recycled steel 338 USD/lb (I-III/2009: 214 USD/lb).
Profitability improved
Group sales in the first nine months of 2010 were up by 61% to EUR 3 026 million
(I-III/2009: EUR 1 883 million) as a result of higher transaction prices and
increased delivery volumes. Stainless steel deliveries increased by 30% and
totalled 979 000 tonnes (I-III/2009: 753 000 tonnes). The Group's capacity
utilisation rate was approximately 75% in the first nine months of 2010.
Operating profit for the first nine months improved significantly and totalled
EUR 1 million (I-III/2009: EUR -409 million), including raw material-related
inventory gains of some EUR 26 million (I-III/2009: loss of EUR 78 million).
Operating profit did not include any non-recurring items (I-III/2009: expenses
of EUR 20 million). Consequently, the underlying operational result was a loss
totalling EUR 25 million (I-III/2009: EUR -311 million) in the first nine
months of 2010. The main reasons for this improved result were increased
delivery volumes, higher base prices and higher ferrochrome price. Loss before
taxes totalled EUR 58 million (I-III/2009: EUR -438 million).
Net financial income and expenses in the first nine months of 2010 totalled EUR
-44 million (I-III/2009: EUR -21 million). Interest expenses increased due to
higher amount of net debt and increased proportion of fixed rate financing in
the loan portfolio. Volatility in exchange rates, mainly in the Swedish krona
and in the third quarter also the US dollar, led to clearly higher financial
expenses. Net loss totalled EUR 33 million (I-III/2009: EUR -330 million) and
earnings per share totalled EUR -0.18 (I-III/2009: EUR -1.82). Return on capital
employed during the first nine months of 2010 was 0.0% (I-III/2009: -14.9%).
Net cash generated from operating activities was negative and totalled EUR -512
million (I-III/2009: EUR 306 million positive). During the review period, some
EUR 516 million cash was tied up in working capital as a result of higher metal
prices and higher inventory levels. Net interest-bearing debt increased by EUR
804 million and totalled EUR 1 818 million at the end of September 2010 (Sept
30, 2009: EUR 1 014 million). Outokumpu's gearing was 74.4% at the end of the
third quarter, close to the Group's target maximum of 75%. In June, Outokumpu
issued a EUR 250 million five-year domestic bond which was listed on the NASDAQ
OMX Helsinki stock exchange.
Capital expenditure and investment projects
Capital expenditure in the first nine months of 2010 totalled EUR 107 million
(I-III/2009: EUR 163 million) and covered both ongoing investment projects and
maintenance. Including the new investment projects already announced capital
expenditure by the Group in 2010 is expected to be below EUR 200 million.
The investment project to increase quarto plate production capability and
capacity in New Castle, Indiana, in the USA was completed in August 2010. This
EUR 45 million investment increases the annual production capacity at this
production site by 20 000 tonnes to 70 000 tonnes. Announced in June, the
investment of EUR 104 million to increase quarto plate production capability and
capacity in Degerfors in Sweden is in its initial face. Annual production
capacity at Degerfors will be increased by 40 000 tonnes to 150 000 tonnes.
Completion of this investment will increase the Group's annual quarto plate
production capacity to some 220 000 tonnes.
Also announced in June, the EUR 440 million investment project to double
ferrochrome production capacity at Tornio in Finland is proceeding according to
plan. The project organisation has been established and the first phase of
construction work has begun. Detailed planning for the project is currently
ongoing.
Investment projects in China and the UK were completed in June 2010. The Group's
new service centre in Kunshan represents an investment of some EUR 20 million,
employs approximately 50 people and has an annual capacity of some 30 000 tonnes
of stainless steel. In Sheffield in the UK, a new stainless steel bar and rebar
facility was opened in the summer. This investment totalled some EUR 10 million.
Outokumpu's strategic priorities adjusted
Outokumpu's strategy was reviewed in the Group's annual strategy process and the
conclusion was that the overall strategic direction remains unchanged.
Outokumpu's vision: 'to be the undisputed number one in stainless steel' also
remained unchanged. The primary meaning of "the number one" position is to have
the best financial performance in the industry.
Some adjustments to strategic priorities and in strategy implementation were
however made. The focus of the Group's adjusted priorities is on improving the
performance of current operations (loading Tornio Works with high-volume
products, transforming rapidly to special grades and products, excel in sales
and customer service and excel in operations) and investing more effort in
developing future growth (ferrochrome production expansion and growth outside
Europe).
Risks and uncertainties
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. Risks and uncertainties may, if they
materialise, have a substantial impact on earnings and cash flows. Key risks are
assessed and updated on a regular basis.
Key strategic and business risks include structural overcapacity in stainless
steel production, competition in stainless steel markets, the Euro-centricity of
the Group's operations and a continuing weak market situation as a consequence
of global recession. To mitigate the risks related to structural overcapacity
and fierce competition in stainless steel markets, Outokumpu aims to utilise its
cost-leadership position in Europe and increase productivity in its operations,
and to develop its market position within duplex and other special grades. One
example of this is the investment in quarto plate production in Sweden. To
mitigate the impact of Euro-centricity, Outokumpu aims to develop its global
sales network with a strong focus on end-customers and project sales.
Outokumpu continues to monitor the situation in stainless steel markets and will
adjust its operations in response to possible changes. Group strategy was
reviewed and strategic priorities were adjusted during the annual strategy
process to meet current challenges and also to mitigate possible impacts if the
stainless markets remain weak for an extended period.
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 are a major fire or
accident and risks related to currently ongoing investment projects. Failures or
delays in these projects may have a negative impact on strategy implementation
and the achievement of financial targets. Key operational risks also include
people risks related to corporate culture and performance management. Protection
of the Group's personnel, assets, processes, information and reputation against
a wide range of potential losses is an essential component in Outokumpu's
operations. These types of risks are primarily mitigated through preventive
actions and insurances. To reduce the risk of property damage and interruptions
to the Group's businesses, Outokumpu has systematic fire-safety and security-
audit programmes in place.
Key financial risks are related to: variations in nickel and electricity prices;
exchange rates for the US dollar and the Swedish krona; euro and Swedish krona
interest rates; and the value of receivables as well as certain equities. The
strengthening of the Swedish krona during 2010 has had a negative impact on
Group earnings and gearing. A proportion of the Swedish krona exposure has been
hedged. As the increase in working capital has also had a negative impact on
gearing, actions aimed at maintaining financial flexibility (including enhanced
inventory level management) are given priority.
People and the environment
Outokumpu's continuing operations had an average of 8 014 full-time employees
during January-September 2010 (I-III/2009: 8 047). At the end of September,
Outokumpu had 7 887 employees (September 30, 2009: 7 699).
The lost-time injury rate (i.e. lost-time accidents per million working hours)
was 6.4 in the third quarter and 5.5 in the first nine months of 2010 (I-
III/2009: 5.8). The Group's 2010 target is less than four.
Emissions to air and discharges to water remained within permitted limits and
the breaches that occurred were temporary, were identified and caused only
minimal environmental impact. Outokumpu is not a party in any significant
juridical or administrative proceeding concerning environmental issues, nor is
it aware of any realised environmental risks that could have a material adverse
effect on the Group's financial position.
Emissions trading activities have been conducted in accordance with obligations,
with agreed procedures and with the Group's financial risk policy. Emissions
under the EU Emission Trading Scheme during the first nine months of 2010
totalled approximately 576 000 tonnes (I-III/2009: 367 000 tonnes). The main
reasons for the low emissions figure in 2009 were the temporary closure of the
ferrochrome production from April until end of September and cut backs in
stainless steel production. In the third quarter of 2010, Outokumpu sold
500 000 emission allowances for EUR 8 million. Outokumpu's carbon dioxide
allowances in the UK, Sweden and Finland proved adequate for the Group's planned
production.
Outokumpu is investing in an energy savings project at Tornio Works in Finland.
A total of 50 separate electrical cooling units in the cold rolling mill will be
replaced by a new centralised district-cooling system. The result will be a
reduction of 11 GWh in annual electricity consumption and a corresponding
decrease in carbon dioxide emissions.
Outokumpu is participating in the construction of a wind farm in Tornio in
Finland. Rajakiiri, a company specialising in wind power technology, has decided
to invest in a 30 MW wind farm at Röyttä, close to the Tornio Works site.
Outokumpu will be allocated 20% of the electrical energy produced.
The Life Cycle Inventory Study on Stainless Steel Production in the EU shows
that Outokumpu products have the smallest carbon footprint in Europe, 10-20%
less than the EU average for stainless steel producers. In February, Outokumpu
also published its new Energy and Low-carbon Programme.
In 2010, for the second time, Outokumpu was awarded "Sector Mover" status by
Sustainable Asset Management (SAM) for having the largest proportional annual
improvement in sustainability performance within the steel industry compared to
the previous year. Outokumpu also qualified for the OMX GES Sustainability
Nordic index.
Civil actions regarding the sold fabricated copper products business
In connection with the industrial copper tubes EU-cartel investigation,
completed in May 2009, Outokumpu has since 2004 been in the process of
addressing several civil complaints, including class actions, raised in the US
against the company and its former fabricated copper products business in the
US. The last remaining class action was one brought in the federal court of
Tennessee on behalf of certain indirect purchasers of industrial copper tubing.
Outokumpu considered the allegations in the proceedings to lack merit, but
settled with the claimants in August 2010 with a nominal settlement amount and
subsequently the action was dismissed by the Federal Judge.
A pending civil complaint in the US, an individual action filed in 2006 in the
federal district court in Memphis, Tennessee, seeks an unstated amount of
damages in connection with an alleged world-wide price-fixing and market-
allocation cartel. The court dismissed this complaint in 2007, and an appeal
against that dismissal is currently pending.
In 2010, a civil action was brought in the UK courts against Outokumpu (and two
other defendant groups) by the same claimant group as that in the Memphis suit.
The claimants allege that they suffered loss across Europe as a result of the
cartel and are seeking recovery from the three main defendant groups either
jointly or jointly and severally. The claimants' initial claim for alleged
losses (between the three defendant groups) is some GBP 20 million excluding
interest. Outokumpu will be challenging the jurisdiction of the UK courts to
hear this claim. In any event, Outokumpu believes that the allegations regarding
damages caused by the cartel are groundless and, if pursued, Outokumpu will
defend itself in any proceedings.
No provisions have been booked in connection with these claims.
Customs investigation of Tornio Work's exports to Russia
In March 2007, Finnish Customs authorities initiated a criminal investigation
into the Group's Tornio Works' export practices to Russia. It was suspected that
a forwarding agency based in south-eastern Finland had prepared defective and/or
forged invoices regarding the export of stainless steel to Russia. The
preliminary investigation focused on possible complicity by Outokumpu Tornio
Works in the preparation of defective and/or forged invoices by the forwarding
agent.
Immediately after the Finnish Customs authorities began their investigations in
2007, Outokumpu initiated its own investigation into the trade practices of
stainless steel exports from Tornio to Russia. In June 2007, based on its own
investigation, a leading Finnish law firm, Roschier Attorneys Ltd. concluded
that it had not found evidence that any employees of Tornio Works or the Group
would have committed any of the crimes alleged by the Finnish Customs. Roschier
has subsequently, at Outokumpu's request, examined the preliminary investigation
material produced by the Finnish Customs and concluded that it contains no
evidence that any Outokumpu employees would have committed either forgery or any
of the accounting offences alleged by the Finnish Customs. Outokumpu's Auditor,
KPMG Oy Ab, has also stated that suspicions related to the making of false
financial statements are groundless.
In June 2009, the Finnish Customs completed its preliminary investigation and
forwarded the matter to the prosecuting authorities for consideration of
possible charges. As of August 2010, the scope of investigation has included
money laundering in addition to the crimes alleged by the Finnish Customs. The
process of considering possible charges is expected to be completed in the
fourth quarter of 2010.
Outokumpu's position remains that neither the Group nor its personnel have
committed any of the alleged crimes.
Organisational changes and appointments
Some of the responsibilities of Outokumpu's Executive Committee members were
changed with effect from August 1, 2010:
Karri Kaitue, Deputy CEO, was made responsible for the Tornio Works business
unit and Hannu Hautala, SVP - Tornio Works now reports to Mr Kaitue. Legal
Affairs and IPR, previously part of Mr Kaitue's responsibilities, now report to
Juha Rantanen, CEO, and the Group's remaining brass operations to Esa Lager,
CFO.
At the beginning of April, Mr Hannu Hautala, SVP - Tornio Works, took up his
duties as head of Tornio Works. Mr Kari Parvento, EVP - Group Sales and
Marketing, and a member of Outokumpu's Executive Committee, took up his position
in Outokumpu at the beginning of April. Mr Pekka Erkkilä, EVP - General
Stainless, left Outokumpu at the beginning of April.
Shares and shareholders
According to the Nordic Central Securities Depository, Outokumpu's largest
shareholders by group at the end of the third quarter were Finnish corporations
(34.9%), foreign investors (22.4%), Finnish public sector institutions (18.1%),
Finnish private households (14.9%), Finnish financial and insurance institutions
(6.9%), and Finnish non-profit organisations (2.8%). The list of largest
shareholders is updated daily on Outokumpu's Internet pages:
www.outokumpu.com/Investors.
Shareholders that have more than 5% of the shares and votes in Outokumpu Oyj are
Solidium Oy (owned by the State of Finland) (30.85%) and the Finnish Social
Insurance Institution (8.01%).
At the end of September, Outokumpu's closing share price was EUR 14.57
(III/2009: EUR 12.86). The average share price during the first nine months of
2010 was EUR 13.95 (I-III/2009: EUR 11.26) with EUR 17.88 (I-III/2009: EUR
15.67) as the highest traded price and EUR 12.03 (I-III/2009: EUR 7.72) as the
lowest. At the end of September, the market capitalisation of Outokumpu shares
totalled EUR 2 666 million (September 30, 2009: EUR 2 341 million) including
treasury shares. Share turnover on the NASDAQ OMX Helsinki exchange during the
first nine months of 2010 amounted to 258.6 million shares (I-III/2009: 279.6
million). The total value of shares traded during the first nine months was EUR
3 606 million (I-III/2009: EUR 3 149 million).
Outokumpu's fully paid-up share capital at the end of September totalled EUR
311.0 million and consisted of 182 958 249 shares. Excluding treasury shares,
the number of shares outstanding at the end of September 2010 was 181 917 361.
Annual General Meeting 2010
The 2010 Annual General Meeting (AGM) in March approved a dividend of EUR 0.35
per share for 2009. Dividends totalling EUR 64 million were paid on April
13, 2010.
The AGM authorised the Board of Directors to decide to repurchase the Group's
own shares and to issue shares and grant special rights entitling to shares. The
maximum number of shares to be repurchased is 18 000 000. These authorisations
are valid for 12 months or until the next AGM, but no longer than May 31, 2011.
To date, the authorisations have not been used.
The 2010 Annual General Meeting also decided that Outokumpu would make a
donation (a maximum of EUR 1 million) to the Aalto University Foundation.
The AGM decided on the number of the Board members, including the Chairman and
Vice Chairman, to be eight. The Outokumpu board members are: Evert Henkes, Ole
Johansson (Chairman), Victoire de Margerie, Anna Nilsson-Ehle, Jussi Pesonen,
Leena Saarinen, Anssi Soila (Vice Chairman) and Olli Vaartimo. 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.
SHORT-TERM OUTLOOK
Some pick-up in demand for standard grades has occurred after the summer period
in Europe. The increasing price of nickel has also had a positive effect
primarily on distributors' buying behaviour. Distributors' inventory levels are
estimated to be close to normal levels. Demand for special grades and products
however continues to be softer and no clear recovery among investment-driven
end-use segments has taken place.
Lead times on mill-deliveries are still normal at 6-8 weeks. Outokumpu's
deliveries of stainless steel in the fourth quarter are expected to improve
compared to the third quarter and be close to volumes in the second quarter
(339 000 tonnes). Outokumpu's average base price for all flat products is
expected to decline by up to 50 EUR/tonne compared to the third quarter due to
weaker geographic and product mix. Comparable market and product specific base
prices are however expected to be relatively unchanged in the fourth quarter.
The weaker US dollar and stronger Swedish krona will have a negative impact on
Outokumpu's profitability.
Outokumpu's underlying operational result*) in the fourth quarter is expected to
be around break-even. At current metal prices, raw material-related timing gains
amounting to some tens of millions of euros are expected in the fourth quarter
as a result of the increase in metal prices after the summer. Subject to metal
price and currency developments, cash flow (before investments) is expected to
be positive in the fourth quarter as a consequence of reduced inventories.
*) Underlying operational result= Operating profit without raw material-related
inventory gains / losses and non-recurring items.
In Espoo, October 21, 2010
Board of Directors
Outokumpu is a global leader in stainless steel with the vision to be the
undisputed number one. Customers in a wide range of industries use our stainless
steel and services worldwide. Being fully recyclable, maintenance-free, as well
as very strong and durable material, stainless steel is one of the key building
blocks for sustainable future. Outokumpu employs some 7 500 people in more than
30 countries. The Group's head office is located in Espoo, Finland. Outokumpu is
listed on the NASDAQ OMX Helsinki.
www.outokumpu.com
CONDENSED FINANCIAL
STATEMENTS (unaudited)
Condensed statement of
comprehensive income
Condensed income statement
Jan- Jan- July- July- Jan-
Sept Sept Sept Sept Dec
EUR million 2010 2009 2010 2009 2009
---------------------------------------------------------------------------
Continuing operations:
Sales 3 026 1 883 999 587 2 611
Cost of sales -2 859 -2 078 -1 005 -586 -2 764
----------------------------------
Gross margin 167 -195 -6 1 -153
Other operating income 37 17 23 16 28
Costs and expenses -198 -206 -64 -66 -280
Other operating expenses -5 -25 -2 -16 -32 ----------------------------------
Operating profit 1 -409 -49 -65 -438
Share of results in
associated companies -15 -8 -5 -6 -12
Financial income and expenses
Interest income 12 13 3 4 17
Interest expenses -37 -29 -17 -6 -38
Market price gains and losses 3 -4 -11 -3 -2
Other financial income 2 4 0 0 5
Other financial expenses -22 -5 -9 -5 -6
----------------------------------
Profit before taxes -58 -438 -88 -81 -474
Income taxes 24 110 32 26 142
----------------------------------
Net profit for the period
from continuing operations -34 -328 -55 -55 -332
Discontinued operations:
Net profit for the period
from discontinued operations 0 -3 -1 -1 -4
Net profit for the period -33 -330 -56 -56 -336
Attributable to:
Owners of the parent -33 -329 -56 -55 -336
Non-controlling interests -0 -1 -0 -0 -0
Earnings per share for
profit attributable
to the owners of the parent:
Earnings per share, EUR -0.18 -1.82 -0.31 -0.31 -1.86
Diluted earnings per share, EUR -0.18 -1.82 -0.31 -0.31 -1.86
Earnings per share from continuing
operations attributable to
the owners of the parent:
Earnings per share, EUR -0.18 -1.81 -0.30 -0.30 -1.83
Earnings per share from discontinued
operations attributable to
the owners of the parent:
Earnings per share, EUR 0.00 -0.01 -0,00 -0,00 -0.02
Statement of other comprehensive income
Jan- Jan- July- July- Jan-
Sept Sept Sept Sept Dec
EUR million 2010 2009 2010 2009 2009
---------------------------------------------------------------------------
Net profit for the period -33 -330 -56 -56 -336
Other comprehensive income:
Exchange differences on
translating foreign operations 18 26 -20 -6 29
Available-for-sale financial assets
Fair value changes during the period 32 25 21 8 34
Income tax relating to
available-for-sale financial assets -4 -9 -4 -1 -9
Cash flow hedges
Fair value changes during the period 44 20 16 18 23
Reclassification adjustments from other
comprehensive income to profit 3 - 1 - 1
Income tax relating to cash flow hedges -12 -5 -4 -5 -6
Net investment hedges
Fair value changes during the period - 1 - -0 1
Income tax relating to
net investment hedges - -0 - 0 -0
Share of other comprehensive income of
associated companies -2 9 -1 -9 5
----------------------------------
Other comprehensive income for
the period, net of tax 78 66 9 5 77
Total comprehensive income for
the period 45 -264 -47 -51 -259
Attributable to:
Owners of the parent 45 -263 -47 -51 -259
Non-controlling interests -0 -1 0 -0 -1
Condensed statement
of financial position
Sept 30 Sept 30 Dec 31
EUR million 2010 2009 2009
----------------------------------------------------
ASSETS
Non-current assets
Intangible assets 581 572 566
Property, plant and equipment 2 081 2 066 2 097
Loan receivables and other
interest-bearing assets 429 390 397
Other receivables 56 60 55
Deferred tax assets 47 20 42
-----------------------
Total non-current assets 3 194 3 108 3 157
Current assets
Inventories 1 542 937 1 016
Loan receivables and other
interest-bearing assets 75 72 39
Trade and other receivables 729 472 508
Cash and cash equivalents 142 210 112
-----------------------
Total current assets 2 488 1 691 1 674
Receivables related to
assets held for sale 32 16 20
TOTAL ASSETS 5 714 4 815 4 850
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the Company
Equity attributable to the
equity holders of the Company 2 443 2 445 2 451
Non-controlling interests 1 0 0
-----------------------
Total equity 2 443 2 446 2 451
Non-current liabilities
Interest-bearing liabilities 1 604 1 003 1 038
Deferred tax liabilities 77 110 100
Pension obligations 68 65 65
Provisions 17 29 17
Trade and other payables 1 1 1
-----------------------
Total non-current liabilities 1 768 1 208 1 221
Current liabilities
Interest-bearing liabilities 882 690 705
Provisions 18 25 26
Trade and other payables 592 438 439
-----------------------
Total current liabilities 1 492 1 154 1 170
Liabilities related to
assets held for sale 11 8 8
TOTAL EQUITY AND LIABILITIES 5 714 4 815 4 850
Statement of changes
in equity
Attributable to the owners of the parent
-------------------------------------------
Share Share Other Fair value
capital premium reserves reserves
EUR million fund
------------------------------------------------------------------
Equity on
December 31, 2008 308 702 15 -28
------------------------------------------------------------------
Total comprehensive
income for the period - - - 47
Transfers within equity - - 2 -
Dividends - - - -
Share-based payments - - - -
Share options exercised 1 3 - -
------------------------------------------------------------------
Equity on
September 30, 2009 309 705 17 19
------------------------------------------------------------------
------------------------------------------------------------------
Equity on
December 31, 2009 309 706 15 22
------------------------------------------------------------------
Total comprehensive
income for the period - - - 64
Dividends - - - -
Share-based payments - - - -
Share options exercised 2 8 - -
Other change - - - -
------------------------------------------------------------------
Equity on
September 30, 2010 311 713 15 86
------------------------------------------------------------------
Attributable to the
owners of the parent
-------------------------------
Treasury Cumulative Retained Non- Total
shares translation earnings controlling equity
EUR million differences interests
------------------------------------------------------------------------
Equity on
December 31, 2008 -27 -138 1 961 1 2 795
------------------------------------------------------------------------
Total comprehensive
income for the period - 19 -329 -1 -264
Transfers within equity - - -2 - -
Dividends - - -90 - -90
Share-based payments 2 - -1 - 1
Share options exercised - - - - 4
------------------------------------------------------------------------
Equity on
September 30, 2009 -25 -119 1 539 0 2 446
------------------------------------------------------------------------
------------------------------------------------------------------------
Equity on
December 31, 2009 -25 -110 1 534 0 2 451
------------------------------------------------------------------------
Total comprehensive
income for the period - 14 -33 -0 45
Dividends - - -64 - -64
Share-based payments - - 1 - 1
Share options exercised - - - - 9
Other change - - - 1 1
------------------------------------------------------------------------
Equity on
September 30, 2010 -25 -96 1 438 1 2 443
------------------------------------------------------------------------
Condensed statement of cash flows
Jan- Jan- July- July- Jan-
Sept Sept Sept Sept Dec
EUR million 2010 2009 2010 2009 2009
-----------------------------------------------------------------
Net profit for the period -33 -330 -56 -56 -336
Adjustments
Depreciation and amortisation 174 156 61 52 211
Impairments - 15 - 15 15
Other non-cash adjustments -95 -215 -30 -64 -230
Change in working capital -516 696 -71 56 548
Dividends received 2 3 - - 3
Interests received 2 4 1 1 8
Interests paid -34 -49 -12 -15 -57
Income taxes paid -11 26 -5 1 36
---------------------------------
Net cash from
operating activities -512 306 -112 -10 198
Purchases of assets -125 -174 -47 -55 -232
Proceeds from the sale of assets 18 12 9 5 17
Net cash from other
investing activities 1 0 0 0 -2
---------------------------------
Net cash from
investing activities -106 -161 -38 -50 -216
Cash flow before
financing activities -618 145 -150 -61 -19
Share options exercised 9 4 0 - 4
Borrowings of long-term debt 695 59 41 - 130
Repayment of long-term debt -111 -308 -11 -25 -350
Change in current debt 115 174 133 78 212
Dividends paid -64 -90 - - -90
Proceeds from the sale
of other financial assets - 0 - 0 0
Other financing cash flow -1 1 5 -0 -1
---------------------------------
Net cash from
financing activities 644 -161 169 53 -97
Net change in cash
and cash equivalents 26 -16 19 -8 -115
Cash and cash equivalents at
the beginning of the period 112 224 123 218 224
Foreign exchange rate effect 4 2 -0 1 3
Discontinued operations'
net change in cash effect 0 0 0 -0 0
Net change in cash
and cash equivalents 26 -16 19 -8 -115
Cash and cash equivalents
at the end of the period 142 210 142 210 112
Cash flows presented for continuing operations.
Key figures
Jan-Sept Jan-Sept Jan-Dec
EUR million 2010 2009 2009
----------------------------------------------------------------------
Sales 3 026 1 883 2 611
Operating profit 1 -409 -438
Operating profit margin, % 0.0 -21.7 -16.8
EBITDA 174 -238 -212
Return on capital employed, % 0.0 -14.9 -11.7
Return on equity, % -1.8 -16.8 -12.8
Return on equity, continuing operations, % -1.8 -16.7 -12.7
Long-term debt 1 558 959 997
Current debt 841 638 652
Other interest-bearing payables 11 6 7
Derivative financial instruments 23 58 63
Investments in associated companies -136 -160 -152
Available-for-sale financial assets -151 -107 -112
Other interest-bearing receivables -165 -162 -149
Assets held for sale -21 -8 -12
Cash and cash equivalents -142 -210 -112
----------------------------------------------------------------------
Net interest-bearing debt at end of period 1 818 1 014 1 183
Capital employed at end of period 4 261 3 459 3 634
Equity-to-assets ratio
at end of period, % 42.8 50.8 50.6
Debt-to-equity ratio at end of period, % 74.4 41.4 48.2
Earnings per share, EUR -0.18 -1.82 -1.86
Earnings per share from
continuing operations, EUR -0.18 -1.81 -1.83
Earnings per share from
discontinued operations, EUR 0.00 -0.01 -0.02
Average number of shares
outstanding, in thousands 1) 181 692 180 779 180 826
Fully diluted earnings per share, EUR -0.18 -1.82 -1.86
Fully diluted average number
of shares, in thousands 1) 181 709 180 907 180 970
Equity per share at end
of period, EUR 13.43 13.51 13.54
Number of shares outstanding
at end of period,in thousands 1) 181 917 180 963 180 970
Capital expenditure,
continuing operations 107 163 245
Depreciation, continuing operations 174 156 211
Deliveries, continuing operations,
1 000 tonnes 979 753 1 030
Average personnel for the
period, continuing operations 8 014 8 047 7 941
----------------------------------------------------------------------
1) The number of own shares repurchased is excluded.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
This interim report is prepared in accordance with IAS 34 (Interim Financial
Reporting). The same accounting policies and methods of computation have been
followed in the interim financial statements as in the annual financial
statements for 2009, except for changes in IFRS standards, which are applicable
from the beginning of 2010. Of these, the most significant are in the following
standards:
- IFRS 3 Business Combinations
- IAS 27 Consolidated and Separate Financial Statements
These changes have not had material impact on the interim financial statements.
All presented figures in this interim report have been rounded and consequently
the sum of individual figures can deviate from the presented sum figure. Key
figures have been calculated using exact figures.
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, and the reported amounts of income and expenses during the
reporting period. Accounting estimates are employed in the financial statements
to determine reported amounts, including the realisability of certain assets,
the useful lives of tangible and intangible assets, income taxes, provisions,
pension obligations, 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.
EUR 250 million bond
In June, Outokumpu Oyj issued an EUR 250 million five-year domestic bond with an
annual coupon of 5.125 %. The bond was listed on the NASDAQ OMX Helsinki on
July, 14. The bond improves the structure of Outokumpu's debt portfolio and the
funds will be used for general corporate purposes.
Shares and share capital
The total number of Outokumpu Oyj shares was 182 958 249 and the share capital
amounted to EUR 311.0 million on September 30, 2010. Outokumpu Oyj held
1 040 888 treasury shares on September 30, 2010. This corresponded to 0.6% of
the share capital and the total voting rights of the Company on September
30, 2010.
Outokumpu has a stock option programme for management. The stock options have
been allocated as part of the Group's incentive programmes to key personnel of
Outokumpu. The option programme has three parts 2003A, 2003B and 2003C. On
September 30, 2010 a total of 650 881 Outokumpu Oyj shares had been subscribed
for on the basis of 2003A stock option programme, a total of 1 016 813 Outokumpu
Oyj shares on the basis of 2003B stock option programme and a total of 40 000
Outokumpu Oyj shares on the basis of 2003C stock option programme. On September
30, 2010, only stock options 2003C had remaining share subscription period and
an aggregate maximum of 60 500 shares can be subscribed with the remaining
2003C stock options. In accordance with the terms and conditions of the option
programme, the dividend adjusted share price for a stock option 2003C was EUR
10.09 on September 30, 2010. As a result of the remaining share options,
Outokumpu Oyj's share capital may be increased by a maximum of EUR 102 850 and
the number of shares by a maximum of 60 500 shares. This corresponds to 0.0% of
the Company's shares and voting rights.
Outokumpu has also two share-based incentive programmes for years 2006-2010 and
2009-2013 as part of the key employee incentive and commitment system of the
Company. The second earnings period for 2006-2010 incentive programme was ended
on December 31, 2009. The set targets for the earnings period were not met and
thus no reward was paid to the participants.
Outokumpu Board approved on February 2, 2010 134 employees to be in the scope of
the share incentive programme 2009-2013 second earnings period (2010-2012). The
amount of reward will be determined and paid to the participants on the basis of
the achievement of performance targets after the financial statements of the
last year of earnings period have been prepared. If persons covered by both
share-based incentive programmes were to receive the number of shares in
accordance with the maximum reward, currently a total of 1 050 580 shares, their
shareholding obtained via the programme would amount to 0.6% of the Company's
shares and voting rights.
Detailed information on the option programme and of the share-based incentive
programmes can be found in Outokumpu's annual report at
http://ar.outokumpu.com/2009.
Discontinued operations
and assets held for sale
Jan-Sept Jan-Sept Jan-Dec
EUR million 2010 2009 2009
------------------------------------------------------
Sales 42 23 31
Operating profit 1 0 -1
Net profit for the period
from discontinued operations 0 -3 -4
Assets
Non-current 10 4 4
Current 22 12 16
Liabilities
Non-current 3 3 3
Current 8 5 5
Operating cash flows -3 7 3
------------------------------------------------------
Outokumpu Brass 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 160 employees. The assets and
liabilities of brass rod business are presented as held for sale. Outokumpu
intends to divest the brass rod business.
Major non-recurring items
in operating profit
Jan-Sept Jan-Sept Jan-Dec
EUR million 2010 2009 2009
-----------------------------------------------------------
Write-down of Avesta
melt-shop investment - -15 -15
Redundancy provisions - -5 -5
--------------------------
- -20 -20
Property, plant and equipment
Jan 1 - Jan 1 - Jan 1 -
Sept 30 Sept 30 Dec 31
EUR million 2010 2009 2009
-----------------------------------------------------------
Historical cost at the
beginning of the period 4 309 4 021 4 021
Translation differences 150 66 69
Additions 101 165 246
Disposals -27 -14 -23
Reclassifications -26 -2 -4
--------------------------
Historical cost at
the end of the period 4 506 4 235 4 309
Accumulated depreciation at
the beginning of the period -2 212 -1 994 -1 994
Translation differences -81 -35 -38
Disposals 20 11 20
Reclassifications -0 0 0
Depreciation -152 -137 -185
Impairments - -15 -15
Accumulated depreciation at
--------------------------
the end of the period -2 425 2 169 -2 212
Carrying value at
the end of the period 2 081 2 066 2 097
Carrying value at the
beginning of the period 2 097 2 027 2 027
Commitments
Sept 30 Sept 30 Dec 31
EUR million 2010 2009 2009
-----------------------------------------------------------
Mortgages and pledges
Mortgages on land 229 186 185
Other pledges 21 1 1
Guarantees
On behalf of subsidiaries
for commercial commitments 38 22 22
On behalf of associated companies
for financing 1 5 1
Other commitments 47 54 53
Minimum future lease payments
on operating leases 79 61 62
-----------------------------------------------------------
Group's off-balance sheet investment commitments totalled EUR 66 million on
September 30, 2010 (September 30, 2009: EUR 81 million, Dec 31, 2009: EUR 62
million).
Related party transactions
Outokumpu's ownership in Outokumpu Industriunderhåll AB (previously ABB
Industriunderhåll AB) increased from 49% to 51% on March 1, 2010 and since then
the company has been consolidated as a subsidiary. Non-controlling interest is
presented separately from the net profit and disclosed as a separate item in the
equity. The acquisition price for the 2% increase in the ownership was EUR
22 000.
At September 30, 2010, remaining material related party transactions were loan
receivables from associated companies totalling EUR 7 million (September
30, 2009: EUR 7 million, Dec 31, 2009: EUR 11 million).
Fair values and nominal
amounts of
derivative instruments
Sept 30 Sept 30 Sept 30 Dec 31 Sept 30 Dec 31
2010 2010 2010 2009 2010 2009
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 49 24 24 -42 2 085 1 784
Interest rate swaps - 4 -4 -3 106 199
Cross-currency swaps - 35 -35 -8 225 212
Currency options, bought - - - 1 - 30
Currency options, sold - - - -0 - 31
Interest options, bought 1 - 1 2 88 78
Interest options, sold - 3 -3 -2 88 78
Tonnes Tonnes
---------------------------------------------------------------------------
Metal derivatives
Nickel options, bought 0 - 0 2 7 344 13 290
Nickel options, sold - 1 -1 -4 5 604 13 290
Forward and futures
nickel contracts 1 3 -2 - 1 356 -
Forward and futures
copper contracts 0 1 -0 -0 1 550 1 275
Forward and futures
zinc contracts 0 0 -0 -0 950 400
Emission allowance
derivatives 1 0 0 0 605 000 404 000
TWh TWh
---------------------------------------------------------------------------
Electricity
derivatives 1 5 -3 -8 0.7 0.8
---------------------------------------------------------------------------
53 76 -23 -63
Segment information
General Stainless
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------
Sales 476 501 496 592 2 065
of which Tornio Works 270 300 303 420 1 292
Operating profit -157 -52 -38 -12 -259
of which Tornio Works -129 -33 -44 22 -183
Operating capital at
the end of period 2 390 2 379 2 355 2 421 2 421
Average personnel
for the period 3 917 3 848 3 820 3 752 3 834
Deliveries of main
products (1 000 tonnes)
Cold rolled 114 132 112 128 486
White hot strip 57 64 64 62 248
Semi-finished products 39 51 45 61 196
-----------------------------------------------------
Total deliveries
of the division 210 248 221 250 929
-----------------------------------------------------
EUR million I/10 II/10 III/10
-----------------------------------------------------
Sales 754 962 860
of which Tornio Works 481 653 565
Operating profit -2 75 -52
of which Tornio Works -7 63 -36
Operating capital at
the end of period 2 484 2 718 2 819
Average personnel
for the period 3 780 4 278 4 214
Deliveries of main
products (1 000 tonnes)
Cold rolled 151 160 151
White hot strip 84 74 64
Semi-finished products 70 76 67
-----------------------------------------------------
Total deliveries
of the division 304 309 282
-----------------------------------------------------
Specialty Stainless
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------
Sales 371 278 258 332 1 239
Operating profit -82 -37 -21 -10 -149
Operating capital at
the end of period 1 007 906 965 1 035 1 035
Average personnel
for the period 3 892 3 656 3 433 3 372 3 588
Deliveries of main
products (1 000 tonnes)
Cold rolled 25 19 19 24 86
White hot strip 23 25 21 24 92
Quarto plate 20 19 15 18 71
Tubular products 14 12 10 11 47
Long products 9 8 10 10 38
-----------------------------------------------------
Total deliveries
of the division 92 82 75 87 335
-----------------------------------------------------
EUR million I/10 II/10 III/10
-----------------------------------------------------
Sales 367 469 397
Operating profit -21 22 -14
Operating capital at
the end of period 1 109 1 245 1 247
Average personnel
for the period 3 319 3 412 3 517
Deliveries of main
products (1 000 tonnes)
Cold rolled 35 36 26
White hot strip 30 34 26
Quarto plate 21 22 21
Tubular products 12 12 10
Long products 13 14 14
-----------------------------------------------------
Total deliveries
of the division 111 119 98
-----------------------------------------------------
Other operations
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------
Sales 66 58 56 62 243
Operating profit -12 -5 -4 -9 -31
Operating capital at
the end of period 108 252 233 240 240
Average personnel
for the period 527 526 521 497 518
-----------------------------------------------------
EUR million I/10 II/10 III/10
-----------------------------------------------------
Sales 89 86 85
Operating profit 2 -15 10
Operating capital at
the end of period 172 284 234
Average personnel
for the period 503 510 511
-----------------------------------------------------
Income statement by quarter
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------------
Continuing operations:
Sales
General Stainless 476 501 496 592 2 065
of which intersegment sales 97 100 107 117 421
Specialty Stainless 371 278 258 332 1 239
of which intersegment sales 75 67 64 87 293
Other operations 66 58 56 62 243
of which intersegment sales 61 52 52 55 221
Intra-group sales -233 -220 -224 -259 -935
-----------------------------------------------------------
Total sales 679 617 587 728 2 611
Operating profit
General Stainless -157 -52 -38 -12 -259
Specialty Stainless -82 -37 -21 -10 -149
Other operations -12 -5 -4 -9 -31
Intra-group items 2 0 -3 2 1
-----------------------------------------------------------
Total operating profit -249 -94 -65 -29 -438
Share of results
in associated companies -3 -0 -6 -3 -12
Financial income and expenses 0 -11 -11 -4 -25
-----------------------------------------------------------
Profit before taxes -252 -105 -81 -36 -474
Income taxes 64 20 26 32 142
-----------------------------------------------------------
Net profit for the period
from continuing operations -188 -85 -55 -4 -332
Net profit for the period
from discontinued
operations 0 -2 -1 -2 -4
-----------------------------------------------------------
Net profit for the period -187 -87 -56 -6 -336
-----------------------------------------------------------
Attributable to:
The owners of the parent -187 -87 -55 -7 -336
Non-controlling interests -0 -0 -0 0 -0
EUR million I/10 II/10 III/10
-----------------------------------------------------------
Continuing operations:
Sales
General Stainless 754 962 860
of which intersegment sales 138 214 189
Specialty Stainless 367 469 397
of which intersegment sales 91 122 86
Other operations 89 86 85
of which intersegment sales 65 70 67
Intra-group sales -294 -407 -342
-----------------------------------------------------------
Total sales 916 1 110 999
Operating profit
General Stainless -2 75 -52
Specialty Stainless -21 22 -14
Other operations 2 -15 10
Intra-group items -1 -10 8
-----------------------------------------------------------
Total operating profit -22 71 -49
Share of results
in associated companies -7 -3 -5
Financial income and expenses -4 -6 -34
-----------------------------------------------------------
Profit before taxes -33 63 -88
Income taxes 12 -20 32
-----------------------------------------------------------
Net profit for the period
from continuing operations -21 43 -55
Net profit for the period
from discontinued
operations 0 1 -1
-----------------------------------------------------------
Net profit for the period -21 44 -56
-----------------------------------------------------------
Attributable to:
The owners of the parent -21 44 -56
Non-controlling interests -0 0 -0
Major non-recurring
items in operating profit
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------------
Specialty Stainless
Write-down of Avesta
melt-shop investment - - -15 - -15
Redundancy provisions -5 - - - -5
-----------------------------------------------------------
-5 - -15 - -20
EUR million I/10 II/10 III/10
-----------------------------------------------------------
Specialty Stainless
Write-down of Avesta
meltshop investment - - -
Redundancy provisions - - -
-----------------------------------------------------------
- - -
Key figures by quarter
EUR million I/09 II/09 III/09 IV/09
---------------------------------------------------------------------
Sales 679 617 587 728
Operating profit -249 -94 -65 -29
Operating profit margin, % -37 -15 -11 -4
EBITDA -198 -42 2 26
Return on capital employed, % -28 -11 -8 -3
Return on equity, % -28 -14 -9 -1
Return on equity,
continuing operations, % -28.1 -13.5 -8.9 -0.7
Capital employed at end of period 3 376 3 423 3 459 3 634
Net interest-bearing
debt at end of period 825 926 1 014 1 183
Equity-to-assets ratio
at end of period, % 51.3 52.2 50.8 50.6
Debt-to-equity ratio
at end of period, % 32.3 37.1 41.4 48.2
Earnings per share, EUR -1.04 -0.48 -0.31 -0.04
Earnings per share from
continuing operations, EUR -1.04 -0.47 -0.30 -0.03
Earnings per share from
discontinued operations, EUR 0.00 -0.01 -0,00 -0.01
Average number of shares
outstanding, in thousands 1) 180 413 180 955 180 963 180 963
Equity per share
at end of period, EUR 14.09 13.79 13.51 13.54
Number of shares outstanding
at end of period, in thousands 1) 180 953 180 963 180 963 180 970
Capital expenditure,
continuing operations 62 45 55 82
Depreciation, continuing operations 52 52 52 55
Deliveries, continuing operations,
1 000 tonnes 247 268 238 277
Average personnel for the period,
continuing operations 8 336 8 031 7 774 7 621
---------------------------------------------------------------------
EUR million I/10 II/10 III/10
---------------------------------------------------------------------
Sales 916 1 110 999
Operating profit -22 71 -49
Operating profit margin, % -2.4 6.4 -4.9
EBITDA 34 128 13
Return on capital employed, % -2.4 7.2 -4.6
Return on equity, % -3.4 7.1 -9.1
Return on equity,
continuing operations, % -3.5 7.0 -9.0
Capital employed at end of period 3 709 4 173 4 261
Net interest-bearing
debt at end of period 1 293 1 683 1 818
Equity-to-assets ratio
at end of period, % 47.3 43.6 42.8
Debt-to-equity ratio
at end of period, % 53.5 67.6 74.4
Earnings per share, EUR -0.12 0.24 -0.31
Earnings per share from
continuing operations, EUR -0.12 0.24 -0.30
Earnings per share from
discontinued operations, EUR 0.00 0.00 -0,00
Average number of shares
outstanding, in thousands 1) 181 245 181 907 181 917
Equity per share
at end of period, EUR 13.28 13.68 13.43
Number of shares outstanding
at end of period, in thousands 1) 181 897 181 915 181 917
Capital expenditure,
continuing operations 28 40 40
Depreciation, continuing operations 56 57 61
Deliveries, continuing operations,
1 000 tonnes 333 339 307
Average personnel for the period,
continuing operations 7 601 8 199 8 242
---------------------------------------------------------------------
1) The number of own shares repurchased is excluded.
Definitions of key financial figures
EBITDA = Operating profit before depreciation,
amortisation and impairments
Capital employed = Total equity + net interest-bearing debt
Operating capital = Capital employed + net tax liability
Return on equity = Net profit for the financial period × 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 period
Earnings per share = attributable to the owners of the parent
------------------------------------------
Adjusted average number
of shares during the period
Equity attributable to
Equity per share = the owners of the parent
------------------------------------------
Adjusted number of shares
at the end of the period
[HUG#1453678]
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