Stock Exchange Release (second part of the release)
January 31, 2008 at 1.00 pm
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This annual accounts bulletin is prepared in accordance with IAS 34
(Interim Financial Reporting). The same accounting policies and
methods have been followed in the interim financial statements as in
the annual financial statements for 2006. The following amended and
new International Financial Reporting Standards and new
interpretations have been adopted as of January 1, 2007:
IFRS 7 Financial Instruments: Disclosures
IAS 1 Presentation of Financial Statements - Capital management
The adoption of amended and new standards had impact only on the
format and extent of disclosure information and comparative
information for 2006 has been amended accordingly.
IFRIC 7 Applying the Restatement Approach under IAS 29 Financial
Reporting in Hyperinflationary Economies
IFRIC 8 Scope of IFRS 2
IFRIC 9 Reassessment of Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment
The adoption of new interpretations had no material impact on the
Group's consolidated accounts.
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 181 321 796 and the
share capital amounted to EUR 308.2 million on December 31, 2007.
Outokumpu Oyj held 1 218 603 treasury shares on December 31, 2007.
This corresponded to 0.7% of the share capital and the total voting
rights of the Company on December 31, 2007.
The Annual General Meeting held in 2003 passed a resolution on 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. Trading with Outokumpu Oyj's stock
options 2003A has commenced on the Main List of the Helsinki Stock
Exchange as of September 1, 2006. On December 31, 2007 a total of 56
862 Outokumpu Oyj shares had been subscribed for on the basis of
2003A stock option program. An aggregate maximum of 602 440 Outokumpu
Oyj shares can be subscribed for with the remaining 2003A stock
options. In accordance with the terms and conditions of the option
program, the dividend adjusted share price for a stock option was EUR
8.45 on December 31, 2007. The share subscription period for the
2003A stock options is September 1, 2006 - March 1, 2009.
Trading with Outokumpu Oyj's stock options 2003B has commenced on the
Main List of the Helsinki Stock Exchange as of September 3, 2007. On
December 31, 2007 a total of 14 379 Outokumpu Oyj shares had been
subscribed for on the basis of 2003B stock option program. An
aggregate maximum of 1 014 441 Outokumpu Oyj shares can be subscribed
for 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 was EUR 11.51 on December 31, 2007.
The share subscription period for the 2003B stock options is
September 3, 2007 - March 1, 2010. The current amounts that Outokumpu
Oyj shares could be subscribed for with the 2003C stock options are
102 500 shares. The subscription period for shares with stock option
2003C is from 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 2 922 948 and the
number of shares by a maximum of 1 719 381 shares. This corresponds
to 1.0% of the Company's shares and voting rights.
Outokumpu's Board of Directors confirmed on February 2, 2006 a
share-based incentive program for years 2006-2010 as part of the key
employee incentive and commitment system of the Company. If persons
to be covered by the first earning period 2006-2008 and the second
earning period 2007-2009 of the program were to receive the number of
shares in accordance with the maximum reward, currently a total of
598 865 shares, their shareholding obtained via the program would
amount to 0.3% 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.
Non-current assets held for sale and discontinued operations
Outokumpu Copper Tube and Brass
The assets and liabilities of Outokumpu Copper Tube and Brass are
presented as held for sale. Outokumpu Copper Tube and Brass business
comprises European sanitary and industrial tubes, including
air-conditioning and refrigeration tubes in Europe, as well as brass
rod. Outokumpu is implementing a vigorous improvement project in this
business and it is Outokumpu's intention to divest the tube and brass
business.
Outotec
Outokumpu Oyj sold 88% of Outotec (former Outokumpu Technology) by a
sale of shares through an Initial Public Offering (IPO) in September
2006. In April, Outokumpu sold its remaining 12% shareholding in
Outotec Oyj to institutional investors. The net proceeds from the
sale totaled EUR 158 million and a tax-free non-recurring gain of EUR
142 million was recognized in financial income.
In the following tables Outokumpu Tube and Brass is referred as TB
and Outotec as OT.
Specification of non-current
assets held for sale and
discontinued operations
Income statement
Jan-Dec Jan-Dec
2007 2006
EUR million TB Total OT TB
Sales 599 1 178 501 678
Expenses -607 -1 124 -470 -654
Operating profit -8 54 31 23
Net financial items -6 -2 5 -7
Profit before taxes -15 53 36 17
Taxes -1 -17 -14 -3
Profit after taxes -15 35 22 14
Gain on the sale of Outotec - 328 328 -
Impairment loss recognized
on the fair valuation of
the Tube and Brass division's
assets and liabilities -3 -6 - -6
Taxes - - - -
After-tax result from the
disposal and impairment loss -18 322 328 -6
Minority interest - 0 0 -
Net profit for the period
from discontinued operations -18 357 349 8
Balance sheet
Dec 31 Dec 31
EUR million 2007 2006
Assets
Intangible and tangible assets 6 6
Other non-current assets 4 4
Inventories 91 122
Other current non
interest-bearing assets 83 104
184 235
Liabilities
Provisions 4 3
Other non-current non
interest-bearing liabilities 5 6
Trade payables 32 46Other current non
interest-bearing liabilities 11 18
52 73
Cash flows
Jan-Dec Jan-Dec
EUR million 2007 2006
Operating cash flows 18 -13
Investing cash flows -3 -145
Financing cash flows -19 80
Total cash flows -4 -77
Acquisitions and disposals
Acquisitions
In May, Outokumpu acquired from Swedish Sandvik its 11.6% minority
shareholding in OSTP for EUR 22 million. Goodwill of EUR 1 million
was recognized from the acquisition. Full ownership in OSTP enables
Outokumpu to develop the business further in line with its strategy
to increase the share of the more value-added special products.
Outokumpu divested the Talvivaara exploration project in 2004 and
held an option to subscribe shares with a 20% discount in a possible
Initial Public Offering (IPO), representing up to 5% ownership in
the company. The IPO of Talvivaara Mining Company Ltd. was carried
out and the listing of the shares started on the London Stock
Exchange on May 30, 2007. Outokumpu participated in the IPO by
subscribing 10.9 million shares, resulting in a 4.9% ownership in the
company on a fully diluted basis, with a total consideration of EUR
32 million. Outokumpu also exercised its option, part of the
divestment agreement, to acquire a 20% stake in the Talvivaara nickel
mining project company (Talvivaara Project Ltd.) owned by Talvivaara
Mining Company Ltd., for a total consideration of one euro.
Talvivaara Project Ltd. is consolidated in the Group's income
statement as an associated company reflecting Outokumpu's 20%
holding. The fair valuation of Outokumpu's 20% stake resulted in a
tax-free non-recurring gain of EUR 110 million, which has been
recognized in financial income. The shareholding in the listed
Talvivaara Mining Company Ltd. has been classified as an
available-for-sale financial asset with changes in fair value
recognized directly in equity.
In the purchase price allocation the majority of the excess value was
allocated to the nickel ore reserves according to the fair value and
it will be amortized using the units-of-production method based on
the depletion of ore reserves in Talvivaara. A goodwill amounting to
EUR 9 million was recognized. Goodwill is not amortized, but tested
annually for impairment. The Talvivaara mine is estimated to start
production of nickel and other metals at the end of 2008. Its target
is to gradually ramp up its nickel output to some 33 000 tons
annually.
Disposals
In March, OSTP (Outokumpu Stainless Tubular Products) sold its flange
business in order to focus on pipes, tubes, butt-welded and threaded
fittings. The purchaser is a subsidiary of Shree Ganesh Forgings Ltd,
an Indian company. The sale had no significant impact on Group's
results.
In February, Outokumpu agreed to sell the Hitura nickel mine in
Finland to Belvedere Resources Ltd. of Canada. The Hitura mine was
the last remaining asset in Outokumpu's Exit Mining program. Hitura
produces some 2 200 tons of nickel in concentrate annually and
employs 90 people. The transaction was completed in June and the
total consideration of EUR 25 million, is in Belvedere shares and
warrants entitling to subscribe for additional Belvedere shares,
resulting in a maximum 19.2% ownership in Belvedere, on a
fully-diluted basis. Outokumpu recognized a non-recurring gain of EUR
25 million on the transaction, which has been included in the
operating profit. The shareholding in Belvedere is classified as an
available-for-sale financial asset with changes in fair value
recognized directly in equity and the warrants as derivative
instruments with changes in fair value recognized in financial income
and expenses.
Net assets of these disposed businesses were EUR 6 million. Net gain
on the disposals was EUR 23 million and net cash flow was EUR 1
million.
Major non-recurring items
in operating profit
Jan-Dec Jan-Dec
EUR million 2007 2006
Gain on the sale of
Hitura mine in Finland 25 -
Thin Strip restructuring in the UK -11 -
Gain on the sale of
real estate in the UK - 9
OSTP Fagersta closure - -8
14 1
Major non-recurring
items in financial income
Jan-Dec Jan-Dec
EUR million 2007 2006
Gain on the sale
of Outotec shares 142 -
Gain on the Talvivaara transaction 110 -
252 -
Income taxes
Jan-Dec Jan-Dec
EUR million 2007 2006
Current taxes -107 -156
Deferred taxes -31 -22
-138 -178
Property, plant
and equipment
Jan 1, Jan 1,
2007 - 2006 -
Dec 31, Dec 31,
EUR million 2007 2006
Historical cost at the
beginning of the period 4 009 4 188
Translation differences -76 37
Additions 137 179
Disposal of subsidiaries -20 -0
Disposals -67 -299
Reclassifications 0 -8
Discontinued operations - -88
Historical cost at
the end of the period 3 984 4 009
Accumulated depreciation at
the beginning of the period -1 939 -2 063
Translation differences 47 -21
Disposal of subsidiaries 19 0
Disposals 56 296
Reclassifications -0 8
Depreciation -190 -204
Impairments 3 -3
Discontinued operations - 48
Accumulated depreciation at
the end of the period -2 004 -1 939
Carrying value at
the end of the period 1 980 2 069
Carrying value at the
beginning of the period 2 069 2 125
Commitments
Dec 31 Dec 31
EUR million 2007 2006
Mortgages and pledges
Mortgages on land 122 126
Other pledges 0 0
Guarantees
On behalf of subsidiaries
For commercial commitments 41 97
On behalf of associated companies
For financing 5 5
Other commitments 64 59
Minimum future lease
payments on
operating leases 56 93
Group's major off-balance sheet investment commitments totaled
EUR 37 million on Dec 31, 2007 (Dec 31, 2006: EUR 15 million).
Fair values and nominal
amounts of
derivative instruments
Dec 31 Dec 31 Dec 31 Dec 31 Dec Dec
2007 2007 2007 2006 2007 2006
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 19 12 8 -9 1 992 2 139
Interest rate swaps 10 - 10 10 282 283
Number Number
of of
shares, shares,
million million
Stock options
Belvedere Resources
Ltd. 3 - 3 - 3.7 -
Tons Tons
Metal derivatives
Forward and futures
copper contracts 0 3 -2 -1 11 775 6 000
Forward and futures
nickel contracts 4 4 0 9 3 114 3 636
Forward and futures
zinc contracts 0 0 -0 0 1 100 2 150
Forward and futures
molybdenum
contracts - 0 -0 - 5 -
Nickel options 0 - 0 - 24 -
Emission allowance
derivatives 0 - 0 - 80 000 -
TWh TWh
Electricity
derivatives 26 10 16 8 2.3 4.1
63 28 35 16
Segment information
General Stainless
EUR million I/06 II/06 III/06 IV/06 2006
Sales 1 013 1 066 1 130 1 561 4 770
of which Tornio Works 652 740 781 1 142 3 316
Operating profit 43 91 166 236 536
of which Tornio Works 37 70 120 213 440
Operating capital at
the end of period 2 397 2 404 2 602 2 847 2 847
Average personnel
for the period 3 926 3 940 3 857 3 529 3 735
Deliveries of main
products (1 000 tons)
Cold rolled 246 206 172 180 805
White hot strip 74 85 62 84 305
Semi-finished products 128 144 126 154 551
Total deliveries
of the division 448 434 360 419 1 661
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
Specialty Stainless
EUR million I/06 II/06 III/06 IV/06 2006
Sales 650 638 614 821 2 723
Operating profit 22 65 81 171 338
Operating capital at
the end of period 1 173 1 240 1 350 1 594 1 594
Average personnel
for the period 4 317 4 377 4 329 4 201 4 289
Deliveries of main
products (1 000 tons)
Cold rolled 56 54 39 47 196
White hot strip 49 41 33 42 166
Quarto plate 44 44 36 39 162
Tubular products 20 20 16 18 74
Long products 14 15 14 16 59
Total deliveries
of the division 182 173 139 162 656
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
Other operations
EUR million I/06 II/06 III/06 IV/06 2006
Sales 87 93 97 85 361
Operating profit 2 -8 -13 -16 -35
Operating capital at
the end of period 133 239 188 138 138
Average personnel
for the period 504 505 479 457 481
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
Income statement by quarter
EUR million I/06 II/06 III/06 IV/06 2006
Continuing operations:
Sales
General Stainless 1 013 1 066 1 130 1 561 4 770
of which intersegment sales 205 277 273 389 1 144
Specialty Stainless 650 638 614 821 2 723
of which intersegment sales 94 92 82 129 397
Other operations 87 93 97 85 361
of which intersegment sales 44 36 38 41 159
Intra-group sales -342 -405 -394 -560 -1 700
Total sales 1 408 1 392 1 447 1 907 6 154
Operating profit
General Stainless 43 91 166 236 536
Specialty Stainless 22 65 81 171 338
Other operations 2 -8 -13 -16 -35
Intra-group items -0 1 -3 -13 -15
Total operating profit 67 149 231 378 824
Share of results
in associated companies 0 2 1 4 8
Financial income and expenses -7 -10 -18 -13 -48
Profit before taxes 60 141 214 369 784
Income taxes -18 -29 -48 -83 -178
Net profit for the period
from continuing operations 41 112 166 286 606
Net profit for the period
from discontinued
operations 15 20 6 317 357
Net profit for the period 56 133 172 603 963
Attributable to:
Equity holders of the Company 56 132 171 603 962
Minority interest -0 0 1 1 2
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
Major non-recurring
items in operating profit
EUR million I/06 II/06 III/06 IV/06 2006
General Stainless
Gain on sale of real
estate in the UK - - - 9 9
Specialty Stainless
Thin Strip restructuring
in the UK - - - - -
OSTP Fagersta closure - - - -8 -8
Other operations
Gain on sale of
Hitura mine in Finland - - - - -
- - - 1 1
EUR million I/07 II/07 III/07 IV/07 2007
General Stainless
Gain on sale of real
estate in the UK - - - - -
Specialty Stainless
Thin Strip restructuring
in the UK - - -11 - -11
OSTP Fagersta closure - - - - -
Other operations
Gain on sale of
Hitura mine in Finland - 25 - - 25
- 25 -11 - 14
Major non-recurring
items in financial income
EUR million I/06 II/06 III/06 IV/06 2006
Gain on the sale of
Outotec shares - - - - -
Gain on the Talvivaara
transaction - - - - -
- - - - -
EUR million I/07 II/07 III/07 IV/07 2007
Gain on the sale of
Outotec shares - 142 - - 142
Gain on the Talvivaara
transaction - 110 - - 110
- 252 - - 252
Key figures by quarter
EUR million I/06 II/06 III/06 IV/06
Operating profit margin, % 4.7 10.7 16.0 19.8
Return on capital employed, % 7.5 16.5 24.3 36.5
Return on equity, % 11.0 25.2 30.4 89.0
Return on equity,
continuing operations, % 8.1 21.4 29.4 42.3
Capital employed at end of period 3 513 3 679 3 910 4 371
Net interest-bearing
debt at end of period 1 483 1 509 1 560 1 300
Equity-to-assets ratio
at end of period, % 37.4 38.4 37.7 47.9
Debt-to-equity ratio
at end of period, % 73.0 69.5 66.4 42.3
Earnings per share, EUR 0.31 0.73 0.94 3.33
Earnings per share from
continuing operations, EUR 0.23 0.62 0.91 1.58
Earnings per share from
discontinued operations, EUR 0.08 0.11 0.03 1.75
Average number of shares
outstanding, in thousands 1) 181 032 181 032 181 032 181 037
Equity per share
at end of period, EUR 11.14 11.91 12.89 16.87
Number of shares outstanding
at end of period, in thousands 1) 181 032 181 032 181 032 181 032
Capital expenditure,
continuing operations 33 34 45 74
Depreciation, continuing operations 50 50 68 52
Average personnel for the period,
continuing operations 8 746 8 822 8 665 8 187
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
1) The number of own shares repurchased is excluded.
Definitions of financial key
figures
Total equity + net
Capital employed = interest-bearing 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
Capital employed (average for the
employed (ROCE) 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
This is the end of the second part II/II.
Outokumpu Annual Accounts Bulletin 2007 - Good results in a turbulent year II/II
| Source: Outokumpu Oyj
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