Rautaruukki Corporation Interim report 30 July 2008 at 9
RAUTARUUKKI CORPORATION'S INTERIM REPORT FOR JANUARY-JUNE 2008
CONTINUED GOOD MARKET SITUATION, OUTLOOK UNCHANGED
Summary of 2008 first half-year results (reference period January-June 2007)
- Net sales EUR 2,008 million (1,960), comparable EUR 1,985 million (1,884)
- Operating profit EUR 309 million (356), comparable EUR 314 million (354)
- Return on capital employed 28.6 per cent (31.8*)
- Earnings per share (diluted) EUR 1.65 (1.89)
- Comparable consolidated net sales growth during the current year is expected
to meet the target and exceed 10 per cent. Operating profit in 2008 is expected
to be higher than in 2007.
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| KEY FIGURES | H1/ | H1/ | Q2/ | Q2/ | 2007 |
| | 2008 | 200 | 200 | 200 | |
| | | 7 | 8 | 7 | |
--------------------------------------------------------------------------------
| Net sales, EUR m | 2 008 | 1 960 | 1 069 | 1 009 | 3 876 |
--------------------------------------------------------------------------------
| Net sales, EUR m, | 1 985 | 1 884 | 1 060 | 973 | 3 744 |
| comparable | | | | | |
--------------------------------------------------------------------------------
| Operating profit, EUR m | 309 | 356 | 166 | 178 | 637 |
--------------------------------------------------------------------------------
| Operating profit, EUR m | 314 | 354 | 172 | 178 | 635 |
| comparable | | | | | |
--------------------------------------------------------------------------------
| Operating profit as % of | 15.4 | 18.2 | 15.5 | 17.7 | 16.4 |
| net sales | | | | | |
--------------------------------------------------------------------------------
| Operating profit as % of | 15.8 | 18.8 | 16.2 | 18.3 | 17.0 |
| net sales, comparable | | | | | |
--------------------------------------------------------------------------------
| Profit before taxes, EUR m | 308 | 353 | 167 | 176 | 621 |
--------------------------------------------------------------------------------
| Profit before taxes, EUR m, | 313 | 351 | 173 | 176 | 619 |
| comparable | | | | | |
--------------------------------------------------------------------------------
| Earnings per share, | 1.65 | 1.89 | 0.89 | 0.93 | 3.31 |
| diluted, EUR | | | | | |
--------------------------------------------------------------------------------
| Return on capital employed, | 28.6 | 31.8* | | | 29.8 |
| % * | | | | | |
--------------------------------------------------------------------------------
| Gearing ratio, % | 5.8 | 13.0 | | | 1.4 |
--------------------------------------------------------------------------------
| Personnel, average | 14 986 | 13 810 | 15 327 | 14 353 | 14 326 |
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The comparable figures exclude the business operations of Ruukki Betonstahl
GmbH, Ruukki Welbond BV and Carl Froh GmbH, which have been divested.
* Based on previous 12 months and reference periods restated in accordance with
the new accounting principle. The figure excludes a capital gain of EUR 100
million on the divestment of Ovako.
2008 first half-year in brief:
- Comparable consolidated net sales for the first half year of 2008 rose to EUR
1,985 million (1,884). Comparable operating profit for the report period was EUR
314 million (354), which is 15.8 per cent (18.8) of net sales. Operating profit
improved to EUR 172 million for the second quarter of 2008 compared to EUR 143
million for the first quarter of 2008.
- Demand for non-residential construction was good across the entire market
area, especially in the Nordic countries and Russia. Demand for infrastructure
construction was brisk and sales volumes were up. A slowdown in residential
construction reduced sales of roofing components in the Baltics.
- The good market situation in the lifting, handling and transportation
equipment industry and energy industry increased Ruukki Engineering's net sales.
Strong demand, price increases and reorganisation of operations improved the
division's profitability.
- Demand for steel products was good. The share of special products rose to 27
per cent (22) of Ruukki Metals' net sales.
President & CEO Sakari Tamminen comments on the 2008 first half-year results:
- Except in residential construction in the Baltics and Nordic countries, the
good market situation in our core market area and main customer industries
continued during the report period.
There was continued good demand in both non-residential and infrastructure
construction. Nevertheless, Ruukki Construction's operating profit was down year
on year. Earnings were affected by expenses relating to the division's extensive
investment programme, as well as by higher steel material costs, which were
still not fully reflected in sales prices during the second quarter.
The order books of engineering customers in the lifting, handling and
transportation equipment industry remained strong and the market situation was
favourable in the energy industry, especially in the wind power sector. Ruukki
Engineering's profitability improvement programme progressed to plan and in this
context operations were reorganised in the Finnish and Hungarian units during
the report period. The programme aims at improving the division's operating
profit by around EUR 20 million during the current year.
Demand for Ruukki Metals' special products was very brisk and we continued
investments to increase delivery capability for special products. The division's
operating profit was down compared to the strong reference period a year
earlier, but improved during the second quarter of 2008 compared to the first
quarter. The rise in the cost of raw materials is expected to add around EUR 220
million to our own steel production costs in 2008 compared to 2007. We estimate
that higher sales prices and improved cost efficiency will offset increased
production costs.
Comparable consolidated net sales growth during the current year is expected to
meet the target and exceed 10 per cent. Operating profit in 2008 is expected to
be higher than in 2007.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Sakari Tamminen, President & CEO, tel. +358 20 592 9075
Mikko Hietanen, CFO, tel. +358 20 592 9030
Press conference
Rautaruukki will hold a press conference for analysts and the media on 30 July
2008 at 10.30 at Ruukki, Suolakivenkatu 1, 00810 Helsinki.
Webcast and conference call
The English webcast and conference call for investors and analysts can be viewed
live on the company's website at www.ruukki.com/investors, today 30 July 2008 at
14.00 Finnish time. A replay of the webcast can be viewed on the same site from
about 18.00 Finnish time.
To attend the conference call, please call +44 (0)20 7162 0025, password:
Rautaruukki, about 5-10 minutes before the conference starts.
A recording of the conference call can be heard until 4 August on
+44 (0)20 7031 4064, access code: 802656
Rautaruukki Corporation
Anne Pirilä
SVP, Corporate Communications and Investor Relations
Rautaruukki supplies metal-based components, systems and integrated systems to
the construction and engineering industries. The company has a wide selection of
metal products and services. Rautaruukki has operations in 25 countries and
employs 14,990 people. Net sales in 2007 totalled EUR 3.9 billion. The company's
share is quoted on the OMX Nordic Exchange Helsinki (Rautaruukki Oyj: RTRKS).
The Corporation uses the marketing name Ruukki.
www.ruukki.com
RAUTARUUKKI CORPORATION INTERIM REPORT JANUARY-JUNE 2008
The good market situation in Rautaruukki's core market areas and main customer
industries continued throughout the first six months of the year.
Demand for non-residential construction was good across the market area, with
brisk markets especially in the Nordic countries and Russia. Good demand for
infrastructure construction continued.
The order books of engineering customers continued to show strength and this has
been reflected in growing demand, with strong demand especially in the lifting,
handling and transportation equipment industry and energy industry.
There was continued good overall demand for steel products, with strong growth
in demand especially for special steel and plate products.
Net sales during January-June
Unless otherwise stated, the comparable figures in brackets refer to the same
period a year earlier.
The company reported net sales of EUR 2,008 million for the first six months of
2008, up by EUR 48 million compared to last year (1,960). Comparable net sales
for the first six months of the year were EUR 1,985 million, up by EUR 101
million year on year (1,884). The comparable figures exclude Ruukki Betonstahl
GmbH and Ruukki Welbond BV, which were part of the Group until November 2007,
and Carl Froh GmbH, which was part of the Group until June 2008.
Ruukki Construction's net sales were EUR 509 million (471), Ruukki Engineering's
EUR 394 million (330) and Ruukki Metals' net sales EUR 1,105 million (1,159).
The solutions businesses - Ruukki Construction and Ruukki Engineering -
increased their share of the company's net sales to 45 per cent (41) during the
report period. Finland accounted for 32 per cent (31) of consolidated net sales,
the other Nordic countries for 31 per cent (32) and Central Eastern Europe,
Russia and Ukraine for 19 per cent (19). The rest of Europe accounted for 14 per
cent (16) of net sales and other countries for 3 per cent (2).
Ruukki Construction's net sales rose year on year due to increased product
deliveries in the project business and infrastructure construction.
Ruukki Engineering increased net sales as a result of growth in the lifting,
handling and transportation equipment business and acquisitions made in Hungary
and Germany. In addition, the continuing favourable market situation in the
energy industry, especially in the wind power sector, increased sales volumes.
Ruukki Metals reported slightly lower net sales in comparison with the same
period a year earlier. Comparable net sales during January-June remained almost
unchanged at EUR 1,082 million (1,083). Very good demand for special products
continued. The division's comparable net sales were up by EUR 60 million or 12
per cent compared to the first quarter of 2008.
Operating profit for January-June
The company reported operating profit of EUR 309 million (356), reflecting 15
per cent (18) in net sales. The share of the solutions businesses rose to 41 per
cent (37) of consolidated operating profit. Ruukki Construction's operating
profit was EUR 59 million (74), Ruukki Engineering's EUR 66 million (59) and
Ruukki Metals' operating profit was EUR 197 million (233).
Profitability of Ruukki Construction's business in Northern Europe was good
throughout the report period. Ruukki Construction's earnings during January-June
were affected by the costs of building the organisation and sales network
associated with implementation of the division's extensive investment programme.
Earnings were also affected by higher steel material costs, which were still not
fully reflected in sales prices during the second quarter.
Ruukki Engineering improved profitability during the report period on the back
of strong demand and higher prices. In addition, the reorganisation of
operations and development of the product range have also improved profitability
of the cabin business and business within the energy industry.
Ruukki Metals' comparable operating profit for January-June 2008 was EUR 202
million (231). Demand for steel products was good and higher sales prices have
covered the increased costs of raw materials. Strikes at the Raahe Works in
Finland had a negative impact of EUR 8 million on the division's operating
profit compared to the strong earnings for the comparable period a year earlier.
Also margins on stainless steel trading were EUR 19 million lower year on year.
Ruukki Metals' reported operating profit was also affected by a EUR 7 million
capital loss booked on the divestment of Carl Froh GmbH.
A change in the IFRS accounting practice in respect of disability pension
increased pension costs by EUR 3 million during the report period.
Net finance expense and exchange rate differences totalled EUR 3 million (6).
Group taxes were EUR 78 million (91), which include a decrease of EUR 8 million
(decrease of 11) in deferred tax. The Group's effective tax rate was 26 per cent
(26).
Profit for the report period was EUR 229 million (262).
Diluted earnings per share were EUR 1.65 (1.89).
Return on capital employed over the past 12 months was 28.6 per cent (31.8) and
return on equity was 23.3 per cent (29.0). Figures for the reference period
exclude the impact of the capital gain on the divestment of Ovako.
Balance sheet
The consolidated balance sheet was EUR 29 million lower than at 30 June 2007 and
EUR 68 million higher at EUR 2,903 million than at year-end 2007. Consolidated
equity at the end of the report period was EUR 1,874 million (1,785).
Cash flow and financing
Cash flow from operating activities was good and rose to EUR 289 million (158).
Cash flow after investing activities was EUR 192 million (63). The largest
change was in working capital, which rose by EUR 14 million during the first six
months of 2008, compared with a rise of EUR 153 million during the comparable
period last year.
Net interest-bearing debt decreased to EUR 109 million (233) at the end of June.
At year-end 2007, net interest-bearing debt was EUR 28 million.
The equity ratio was 66.1 per cent (62.4) and net gearing 5.8 per cent (13.0).
At 30 June, the Group had liquid assets of EUR 103 million and undrawn revolving
credit facilities totalling EUR 300 million. Shareholders' equity at June 30 was
EUR 1,874 million (1,785) or EUR 13.51 per share (12.92). In April, Rautaruukki
paid its shareholders dividends amounting to EUR 277 million.
Personnel
During the first six months of 2008, the Group employed an average of 14,986
(13,810) people. The headcount increased especially in Central Eastern Europe.
At 30 June, the headcount was 15,655 (15,297).
Changes in Group structure
EUR 6 million was spent on M&A arrangements during the report period. Through
M&A, property, plant and equipment increased by EUR 8 million and goodwill by
EUR 2 million.
In February, Ruukki Engineering acquired the German company Wolter
Metallverarbeitung GmbH, which makes booms for telescopic and special cranes.
This acquisition strengthens Rautaruukki's position among customers within the
lifting, handling and transportation equipment industry.
In April, Ruukki Metals acquired the business operations of Finnish company
Hybri-Steel Oy. This acquisition adds laser and laser hybrid welding to
Rautaruukki's special product expertise.
In June, Ruukki Metals sold its German unit Carl Froh GmbH, which makes
precision tubes and components for the automotive industry. The divestment is
part of the division's strategy of focusing on special products in the Central
and Southern European markets. The transaction has a positive impact of around
EUR 10 million on cash flow.
Annual General Meeting 2008
Rautaruukki Corporation held its Annual General Meeting in Helsinki on 2 April
2008. The Meeting approved the payment of a dividend for 2007 of EUR 1.70 plus
an additional dividend of EUR 0.30 per share to make a total dividend of EUR
2.00 per share. The total dividend payout of EUR 277 million was paid on 16
April 2008.
The Annual General Meeting reappointed Mr Jukka Viinanen and Mr Reino Hanhinen
as chairman and deputy chairman respectively of the Board of Directors.
President and CEO Maarit Aarni-Sirviö, CEO Christer Granskog, Pirkko Juntti LLM,
Undersecretary of State Kalle J. Korhonen and Chairperson of the Board Liisa
Leino were all reappointed to the Board for a further term of office. The term
of office of the Board of Directors ends at the close of the following Annual
General Meeting.
The Annual General Meeting appointed Marjo Matikainen-Kallström MP as the new
chairperson of the Supervisory Board and Inkeri Kerola MP as the new deputy
chairperson. Heikki Allonen MSc (Tech), Turo Bergman, Political Secretary,
Miapetra Kumpula-Natri MP, Petteri Orpo MP, Jouko Skinnari MP, Markku Tynkkynen,
Executive Vice President, Resources, and Tapani Tölli MP were all appointed as
members of the Supervisory Board. The term of office of the Supervisory Board
ends at the close of the following Annual General Meeting.
The Annual General Meeting elected Authorised Public Accountants firm KPMG Oy Ab
as the company's new auditor, with Mauri Palvi APA as the principal auditor.
The Annual General Meeting authorised the Board of Directors to resolve to
acquire a maximum of 12,000,000 of the company's own shares. This authorisation
is valid for 18 months from the decision of the Annual General Meeting.
The Annual General Meeting decided to establish a shareholders' Nomination
Committee to prepare proposals for the following Annual General Meeting
regarding the composition of the Board of Directors and directors' fees.
Capital expenditure
Capital expenditure during January-June amounted to EUR 103 million (73). During
the report period, divestments of property, plant and equipment amounted to EUR
11 million (4). EUR 6 million was spent on M&A arrangements during the report
period. Capital expenditure in 2008 is expected to exceed EUR 250 million.
A decision was taken in January to strengthen delivery capability in the Nordic
and Baltic non-residential construction markets by building a new sandwich panel
plant in Finland. The total investment is worth around EUR 20 million. The new
plant, when completed in autumn 2009, will double annual panel output in Finland
to over 2 million square metres.
A decision was taken in April to increase steel service centre capacity in
Russia. Work is under way on the construction of a steel service centre next to
the production plant in Obninsk, to the southwest of Moscow. The approximately
EUR 13 million investment will broaden the product range and service capability
to increasingly encompass also the engineering industry. The new service centre
will begin operations in late 2009. A new cut-to-length line will start up at
the steel service centre in St Petersburg this autumn.
New finishing capacity for special steel production will come on stream in
stages during the current year. Rautaruukki is spending some EUR 44 million
during 2008 to increase capacity. During the report period, the production
capacity of high-strength and wear-resistant steels and components was increased
by a new plasma cutting and packaging unit especially for high-strength plate
products, as well as by the commissioning of the first stage of a new ladle
treatment unit.
Shares and share capital
During the first six months of 2008, Rautaruukki Oyj shares were traded for a
total of EUR 3,382 million (3,956) on the OMX Nordic Exchange Helsinki. The
highest price quoted was EUR 34.77 in June and the lowest was EUR 22.37 in
January. The volume weighted average share price was EUR 28.77. At 30 June 2008,
the share closed at EUR 29.06 and the company had a market capitalisation value
of EUR 4,075 million (6,668).
The company's registered share capital at 30 June 2008 was EUR 238.4 million and
there were 140,215,328 shares issued.
The Board of Directors is authorised to acquire a maximum of 12,000,000 of the
company's own shares. The authorisation is valid for a period of 18 months from
the resolution of the Annual General Meeting on 2 April 2008. The Board of
Directors did not exercise the authorisation to buy own shares during the report
period.
The Board of Directors is also authorised to transfer a maximum of 13,785,381
treasury shares retained by the company. The authorisation is valid until the
close of the 2009 Annual General Meeting.
At 30 June 2008, the company had 1,466,937 treasury shares, which at that date
had a market value of EUR 42.6 million and an accountable par value of EUR 6.3
million. Treasury shares account for a relative percentage of 1.05 per cent of
the total number of shares and votes.
Employee warrants based on the 2003 bond with warrants have been publicly traded
on the OMX Nordic Exchange Helsinki since 24 May 2006. One warrant entitles the
holder to subscribe one share at an issue price of EUR 1.70. Warrants had been
exercised to subscribe a total of 1,328,883 shares by 30 June 2008. The
remaining warrants entitle holders to subscribe a total of 71,117 shares. The
subscription period expires on 23 May 2009.
At the end of the report period, the Board of Directors have no valid
authorisations to issue convertible bonds or bonds with warrants or to increase
the company's share capital.
Disclosure notifications
Pursuant to Chapter 2, Section 9 of the Finnish Securities Markets Act,
Rautaruukki received, on 28 May 2008, a disclosure notification from Capital
Research and Management Company that the aggregate holding of Rautaruukki's
shares and votes by the mutual funds CRMC manages had increased to 5.42 per
cent.
Environmental and energy issues
There were no major changes in environmental and energy issues during the report
period.
In the free allocation for the second period 2008-2012 of the EU Emissions
Trading Scheme, the Raahe Works received emissions allowances corresponding to
91 per cent and the steam boilers at the Hämeenlinna Works allowances
corresponding to 86 per cent of their maximum needs. This makes a total of 23.5
million emissions allowances.
In March, Rautaruukki made a decision to close down sinter plant operations at
the Raahe Works by the end of 2011. The company is switching over to using iron
pellets instead of sinter as the only raw material in the iron-making process.
Closure of the sinter plant will reduce the present level of carbon dioxide
emissions by 10 per cent or 500,000 tonnes a year. It will also significantly
reduce dust and sulphur dioxide emissions at the works and cut energy
consumption.
Improvement in cost efficiency
Ruukki United, Rautaruukki's programme to harmonise ways of working and improve
efficiency, aims to achieve annual cost savings, compared with 2004 levels, of
around EUR 150 million by the end of the current year. EUR 119 million of this
target had been achieved by the end of the report period.
The Ruukki United programme also seeks to permanently free up some EUR 150
million of capital by year-end 2008. EUR 127 million of this figure had been
achieved by the end of the report period.
Events taking place after 30 June 2008
In July, Rautaruukki signed a contract to supply the steel superstructures for
the bridge at Partihallarna in Gothenburg, Sweden. The bridge is part of the
Swedish Road Administration's Partihallsförbindelsen road link project. The
contract is worth around EUR 9 million. Delivery and installation work are
scheduled for 2009-2010.
July saw the end of employer-employee negotiations initiated by Ruukki
Engineering in May 2008. The negotiations concerned the division's Hungarian
unit, Ruukki Tisza Zrt., and senior salaried employees in the division's Finnish
units in Helsinki, Tampere and Hämeenlinna. In Hungary, agreement was reached to
cut the number of white-collar jobs by 190 during the course of this year and
2009. In Finland, negotiations resulted in 17 jobs being shed in division
administration during the course of this autumn. The outcome of negotiations
includes retirement agreements and the termination of seven employment
contracts.
Rise in prices of steel raw materials in 2008
Prices of raw materials (iron ore, coal, filler materials, alloying elements and
recycled steel) have risen sharply on the global market. It is estimated the
higher cost of raw materials will add around EUR 220 million to company's own
steel production costs in 2008 compared to 2007. Around one third of the rise in
costs was realised during the first half of the year and two thirds will be
realised during the second half.
It is estimated higher raw material costs can be offset in full by increasing
sales prices and by improving cost efficiency. The size and timing of price
increases will vary according to product and market area.
Risks and risk management
There were no significant changes in Rautaruukki's strategic, operative, hazard
and financial risks or in risk management during the report period.
Exchange rate fluctuations can have significant impact on the company's
performance. The company's largest purchasing currency is the US dollar. The
annual deficit in US dollars is about EUR 680 million, of which some six months'
deficit is hedged using currency derivatives. In sales, the Group is exposed to
a foreign currency risk mainly in Swedish, Norwegian and Danish crowns, the
Russian rouble, Polish zloty and Baltic currencies.
As its spreads, the US credit crisis and other factors of uncertainty in the
global economy might affect demand for the company's products. However, the
company believes the impact of these factors will be less in its core market
areas - the Nordic countries, Central Eastern Europe and especially in Russia
and Ukraine.
Near-term outlook
Good demand is expected to continue in Rautaruukki's key customer industries.
The non-residential construction markets in Central Eastern Europe and Russia
are still showing strong growth and demand in Northern Europe is expected to
remain good for the rest of the year. Likewise, good demand is expected to
continue in infrastructure construction. Residential construction activity in
the Baltics and in the Nordic countries is expected to slow down.
Continued good demand for the company's products is expected from engineering
industry customers. Order books of customers in the lifting, handling and
transportation equipment industry are strong and demand is expected to grow.
Demand in the energy industry is expected to remain good, especially within the
wind power sector. Continued strong demand is also expected in the shipbuilding
industry.
Good demand for steel products is expected to continue in all product groups.
Demand is still showing strong growth especially for plate and special steel
products.
Comparable consolidated net sales growth during the current year is expected to
meet the target and exceed 10 per cent. Operating profit in 2008 is expected to
be higher than in 2007.
This report is unaudited.
Helsinki, 30 July 2008
Rautaruukki Corporation
Board of Directors
DIVISIONS
Since the beginning of 2008, the accounting principle for segment information
has been revised as follows: Ruukki Metals division is responsible for the costs
or income arising when steel production diverges from normal capacity
utilisation. The comparable segment information for 2007 has been adjusted to
comply with the new accounting principle.
Ruukki Construction
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
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| Net sales | 213 | 258 | 278 | 292 | 1 042 | 225 | 285 |
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| Operating profit | 34 | 40 | 51 | 38 | 163 | 21 | 38 |
--------------------------------------------------------------------------------
| as % of net | 16 | 16 | 18 | 13 | 16 | 9 | 13 |
| sales | | | | | | | |
--------------------------------------------------------------------------------
Ruukki Construction's net sales during January-June were EUR 509 million (471),
up by 8 per cent on the comparable period a year earlier. The division accounted
for 25 per cent (24) of consolidated net sales.
Higher net sales were a result of increased deliveries in the project business
and infrastructure construction. There was continued good demand for
non-residential construction across the market area, with particularly strong
demand in the Nordic countries and Russia. A colder winter than during the
previous year in Central Eastern Europe meant less construction. This explains
the decrease in sales volumes in this market area during the first quarter of
2008 compared to the same period a year earlier.
Infrastructure construction demand and sales volumes rose in both road and
railway construction and foundation building compared to the first half of 2007.
Demand for infrastructure construction was especially good in Sweden.
Demand for roofing components in the Nordic countries remained almost unchanged
year on year, but declined in the Baltics as the result of an overall slowdown
in the residential construction market. Residential construction accounts for
about 10 per cent of the division's net sales.
Ruukki Construction's operating profit for the first half of 2008 was EUR 59
million (74). The costs of building the organisation and sales network
associated with the implementation of an extensive investment programme affected
the division's earnings during the report period. The investments will be
completed during the course of 2008-2009 and support the division's target of
achieving annual net sales of EUR 1.5 billion by the end of 2010 (excluding
acquisitions).
Earnings were also affected by higher steel material costs, which were still not
fully reflected in sales prices during the report period.
Major new orders and solutions
Rautaruukki further strengthened its position as a leading steel constructor
especially in Russia and the Nordic countries.
Deliveries, agreed in February, of steel structures worth around EUR 100 million
for the new Zenit football stadium to be built in St Petersburg will start
during the fourth quarter of 2008 and end during the course of 2009.
In June, the company signed a contract worth EUR 12 million with Oris LLC to
deliver steel frame and cladding structures for an oriented strand board
production plant in Russia. During the first half of the year, Rautaruukki also
signed contracts for total deliveries of industrial and logistics buildings in
Russia with customers such as Samsung and Rosneft, and in Finland, for total
delivery of a maintenance and office building at Helsinki-Vantaa Airport. In
Sweden, a contract was signed to supply steel structures for the bridge crossing
the Hudälven river and foundations for the Henriksdalhamn landfill site in
Stockholm.
Ruukki Construction continued to launch new technologies on the market. During
the first six months of 2008, the division's effective solution to speed up the
construction of single-storey buildings was presented in five countries:
Hungary, Slovakia, Poland, Czech Republic and Ukraine. Contracts totalling
around EUR 11 million for deliveries based on the single-storey construction
concept deliveries were signed in the Central Eastern European area during the
report period. The concept is based on software developed by the company to
considerably shorten the initial stage in a project and ensure the choice of
compatible building components. The solution includes building design,
foundations, frame and envelope structures.
Capital expenditure
Ruukki Construction has an investment programme of around EUR 120 million under
way to expand production capacity in Central Eastern Europe, Russia and Finland.
Investments will especially strengthen frame and sandwich panel delivery
capacity.
New frame structure production lines included in the investment programme
started up in Poland and Romania during the report period. The sandwich panel
line in Romania and profile production and sandwich panel line at the Ukraine
plant will start up later this year. Expansion investments in Russia will also
be up and running this year. In addition, a new sandwich panel line will be
built in Russia in autumn 2009.
The construction of a new sandwich panel plant in Finland will strengthen
delivery capacity for industrial and commercial customers in the Nordic, Baltic
and Northwest Russian non-residential construction markets. The plant is
scheduled for completion in late 2009 at a total cost of around EUR 20 million.
Ruukki Engineering
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Net sales | 167 | 163 | 157 | 180 | 667 | 188 | 205 |
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| Operating profit | 32 | 27 | 25 | 18 | 103 | 32 | 35 |
--------------------------------------------------------------------------------
| as % of net | 19 | 17 | 16 | 10 | 15 | 17 | 17 |
| sales | | | | | | | |
--------------------------------------------------------------------------------
Ruukki Engineering's net sales during January-June 2008 were up by 19 per cent
year on year to EUR 394 million (330). The division accounted for 20 (17) per
cent of consolidated net sales.
Higher net sales were attributable to organic growth within the lifting,
handling and transportation equipment business, and to acquisitions made in
Hungary and Germany. In addition, the continued favourable market situation in
the energy industry, especially in the wind power sector, and shipbuilding
increased sales volumes and thus net sales. In certain product groups, demand
exceeds existing production capacity.
The division's operating profit for January-June 2008 was EUR 66 million (59).
Profitability improved as a result of strong demand and increases in sales
prices implemented during the first quarter. In addition, the division has
reorganised production and developed its product portfolio to improve
profitability.
Demand has remained good and sales prices have been increased to offset higher
costs of raw materials. Twenty-five per cent of the division's customers are on
an annual contract basis. It is uncertain whether or not the higher costs of raw
materials can be passed on to sales prices in respect of these contracts during
the course of 2008.
In February, Ruukki Engineering acquired German company Wolter
Metallverarbeitung GmbH, which makes booms for telescopic and special cranes.
This acquisition strengthens Rautaruukki's position among customers within the
lifting, handling and transportation equipment industry.
Integration of the units acquired by the division in Germany and Hungary is
progressing to plan and will be completed by the end of the year.
In February, Ruukki Engineering launched a profitability improvement programme
aimed at improving the division's operating profit by around EUR 20 million
during the current year. Progress has been made to plan: Operations and
production have been streamlined to improve profitability. Investments in
machinery and equipment at production facilities in Hungary, Poland and Finland
have provided additional capacity in response to a broader customer base and to
meet growing demand. The division has also developed its product portfolio and
redefined its customer strategy.
Also reorganisation has made operations within the division more effective. In
this context, the report period saw the start of employer-employee negotiations
at the division's Ruukki Tisza unit in Hungary and with senior salaried
employees in Helsinki, Tampere and Hämeenlinna in Finland. In Hungary, agreement
was reached to cut the number of white-collar jobs by 190. In Finland,
negotiations resulted in the loss of 17 jobs in division administration. The
outcome of the negotiations includes retirement agreements and the termination
of seven contracts.
Ruukki Metals
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Net sales | 531 | 552 | 464 | 488 | 2 035 | 511 | 571 |
--------------------------------------------------------------------------------
| Operating profit | 116 | 115 | 96 | 68 | 395 | 96 | 106 |
--------------------------------------------------------------------------------
| as % of net | 22 | 21 | 21 | 14 | 19 | 19 | 19 |
| sales | | | | | | | |
--------------------------------------------------------------------------------
All figures are comparable and exclude Ruukki Betonstahl GmbH, Ruukki Welbond BV
and Carl Froh GmbH.
Ruukki Metals reported net sales of EUR 1,105 million (1,159) for January-June
2008. Net sales were slightly down year on year. The division accounted for 55
per cent (59) of consolidated net sales. Comparable net sales for January-June
were almost unchanged at EUR 1,082 million (1,083) compared to a year earlier.
The comparable figures exclude Ruukki Betonstahl GmbH and Ruukki Welbond BV,
which were part of Rautaruukki until November 2007, and Carl Froh GmbH, which
was part of Rautaruukki until June 2008. The comparable figures exclude a
capital loss of EUR 7 million recognised during the second quarter on the sale
of Carl Froh GmbH.
Demand for special products remained very good. The division's comparable net
sales for the second quarter of the year were up 12 per cent or EUR 60 million
compared to the first quarter.
Good demand for steel products has continued across all the division's market
areas and in all customer sectors. Demand for special products was particularly
brisk. Very good demand for plates and hot sheets meant longer delivery times
than normal.
Ruukki Metals is making good progress with its strategy to increase its share of
special products. During the first half of the year, the share of special
products rose to account for 27 per cent (22) of the division's net sales.
The division's operating profit for January-June 2008 was EUR 197 million (233).
The comparable operating profit for the same period was EUR 202 million (231).
Demand for steel products was good and increases in raw material costs were able
to be passed on to the prices of end products. Strikes at the Raahe Works in
Finland had a negative impact of EUR 8 million on operating profit compared to
the strong reference period a year earlier. In addition, sales margins on
stainless steel trading were around EUR 19 million lower than during the first
half of 2007. However, trading margins improved during the second quarter of the
current year compared to the first quarter.
Price increases were implemented within Ruukki Metals during the second quarter
and will continue to be implemented during the second half of the year. Price
increases are expected to cover the higher costs of raw materials.
New finishing capacity for special steel products will come on stream during
this year. This will support the division's aim to increase the share of special
products to 40 per cent of net sales by the end of 2010. During the report
period, the division expanded its special product expertise into laser-welded
sandwich panels and laser-hybrid and laser welding through acquisition of the
business operations of Finnish company, Hybri-Steel Oy. The new technology is
used especially by customers in the construction and shipbuilding industries,
and in the lifting, handling and transportation equipment industry.
A decision was taken during the report period to establish a new steel service
centre next to the steel structure production plant in Obninsk, to the southwest
of Moscow. The investment is worth around EUR 13 million and will broaden the
product range and service capacity. This new centre is scheduled to start up in
late 2009. Machinery at the steel service centre in St Petersburg was modernised
during the report period and a new cut-to-length line will start up there in the
autumn.
Employer-employee negotiations were initiated at the division's service centres
at Järvenpää and Naantali in Finland and at Halmstad in Sweden to streamline
steel service centre operations. Efforts will be made to find work in the
company's other units for the approximately 15-20 people affected. The
negotiations will be concluded in August.
Flame cutting operations, which began during the report period, have got off to
a good start at the steel construction plant in Oborniki, Poland. Flame cutting
will improve the delivery capability of special products and parts, especially
for customers in the heavy engineering industry. The division is improving
operations by centralising activities in Poland: cut-to-length and slitting
services will be relocated from Zyrardow to Oborniki during the fourth quarter.
During the report period, a contract was signed to start parts processing for
waste treatment containers for the Russian market. The containers will be made
in cooperation with Europress Group Oy, the leading manufacturer of waste
handling equipment in the Nordic countries. Rautaruukki and Europress have
agreed to work together long-term in manufacturing.
The Ministry for Economic Development and Trade of the Russian Federation has
started an anti-dumping investigation of colour-coated products. If introduced,
import duties would apply from 2009 to exports of colour-coated products to
Russia. Rautaruukki manufactures and exports around EUR 30 million of these
products to Russia each year.
Ruukki Production
--------------------------------------------------------------------------------
| 1000 tonnes | Q1/07 | Q2/07 | Q3/07 | Q4/07 | 2007 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Steel production | 703 | 672 | 610 | 561 | 2 546 | 672 | 680 |
--------------------------------------------------------------------------------
Rautaruukki's steel production during January-June decreased to 1,352,000
tonnes, compared to 1,375,000 tonnes during the first six months of 2007.
Production was affected by strikes at the Raahe Works in Finland in February and
May. These strikes were judged unlawful by the Labour Court. Also during the
first half of the year, deliveries were affected by more technical disruptions
in production than usual.
Prices of raw materials - especially iron ore, coal, filler materials, alloying
elements and recycled steel - have risen sharply on the global market. It is
estimated higher raw material costs will add around EUR 220 million to company's
own steel production costs in 2008 compared to 2007. Around one third of the
rise in costs was realised during the first half of the year and two thirds will
be realised during the second half.
A total of around EUR 44 million will be spent during the year to increase
special steel production capacity. During the report period, the production
capacity of high-strength and wear-resistant steels and components for use in
the lifting, handling and transportation equipment industry was increased by a
new plasma cutting and packaging unit, as well as by the commissioning of the
first stage of a new ladle treatment unit. The second half of the year will see
the start up of a cold leveller at the plate mill and the second stage of the
new ladle treatment unit, as well as an increase in plasma cutting capacity.
There was a clear improvement in the division's accident frequency rate compared
to a year earlier. The accident frequency rate was 11 (20) per million hours
worked for the first six months of 2008.
TABLES
This interim report has been prepared in accordance with IAS 34 and is in
conformity with the accounting policies published in the annual financial
statements.
Individual figures and totals appearing in the tables have been rounded to the
nearest full million of euros. This means that they will not always tally when
added together or subtracted. The figures given in the tables are unaudited.
Rautaruukki changed the accounting principle for pension and disability pension
liabilities from 1 January 2008. The change in accounting principle decreased
equity by EUR 58 million, including the tax effect, and decreased balance sheet
assets by EUR 73 million as at 1 January 2008. Further information about the
change in accounting principle is given at the end of this release.
--------------------------------------------------------------------------------
| SUMMARY CONSOLIDATED INCOME STATEMENT |
--------------------------------------------------------------------------------
| EUR million | Q2/08 | Q2/07 | H1/08 | H1/07 | 2007 |
--------------------------------------------------------------------------------
| Net sales | 1 069 | 1 009 | 2 008 | 1 960 | 3 876 |
--------------------------------------------------------------------------------
| Other operating income | 8 | 5 | 13 | 9 | 26 |
--------------------------------------------------------------------------------
| Operating expenses | -875 | -779 | -1 639 | -1 538 | -3 111 |
--------------------------------------------------------------------------------
| Depreciation, amortisation | -36 | -38 | -73 | -75 | -153 |
| and impairment losses | | | | | |
--------------------------------------------------------------------------------
| Operating profit | 166 | 178 | 309 | 356 | 637 |
--------------------------------------------------------------------------------
| Finance income and expense | 1 | -4 | -3 | -6 | -20 |
--------------------------------------------------------------------------------
| Share of results of | 1 | 2 | 2 | 3 | 3 |
| associated companies | | | | | |
--------------------------------------------------------------------------------
| Profit before taxes | 167 | 176 | 308 | 353 | 621 |
--------------------------------------------------------------------------------
| Taxes | -45 | -46 | -78 | -91 | -162 |
--------------------------------------------------------------------------------
| Profit for the period | 123 | 130 | 229 | 262 | 459 |
--------------------------------------------------------------------------------
| Attributable to: | | | | | |
--------------------------------------------------------------------------------
| Equity shareholders of the | 123 | 130 | 229 | 261 | 458 |
| parent | | | | | |
--------------------------------------------------------------------------------
| Minority interests | 0 | 0 | 0 | 1 | 1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Diluted earnings per share, | 0.89 | 0.93 | 1.65 | 1.89 | 3.31 |
| EUR | | | | | |
--------------------------------------------------------------------------------
| Basic earnings per share, | 0.89 | 0.94 | 1.65 | 1.89 | 3.31 |
| EUR | | | | | |
--------------------------------------------------------------------------------
| Operating profit as % of net | 15.5 | 17.7 | 15.4 | 18.2 | 16.4 |
| sales | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| SUMMARY CONSOLIDATED BALANCE SHEET |
--------------------------------------------------------------------------------
| EUR million | 30 Jun | 30 Jun | 31 Dec |
| | 2008 | 2007 | 2007 |
--------------------------------------------------------------------------------
| ASSETS | | | |
--------------------------------------------------------------------------------
| Non-current assets | 1 427 | 1 457 | 1 447 |
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Inventories | 669 | 693 | 614 |
--------------------------------------------------------------------------------
| Trade and other receivables | 705 | 666 | 579 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 103 | 116 | 196 |
--------------------------------------------------------------------------------
| | 2 903 | 2 932 | 2 835 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | | |
--------------------------------------------------------------------------------
| Equity | | | |
--------------------------------------------------------------------------------
| Equity attributable to | 1 874 | 1 785 | 1 960 |
| shareholders of the parent | | | |
--------------------------------------------------------------------------------
| Minority interests | 3 | 3 | 3 |
--------------------------------------------------------------------------------
| Non-current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing | 134 | 207 | 138 |
--------------------------------------------------------------------------------
| Other | 175 | 213 | 189 |
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing | 77 | 141 | 86 |
--------------------------------------------------------------------------------
| Trade payables and other | 640 | 582 | 461 |
| liabilities | | | |
--------------------------------------------------------------------------------
| | 2 903 | 2 932 | 2 835 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| SUMMARY CASH FLOW STATEMENT |
--------------------------------------------------------------------------------
| EUR million | H1/08* | H1/07* | 2007* |
--------------------------------------------------------------------------------
| Profit for the period | 229 | 262 | 458 |
--------------------------------------------------------------------------------
| Adjustments | 149 | 165 | 290 |
--------------------------------------------------------------------------------
| Cash flow before change in working | 378 | 427 | 749 |
| capital | | | |
--------------------------------------------------------------------------------
| Change in working capital | -14 | -153 | -112 |
--------------------------------------------------------------------------------
| Financing items and taxes | -75 | -116 | -219 |
--------------------------------------------------------------------------------
| Cash flow from operating activities | 289 | 158 | 417 |
--------------------------------------------------------------------------------
| Cash flow from investing activities | -97 | -95 | -146 |
--------------------------------------------------------------------------------
| Cash flow before financing activities | 192 | 63 | 271 |
--------------------------------------------------------------------------------
| Dividends paid | -277 | -276 | -276 |
--------------------------------------------------------------------------------
| Change in debt | -8 | -31 | -155 |
--------------------------------------------------------------------------------
| Other net cash flow from financing | 1 | -2 | -6 |
| activities | | | |
--------------------------------------------------------------------------------
| Change in cash and cash equivalents | -93 | -245 | -166 |
--------------------------------------------------------------------------------
| * Changes in the classification of items and in working capital have been |
| made in cash flow. Figures for the reference periods have been restated |
| accordingly. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| KEY FIGURES | H1/08 | H1/07 | 2007 |
--------------------------------------------------------------------------------
| Net sales, EUR m | 2 008 | 1 960 | 3 876 |
--------------------------------------------------------------------------------
| Operating profit, EUR m | 309 | 356 | 637 |
--------------------------------------------------------------------------------
| as % of net sales | 15.4 | 18.2 | 16.4 |
--------------------------------------------------------------------------------
| Profit before taxes, EUR m | 308 | 353 | 621 |
--------------------------------------------------------------------------------
| as % of net sales | 15.3 | 18.0 | 16.0 |
--------------------------------------------------------------------------------
| Profit for the period, EUR m | 229 | 262 | 459 |
--------------------------------------------------------------------------------
| as % of net sales | 11.4 | 13.3 | 11.8 |
--------------------------------------------------------------------------------
| Return on capital employed*, | 28.6 | 36.5 | 29.8 |
| % | | | |
--------------------------------------------------------------------------------
| Return on equity*, % | 23.3 | 35.1 | 24.2 |
--------------------------------------------------------------------------------
| Equity ratio*, % | 66.1 | 62.4 | 70.1 |
--------------------------------------------------------------------------------
| Gearing ratio, % | 5.8 | 13.0 | 1.4 |
--------------------------------------------------------------------------------
| Net interest-bearing | 109 | 233 | 28 |
| liabilities, EUR m | | | |
--------------------------------------------------------------------------------
| Equity per share, EUR * | 13.51 | 12.92 | 14.13 |
--------------------------------------------------------------------------------
| Personnel on average | 14 968 | 13 810 | 14 326 |
--------------------------------------------------------------------------------
| Number of shares | 140 215 328 | 140 172 984 | 140 198 128 |
--------------------------------------------------------------------------------
| - excluding treasury shares | 138 748 391 | 138 471 603 | 138 721 191 |
--------------------------------------------------------------------------------
| - diluted, average | 138 795 862 | 138 410 652 | 138 566 355 |
--------------------------------------------------------------------------------
| Return on capital employed and return on equity are based on the previous 12 |
| months. |
| * The reference periods have been restated in accordance with the new |
| accounting principle. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CHANGES IN EQUITY H1/2008 |
--------------------------------------------------------------------------------
| EUR million | Attributable to equity shareholders of the parent |
--------------------------------------------------------------------------------
| | Share | Share | Fair | Trans- | Ret-ai | Total | Mino-r |
| | cap-it | prem. | value | lation | ned | | ity |
| | al | act. | and | diff. | earn-i | | int. |
| | | | other | | ngs | | |
| | | | re-ser | | | | |
| | | | ves | | | | |
--------------------------------------------------------------------------------
| EQUITY AT 1 | 238 | 220 | 9 | -6 | 1 498 | 1 960 | 3 |
| JAN | | | | | | | |
--------------------------------------------------------------------------------
| Cash flow | | | -3 | | | -3 | |
| hedges, net of | | | | | | | |
| tax | | | | | | | |
--------------------------------------------------------------------------------
| Actuarial | | | | | -34 | -34 | |
| gains and | | | | | | | |
| losses, net of | | | | | | | |
| tax | | | | | | | |
--------------------------------------------------------------------------------
| Change in | | | | 1 | | 1 | |
| translation | | | | | | | |
| difference | | | | | | | |
--------------------------------------------------------------------------------
| Net income and | 0 | 0 | -3 | 1 | -34 | -37 | 0 |
| expense | | | | | | | |
| recognised | | | | | | | |
| directly in | | | | | | | |
| equity | | | | | | | |
--------------------------------------------------------------------------------
| Profit for the | | | | | 229 | 229 | 0 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Total income | 0 | 0 | -3 | 1 | 195 | 193 | 0 |
| and expense | | | | | | | |
| recognised for | | | | | | | |
| the period | | | | | | | |
--------------------------------------------------------------------------------
| Share-based | | | 0 | | | 0 | |
| payments, net | | | | | | | |
| of tax | | | | | | | |
--------------------------------------------------------------------------------
| Disposal of | | | 0 | | 0 | 0 | |
| treasury | | | | | | | |
| shares | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | | | | | -277 | -277 | 0 |
| distribution | | | | | | | |
--------------------------------------------------------------------------------
| EQUITY AT 30 | 238 | 220 | 6 | -5 | 1 415 | 1 874 | 3 |
| JUN | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CHANGE IN EQUITY H1/2007 |
--------------------------------------------------------------------------------
| EUR million | Attributable to equity shareholders of the parent |
--------------------------------------------------------------------------------
| | Share | Share | Fair | Trans- | Ret-ai | Total | Mino-r |
| | cap-it | prem. | value | lation | ned | | ity |
| | al | act. | and | diff. | earn-i | | int. |
| | | | other | | ngs | | |
| | | | re-ser | | | | |
| | | | ves | | | | |
--------------------------------------------------------------------------------
| EQUITY AT 1 | 238 | 220 | 44 | -3 | 1 326 | 1 825 | 1 |
| JAN | | | | | | | |
--------------------------------------------------------------------------------
| Cash flow | | | -18 | | | -18 | |
| hedges, net of | | | | | | | |
| tax | | | | | | | |
--------------------------------------------------------------------------------
| Actuarial | | | | | -8 | -8 | |
| gains and | | | | | | | |
| losses, net of | | | | | | | |
| tax | | | | | | | |
--------------------------------------------------------------------------------
| Change in | | | | | 0 | 0 | |
| translation | | | | | | | |
| difference | | | | | | | |
--------------------------------------------------------------------------------
| Net income and | 0 | 0 | -18 | 0 | -8 | -26 | 0 |
| expense | | | | | | | |
| recognised | | | | | | | |
| directly in | | | | | | | |
| equity | | | | | | | |
--------------------------------------------------------------------------------
| Profit for the | | | | | 261 | 261 | 2 |
| period | | | | | | | |
--------------------------------------------------------------------------------
| Total income | 0 | 0 | -18 | 0 | 253 | 235 | 2 |
| and expense | | | | | | | |
| recognised for | | | | | | | |
| the period | | | | | | | |
--------------------------------------------------------------------------------
| Share-based | | | 0 | | | 0 | |
| payments, net | | | | | | | |
| of tax | | | | | | | |
--------------------------------------------------------------------------------
| Disposal of | | | -2 | | 3 | 1 | |
| treasury | | | | | | | |
| shares | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | | | | | -276 | -276 | |
| distribution | | | | | | | |
--------------------------------------------------------------------------------
| EQUITY AT 30 | 238 | 220 | 25 | -3 | 1 305 | 1 785 | 3 |
| JUN | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE * |
--------------------------------------------------------------------------------
| EUR million | H1/08 | H1/07 | 2007 |
--------------------------------------------------------------------------------
| Profit for the period | 229 | 261 | 459 |
--------------------------------------------------------------------------------
| Cash flow hedges, net of tax | -3 | -18 | -33 |
--------------------------------------------------------------------------------
| Translation difference on net investments in | 1 | 0 | 1 |
| subsidiaries | | | |
--------------------------------------------------------------------------------
| Defined benefit plan actuarial gains | -34 | -8 | -16 |
| (losses), net of tax | | | |
--------------------------------------------------------------------------------
| Net income and expense recognised directly | -36 | -26 | -48 |
| in equity | | | |
--------------------------------------------------------------------------------
| Total income and expense recognised for the | 193 | 235 | 411 |
| period | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Recognised income and expense attributable | 0 | 2 | 1 |
| to minority interests during the period | | | |
--------------------------------------------------------------------------------
| Recognised income and expense attributable | 193 | 233 | 410 |
| to shareholders during the period | | | |
--------------------------------------------------------------------------------
| Total income and expense recognised for the | 193 | 235 | 411 |
| period | | | |
--------------------------------------------------------------------------------
| * The statement includes the profit for the period and gains and losses |
| recognised directly in equity in accordance with IFRS standards. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| NET SALES BY DIVISION |
--------------------------------------------------------------------------------
| EUR million | H1/08 | H1/07 | 2007 | H1/08 | H1/07 | 2007 |
| | | | | compara | compara | compara |
| | | | | ble | ble | ble |
--------------------------------------------------------------------------------
| Ruukki Construction | 509 | 471 | 1 042 | 509 | 471 | 1 042 |
--------------------------------------------------------------------------------
| Ruukki Engineering | 394 | 330 | 667 | 394 | 330 | 667 |
--------------------------------------------------------------------------------
| Ruukki Metals | 1 105 | 1 159 | 2 168 | 1 082 | 1 083 | 2 035 |
--------------------------------------------------------------------------------
| Group management | 0 | 0 | 0 | 0 | 0 | 0 |
| and other units | | | | | | |
--------------------------------------------------------------------------------
| Consolidated net | 2 008 | 1 960 | 3 876 | 1 985 | 1 884 | 3 744 |
| sales | | | | | | |
--------------------------------------------------------------------------------
| Comparable = excluding Ruukki Betonstahl GmbH, Ruukki Welbond BV and Carl |
| Froh GmbH. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| OPERATING PROFIT BY DIVISION |
--------------------------------------------------------------------------------
| EUR million | H1/08 | H1/07 | 2007 | H1/08 | H1/07 | 2007 |
| | | | | compara | compara | compara |
| | | | | ble | ble | ble |
--------------------------------------------------------------------------------
| Ruukki Construction | 59 | 74 | 163 | 59 | 74 | 163 |
--------------------------------------------------------------------------------
| Ruukki Engineering | 66 | 59 | 103 | 66 | 59 | 103 |
--------------------------------------------------------------------------------
| Ruukki Metals | 197 | 233 | 397 | 202 | 231 | 395 |
--------------------------------------------------------------------------------
| Group management | -14 | -10 | -25 | -14 | -10 | -25 |
| and other units | | | | | | |
--------------------------------------------------------------------------------
| Consolidated | 309 | 356 | 637 | 314 | 354 | 635 |
| operating profit | | | | | | |
--------------------------------------------------------------------------------
| Comparable = excluding Ruukki Betonstahl GmbH, Ruukki Welbond BV and Carl |
| Froh GmbH. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| QUARTERLY NET SALES |
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Ruukki Construction | 213 | 258 | 278 | 292 | 225 | 285 |
--------------------------------------------------------------------------------
| Ruukki Engineering | 167 | 163 | 157 | 180 | 188 | 205 |
--------------------------------------------------------------------------------
| Ruukki Metals | 570 | 588 | 500 | 509 | 525 | 580 |
--------------------------------------------------------------------------------
| Group management and | 0 | 0 | 0 | 0 | 1 | -1 |
| other units | | | | | | |
--------------------------------------------------------------------------------
| Consolidated net | 950 | 1 009 | 935 | 982 | 939 | 1 069 |
| sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| QUARTERLY OPERATING PROFIT |
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Ruukki Construction | 34 | 40 | 51 | 38 | 21 | 38 |
--------------------------------------------------------------------------------
| Ruukki Engineering | 32 | 27 | 25 | 18 | 32 | 35 |
--------------------------------------------------------------------------------
| Ruukki Metals | 117 | 115 | 96 | 68 | 97 | 100 |
--------------------------------------------------------------------------------
| Group management and | -6 | -5 | -10 | -5 | -7 | -7 |
| other units | | | | | | |
--------------------------------------------------------------------------------
| Consolidated operating | 178 | 178 | 162 | 120 | 143 | 166 |
| profit | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| QUARTERLY NET SALES (COMPARABLE) EXCLUDING RUUKKI BETONSTAHL, RUUKKI WELBOND |
| and CARL FROH |
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Ruukki Construction | 213 | 258 | 278 | 292 | 225 | 285 |
--------------------------------------------------------------------------------
| Ruukki Engineering | 167 | 163 | 157 | 180 | 188 | 205 |
--------------------------------------------------------------------------------
| Ruukki Metals | 531 | 552 | 464 | 488 | 511 | 571 |
--------------------------------------------------------------------------------
| Group management and | 0 | 0 | 0 | 0 | 1 | -1 |
| other units | | | | | | |
--------------------------------------------------------------------------------
| Consolidated net sales | 911 | 973 | 899 | 960 | 925 | 1 060 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| QUARTERLY OPERATING PROFIT (COMPARABLE) EXCLUDING RUUKKI BETONSTAHL, RUUKKI |
| WELBOND and CARL FROH |
--------------------------------------------------------------------------------
| EUR million | Q1/07 | Q2/07 | Q3/07 | Q4/07 | Q1/08 | Q2/08 |
--------------------------------------------------------------------------------
| Ruukki Construction | 34 | 40 | 51 | 38 | 21 | 38 |
--------------------------------------------------------------------------------
| Ruukki Engineering | 32 | 27 | 25 | 18 | 32 | 35 |
--------------------------------------------------------------------------------
| Ruukki Metals | 116 | 115 | 96 | 68 | 96 | 106 |
--------------------------------------------------------------------------------
| Group management and | -6 | -5 | -10 | -5 | -7 | -7 |
| other units | | | | | | |
--------------------------------------------------------------------------------
| Consolidated operating | 177 | 178 | 162 | 119 | 141 | 172 |
| profit | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| NET SALES BY REGION |
--------------------------------------------------------------------------------
| As % of net sales | H1/08 | H1/07 | 2007 |
--------------------------------------------------------------------------------
| Finland | 32 | 31 | 31 |
--------------------------------------------------------------------------------
| Other Nordic countries | 31 | 32 | 30 |
--------------------------------------------------------------------------------
| Central Eastern Europe, | 19 | 19 | 21 |
| Russia and Ukraine | | | |
--------------------------------------------------------------------------------
| Rest of Europe | 14 | 16 | 15 |
--------------------------------------------------------------------------------
| Other countries | 3 | 2 | 3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CONTINGENT LIABILITIES |
--------------------------------------------------------------------------------
| EUR million | Jun 08 | Jun 07 | Dec 07 |
--------------------------------------------------------------------------------
| Mortgaged real estates | 24 | 25 | 24 |
--------------------------------------------------------------------------------
| Pledges given | 6 | 16 | 5 |
--------------------------------------------------------------------------------
| Other guarantees given | 46 | 48 | 41 |
--------------------------------------------------------------------------------
| Collateral | | | |
--------------------------------------------------------------------------------
| Given on behalf of | 0 | 0 | 0 |
| associates | | | |
--------------------------------------------------------------------------------
| Given on behalf of others | 6 | 12 | 6 |
--------------------------------------------------------------------------------
| Leasing and rental liabilities | 143 | 99 | 154 |
--------------------------------------------------------------------------------
| Other financial liabilities | 0 | 1 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| VALUES OF DERIVATIVE CONTRACTS AT 30 JUNE 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CASH FLOW HEDGES QUALIFYING FOR HEDGE ACCOUNTING |
--------------------------------------------------------------------------------
| | Nominal amount | Fair value |
| | | EUR |
| | | million |
--------------------------------------------------------------------------------
| Zinc derivatives | | |
--------------------------------------------------------------------------------
| Forward contracts, tonnes | 42 000 | -16.2 |
--------------------------------------------------------------------------------
| Electricity derivatives | | |
--------------------------------------------------------------------------------
| Forward contracts, Gwh | 1 054 | 23.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| DERIVATIVES NOT QUALIFYING FOR HEDGE ACCOUNTING |
--------------------------------------------------------------------------------
| | Nominal value | Fair value |
| | EUR | EUR million |
| | million | |
--------------------------------------------------------------------------------
| Foreign currency derivatives | | |
--------------------------------------------------------------------------------
| Forward contracts | 584 | -7.0 |
--------------------------------------------------------------------------------
| Options | | |
--------------------------------------------------------------------------------
| Bought | 265 | -2.5 |
--------------------------------------------------------------------------------
| Sold | 265 | -7.8 |
--------------------------------------------------------------------------------
| | | -10.3 |
--------------------------------------------------------------------------------
The unrealised result of cash flow hedges is recognised in equity to the extent
the hedge is effective. Other changes in fair value are recorded through profit
and loss.
--------------------------------------------------------------------------------
| CHANGES IN PLANT, PROPERTY AND EQUIPMENT |
--------------------------------------------------------------------------------
| EUR million | H1/08 | H1/07 | 2007 |
--------------------------------------------------------------------------------
| Carrying value at start of period | 1 076 | 1 043 | 1 043 |
--------------------------------------------------------------------------------
| Additions | 98 | 66 | 157 |
--------------------------------------------------------------------------------
| Additions through acquisitions | 4 | 14 | 18 |
--------------------------------------------------------------------------------
| Disposals | -2 | -2 | -11 |
--------------------------------------------------------------------------------
| Disposals through acquisitions | -22 | 0 | 0 |
--------------------------------------------------------------------------------
| Depreciation and value adjustments | -61 | -64 | -129 |
--------------------------------------------------------------------------------
| Exchange rate differences | 4 | 1 | -1 |
--------------------------------------------------------------------------------
| Carrying value at end of period | 1 098 | 1 059 | 1 076 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| TRANSACTIONS WITH RELATED PARTIES |
--------------------------------------------------------------------------------
| EUR million | H1/08 | H1/07 | 2007 |
--------------------------------------------------------------------------------
| Transactions with associated companies | | | |
--------------------------------------------------------------------------------
| Sales to associated companies | 11 | 14 | 23 |
--------------------------------------------------------------------------------
| Purchases from associated companies | 4 | 2 | 7 |
--------------------------------------------------------------------------------
| Trade and other receivables at 30 June | 7 | 7 | 6 |
--------------------------------------------------------------------------------
| Trade and other creditors at 30 June | 0 | 1 | 0 |
--------------------------------------------------------------------------------
| Transactions with Pension Foundation | 3 | 3 | 6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| INVESTMENT COMMITMENTS* | |
--------------------------------------------------------------------------------
| EUR million | After 30 June 2008 |
--------------------------------------------------------------------------------
| Maintenance investments | 141 |
--------------------------------------------------------------------------------
| Development investments and investments in special | 183 |
| products | |
--------------------------------------------------------------------------------
| Total | 325 |
--------------------------------------------------------------------------------
| *Investment commitments include the estimated costs of projects that have |
| received permission to go ahead. |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| INFORMATION ABOUT ACQUISITIONS* | | |
--------------------------------------------------------------------------------
| EUR million | Fair value | Acquired company's |
| | | carrying amount |
--------------------------------------------------------------------------------
| Assets and liabilities of acquired | | |
| companies (carrying amount) | | |
--------------------------------------------------------------------------------
| Non-current assets | 7 | 0 |
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Inventories | 0 | 0 |
--------------------------------------------------------------------------------
| Trade and other receivables | 1 | 1 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 0 | 0 |
--------------------------------------------------------------------------------
| Total assets | 8 | 1 |
--------------------------------------------------------------------------------
| Non-current liabilities | | |
--------------------------------------------------------------------------------
| Interest-bearing | 0 | 0 |
--------------------------------------------------------------------------------
| Other | 1 | 0 |
--------------------------------------------------------------------------------
| Current liabilities | | |
--------------------------------------------------------------------------------
| Interest-bearing | 0 | 0 |
--------------------------------------------------------------------------------
| Other | 1 | 1 |
--------------------------------------------------------------------------------
| Total liabilities | 2 | 1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net assets | 6 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition cost | 8 | |
--------------------------------------------------------------------------------
| - including conditional purchase | 2 | |
| price | | |
--------------------------------------------------------------------------------
| Goodwill | 2 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition cost paid in cash | 6 | |
--------------------------------------------------------------------------------
| Cash and cash equivalents of the | 0 | |
| acquired subsidiary | | |
--------------------------------------------------------------------------------
| Impact on cash flow | 6 | |
--------------------------------------------------------------------------------
| * Includes information about the acquisition of Wolter Metallverarbeitung |
| GmbH and business of Hybri-Steel Oy. |
--------------------------------------------------------------------------------
CHANGES IN ACCOUNTING PRINCIPLES
Until 2008, the company applied the “corridor method” to recognise actuarial
gains and losses relating to its defined benefit pension plans. This meant that
actuarial gains and losses were expensed over the assumed average remaining
working lives of people in the plan.
From 1 January 2008, the company applies a revised interpretation of IAS 19
Employee Benefits, which allows all actuarial gains and losses to be recognised
directly in equity in the period in which they occur instead of in the income
statement. The comparable figures are also presented accordingly. The change in
accounting principle decreased equity, net of tax, by EUR 24 million at 31
December 2007 (EUR 7 million at year-end 2006).
The company has changed the IFRS interpretation of the Finnish disability
benefit from a defined contribution plan to a defined benefit plan with effect
from 1 January 2008. This change will increase IFRS pension costs by an
estimated EUR 6 million in 2008. The ensuing actuarial loss as a result of this
change was recognised as a decrease in equity in accordance with the accounting
practice referred to above. The change decreased equity, net of tax, by EUR 34
million. The change marks a shift to using the interpretation applied by the
majority of companies on the market preparing financial statements in accordance
with IFRS.
--------------------------------------------------------------------------------
| CONSOLIDATED BALANCE SHEET | 31 Dec 2007 | 31 Dec 2007 | 1 Jan 2008 |
--------------------------------------------------------------------------------
| | published | amended* | amended** |
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| ASSETS | | | |
--------------------------------------------------------------------------------
| Non-current assets | 1 473 | 1 447 | 1 400 |
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Inventories | 614 | 614 | 614 |
--------------------------------------------------------------------------------
| Trade and other receivables | 579 | 579 | 579 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 196 | 196 | 196 |
--------------------------------------------------------------------------------
| | 2 861 | 2 835 | 2 789 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | | |
--------------------------------------------------------------------------------
| Equity | | | |
--------------------------------------------------------------------------------
| Equity attributable to | 1 984 | 1 960 | 1 925 |
| shareholders of the parent | | | |
--------------------------------------------------------------------------------
| Minority interests | 3 | 3 | 3 |
--------------------------------------------------------------------------------
| Non-current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 138 | 138 | 138 |
--------------------------------------------------------------------------------
| Other non-current liabilities | 191 | 189 | 177 |
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 86 | 86 | 86 |
--------------------------------------------------------------------------------
| Trade payables and other | 460 | 460 | 460 |
| liabilities | | | |
--------------------------------------------------------------------------------
| | 2 861 | 2 835 | 2 789 |
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* Change concerning the recognition of actuarial gains and losses.
** Change concerning the interpretation of disability.
