OUTOTEC OYJ STOCK EXCHANGE RELEASE FEBRUARY 1, 2008 AT 9:00 am
FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2007
Strong profitable growth in 2007
- Board of directors' dividend proposal EUR 0.95 per share
Financial year January 1-December 31, 2007 in brief (2006
corresponding figures in parentheses):
- Sales: EUR 1,000.1 million (EUR 740.4 million)
- Operating profit: EUR 96.1 million (EUR 51.6 million)
- Profit before taxes: EUR 104.8 million (EUR 56.6 million)
- Earnings per share: EUR 1.85 (EUR 0.88)
- Order intake: EUR 1,463.0 million (EUR 1,032.2 million)
- Order backlog at the end of the period: EUR 1,317.2 million (EUR
866.4 million)
- Net cash flow from operating activities: EUR 143.0 million (EUR
67.8 million)
Fourth quarter of 2007 in brief (2006 corresponding figures in
parentheses):
- Sales: EUR 315.5 million (EUR 239.6 million)
- Operating profit: EUR 33.0 million (EUR 23.0 million)
- Profit before taxes: EUR 36.1 million (EUR 23.5 million)
- Order intake: EUR 384.2 million (EUR 235.3 million)
CEO Tapani Järvinen:"The year 2007 was successful for Outotec, with strong growth and
improved profitability. Our order intake rose to an all-time high
level, sales increased by 35% and earnings per share more than
doubled.
We were able to recruit nearly 350 employees despite of the shortage
of skilled employees in certain countries. In addition, we further
improved our project management skills and our global engineering and
subcontractor network was working efficiently.
After winning several large orders in 2007, our existing order
backlog gives us good visibility and a solid platform for 2008. We
estimate that the strong demand for all metals is continuing and that
our technologies and products are well positioned to serve the
markets in the whole value chain from mine to metal. In addition, we
have taken steps to speed up the growth of the Services and After
Sales business and make it a significant part of our business in the
coming years."
Summary of key figures
Q4 Q4 Q1-Q4 Q1-Q4
2007 2006 2007 2006
Sales, EUR million 315.5 239.6 1,000.1 740.4
Gross margin, % 20.6 22.2 20.4 20.7
Operating profit, EUR million 33.0 23.0 96.1 51.6
Operating profit in relation to sales,
% 10.5 9.6 9.6 7.0
Profit before taxes, EUR million 36.1 23.5 104.8 56.6
Net cash from operating activities,
EUR million 45.3 47.4 143.0 67.8
Net interest-bearing debt at the end
of period, EUR million -292.9 -170.0 -292.9 -170.0
Gearing at the end of period, % -136.4 -118.0 -136.4 -118.0
Working capital at the end of period,
EUR million -153.9 -122.3 -153.9 -122.3
Return on investment, % 71.9 73.3 59.8 45.4
Return on equity, % 53.9 50.0 43.3 29.1
Order backlog at the end of period,
EUR million 1,317.2 866.4 1,317.2 866.4
Order intake, EUR million 384.2 235.3 1,463.0 1,032.2
Personnel, average for the period 2,185 1,809 2,031 1,825
Earnings per share, EUR 0.65 0.40 1.85 0.88
Dividend per share, EUR - - 0.95*) 0.35
*) Board of Director's proposal for dividend per share
OUTLOOK FOR 2008
Outotec's market outlook is expected to remain good in 2008. The
mining and metals industry's outlook remains robust and the
underlying global imbalance in the supply and demand for all metals
encourages the industry to invest extensively in greenfield projects
and expansions. Driven by the strong market situation, the demand for
Outotec's process technologies and services is expected to continue
strong in 2008.
Based on the strong existing order backlog and new order prospects,
the management expects that in 2008:
- sales will grow over 25% compared to 2007, and
- operating profit will continue to improve from 2007 and the
operating profit margin will be moderately above the 2007 level,
depending on the mix of new orders received and the timing of project
completions.
FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2007
MARKETS
In 2007, the economies in most of Outotec's geographical market areas
developed strongly and this was also evidenced by the strong demand
for Outotec's products and services for the mining and metals
industry. New prospects further increased because of the strong cash
position and capital investments of mining and metals companies.
Outotec's customers initiated projects related to technologies for
iron ore, aluminum, copper, nickel, zinc, and precious metals. In
addition, demand from other process industries outside the mining and
metals sectors was more active in 2007 than earlier.
In 2007, major mining and metals companies upgraded their investment
plans for the next three to five years in anticipation of continuing
growth in the global consumption of metals. In addition, these
companies are actively looking for new expansion opportunities and
avenues for rapidly satisfying the growing demand foreseen for all
metals.
In addition to the traditional mining and metals market areas such as
Africa, Australia and South America, customers also initiated
projects in the CIS, Middle East and South Asia.
In 2007, Outotec established subsidiaries in New Delhi, India and in
Almaty, Kazakhstan in order to better serve customers in the growing
markets in these and the surrounding countries.
ORDER INTAKE
The order intake continued to grow in 2007 and the total orders
received amounted to EUR 1,463.0 million (2006: EUR 1,032.2 million),
representing growth of 41.7%. The fourth-quarter 2007 order intake
totaled EUR 384.2 million (Q4/2006: EUR 235.3 million). Both the
strong market and Outotec's extensive product portfolio contributed
to the growth.
Major new orders in the fourth quarter of 2007 included:
- a complete zinc roasting plant for Votorantim Metais in
Cajamarquilla, Peru (EUR 80 million);
- a copper-gold concentrator plant for Hellas Gold in Skouries,
Greece (EUR 30 million);
- grinding technology for Scandinavian Minerals' Kevitsa project in
Finland. (EUR 20 million);
- two iron ore sinter plants for Steel Authority of India (SAIL) for
IISCO Steel Plant, Burnpur in India (EUR 22 million);
- a complete flotation circuit and engineering services for an entire
concentrator for the copper project of Boliden's Aitik mine in Sweden
(EUR 25 million); and
- a copper solvent extraction and electrowinning plant for Centenario
Copper for the Franke project in Chile (EUR 30 million).
Major new orders in the third quarter of 2007 included:
- an alumina calcination plant for Companhia Brasileira de Aluminio
in Aluminio, Sao Paulo state, Brazil (EUR 40 million);
- a new green anode plant and spent anode crushing facility for
Emirates Aluminium's aluminum smelter in Abu Dhabi (EUR 100 million);
- a chromite pelletizing and sinter plant for Samancor Chrome in
South Africa (EUR 15 million);
- iron ore sintering technology for Tata Steel's new Kalinganagar
steel plant in India (EUR 35 million);
- metals recovery technology including reactors and thickeners for
Talvivaara nickel project in Sotkamo, Finland (EUR 40 million);
- grinding technology for Boliden's Aitik mine in Sweden and Tara
Mine in Ireland;
- grinding technology for Kazzinc of Kazakhstan;
- a new zinc roaster with gas cleaning and sulfuric acid plant for
OZK Kardzhali for the zinc smelter expansion in Bulgaria (EUR 25
million);
- an iron ore sinter plant for JSW Steel's integrated steelworks at
Toranagulla, India; and
- a drinking water treatment facility for the eastern coastal towns
of Ampara District in Sri Lanka (USD 100 million). The order will
become effective after the approval of the finance agreement between
the government of Sri Lanka, the Australian and New Zealand Banking
Group, and Export Finance Insurance Corporation of Australia. The
project was not included in the backlog at the end of 2007.
Major new orders in the second quarter of 2007 included:
- grinding technology for Mirabela Nickel of Australia, for the Santa
Rita nickel sulfide project in Bahia state, Brazil;
- grinding technology for Adanac Molybdenum of Canada for the Ruby
Creek molybdenum project in British Columbia, Canada;
- grinding technology for Shalkiya Zinc for the Shalkiya zinc-lead
project in Kazakhstan;
- a second gas cleaning plant for the new 208 MW Bluewaters Power
Station for IHI Engineering in Australia;
- design and expansion of heavy mineral sands processing plants for
Sierra Rutile, a subsidiary of Titanium Resources Group in Sierra
Leone, Western Africa;
- two turntable anode vibrocompactors for Gansu Hualu Aluminum in
Gansu Province, China;
- two sow casting systems for Henan Wanji Aluminum in China;
- one vibrocompactor to Qingtongxia Qingxin Fangyuan Carbon, which
belongs to Qingtongxia Aluminum Group in Ningxia Province, China;
- a second chromite pellet plant for Kazchrome's Donskoy chrome mine
in Kazakhstan. The new pellet plant, in combination with Outotec's
earlier delivery of a similar plant in 2005, will be the world's
largest production unit for chromite pellets (EUR 40 million);
- the world's largest sulfuric acid plant delivery, to Ma'aden (EUR
270 million);
- two alumina calciners for ZAO Komi Aluminium's Sosnogorsk Alumina
Refinery in the Republic of Komi, Russia (EUR 20 million).
Major new orders in the first quarter of 2007 included:
- silver refinery equipment for the JSC Krasnoyarsk Non-Ferrous
Metals Plant in Russia;
- a complete thickening circuit for Boddington Gold Mine in
Australia;
- a zinc plant expansion with new, environmentally advanced leaching
technology for Hunan Zhuye Torch Metals in China (EUR 30 million);
modernization of a Flash Smelting production line for Norilsk
Nickel's Nadezha metallurgical plant in Russia (EUR 16 million);
- three TankCell®-300 flotation cells for OceanaGold's Macraes
operation in New Zealand;
- a gas cleaning plant for the new 208 MW Bluewaters Power Station
for IHI Engineering in Australia;
- KALDO precious metals technology for Tongling Nonferrous Metals in
China;
- a copper converter and gas handling technology for Engineering
Dobersek new copper smelter of Kazzinc in Kazakhstan.
ORDER BACKLOG
The order backlog at the end of December 2007 totaled EUR 1,317.2
million (December 31, 2006: EUR 866.4 million). The value of the
order backlog represents growth of 52% from the 2006 level due to the
record high order intake in 2007.
At the end of December 2007, Outotec's order backlog included 30
projects with a value in excess of EUR 10 million, accounting for 72%
of the total backlog. According to the management's estimate, some
70% of the current backlog will be delivered in 2008, and the rest in
2009 and beyond.
The drinking water treatment facility project for the eastern coastal
towns of Ampara District in Sri Lanka (USD 100 million) is pending
the customer's financial agreement and is not included in the backlog
at the end of 2007.
SALES AND FINANCIAL RESULT
Outotec's sales in 2007 totaled EUR 1,000.1 million (2006: EUR 740.4
million), up 35% from 2006. All three divisions contributed to the
organic growth of the company. The Services and After Sales business,
which is included in the divisions' sales figures, contributed EUR
80.6 million (2006: EUR 55.3 million) to the sales, up 46% from the
2006 level. The sales for the fourth quarter came to EUR 315.5
million (Q4/2006: EUR 239.6 million), up 32% from the corresponding
2006 level.
Sales generated by regions, % 2007 2006
Europe (including CIS) 27 21
Africa 11 17
Asia 15 18
Australia 11 14
North America 4 8
South America 32 22
Total 100 100
The operating profit for 2007 improved significantly compared to 2006
and was EUR 96.1 million (2006: EUR 51.6 million), representing 9.6%
of sales (2006: 7.0%). Operating profit for the fourth quarter of
2007 was EUR 33.0 million (Q4/2006: EUR 23.0 million), and the
corresponding profit margin was 10.5% (Q4/2006: 9.6%).
In 2007, the positive profit development was attributable to the
increased volume of sales, better project mix, successful project
execution and completion of some long-term projects and license fee
income. In the fourth quarter of 2007, the operating profit further
improved from the fourth quarter of 2006 because of successfully
completed projects.
Profitability improvement was also impacted by the fair valuation of
the unrealized currency hedging contracts between the euro and the
U.S. dollar for the amount of EUR 3.7 million (2006: EUR 2.0
million), which are not included in hedge accounting.
At the beginning of the third quarter in 2007, Outotec started to
apply cash flow hedge accounting to one major project in accordance
with IAS 39 in order to hedge its exposure to the euro and the U.S.
dollar foreign exchange rate fluctuations inherent to U.S. dollar
denominated cash flows. In 2007, Outotec recognized gains of EUR 1.8
million in the income statement and reserved net gains of EUR 8.1
million in equity.
Outotec's fixed costs in 2007 were higher than in the corresponding
period of 2006. The increase in administration costs came mainly from
the change in Outotec's company status to a listed company on October
10, 2006 and the subsequent strengthening of some management and
support functions, as well as from the finalization of the
information technology separation from the former parent company. The
increase in some administration costs was also related to the
business divisions worldwide, the change of the company's name and
higher employee incentive accruals.
Outotec's profit before taxes in 2007 was EUR 104.8 million (2006:
EUR 56.6 million). The profit before taxes was affected by the net
interest income from the high net cash position. Net profit for 2007
was EUR 77.6 million (2006: EUR 37.0 million). In 2007, the Group's
effective tax rate was exceptionally low because of the tax reform
enacted in Germany. Earnings per share were EUR 1.85 (2006: EUR
0.88).
Outotec's return on equity for 2007 was 43.3% (2006: 29.1%) and
return on investment 59.8% (2006: 45.4%).
Sales and operating profit
by segment
Q4 Q4 Q1-Q4 Q1-Q4
EUR million 2007 2006 2007 2006
Sales
Minerals Processing 110.5 95.3 302.9 256.6
Base Metals 85.6 53.4 274.2 192.3
Metals Processing 120.8 90.8 432.3 292.2
Other Businesses 11.1 11.9 37.8 32.6
Unallocated items*) and
intra-group sales -12.5 -11.9 -47.0 -33.2
Total 315.5 239.6 1,000.1 740.4
Operating profit
Minerals Processing 16.3 13.1 25.2 12.7
Base Metals 9.3 6.7 43.9 23.6
Metals Processing 11.5 5.3 38.1 21.2
Other Businesses 0.3 1.0 2.2 0.3
Unallocated**) and
intra-group items -4.4 -3.0 -13.3 -6.1
Total 33.0 23.0 96.1 51.6
*) Unallocated items primarily include invoicing of internal
management and administrative services.
**) Unallocated items primarily include management and administrative
services and share of the result of associated companies.
Minerals Processing
The Minerals Processing division's sales in 2007 totaled EUR 302.9
million (2006: EUR 256.6 million). Operating profit in 2007 was EUR
25.2 million (2006: EUR 12.7 million). The improvement in the
division's operating profit resulted from growth in sales, efficient
project implementation and completion and better project mix. In
addition, the division's profit includes some EUR 3 million related
to the fair valuation of the unrealized currency hedging contracts
between the euro and the U.S. dollar. Profit generation for the
Minerals Processing division is typically weaker in the first half of
the year and stronger in the second half due to the seasonality
within a fiscal year.
Base Metals
The Base Metals division's sales in 2007 totaled EUR 274.2 million
(2006: EUR 192.3 million) and operating profit was EUR 43.9 million
(2006: EUR 23.6 million). The growth in sales and the increased
proportion of proprietary technologies in deliveries significantly
improved the division's profitability. In addition, some license fee
income and the completion of four long-term projects in 2007 had a
favorable impact on the operating profit. The operating profit for
the fourth quarter was lower than in the previous quarters in 2007
due to the project mix and increase of provisions in some unfinished
projects.
Metals Processing
The Metals Processing division's sales grew significantly in 2007 and
totaled EUR 432.3 million (2006: EUR 292.2 million). The growth came
from the ferrous technology projects and new aluminum and sulfuric
acid plant as well as roasting plant projects in 2007. The operating
profit improved to EUR 38.1 million (2006: EUR 21.2 million). The
main positive impacts came from the volume growth, successful project
completions and project margin improvements.
BALANCE SHEET, FINANCING, AND CASH FLOW
Net cash flow from operating activities for 2007 was strong at EUR
143.0 million (2006: EUR 67.8 million). Compared to the corresponding
period in 2006, an improvement of over 110% in net cash flow from
operating activities was achieved. The main reasons for the
improvement were the good result and the decrease in working capital
and interest income from the strong cash position. The parent company
paid EUR 14.7 million in dividends in April 2007.
Outotec's working capital amounted to EUR -153.9 million on December
31, 2007 (December 31, 2006: EUR -122.3 million). The working capital
improved due to favorable payment terms and conditions in customer
and sub-supplier contracts.
The balance sheet structure remained strong. Net interest-bearing
debt on December 31, 2007 was EUR -292.9 million (December 31, 2006:
EUR -170.0 million). The advances received at the end of 2007 totaled
EUR 190.1 million (December 31, 2006: EUR 194.8 million). Outotec's
gearing at the end of 2007 was -136.4% (December 31, 2006: -118.0%),
and the equity-to-assets ratio was 38.2% (December 31, 2006: 36.9%).
The company's capital expenditure in 2007 was EUR 11.6 million (2006:
EUR 8.0 million), which consisted mainly of costs related to the
separation from the former parent company in terms of information
technology, investments in intellectual property rights (IPRs), and
maintenance investments.
Guarantees for commercial commitments, including advance payment
guarantees issued by the parent and other Group companies, came to
EUR 391.9 million at the end of 2007, showing an increase from the
previous year's level relative to business growth (December 31, 2006:
EUR 259.4 million).
RESEARCH AND TECHNOLOGY DEVELOPMENT
In 2007, Outotec's research and technology development expenses
totaled EUR 19.9 million (2006: EUR 19.2 million), representing 2.0%
of sales (2006: 2.6%). Outotec filed 45 new priority patent
applications (2006: 34), and 303 new national patents (2006: 298)
were granted.
In the fourth quarter of 2007, Outotec received the Cleantech
Finland® award for developing new ferrochrome production technology
that promotes sustainable development. By winning the Cleantech
Finland® competition in the process category, Outotec was qualified
for the European Business Awards for the Environment 2008
competition.
In addition, Outotec's new copper production method for the Cobre Las
Cruces project was selected as the Quality Innovation of the Year
2007 by Excellence Finland.
The FloatForce(tm) mixing technology was commercialized in the
flotation plant delivery for Boliden's Aitik mine in Sweden. The
patented FloatForce(tm) technology was first published in 2006 and it
has been proven in several field-tests. Another break-through was the
autogenous grinding mills of Outotec's proprietary design to be
delivered to Scandinavian Minerals' Kevitsa project in Finland. The
three fully autogenous mills will bring substantial savings in
operational costs of the grinding circuit compared to traditional SAG
mills.
Other major achievements in research and technology development in
2007:
Development of bioleaching technology began in 1987 at Outotec's
research center in Pori, Finland. The aim was to find a process that
could be used to recover metals from the low-grade Talvivaara nickel
ore. The progress of the Talvivaara nickel project in Sotkamo,
Finland, represents an important step in the commercialization of
bioleaching. The new bioleaching technology is now in commercial use,
allowing economical exploitation of the low-grade nickel deposits.
During the third quarter of 2007, Outotec achieved a new
break-through with its aluminum technology when an agreement was
signed with Emirates Aluminium for the supply of a new green anode
plant and spent anode-crushing facility for the aluminum smelter in
Abu Dhabi. The new plant is based on the latest technical
development, including a special grinding and mixing concept as well
as innovative Regenerative Thermal Oxidization technology for
efficient pitch fume treatment.
During the second quarter of 2007, Outotec strengthened its halide
technology know-how, on which the HydroCopper® process is based, by
entering into a collaboration agreement in the field of chloride
hydrometallurgy with Intec Ltd. of Australia. Under the agreement,
Intec makes available to Outotec its globally patented mixed halide
technology, which enhances the recovery of gold and other precious
metals from mineral ores and concentrates.
During the first quarter of 2007, Outotec commercialized two new
products. First, Outotec signed an agreement with the leading Chinese
zinc producer, Hunan Zhuye Torch Metals Co. Ltd, on the design and
delivery of a zinc plant expansion with new environmentally advanced
leaching technology. Secondly, Outotec agreed to deliver three
TankCell®-300 flotation cells to OceanaGold's Macraes operation in
New Zealand. The TankCell®-300, with an active capacity of over 300
m3, is the largest mechanical flotation cell in the world.
In the first quarter, Outotec complemented its technologies by
acquiring the Chena® (Chemistry Navigator) technology and trademark
from the Finnish company Liqum. The technology acquisition will
further improve Outotec's competitiveness in the fields of minerals
processing and hydrometallurgical process solutions. Chena®
technology is a patented electrochemistry measurement technology for
improving the efficiency of production processes.
Outotec's research centers in Pori and Frankfurt were active in
carrying out in-house development and implementation projects as well
as test work for customers in 2007. In total, some 175 employees work
in the Pori and Frankfurt Research Centers.
PERSONNEL
At the end of 2007, Outotec had a total of 2,144 employees (December
31, 2006: 1,797). In 2007, Outotec had an average of 2,031 employees
(2006: 1,825). The number of personnel increased by 347 compared to
the corresponding period of 2006 due to business growth and the
accompanying active recruitment. Temporary employees accounted for
some 14% of the total number of employees.
Distribution of personnel by country
December 31, December 31, Change, %
2007 2006
Finland 835 765 9.2
Germany 323 295 9.5
Rest of Europe 219 200 9.5
Americas 463 265 74.7
Australia 185 176 5.1
Rest of the world 119 96 24.0
Total 2,144 1,797 19.3
At the end of December 2007, in addition to the personnel on
Outotec's payroll, the company had roughly 490 full-time equivalent
contracted people working in project engineering, management and
construction. The number of contracted people at any given time
changes depending on the active project mix and local rules and
regulations.
In 2007, salaries and other employee benefit expenses totaled EUR
135.4 million (2006: EUR 116.6 million).
SHARE-BASED INCENTIVE PROGRAM FOR KEY PERSONNEL
On March 23, 2007, Outotec published a share-based incentive program.
The purpose of the incentive program is to obtain key employees'
commitment and to encourage them in achieving the company's financial
targets, as well as to increase the company's shareholder value. Some
20 key employees are participants in the two-year share-based
incentive program. The earnings period started on January 1, 2007 and
ends on December 31, 2008.
The reward paid to the key personnel is determined by the achievement
of the targets set for the development of the company's net profit
and order backlog. The reward is paid in shares and as a cash payment
(which roughly covers income taxes payable for the reward). The
shares will be allocated to the key personnel in the spring of 2009,
if the earnings criteria are met. The maximum reward of the incentive
program is EUR 6.7 million.
SHARE AND SHARE CAPITAL
Outotec's shares were entered in the Finnish Book-Entry Securities
System on September 22, 2006. The company's share capital is EUR 16.8
million, consisting of 42.0 million shares. The counter-book value of
the share is EUR 0.40 per share. Each share entitles its holder to
one vote at general meetings of shareholders of the company. At the
end of 2007, the company did not hold any treasury shares. Shares
held in 14 nominee registers accounted for 85.86% of all Outotec
shares at the end of 2007.
TRADING AND MARKET CAPITALIZATION
Outotec's shares are listed on the OMX Nordic Exchange Helsinki
(OTE1V). In 2007, the highest quotation for a share in the company
was EUR 54.75 and the lowest EUR 19.25. The trading of Outotec shares
in 2007 exceeded 138 million shares, with a total value of over EUR
5,000 million. On April 27, 2007, former parent company Outokumpu Oyj
sold its remaining stake of 12% in Outotec Oyj. On December 31, 2007,
Outotec's market capitalization was EUR 1,579 million and the last
quotation for Outotec's share was EUR 37.60.
RESOLUTIONS OF THE ANNUAL GENERAL MEETING 2007
Outokumpu Technology Oyj's Annual General Meeting (AGM) was held on
April 2, 2007, in Espoo, Finland. The AGM approved the parent
company's and the group's Financial Statements, and discharged the
members of the Board of Directors and the CEO from liability for the
2006 financial year. The AGM decided that a dividend of EUR 0.35 per
share be paid for the financial year that ended on December 31, 2006.
The dividend record date was April 5, 2007, and the dividends
(totaling EUR 14.7 million) were paid on April 17, 2007.
The AGM decided that the number of Board members, including Chairman
and Vice Chairman, should be five (5). Mr. Carl-Gustaf Bergström, Mr.
Karri Kaitue, Mr. Hannu Linnoinen, Mr. Anssi Soila and Mr. Risto
Virrankoski were re-elected as members of the Board of Directors for
the term expiring at the end of the next AGM. The AGM re-elected Mr.
Risto Virrankoski as the Chairman and Mr. Karri Kaitue as the Vice
Chairman of the Board of Directors.
The AGM confirmed the monthly remunerations paid to the Board members
as follows: Chairman EUR 3,000, Vice Chairman EUR 2,500, and other
Board members EUR 2,000, and in addition a meeting remuneration of
EUR 500 per meeting for each Board member.
KPMG Oy Ab, Authorized Public Accountants, was re-elected as the
company's auditor, with Mauri Palvi as auditor in charge.
Amendment to the Articles of Association and company's business name
The AGM approved the amendments to the Articles of Association,
including the change of the company's business name, to Outotec Oyj.
The change of business name became effective on April 24, 2007. Other
amendments included the technical revision of the company's line of
business and the election procedure of the Vice Chairman of the
Board, and other amendments of a technical nature.
BOARD'S AUTHORIZATIONS
The AGM authorized the Board of Directors to resolve upon issues of
shares as follows:
- The authorization includes the right to issue new shares,
distribute own shares held by the company, and the right to issue
special rights referred to in Chapter 10, Section 1 of the Companies
Act. This authorization to the Board of Directors does not, however,
entitle the Board of Directors to issue share option rights as an
incentive to the personnel.
- The total number of new shares to be issued and own shares held by
the company to be distributed under the authorization may not exceed
4,200,000 shares.
- The Board of Directors is entitled to decide on the terms of the
share issue, such as the grounds for determining the subscription
price of the shares and the final subscription price as well as the
approval of the subscriptions, the allocation of the issued new
shares, and the final amount of issued shares.
The authorization shall be in force until the end of the next AGM.
The Annual General Meeting authorized the Board of Directors to
resolve upon the repurchase of the company's own shares as follows:
- The company may repurchase the maximum number of 4,200,000 shares
using free equity and deviating from the shareholders' pre-emptive
rights to the shares, provided that the number of own shares held by
the company will not exceed ten (10) percent of all shares of the
company.
- The shares are to be repurchased in public trading at the OMX
Nordic Exchange Helsinki at the price established in the trading at
the time of acquisition.
The authorization shall be in force until the end of the next AGM.
The authorizations have not been exercised by February 1, 2008.
EVENTS AFTER THE REPORTING PERIOD
In January 2008, Outotec specified its strategic goals to grow its
Services and After Sales business and to become the lifetime service
partner for its customers. The growth target for the Services and
After Sales business is to increase the business to an annual level
of EUR 250-300 million by the end of 2010.
In 2007, the Services and After Sales business, which is included in
the divisions' sales figures, contributed EUR 80.6 million (2006: EUR
55.3 million) to the sales. Outotec's Services and After Sales
business consists of spare part services, maintenance contracts,
process expert services, certain engineering services and studies,
plant audits, debottlenecking, upgrading and customer training.
SHORT-TERM RISKS AND UNCERTAINTIES
Outotec monitors its key risks by active risk management. In the
fourth quarter 2007 risk assessment, all unfinished projects under
the method of the percentage of completion were reviewed and the
needed contingencies were updated. In projects where the stage of
completion was close to 100%, provisions for performance guarantees
and warranty period guarantees and possible provisions for project
losses were evaluated and made.
Generally, high demand has led to a shortage of certain components
and equipment, and availability has remained tight in some regions
and affected delivery times and profit recognition. In one large
ongoing project, there is still a further risk that material and
labor costs may rise later on during the implementation of the
project.
Skilled personnel is the key asset for Outotec. In certain regions,
the company may face challenges in recruiting skilled people and
finding suitable subcontractors. This may cause wage inflation and
slow-down in operations. Outotec manages these risks by strengthening
its image as an attractive employer and a technology leader in the
industry. Furthermore, the company develops its existing global
subcontractor network.
Risks related to new commercialized products were also evaluated and
quantified, and the necessary provisions for quality related costs
were reserved.
More than half of Outotec's total cash flow is denominated in euros,
and the rest is divided among various currencies, which include the
U.S. dollar, Brazilian real, and Australian dollar. In some of new
projects the weight of any given currency can fluctuate change
substantially, but the majority of cash-flow-related risks are hedged
in the short and long term. The forecasted and probable cash flows
are hedged selectively and always based on separate decisions and
risk analysis.
Changes in the global economy or uncertainty in the financial markets
may have an impact on Outotec's business prospects in the future;
however, these have not affected the ongoing negotiations between
Outotec and its customers.
OUTLOOK FOR 2008
Outotec's market outlook is expected to remain good in 2008. The
mining and metals industry's outlook remains robust and the
underlying global imbalance in the supply and demand for all metals
encourages the industry to invest extensively in greenfield projects
and expansions. Driven by the strong market situation, the demand for
Outotec's process technologies and services is expected to continue
strong in 2008.
Based on the strong existing order backlog and new order prospects,
the management expects that in 2008:
- sales will grow over 25% compared to 2007, and
- operating profit will continue to improve from 2007 and the
operating profit margin will be moderately above the 2007 level,
depending on the mix of new orders received and the timing of project
completions.
BOARD OF DIRECTORS' PROPOSAL FOR PROFIT DISTRIBUTION
The Board of Directors of Outotec proposes to the Annual General
Meeting that a dividend of EUR 0.95 per share be paid from Outotec
Oyj's distributable funds for December 31, 2007, and that any
remaining distributable funds be allocated to retained earnings. The
suggested dividend record date is March 25, 2008, with the dividend
to be paid on April 1, 2008.
According to the financial statements for December 31, 2007, the
parent company's distributable funds total EUR 122.4 million. The
proposed dividend corresponds to 51% of the Group's profit for the
financial year 2007.
There have been no substantial changes in the financial position of
the company after the balance sheet date. According to the Board of
Directors, the liquidity of the company is good and the proposed
profit sharing will not affect the solvency of the company.
Espoo, February 1, 2008
Outotec Oyj
Board of Directors
For further information, please contact:
Outotec Oyj
Tapani Järvinen, CEO
tel. +358 20 529211
Vesa-Pekka Takala, CFO
tel. +358 20 529211, mobile +358 40 5700074
Eila Paatela, Vice President - Corporate Communications
tel. +358 20 5292004, mobile +358 400 817198
Rita Uotila, Vice President - Investor Relations
tel. +358 20 5292003, mobile +358 400 954141
Format for e-mail addresses: firstname.lastname@outotec.com
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Income statement
Q4 Q4 Q1-Q4 Q1-Q4
EUR million 2007 2006 2007 2006
Sales 315.5 239.6 1,000.1 740.4
Cost of sales -250.6 -186.3 -796.4 -587.5
Gross margin 64.9 53.3 203.8 153.0
Other operating income 2.2 1.7 5.9 3.7
Selling and marketing
expenses -11.8 -13.0 -44.6 -46.1
Administrative expenses -15.1 -11.0 -47.0 -35.0
Research and development
expenses -5.6 -6.4 -19.9 -19.2
Other operating expenses -1.1 -1.2 -0.7 -3.8
Share of results of
associated companies -0.4 -0.4 -1.4 -1.1
Operating profit 33.0 23.0 96.1 51.6
Financial income and
expenses
Interest income and
expenses 3.7 2.0 12.4 9.3
Market price gains and
losses 0.3 0.2 0.2 -1.4
Other financial income and
expenses -0.9 -1.8 -3.9 -2.9
Total financial income and
expenses 3.1 0.5 8.7 5.0
Profit before taxes 36.1 23.5 104.8 56.6
Income taxes -9.0 -6.5 -27.2 -19.6
Net profit for the period 27.2 16.9 77.6 37.0
Attributable to:
Equity holders of the
Company 27.1 16.9 77.6 37.1
Minority interest 0.0 0.0 0.0 -0.0
Earnings per share for profit attributable to the equity
holders of the Company:
Earnings per share, EUR 0.65 0.40 1.85 0.88
Diluted earnings per
share, EUR 0.65 0.40 1.85 0.88
All figures in the tables have been rounded; consequently, the sum of
individual figures may deviate from the sum presented. Key figures
have been calculated using exact figures.
Condensed balance sheet
Dec 31 Dec 31
EUR million 2007 2006
ASSETS
Non-current assets
Intangible assets 74.8 72.7
Property, plant and equipment 24.6 26.7
Non-current financial assets
Interest-bearing 3.4 1.1
Non interest-bearing 17.3 13.0
Total non-current assets 120.0 113.5
Current assets
Inventories *) 117.0 84.4
Current financial assets
Interest-bearing 0.8 1.0
Non interest-bearing 224.0 214.7
Cash and cash equivalents 291.0 171.4
Total current assets 632.8 471.4
TOTAL ASSETS 752.8 584.9
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity holders of the
Company 214.7 144.0
Minority interest 0.1 0.0
Total equity 214.8 144.1
Non-current liabilities
Interest-bearing 1.2 2.2
Non interest-bearing 47.4 35.6
Total non-current liabilities 48.6 37.8
Current liabilities
Interest-bearing 1.0 1.2
Non interest-bearing **) 488.5 401.7
Total current liabilities 489.5 403.0
TOTAL EQUITY AND LIABILITIES 752.8 584.9
*) Of which advances paid for inventories amounted to EUR 34.8
million on December 31, 2007 (December 31, 2006: EUR 30.0 million).
**) Of which gross advances received amounted to EUR 589.7 million on
December 31, 2007 (December 31, 2006: EUR 435.0 million). Net
advances received after percentage of completion revenue recognition
amounted to EUR 190.1 million on December 31, 2007 (December 31,
2006: EUR 194.8 million).
Condensed statement of cash flows
Q1-Q4 Q1-Q4
EUR million 2007 2006
Cash flow from operating activities
Net profit for the period 77.6 37.0
Adjustments for
Depreciation and amortization 11.3 10.1
Impairments - 3.3
Other adjustments 25.8 10.9
Decrease in working capital 29.2 12.4
Interest received 11.8 9.8
Interest paid -0.2 -0.4
Income tax paid -12.6 -15.3
Net cash from operating activities 143.0 67.8
Purchases of assets -11.6 -8.0
Proceeds from sale of assets 0.2 0.3
Change in other investing activities -0.6 -0.3
Net cash from investing activities -12.1 -8.0
Cash flow before financing activities 131.0 59.8
Repayments of long-term debt -1.0 -0.4
Decrease in current debt - -4.8
Dividends paid -14.7 -
Change in other financing activities -0.8 -0.9
Net cash from financing activities -16.5 -6.1
Net change in cash and cash equivalents 114.5 53.6
Cash and cash equivalents at the beginning of the period 171.4 126.3
Foreign exchange rate effect on cash and cash equivalents 5.1 -8.6
Net change in cash and cash equivalents 114.5 53.6
Cash and cash equivalents at the end of the period 291.0 171.4
Statement of changes in equity
A = share capital, B = premium fund, C = other reserves, D = fair
value reserves, E = cumulative translation differences, F = retained
earnings, G = minority interest, H = total equity
Attributable to the equity holders of the
EUR million Company
A B C D E F G H
Equity on Jan 1, 2006 16.8 20.2 0.1 0.0 9.3 64.2 0.1 110.7
Fair value losses on
available-for-sale
financial assets - - - -0.0 - - - -0.0
Change in translation
differences - - - - -3.5 - -0.0 -3.5
Items recognized
directly in equity - - - -0.0 -3.5 - -0.0 -3.5
Net profit for the
period - - - - - 37.1 -0.0 37.0
Total recognized
income and expenses - - - -0.0 -3.5 37.1 -0.0 33.6
Management stock
option program:
Value of received
services - - - - - -0.2 - -0.2
Equity on Dec 31, 2006 16.8 20.2 0.1 - 5.8 101.1 0.0 144.1
Equity on Jan 1, 2007 16.8 20.2 0.1 - 5.8 101.1 0.0 144.1
Cash flow hedges:
Hedge result
deferred
to equity - - - 11.3 - - - 11.3
Deferred tax in
equity - - - -3.2 - - - -3.2
Available for sale
financial assets:
Fair value changes
recognized in
equity - - - -0.2 - - - -0.2
Deferred tax in
equity - - - -0.0 - - - -0.0
Change in translation
differences - - - - -0.1 - -0.0 -0.1
Other changes - - 0.0 - - - - 0.0
Items recognized
directly in equity - - 0.0 7.9 -0.1 - -0.0 7.8
Net profit for the
period - - - - - 77.6 0.0 77.6
Total recognized
income and expenses - - 0.0 7.9 -0.1 77.6 0.0 85.4
Dividends paid - - - - - -14.7 - -14.7
Equity on Dec 31, 2007 16.8 20.2 0.2 7.9 5.7 164.0 0.1 214.8
Key figures
Q4 Q4 Q1-Q4 Q1-Q4
2007 2006 2007 2006
Sales, EUR million 315.5 239.6 1,000.1 740.4
Gross margin, % 20.6 22.2 20.4 20.7
Operating profit, EUR million 33.0 23.0 96.1 51.6
Operating profit in relation to sales,
% 10.5 9.6 9.6 7.0
Profit before taxes, EUR million 36.1 23.5 104.8 56.6
Profit before taxes in relation to
sales, % 11.5 9.8 10.5 7.6
Net cash from operating activities,
EUR million 45.3 47.4 143.0 67.8
Net interest-bearing debt at the end
of period, EUR million -292.9 -170.0 -292.9 -170.0
Gearing at the end of period, % -136.4 -118.0 -136.4 -118.0
Equity-to-assets ratio at the end of
period, % 38.2 36.9 38.2 36.9
Working capital at the end of period,
EUR million -153.9 -122.3 -153.9 -122.3
Capital expenditure, EUR million 1.7 2.5 11.6 8.0
Capital expenditure in relation to
sales, % 0.5 1.0 1.2 1.1
Return on investment, % 71.9 73.3 59.8 45.4
Return on equity, % 53.9 50.0 43.3 29.1
Order backlog at the end of period,
EUR million 1,317.2 866.4 1,317.2 866.4
Order intake, EUR million 384.2 235.3 1,463.0 1,032.2
Personnel, average for the period 2,185 1,809 2,031 1,825
Net profit for the period in relation
to sales, % 8.6 7.1 7.8 5.0
Research and development expenses, EUR
million 5.6 6.4 19.9 19.2
Research and development expenses in
relation to sales, % 1.8 2.7 2.0 2.6
Earnings per share, EUR *) 0.65 0.40 1.85 0.88
Equity per share, EUR *) 5.11 3.43 5.11 3.43
Dividend per share, EUR - - 0.95**) 0.35
*) Outotec Oyj shares have been split on August 10, 2006 from 8.4
million to 42.0 million shares, after which counter-book value of a
share is EUR 0.40. Earnings per share and equity per share have been
calculated with 42.0 million shares.
**) Board of Director's proposal for dividend per share
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This financial statements review is prepared in accordance with IAS
34 Interim Financial Reporting in keeping with the accounting
policies and methods as in the recent annual financial statements. In
2007, Outotec has adopted the following new standards which have
become effective on January 1, 2007: IFRS 7 Financial instruments:
Disclosures and Amendment to IAS 1 - Presentation of financial
statements: Capital disclosures. The adoption of these new standards
has mainly impact on the disclosure information on the 2007 financial
statements. This financial statements review is unaudited.
Starting from July 1, 2007, Outotec is applying cash flow hedge
accounting for one major project to hedge its exposure to EUR/USD
foreign exchange rate fluctuations inherent to USD denominated cash
flows. The hedge results are recognized in the income statement in
the same periods as the project revenue. The hedged cash flows are
customer prepayments that are recognized as revenue in the income
statement using the percentage of completion method. The respective
proportion of the hedge results has been recognized in the income
statement as an adjustment to sales, and the remaining part in the
cash flow hedge reserve in equity. The amounts in the cash flow hedge
reserve also include a respective proportion of the realized result
of hedges of customer prepayments that have already taken place but
not recognized in income statement.
The comparison figures for 2006 are based on combined financial
statements, which have been prepared so that business structure and
combined financial information of Outotec would fairly present the
result of operations, cash flows and financial position of Outotec's
current operations.
Use of estimates
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 review 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.
Adoption of new and amended standards and interpretations
- IFRIC 8 - Scope of IFRS 2 (effective date May 1, 2006)
- IFRIC 9 - Reassessment of Embedded Derivatives (effective date June
1, 2006)
- IFRIC 10 Interim Financial Reporting and Impairment (effective date
November 1, 2006)
- IFRIC 11 -IFRS 2 Group and Treasury Share Transactions (effective
date March 1, 2007)
- IFRIC 12 - Service Concession Arrangements (effective date January
1, 2008). The interpretation has not yet been approved to be applied
in the EU.
- IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction (effective date January 1,
2008). The interpretation has not yet been approved to be applied in
the EU.
The adoption of these interpretations will not have impact on 2007
financial statements.
Outotec will estimate the impacts on the following standards and will
apply the new standards from the financial period beginning January
1, 2009 onwards:
- IFRS 8 Operating segments (effective date January 1, 2009)
- IAS 1 Presentation of Financial Statements (effective date January
1, 2009). The amended standard has not yet been approved to be
applied in the EU.
- IAS 23 Borrowing costs (effective date January 1, 2009). The
amended standard has not yet been approved to be applied in the EU.
Major non-recurring items in operating profit for the period
Q1-Q4 Q1-Q4
EUR million 2007 2006
One-time expenses related to the listing - -1.3
Gain from available-for-sale financial
assets 1.9 -
The value of shares owned by Outotec in Pacific Ore Ltd (UK) was EUR
0.8 million on December 31, 2006. In 2007, the shares were changed
into shares of Trajan Minerals Limited. Trajan Minerals Limited was
listed to Australian stock exchange (ASX) on November 30, 2007. For
Outotec, the listing resulted in EUR 1.9 million gain. The change in
the fair value of the shares between the listing and December 31,
2007 (EUR -0.3 million) was booked to the revaluation reserve for
available-for-sale financial assets in Outotec's equity.
Income taxes
Q1-Q4 Q1-Q4
EUR million 2007 2006
Current taxes -24.5 -17.9
Deferred taxes -2.7 -1.7
Total income taxes -27.2 -19.6
In 2007, the effective tax rate of the Group was 26%. The most
significant item affecting the tax rate was the tax reform enacted in
Germany, which lowered the tax rate of the Group by approximately
four percentage points.
Property, plant and equipment
Dec 31 Dec 31
EUR million 2007 2006
Historical cost at the beginning of the period 77.4 76.2
Translation differences 0.0 -1.7
Additions 5.1 5.2
Disposals -1.5 -2.6
Reclassifications 0.2 0.0
Historical cost at the end of the period 81.3 77.4
Accumulated depreciation and impairment at the
beginning of the period -50.7 -45.7
Translation differences 0.1 0.6
Disposals 1.1 2.3
Reclassifications 0.0 0.0
Depreciation during the period -7.2 -7.0
Impairment during the period - -1.0
Accumulated depreciation and impairment at the end of
the period -56.7 -50.7
Carrying value at the end of the period 24.6 26.7
Commitments and contingent liabilities
Dec 31 Dec 31
EUR million 2007 2006
Pledges 2.1 27.8
Guarantees for commercial commitments 185.7 121.3
Minimum future lease payments on
operating leases 51.4 51.2
The value of commercial guarantees does not include advance payment
guarantees issued by the parent or other group companies. The total
amount of guarantees for financing issued by group companies amounted
to EUR 2.8 million at December 31, 2007 (December 31, 2006: EUR 0.4
million) and for commercial guarantees including advance payment
quarantees EUR 391.9 million at December 31, 2007 (December 31, 2006:
EUR 259.4 million).
Derivative instruments
Currency forwards
Dec 31 Dec 31
EUR million 2007 2006
Net fair values 13.9 *) 2.0
Number of contracts 344 103
*) of which EUR 11.1 million designated as cash flow hedges
Related party transactions
Transactions and balances with associated companies
Q1-Q4 Q1-Q4
EUR million 2007 2006
Sales 0.0 0.3
Financial income and expenses 0.2 0.1
Loan receivables 1.2 1.3
Trade and other receivables 1.0 0.9
Current liabilities - 2.2
Sales and operating profit by quarters
EUR million Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07
Sales
Minerals
Processing 69.8 36.4 57.4 67.5 95.3 55.2 64.6 72.7 110.5
Base Metals 64.2 44.9 50.6 43.3 53.4 60.1 64.5 64.1 85.6
Metals
Processing 70.2 62.9 67.5 71.0 90.8 97.5 100.9 113.0 120.8
Other
Businesses 10.5 6.6 8.1 6.0 11.9 6.7 8.9 11.1 11.1
Unallocated
items*) and
intra-group
sales -8.3 -6.7 -6.8 -7.9 -11.9 -7.8 -11.7 -15.0 -12.5
Total 206.4 144.2 176.8 179.9 239.6 211.7 227.1 245.9 315.5
Operating
profit
Minerals
Processing 4.6 -3.7 -1.9 5.2 13.1 1.9 3.3 3.6 16.3
Base Metals 12.7 5.6 7.1 4.1 6.7 9.4 13.2 12.1 9.3
Metals
Processing 6.1 4.1 6.1 5.6 5.3 4.7 10.5 11.5 11.5
Other
Businesses -0.1 -0.5 0.2 -0.3 1.0 0.0 0.6 1.3 0.3
Unallocated
items **) -1.1 -1.5 -1.5 -0.2 -3.0 -2.4 -4.1 -2.5 -4.4
Total 22.2 4.1 10.0 14.5 23.0 13.6 23.4 26.0 33.0
*) Unallocated items primarily include invoicing of internal
management and administrative services.
**) Unallocated items primarily include management and administrative
services and share of the result of associated companies.
Definitions for key financial figures
Net interest-bearing debt = Interest-bearing debt -
interest-bearing assets
Gearing = Net interest-bearing debt × 100
Total equity
Equity-to-assets ratio = Total equity × 100
Total assets - advances received
Return on investment = Operating profit + financial income × 100
Total assets - non interest-bearing
debt (average for the period)
Return on equity = Net profit for the period × 100
Total equity (average for the
period)
Research and development = Research and development expenses
costs in the income statement
(including expenses covered by
grants received)
Earnings per share = Net profit for the financial period
attributable to the equity holders
Average number of shares during the
period, as adjusted for stock split
Dividend per share = Dividend for the financial year
Number of shares at the end of the
period, as adjusted for stock split
OUTOTEC'S JANUARY-DECEMBER 2007 FINANCIAL STATEMENTS REVIEW BRIEFING
A briefing, in which CEO Tapani Järvinen and CFO Vesa-Pekka Takala
will present the 2007 results, will be held in Helsinki, Finland.
BRIEFING
Date: Friday, February 1, 2008
Time: 3.00-4.00pm (EET)
Venue: Hotel Kämp, Meeting room Paavo Nurmi, Pohjoisesplanadi 29,
Helsinki
JOINING VIA WEBCAST
You may follow the briefing via a live webcast at
www.outotec.com/Presentations. Please, click in and register
approximately 5 to 10 minutes before the briefing. The webcast will
be recorded and published on Outotec's website.
JOINING VIA TELECONFERENCE
You may also join the briefing by telephone. To register as a
participant for the teleconference, please dial in 5 to 10 minutes
before the beginning of the event:
FI/UK: +44 20 7162 0025
US/CANADA: +1 334 323 6201
Password: Outotec
In addition, an instant replay service of the conference call will be
available until February 6 midnight on the following numbers:
FI/UK: +44 20 7031 4064
US/CANADA: +1 954 334 0342
Access code: 781695
The contact information is gathered for registration purposes only
and it is not used for commercial purposes.
FINANCIAL REPORTING SCHEDULE FOR 2008
Outotec will disclose the following financial information in 2008:
Interim report for January-March 2008, on Wednesday, April 23, 2008
Interim report for January-June 2008, on Wednesday, July 23, 2008
Interim report for January-September 2008, on Thursday, October 23,
2008
The Outotec Annual General Meeting is expected to be held on Tuesday,
March 18, 2008, in Espoo, Finland.
Outotec's Annual Report 2007 will be published in week 10.
DISTRIBUTION:
OMX Nordic Exchange Helsinki
Main media
www.outotec.com
