INTERIM REPORT
July 22, 2010 9.00 am EET
Second-quarter 2010 highlights
- Operating profit EUR 71 million (I/2010: EUR -22 million) including some EUR
55 million (I/2010: 10 million) of raw material-related inventory gains,
underlying operational result some EUR 16 million (I/2010: EUR -32 million).
- EBITDA EUR 128 million (I/2010: EUR 34 million), operative cash flow EUR -314
million (I/2010: EUR -86 million) due to increased working capital.
- Improving underlying demand for standard grades, demand for special grades
remained weaker, deliveries of stainless steel totalled 339 000 tonnes (I/2010:
333 000 tonnes).
- Major investment decisions: ferrochrome capacity to be doubled, quarto plate
position to be strengthened, totalling approximately EUR 550 million.
Group key figures
II/10 I/10 II/09 2009
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Sales EUR million 1 110 916 617 2 611
Operating profit EUR million 71 -22 -94 -438
EBITDA EUR million 128 34 -42 -212
Non-recurring items
in operating profit EUR million - - - -20
Profit before taxes EUR million 63 -33 -105 -474
Net profit for the period
from continuing operations EUR million 43 -21 -85 -332
Net profit for the period EUR million 44 -21 -87 -336
Earnings per share
from continuing operations EUR 0.24 -0.12 -0.47 -1.83
Earnings per share EUR 0.24 -0.12 -0.48 -1.86
Return on capital employed % 7.2 -2.4 -11.1 -11.7
Net cash generated from
operating activities 1) EUR million -314 -86 21 198
Capital expenditure,
continuing operations EUR million 40 28 45 245
Net interest-bearing debt
at end of period EUR million 1 683 1 293 926 1 183
Debt-to-equity ratio at
end of period % 67.6 53.5 37.1 48.2
Stainless steel deliveries 1 000 tonnes 339 333 268 1 030
Stainless steel
base price 2) EUR/tonne 1 317 1 235 1 117 1 161
Personnel at the
end of period,
continuing operations 8 617 7 597 7 985 7 606
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1) Cash flows presented for continuing operations.
2) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
SHORT-TERM OUTLOOK
Underlying demand for standard grades continues to recover and this is expected
to continue also after the holiday season. Demand for special grades is still
lagging. However, commercial activity in the investment-driven customer segments
continues and is expected to generate orders within the next 6-12 months.
Currently, the normal seasonality in demand that results from the ongoing
holiday season in Europe is causing some distributors to be hesitant about
placing orders. The declined nickel price is having a similar impact on buying
behaviour. This has led to some destocking among distributors. Inventories in
Europe are estimated to be close to normal level.
Lead times on mill-deliveries for standard grades are normal at 6-8 weeks. The
slowdown of demand during the holiday season and annual maintenance breaks at
the Group's mills will result in stainless delivery volumes for the third
quarter to be 10-20% lower than in the second quarter (339 000 tonnes). Compared
to the second quarter of 2010, Outokumpu's average base prices in the third
quarter are expected to be fairly stable.
The underlying operational result*) in the third quarter is expected to be
somewhat negative. At current metal prices, raw material-related losses of some
tens of millions of euros are expected in the third quarter as a result of the
recent decline in metal prices. Operative cash flow (before investments) in the
third quarter is expected to turn positive subject to metal price development.
*) Underlying operational result= Operating profit without raw material-related
inventory gains and losses and non-recurring items.
CEO Juha Rantanen:
"After several loss-making quarters it is gratifying to present Outokumpu's
return to profits in the second quarter. A clear recovery in the standard grades
business and improved prices have been the main factors, while business in
capital investment-driven special grades is still lagging. As always, the third
quarter is expected to be seasonally weak. We are confident that underlying
demand continues to improve and we are making preparations to take full
advantage of a recovery in demand after the holiday season.
Outokumpu made some major news announcements during the second quarter. The
market recovery and our financial performance enabled us to embark on two
important strategic investments. The expansion in ferrochrome production is not
only about raw material self-sufficiency but also about growth. The investment
in quarto plate production solidifies our leading position in the tailor-made
plate business, strongly supporting our special grades strategy."
The attachments present the Management analysis for the second-quarter operating
result and the Interim review by the Board of Directors for January-June 2010,
the accounts and notes to the interim accounts. This report is unaudited.
For further information, please contact:
Päivi Lindqvist, SVP - Communications and IR
tel. +358 9 421 2432, mobile +358 40 708 5351
paivi.lindqvist@outokumpu.com
Ingela Ulfves, VP - Investor Relations and Financial Communications
tel. +358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com
Esa Lager, CFO
tel. + 358 9 421 2516
esa.lager@outokumpu.com
News conference and live webcast today at 1.00 pm
A combined news conference, conference call and live webcast concerning the
second-quarter 2010 results will be held on July 22, 2010 at 1.00 pm EET (12.00
pm CET, 6.00 am US EST, 11.00 am UK time) at Hotel Kämp, conference room Akseli
Gallen-Kallela, address Pohjoisesplanadi 29, 00100 Helsinki, Finland.
To participate via a conference call, please dial in 5-10 minutes before the
beginning of the event:
UK +44 20 3043 2436
US & Canada +1 866 458 4087
Sweden +46 8 505 598 53
Password Outokumpu
The news conference can be viewed live via Internet at www.outokumpu.com. Stock
exchange release and presentation material will be available before the news
conference at www.outokumpu.com/Investors.
An on-demand webcast of the news conference will be available at
www.outokumpu.com as of July 22, 2010 at around 3.00 pm.
OUTOKUMPU OYJ
Corporate Management
MANAGEMENT ANALYSIS - SECOND-QUARTER OPERATING RESULT
Group key figures
EUR million I/09 II/09 III/09 IV/09 2009
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Sales
General Stainless 476 501 496 592 2 065
Specialty Stainless 371 278 258 332 1 239
Other operations 66 58 56 62 243
Intra-group sales -233 -220 -224 -259 -935
-------------------------------------------------------------------
The Group 679 617 587 728 2 611
Operating profit
General Stainless -157 -52 -38 -12 -259
Specialty Stainless -82 -37 -21 -10 -149
Other operations -12 -5 -4 -9 -31
Intra-group items 2 0 -3 2 1
-------------------------------------------------------------------
The Group -249 -94 -65 -29 -438
EUR million I/10 II/10
-------------------------------------------------------------------
Sales
General Stainless 754 962
Specialty Stainless 367 469
Other operations 89 86
Intra-group sales -295 -407
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The Group 916 1 110
Operating profit
General Stainless -2 75
Specialty Stainless -21 22
Other operations 2 -15
Intra-group items -1 -10
-------------------------------------------------------------------
The Group -22 71
Stainless steel
deliveries
1 000 tonnes I/09 II/09 III/09 IV/09 2009
-------------------------------------------------------------------
Cold rolled 133 145 124 143 545
White hot strip 59 69 66 69 263
Quarto plate 19 18 14 16 67
Tubular products 16 13 12 12 53
Long products 10 9 11 10 40
Semi-finished
products 10 14 12 27 63
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Total deliveries 247 268 238 277 1 030
1 000 tonnes I/10 II/10
-------------------------------------------------------------------
Cold rolled 171 182
White hot strip 82 75
Quarto plate 21 21
Tubular products 13 14
Long products 13 15
Semi-finished
products 33 32
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Total deliveries 333 339
Market prices and
exchange rates
I/09 II/09 III/09 IV/09 2009
-------------------------------------------------------------------
Market prices 1)
Stainless steel
Base price EUR/t 925 1 117 1 307 1 297 1 161
Alloy surcharge EUR/t 893 634 923 1 049 875
Transaction price EUR/t 1 818 1 751 2 229 2 346 2 036
Nickel USD/t 10 471 12 920 17 700 17 528 14 655
EUR/t 8 036 9 478 12 375 11 860 10 507
Ferrochrome
(Cr-content) USD/lb 0.79 0.69 0.89 1.03 0.85
EUR/kg 1.34 1.12 1.37 1.54 1.34
Molybdenum USD/lb 9.15 9.41 15.36 11.76 11.42
EUR/kg 15.49 15.22 23.67 17.54 18.05
Recycled steel USD/t 207.00 199.00 236.00 250.00 223.00
EUR/t 159.00 146.00 165.00 169.00 160.00
Exchange rates
EUR/USD 1.303 1.363 1.430 1.478 1.395
EUR/SEK 10.941 10.781 10.424 10.351 10.619
EUR/GBP 0.909 0.879 0.872 0.905 0.891
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I/10 II/10
-------------------------------------------------------------------
Market prices 1)
Stainless steel
Base price EUR/t 1 235 1 317
Alloy surcharge EUR/t 1 094 1 701
Transaction price EUR/t 2 329 3 018
Nickel USD/t 19 959 22 476
EUR/t 14 433 17 686
Ferrochrome
(Cr-content) USD/lb 1.01 1.36
EUR/kg 1.61 2.36
Molybdenum USD/lb 16.19 16.45
EUR/kg 25.81 28.53
Recycled steel USD/t 323 346
EUR/t 234 272
Exchange rates
EUR/USD 1.383 1.271
EUR/SEK 9.946 9.631
EUR/GBP 0.888 0.852
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1) Sources of market prices:
Stainless steel: CRU - German base price, alloy surcharge and
transaction price (2 mm cold rolled 304 sheet), estimates for
deliveries during the period.
Nickel: London Metal Exchange (LME) cash quotation
Ferrochrome: Metal Bulletin - Quarterly contract price,
Ferrochrome lumpy chrome charge, basis 52% chrome
Molybdenum: Metal Bulletin - Molybdenum oxide - Europe
Recycled steel: Metal Bulletin - Steel scrap HMS 1&2 fob Rotterdam
Stainless steel markets in the second quarter
Stainless steel markets continued to be healthy in the beginning of the second
quarter of 2010. Negative economic reports had an adverse effect on market
activity in May and demand for stainless steel weakened as the nickel price
started to decline. Compared to the first quarter of 2010, apparent consumption
of stainless steel flat products in the second quarter is estimated to have been
almost unchanged in Europe and 10% higher globally. While in China, apparent
consumption is estimated to have increased by 16%. Both in Europe and globally,
production of stainless steel is estimated to have been at almost the same level
compared to the first quarter of 2010. In China, production of stainless steel
was up by 5%.
The average base price for 2mm cold rolled 304 stainless steel sheet in Germany
increased by 7% and was 1 317 EUR/tonne in the second quarter (I/2010: 1 235
EUR/tonne). The alloy surcharge increased by 55% and was 1 701 EUR/tonne
(I/2010: 1 094 EUR/tonne). The average transaction price during the second
quarter was 3 018 EUR/tonne (I/2010: 2 329 EUR/tonne). (CRU)
Among alloying elements, the price of nickel was on a rising trend at the
beginning of the second quarter and reached a level of 27 000 USD/tonne in
mid-April. It then began to decline and was some 18 000 USD/tonne at the
beginning of June before rebounding to around 20 000 USD/tonne in late-June. The
average nickel price during the second quarter was 22 476 USD/tonne (I/2010:
19 959 USD/tonne). Ferrochrome markets were close to balance in the second
quarter. The quarterly contract price for ferrochrome in the second quarter was
1.36 USD/lb (I/2010: 1.01 USD/lb) and has preliminarily been settled at 1.30
USD/lb for the third quarter. The average price of molybdenum was 16.45 USD/lb
in the second quarter (I/2010: 16.19 USD/lb) while the price of recycled steel
increased by 7% and averaged 346 USD/tonne (I/2010: 323 USD/tonne).
Return to profits in the second quarter
Group sales in the second quarter increased to EUR 1 110 million (I/2010: EUR
916 million). Deliveries of stainless steel increased marginally to 339 000
tonnes (I/2010: 333 000 tonnes). Capacity utilisation at Group operations was
approximately 75% with Tornio Works running at a higher rate than the Group
average during the second quarter.
After several loss-making quarters, the Group turned to profits with an
operating profit in the second quarter totalling EUR 71 million (I/2010: EUR -22
million). This figure includes some EUR 55 million (I/2010: EUR 10 million) of
raw-material related inventory gains which resulted primarily from higher nickel
prices. Higher base prices and a higher ferrochrome price also had an effect and
the underlying operational result in the second quarter turned positive at EUR
16 million (I/2010: EUR -32 million). Outokumpu's average base prices for flat
products realised in the second quarter increased by some 60 EUR/tonne but were
below base prices reported by CRU for German 304 sheet.
Return on capital employed in the second quarter was 7.2% (I/2010: -2.4%).
Earnings per share totalled EUR 0.24 (I/2010: EUR -0.12).
Net cash generated from operating activities in continuing operations remained
negative and amounted to EUR -314 million (I/2010: -86 million). In the second
quarter, EUR 402 million of cash was tied up in working capital as a result of
increased purchase of raw materials as well as higher metal prices. Inventories
were increased in the second quarter in order to compensate for the lost
production during the planned maintenance breaks in order to meet the expected
increase in demand after the holiday period.
Outokumpu's gearing at the end of the second quarter was 67.6% (Mar
31, 2010: 53.5%), still below the Group's target level of <75%. Net-interest
bearing debt increased by EUR 390 million to EUR 1 683 million (I/2010: EUR
1 293 million) in the second quarter. The dividend for 2009 totalling EUR 64
million was paid in the second quarter. In June, Outokumpu issued a EUR 250
million domestic five-year bond. The bond improved the structure of the Group's
debt portfolio and will be used for general corporate purposes.
Capital expenditure totalled EUR 40 million (I/2010: EUR 28 million) in the
second quarter.
Sales by General Stainless in the second quarter totalled EUR 962 million
(I/2010: EUR 754 million), and deliveries increased to 309 000 tonnes (I/2010:
304 000 tonnes). General Stainless returned to profits with an operating profit
of EUR 75 million (I/2010: EUR -2 million) and Tornio Works posted a profit of
EUR 63 million (I/2010: EUR -7 million).
Sales by Specialty Stainless in the second quarter totalled EUR 469 million
(I/2010: EUR 367 million) and deliveries totalled 119 000 tonnes (I/2010:
111 000 tonnes). Operating profit was positive at EUR 22 million (I/2010: EUR
-21 million).
Other Operations posted an operating loss of EUR 15 million (I/2010: EUR 2
million) in the second quarter.
Finalised investment projects
Outokumpu has established a service centre in China, the world's fastest-growing
market for stainless steel. The new facility supports the Group strategy of
expanding operations in Asia and serving end-user and project customers with
value-added special products. In the main, Outokumpu's offering to the Chinese
market consists of special grades, especially duplex grades, employed in the
most demanding applications in the energy, petrochemical, transportation and
pulp and paper sectors. The new Kunshan service centre has an annual capacity of
some 30 000 tonnes of stainless steel and employs approximately 50 people and
represents an investment by the Group of some EUR 20 million.
A new stainless steel bar and rebar facility was opened in June in Sheffield,
UK. The new plant broadens the Group's product range and can offer stainless
steel rebar in straight lengths or formed components as well as produce
cold-drawn bar. Outokumpu can now serve its long products customers from a
fully-integrated production route in Sheffield. This investment totalled some
EUR 10 million.
New investment decisions
In June, based on the results of the updated feasibility study, the decision was
made to invest EUR 440 million in doubling ferrochrome production capacity at
Tornio in Finland. The original decision on this investment was made in June
2008 but the financial crisis and uncertain market conditions resulted in it
being put on hold in December 2008. Annual ferrochrome production in Tornio will
be doubled to 530 000 tonnes enabling the Group to meet its internal needs and
also supply the global market with more than 200 000 tonnes of ferrochrome
annually. Implementation of the project will begin immediately and the
additional production capacity is expected to be operational in 2013 and ramped
up in 2015. The main capital expenditure cash outflows will take place in 2011
and 2012.
The decision to invest EUR 104 million in increasing quarto plate production
capability and capacity in Degerfors in Sweden was also made in June. This
investment strengthens Outokumpu's position as a world-leading producer of these
thick, wide and individually rolled plates and will increase the Group's annual
quarto plate production capacity to more than 200 000 tonnes. The majority of
the new production capacity is scheduled to be available in 2014. Capital
expenditure will be spread over five years with the majority of cash out-flows
taking place in 2012 and 2013.
Domestic bond issued
In June, Outokumpu issued a EUR 250 million five-year domestic bond. The funds
will be used for general corporate purposes. The bond is listed on the NASDAQ
OMX Helsinki exchange.
Events after the review period
At the beginning of July, the Finnish Parliament voted on decisions-in-principle
to build two new nuclear power plants in Finland. The voting was positive for
Fennovoima, in which Outokumpu has a stake of some 10%. Once the new nuclear
power plant is operational, Outokumpu will be able to obtain approximately one
third of its current electricity needs at the cost of production from 2020
onwards.
INTERIM REVIEW BY THE BOARD OF DIRECTORS - JANUARY-JUNE 2010
Recovery in stainless steel markets
Stainless steel markets started to recover from the beginning of 2010 with
demand especially for standard grades improving significantly compared to the
beginning of 2009. In May, negative economic reports in Europe resulted in a
softening market conditions for stainless steel and the decline of the nickel
price from its year-high levels led to some destocking by distributors. Compared
to the first half of 2009, apparent consumption of stainless steel during the
first half of 2010 is estimated to be up by 53% in Europe and 35% globally. The
average German base price for 2mm cold rolled 304 stainless steel sheet was
1 276 EUR/tonne during the first six months of 2010 (I-II/2009: 1 021 EUR/tonne)
and the average transaction price during the period was 2 674 EUR/tonne
(I-II/2009: 1 784 EUR/tonne).
During the first half of 2010, the nickel price averaged 21 217 USD/tonne
(I-II/2009: 11 696 USD/tonne) and the average contract price for ferrochrome was
1.19 USD/lb (I-II/2009: 0.74 USD/lb). The average price of molybdenum during the
first six months of 2010 was 16.32 USD/lb (I-II/2009: 9.28 USD/lb) and the
average price of recycled steel was 335 USD/tonne (I-II/2009: 203 USD/tonne).
(CRU)
Profitability improved with higher delivery volumes
Group sales in the first half of 2010 increased by 56% to EUR 2 026 million
(I-II/2009: EUR 1 296 million) as a result of both higher transaction prices and
higher delivery volumes. Deliveries of stainless steel increased by 30% to
672 000 tonnes (I-II/2009: 515 000 tonnes). Group production facilities were
operating at 75% capacity utilisation in the first half of 2010.
Operating profit for the first half of 2010 totalled EUR 49 million (I-II/2009:
EUR -343 million). This result includes some EUR 65 million of raw
material-related gains (I-II/2009: EUR -110 million) with the underlying result
being some EUR -16 million (I-II/2009: EUR -228 million). The main contributors
to the improved result were higher base prices and higher delivery volumes. The
operating profit in the first six months of 2010 did not include any
non-recurring items. In the first half of 2009 the operating loss included EUR
5 million of redundancy provisions.
Net financial income and expenses in the first half of 2010 totalled EUR -10
million (I-II/2009: EUR -10 million). Net profit for the review period totalled
EUR 23 million (I-II/2009: EUR -274 million) and earnings per share totalled EUR
0.13 (I-II/2009: EUR -1.52). Return on capital employed during the first six
months of 2010 was 2.5% (I-II/2009: -18.8%).
Net cash generated from operating activities totalled EUR -401 million
(I-II/2009: EUR 316 million) in the first six months of 2010. Some EUR 445
million (I-II/2009: release of EUR 640 million) was tied up in working capital
as a result of higher metal prices and higher inventory levels. Net
interest-bearing debt increased by EUR 757 million and totalled EUR 1 683
million at the end of June 2010 (Jun 30, 2009: EUR 926 million). Gearing
increased to 67.6% (Jun 30, 2009: 37.1%) approaching the Group's target of a
maximum of 75%. In June, Outokumpu issued a EUR 250 million five-year domestic
bond, which was listed on the NASDAQ OMX Helsinki exchange in July. The funds
will be used for general corporate purposes.
Capital expenditure and investments
Capital expenditure in the first half of 2010 totalled EUR 68 million
(I-II/2009: EUR 107 million) and covered the finalising of ongoing investment
projects and maintenance. Capital expenditure by the Group in 2010 including the
new investment projects announced in 2010 is expected to total approximately EUR
200 million.
Investment projects in China and the UK were completed in June. Now open, the
Group's service centre in Kunshan represents an investment of some EUR 20
million, employs approximately 50 people and has an annual capacity of some
30 000 tonnes of stainless steel. In Sheffield in the UK, a new stainless steel
bar and rebar facility was opened. This investment totalled some EUR 10 million.
In June, based on the results of an updated feasibility study, the decision was
made to invest EUR 440 million in doubling ferrochrome production capacity at
Tornio in Finland. The original decision on this investment was made in June
2008, but the financial crisis and uncertain market conditions resulted in it
being put on hold in December 2008. Annual ferrochrome production in Tornio will
be doubled to 530 000 tonnes enabling the Group to meet its internal needs and
also supply the global market with more than 200 000 tonnes of ferrochrome
annually. Implementation of the project will begin immediately and the
additional production capacity is expected to be operational in 2013 and ramped
up in 2015. The main capital expenditure cash outflows will take place in 2011
and 2012.
The decision to invest EUR 104 million in increasing quarto plate production
capability and capacity in Degerfors in Sweden was also made in June. This
investment strengthens Outokumpu's position as a world-leading producer of these
thick, wide and individually rolled plates and will increase the Group's annual
quarto plate production capacity to more than 200 000 tonnes. The majority of
the new production capacity is scheduled to be available in 2014. Capital
expenditure will be spread over five years with the majority of cash out-flows
taking place in 2012 and 2013.
Risks and uncertainties
Outokumpu operates in accordance with the risk management policy approved by its
Board of Directors. This policy defines the objectives, approaches and areas of
responsibility in risk management. Risks and uncertainties may, if they
materialise, have a substantial impact on earnings and cash flows. Key risks are
assessed and updated on a regular basis.
Important strategic and business risks include structural overcapacity in
stainless steel production, competition in stainless steel markets, the
Euro-centricity of the Group's operations and weakening of the market situation
affecting utilisation of the Group's stainless steel production capacity. To
mitigate risks related to structural overcapacity and fierce competition in
stainless steel markets, Outokumpu aims to maintain the cost-efficiency of its
operations, broaden the Group's product offering and increase sales to end-users
by, for example, developing distribution channels. This strategy is supported by
the Group Sales and Marketing function, which ensures that customers are served
in an optimal way. To mitigate impact of Euro-centricity, Outokumpu is also
aiming to grow outside Europe.
The recovery in stainless steel markets continued during the review period.
Outokumpu monitors the situation continuously and will adjust its operations in
response to possible changes in the market situation. If the market for
stainless steel remains weak for an extended period, this could have an impact
on the Group's strategy implementation.
Operational risks arise as a consequence of inadequate or failed internal
processes, employee actions, systematic or other events such as natural
catastrophes, misconduct or crime. Operational risks also include different
issues related to organisational efficiency. Key operational risks are a major
fire or accident and insufficient ability to adjust production capacity.
Protection of the Group's personnel, assets, processes, information and
reputation against a wide range of potential losses is an essential component in
Outokumpu's operations. These types of risks are primarily mitigated through
preventive actions and insurances. To reduce the risk of property damage and
interruptions to the Group's businesses, Outokumpu conducts systematic fire and
security auditing.
Key financial risk are related to variations in the nickel and electricity
prices, exchange rates for the US dollar and Swedish krona, interest rates and
the value of receivables as well as certain equities. The strengthening of the
US dollar during the second quarter had a slight positive impact on earnings but
also increased Group working capital. Outokumpu issued a EUR 250 million
five-year bond in June, which improved the Group's debt capital structure.
People and the environment
The Group's continuing operations employed an average of 7 900 full-time
personnel during January-June 2010 (I-II/2009: 8 184). Summer-trainees expanded
the number of full-time employees to 8 617 (June 30, 2009: 7 985) at the end of
June. The lost-time injury rate (i.e. lost-time accidents per million working
hours) improved during the second quarter and was 5.0 for the first half of
2010 (I-II/2009: 5.6), but did not reach the Group's 2010 target of less than
four.
Emissions to air and discharges to water remained within permitted limits and
the breaches that occurred were temporary, were identified and caused only
minimal environmental impact. Outokumpu is not a party in any significant
juridical or administrative proceeding concerning environmental issues, nor is
it aware of any realised environmental risks that could have a material adverse
effect on the Group's financial position.
Emissions trading activities have been conducted in accordance with obligations,
agreed procedures and the Group's financial risk policy. Emissions under the EU
Emission Trading Scheme during the first half of 2010 totalled approximately
389 000 tonnes (I-II/2009: 282 000 tonnes). The main reason for the low level of
emissions in 2009 was the temporary closure of the Group's ferrochrome
production facilities from April until the end of September. No external trading
of emission allowances was carried out during the first six months of 2010.
Outokumpu's carbon dioxide allowances in Finland, Sweden and the UK proved
adequate for the Group's planned production.
Outokumpu is participating in the construction of a wind farm in Tornio in
Finland. Rajakiiri, a company specialising in wind power technology, has decided
to invest in a 30 MW wind farm at Röyttä, close to the Tornio Works site.
Outokumpu will be allocated 20% of the electrical energy produced. This new wind
power project will meet approximately 0.5% of Outokumpu's total energy needs.
The Life Cycle Inventory Study on Stainless Steel Production in the EU shows
that Outokumpu products have the smallest carbon footprint, 10-20% less than the
EU average for stainless steel producers. Outokumpu also published a new Energy
and Low-carbon Programme.
In 2010, for the second time, Outokumpu was awarded "Sector Mover" status by
Sustainable Asset Management (SAM) for having the largest proportional annual
improvement in sustainability performance within the steel industry compared to
the previous year. Outokumpu also qualified for the OMX GES Sustainability
Nordic index. Calculated by NASDAQ OMX in cooperation with GES Investment
Services, this is a benchmark sustainability index which consists of 50 leading
companies listed on the NASDAQ OMX Copenhagen, Helsinki, Stockholm and Oslo Bors
exchanges.
Civil actions regarding the sold fabricated copper products business
In the autumn of 2004, the European Commission issued its judgment on
Outokumpu's participation in a European price-fixing and market-sharing cartel
involving sanitary copper tubes during 1988-2001 and imposed a fine of EUR 36
million on Outokumpu for participation in the cartel. In 2004, Outokumpu
appealed to the General Court (previously known as the Court of First Instance
for Europe) regarding the level of the fine. According to a Court decision
issued in May 2010 the fine remained unchanged. As Outokumpu paid the fines in
2009, this decision will have no impact on Group profits or cash flow. Outokumpu
exited the copper fabrication business by divesting the major part of the
Group's business in 2005 and the remaining units in 2008.
In connection with the industrial tubes cartel investigation, Outokumpu Oyj has
since 2004 been in the process of addressing several civil complaints raised in
the US against the company and its former fabricated copper products business in
the US. The majority of those complaints have been concluded, but two civil
actions are still pending in the US. The first of these is a class action
brought in the federal court of Tennessee on behalf of certain indirect
purchasers of industrial copper tubing. Outokumpu believes that this class
action lacks merit and is attempting to reach a favourable resolution. The
second pending civil complaint in the US, an individual action filed in 2006 in
the federal district court in Memphis, Tennessee seeks an unstated amount of
damages related to an alleged world-wide price-fixing and market allocation
cartel. The court dismissed this complaint in 2007, and it is the appeal against
that dismissal which is currently pending. In 2010, a third civil action was
brought in the UK courts against Outokumpu Oyj (and two other defendant groups)
by the same claimant group as that in the Memphis suit. The claimants allege
that they suffered loss across Europe as a result of the cartel and are seeking
to recovery from the three main defendant groups either jointly or jointly and
severally. The claimants' initial claim for alleged losses (between the three
defendant groups) is some GBP 20 million excluding interest. Outokumpu will be
challenging the jurisdiction of the UK courts to hear this claim. In any event,
Outokumpu believes that the allegations regarding damages caused by the cartel
are groundless and, if pursued, Outokumpu will defend itself in any proceedings.
No provisions have been booked in connection with these claims.
Customs investigation of exports to Russia by Tornio Works
In March 2007, Finnish Customs authorities initiated a criminal investigation
into the Group's Tornio Works' export practices to Russia. It was suspected that
a forwarding agency based in south-eastern Finland had prepared defective and/or
forged invoices regarding the export of stainless steel to Russia. The
preliminary investigation focused on possible complicity by Outokumpu Tornio
Works in the preparation of defective and/or forged invoices by the forwarding
agent.
In June 2009, the Finnish Customs completed its preliminary investigation and
forwarded the matter for consideration of possible charges to the prosecuting
authorities. The process of considering possible charges is expected to be
completed in the third quarter of 2010.
Immediately after the Finnish Customs authorities began their investigations in
2007, Outokumpu initiated its own investigation into the trade practices
connected with stainless steel exports from Tornio to Russia. In June 2007,
based on its own investigation, a leading Finnish law firm Roschier Attorneys
Ltd. concluded that it had not found evidence that any employees of Tornio Works
or the Group would have committed any of the crimes alleged by the Finnish
Customs.
Roschier has subsequently, at Outokumpu's request, examined the preliminary
investigation material produced by the Finnish Customs and concluded that it
contains no evidence that any Outokumpu employees would have committed either
forgery or any accounting offences as alleged by the Finnish Customs.
Outokumpu's Auditor, KPMG Oy Ab, has also stated that suspicions related to the
making of false financial statements are groundless.
Outokumpu has stated that neither the Group nor its personnel have committed any
of the crimes alleged by the Finnish Customs.
Organisational changes and appointments
At the beginning of April, Mr Pekka Erkkilä, EVP - General Stainless, left
Outokumpu Oyj and joined Outotec Oyj. Mr Hannu Hautala, SVP - Tornio Works, took
up his duties as head of Tornio Works at the beginning of April.
Mr Kari Parvento, EVP - Group Sales and Marketing, and a member of Outokumpu's
Executive Committee, took up his position at Outokumpu Oyj at the beginning of
April.
Some of the responsibilities of Outokumpu's Executive Committee members will
change from August 1, 2010:
Karri Kaitue, Deputy CEO, will be responsible for the Tornio Works business unit
and Hannu Hautala, SVP - Tornio Works will report to Mr. Kaitue. Starting in
August, Legal Affairs and IPR, currently part of Mr Kaitue's responsibilities,
will report to Juha Rantanen, CEO, and the Group's remaining brass operations
will report to Esa Lager, CFO.
Shares and shareholders
According to the Nordic Central Securities Depository, Outokumpu's largest
shareholders by group at the end of the second quarter were Finnish corporations
(34.94%), foreign investors (21.84%), Finnish public sector institutions
(18.55%), Finnish private households (14.86%), Finnish financial and insurance
institutions (6.91%), and Finnish non-profit organisations (2.89%). The list of
largest shareholders is updated regularly on Outokumpu's Internet pages:
www.outokumpu.com/Investors.
Shareholders that have more than 5% of the shares and votes in Outokumpu Oyj are
Solidium Oy (owned by the State of Finland) (30.85%) and the Finnish Social
Insurance Institution (8.01%).
At the end of June, Outokumpu's closing share price was EUR 12.43 (II/2009: EUR
12.29). The average share price during the first half of 2010 was EUR 14.11
(I-II/2009: EUR 10.37) with EUR 17.88 (I-II/2009: EUR 14.68) as the highest
traded price and EUR 12.03 (I-II/2009: EUR 7.72) as the lowest. At the end of
June, the market capitalisation of Outokumpu Oyj shares totalled EUR 2 274
million (June 30, 2009: EUR 2 237 million) including treasury shares. Share
turnover on the Nasdaq OMX Helsinki exchange during the first half of 2010
amounted to 186.0 million (I-II/2009: 204.5 million) shares. The total value of
shares traded during the first six months was EUR 2 624.3 million (I-II/2009:
EUR 2 119.9 million).
Outokumpu's fully paid-up share capital at the end of June totalled EUR 311.0
million and consisted of 182 956 249 shares. The number of shares outstanding at
the end of the second quarter was 181 915 361 excluding treasury shares.
Annual General Meeting 2010
The 2010 Annual General Meeting (AGM) in March approved a dividend of EUR 0.35
per share for 2009. Dividends totalling EUR 64 million were paid on April
13, 2010.
The AGM authorised the Board of Directors to decide to repurchase the Group's
own shares and to issue shares and grant special rights entitling to shares. The
maximum number of shares to be repurchased is 18 000 000. These authorisations
are valid for 12 months or until the next AGM, but no longer than May 31, 2011.
To date, the authorisations have not been used.
The 2010 Annual General Meeting also decided that Outokumpu would make a
donation (a maximum of EUR 1 million) to the Aalto University Foundation.
The AGM decided on the number of the Board members, including the Chairman and
Vice Chairman, to be eight. The Outokumpu board members are: Evert Henkes, Ole
Johansson (Chairman), Victoire de Margerie, Anna Nilsson-Ehle, Jussi Pesonen,
Leena Saarinen, Anssi Soila (Vice Chairman) and Olli Vaartimo. The AGM also
resolved to form a Shareholders' Nomination Committee to prepare proposals on
the composition and remuneration of the Board of Directors for presentation to
the next AGM.
Events after the review period
At the beginning of July, the Finnish Parliament voted on decisions-in-principle
to build two new nuclear power plants in Finland. The voting was positive for
Fennovoima, in which Outokumpu has a stake of some 10%. Once the new nuclear
power plant is operational, Outokumpu will be able to obtain approximately one
third of its current electricity needs at the cost of production from 2020
onwards.
SHORT-TERM OUTLOOK
Underlying demand for standard grades continues to recover and this is expected
to continue also after the holiday season. Demand for special grades is still
lagging. However, commercial activity in the investment-driven customer segments
continues and is expected to generate orders within the next 6-12 months.
Currently, the normal seasonality in demand that results from the ongoing
holiday season in Europe is causing some distributors to be hesitant about
placing orders. The declined nickel price is having a similar impact on buying
behaviour. This has led to some destocking among distributors. Inventories in
Europe are estimated to be close to normal level.
Lead times on mill-deliveries for standard grades are normal at 6-8 weeks. The
slowdown of demand during the holiday season and annual maintenance breaks at
the Group's mills will result in stainless delivery volumes for the third
quarter to be 10-20% lower than in the second quarter (339 000 tonnes). Compared
to the second quarter of 2010, Outokumpu's average base prices in the third
quarter are expected to be fairly stable.
The underlying operational result*) in the third quarter is expected to be
somewhat negative. At current metal prices, raw material-related losses of some
tens of millions of euros are expected in the third quarter as a result of the
recent decline in metal prices. Operative cash flow (before investments) in the
third quarter is expected to turn positive subject to metal price development.
*) Underlying operational result= Operating profit without raw material-related
inventory gains and losses and non-recurring items.
Outokumpu is a global leader in stainless steel with the vision to be the
undisputed number one. Customers in a wide range of industries use our stainless
steel and services worldwide. Being fully recyclable, maintenance-free, as well
as very strong and durable material, stainless steel is one of the key building
blocks for sustainable future. Outokumpu employs some 7 500 people in more than
30 countries. The Group's head office is located in Espoo, Finland. Outokumpu is
listed on the NASDAQ OMX Helsinki.
www.outokumpu.com
CONDENSED FINANCIAL
STATEMENTS (unaudited)
Condensed statement of
comprehensive income
Condensed income statement
Jan- Jan- April- April- Jan-
June June June June Dec
EUR million 2010 2009 2010 2009 2009
----------------------------------------------------------------------------
Continuing operations:
Sales 2 026 1 296 1 110 617 2 611
Cost of sales -1 854 -1 492 -974 -637 -2 764
-----------------------------------
Gross margin 172 -196 137 -21 -153
Other operating income 14 12 8 1 28
Costs and expenses -134 -140 -71 -70 -280
Other operating expenses -3 -19 -2 -4 -32
-----------------------------------
Operating profit 49 -343 71 -94 -438
Share of results in
associated companies -10 -3 -3 -0 -12
Financial income and expenses
Interest income 8 9 5 5 17
Interest expenses -20 -23 -11 -9 -38
Market price gains and losses 13 -0 7 -5 -2
Other financial income 2 3 0 0 5
Other financial expenses -13 -0 -7 -1 -6
-----------------------------------
Profit before taxes 30 -357 63 -105 -474
Income taxes -8 84 -20 20 142
-----------------------------------
Net profit for the period
from continuing operations 22 -272 43 -85 -332
Discontinued operations:
Net profit for the period
from discontinued operations 1 -2 1 -2 -4
Net profit for the period 23 -274 44 -87 -336
Attributable to:
Owners of the parent 23 -274 44 -87 -336
Non-controlling interests -0 -1 0 -0 -0
Earnings per share for profit
attributable to the owners
of the parent:
Earnings per share, EUR 0.13 -1.52 0.24 -0.48 -1.86
Diluted earnings per share, EUR 0.13 -1.52 0.24 -0.48 -1.86
Earnings per share from continuing
operations attributable to the owners
of the parent:
Earnings per share, EUR 0.12 -1.50 0.24 -0.47 -1.83
Earnings per share from discontinued
operations attributable to the owners
of the parent:
Earnings per share, EUR 0.01 -0.01 0.00 -0.01 -0.02
Statement of other
comprehensive income
Jan- Jan- April- April- Jan-
June June June June Dec
EUR million 2010 2009 2010 2009 2009
----------------------------------------------------------------------------
Net profit for the period 23 -274 44 -87 -336
Other comprehensive income:
Exchange differences on translating
foreign operations 38 32 24 15 29
Available-for-sale financial assets
Fair value changes during the period 11 17 -0 17 34
Income tax relating to
available-for-sale financial assets -0 -8 1 -5 -9
Cash flow hedges
Fair value changes during the period 28 2 10 6 23
Reclassification adjustments from other
comprehensive income to profit 2 - 2 - 1
Income tax relating to cash flow hedges -8 -1 -3 -2 -6
Net investment hedges
Fair value changes during the period - 1 - 0 1
Income tax relating
to net investment hedges - -0 - -0 -0
Share of other comprehensive
income of associated companies -2 18 -6 - 5
-----------------------------------
Other comprehensive income for
the period, net of tax 69 61 29 32 77
Total comprehensive income for
the period 92 -213 73 -55 -259
Attributable to:
Owners of the parent 92 -213 73 -55 -259
Non-controlling interests -0 -0 0 -0 -1
Condensed statement
of financial position
June 30 June 30 Dec 31
EUR million 2010 2009 2009
-------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 562 574 566
Property, plant and equipment 2 115 2 051 2 097
Loan receivables and other interest-bearing assets 427 403 397
Other receivables 56 62 55
Deferred tax assets 39 20 42
-----------------------
Total non-current assets 3 198 3 111 3 157
Current assets
Inventories 1 532 879 1 016
Loan receivables and other interest-bearing assets 49 66 39
Trade and other receivables 782 501 508
Cash and cash equivalents 123 218 112
-----------------------
Total current assets 2 487 1 663 1 674
Receivables related to assets held for sale 34 13 20
TOTAL ASSETS 5 718 4 787 4 850
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the Company
Equity attributable to the
equity holders of the Company 2 489 2 496 2 451
Non-controlling interests 1 1 0
-----------------------
Total equity 2 490 2 497 2 451
Non-current liabilities
Interest-bearing liabilities 1 581 1 027 1 038
Deferred tax liabilities 98 132 100
Pension obligations 71 65 65
Provisions 18 32 17
Trade and other payables 1 1 1
-----------------------
Total non-current liabilities 1 769 1 256 1 221
Current liabilities
Interest-bearing liabilities 723 593 705
Provisions 20 28 26
Trade and other payables 704 406 439
-----------------------
Total current liabilities 1 447 1 027 1 170
Liabilities related to assets held for sale 12 7 8
TOTAL EQUITY AND LIABILITIES 5 718 4 787 4 850
Statement of changes
in equity
Attributable to the owners of the parent
-------------------------------------------
Share Share Other Fair value
capital premium reserves reserves
EUR million fund
----------------------------------------------------------------------
Equity on December 31, 2008 308 702 15 -28
----------------------------------------------------------------------
Total comprehensive
income for the period - - - 33
Transfers within equity - - 2 -
Dividends - - - -
Share-based payments - - - -
Share options exercised 1 3 - -
----------------------------------------------------------------------
Equity on June 30, 2009 309 705 17 6
----------------------------------------------------------------------
----------------------------------------------------------------------
Equity on December 31, 2009 309 706 15 22
----------------------------------------------------------------------
Total comprehensive
income for the period - - - 33
Dividends - - - -
Share-based payments - - - -
Share options exercised 2 8 - -
Other change - - - -
----------------------------------------------------------------------
Equity on June 30, 2010 311 713 15 55
----------------------------------------------------------------------
Attributable to the
owners of the parent
-------------------------------
Treasury Cumulative Retained Non- Total
shares translation earnings controlling equity
EUR million differences interests
----------------------------------------------------------------------------
Equity on December 31, 2008 -27 -138 1 961 1 2 795
----------------------------------------------------------------------------
Total comprehensive
income for the period - 28 -274 -0 -213
Transfers within equity - - -2 - -
Dividends - - -90 - -90
Share-based payments 2 - -1 - 1
Share options exercised - - - - 4
----------------------------------------------------------------------------
Equity on June 30, 2009 -25 -110 1 594 1 2 497
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Equity on December 31, 2009 -25 -110 1 534 0 2 451
----------------------------------------------------------------------------
Total comprehensive
income for the period - 36 23 -0 92
Dividends - - -64 - -64
Share-based payments - - 1 - 1
Share options exercised - - - - 9
Other change - - - 1 1
----------------------------------------------------------------------------
Equity on June 30, 2010 -25 -74 1 494 1 2 490
----------------------------------------------------------------------------
Condensed statement of cash flows
Jan- Jan- April- April- Jan-
June June June June Dec
EUR million 2010 2009 2010 2009 2009
-------------------------------------------------------------------
Net profit for the period 23 -274 44 -87 -336
Adjustments
Depreciation and amortisation 112 103 57 52 211
Impairments - - - - 15
Other non-cash adjustments -65 -151 3 -82 -230
Change in working capital -445 640 -402 150 548
Dividends received 2 3 0 0 3
Interests received 1 3 1 2 8
Interests paid -22 -34 -12 -20 -57
Income taxes paid -6 26 -3 6 36
----------------------------------
Net cash from
operating activities -401 316 -314 21 198
Purchases of assets -79 -118 -35 -47 -232
Proceeds from the sale of assets 9 7 5 1 17
Net cash from other
investing activities 1 0 0 0 -2
----------------------------------
Net cash from
investing activities -68 -111 -30 -45 -216
Cash flow before
financing activities -469 205 -344 -24 -19
Share options exercised 9 4 0 0 4
Borrowings of long-term debt 654 59 598 50 130
Repayment of long-term debt -100 -283 -49 -274 -350
Change in current debt -18 97 -119 173 212
Dividends paid -64 -90 -64 -90 -90
Proceeds from the sale
of other financial assets - 0 - 0 0
Other financing cash flow -6 1 -0 0 -1
----------------------------------
Net cash from
financing activities 475 -213 366 -141 -97
Net change in cash
and cash equivalents 7 -8 22 -165 -115
Cash and cash equivalents at
the beginning of the period 112 224 100 381 224
Foreign exchange rate effect 5 1 2 1 3
Discontinued operations'
net change in cash effect 0 0 -1 1 0
Net change in cash
and cash equivalents 7 -8 22 -165 -115
Cash and cash equivalents
at the end of the period 123 218 123 218 112
Cash flows presented for continuing operations.
Key figures
Jan-June Jan-June Jan-Dec
EUR million 2010 2009 2009
----------------------------------------------------------------------
Sales 2 026 1 296 2 611
Operating profit 49 -343 -438
Operating profit margin, % 2.4 -26.5 -16.8
EBITDA 162 -240 -212
Return on capital employed, % 2.5 -18.8 -11.7
Return on equity, % 1.9 -20.8 -12.8
Return on equity, continuing operations, % 1.8 -20.6 -12.7
Long-term debt 1 541 975 997
Current debt 685 555 652
Other interest-bearing payables 6 15 7
Derivative financial instruments 48 40 63
Investments in associated companies -141 -177 -152
Available-for-sale financial assets -128 -96 -112
Other interest-bearing receivables -183 -162 -149
Assets held for sale -22 -6 -12
Cash and cash equivalents -123 -218 -112
----------------------------------------------------------------------
Net interest-bearing debt at end of period 1 683 926 1 183
Capital employed at end of period 4 173 3 423 3 634
Equity-to-assets ratio
at end of period, % 43.6 52.2 50.6
Debt-to-equity ratio at end of period, % 67.6 37.1 48.2
Earnings per share, EUR 0.13 -1.52 -1.86
Earnings per share from
continuing operations, EUR 0.12 -1.50 -1.83
Earnings per share from
discontinued operations, EUR 0.01 -0.01 -0.02
Average number of shares
outstanding, in thousands 1) 181 578 180 685 180 826
Fully diluted earnings per share, EUR 0.13 -1.52 -1.86
Fully diluted average number
of shares, in thousands 1) 181 596 180 736 180 970
Equity per share at end
of period, EUR 13.68 13.79 13.54
Number of shares outstanding
at end of period,in thousands 1) 181 915 180 963 180 970
Capital expenditure,
continuing operations 68 107 245
Depreciation, continuing operations 112 103 211
Deliveries, continuing operations,
1 000 tonnes 672 515 1 030
Average personnel for the
period, continuing operations 7 900 8 184 7 941
----------------------------------------------------------------------
1) The number of own shares repurchased is excluded.
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
This interim report is prepared in accordance with IAS 34 (Interim Financial
Reporting). The same accounting policies and methods of computation have been
followed in the interim financial statements as in the annual financial
statements for 2009, except for changes in IFRS-standards, which are applicable
from the beginning of 2010. Of these, the most significant are in the following
standards:
IFRS 3 Business Combinations
IAS 27 Consolidated and Separate Financial Statements
These changes have not had material impact on the interim financial statements.
All presented figures in this interim report have been rounded and consequently
the sum of individual figures can deviate from the presented sum figure. Key
figures have been calculated using exact figures.
Use of estimates
The preparation of the financial statements in accordance with IFRS requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, as well as the disclosure of contingent assets and
liabilities, and the reported amounts of income and expenses during the
reporting period. Accounting estimates are employed in the financial statements
to determine reported amounts, including the realisability of certain assets,
the useful lives of tangible and intangible assets, income taxes, provisions,
pension obligations, impairment of goodwill and other items. Although these
estimates are based on management's best knowledge of current events and
actions, actual results may differ from the estimates.
EUR 250 million bond
In June, Outokumpu Oyj issued an EUR 250 million five-year domestic bond with an
annual coupon of 5.125 %. The bond was listed on the NASDAQ OMX Helsinki on
July, 14. The bond improves the structure of Outokumpu's debt portfolio and the
funds will be used for general corporate purposes.
Shares and share capital
The total number of Outokumpu Oyj shares was 182 956 249 and the share capital
amounted to EUR 311.0 million on June 30, 2010. Outokumpu Oyj held 1 040 888
treasury shares on June 30, 2010. This corresponded to 0.6% of the share capital
and the total voting rights of the Company on June 30, 2010.
Outokumpu has a stock option programme for management. The stock options have
been allocated as part of the Group's incentive programmes to key personnel of
Outokumpu. The option programme has three parts 2003A, 2003B and 2003C. On June
30, 2010 a total of 650 881 Outokumpu Oyj shares had been subscribed for on the
basis of 2003A stock option programme, a total of 1 016 813 Outokumpu Oyj shares
on the basis of 2003B stock option programme and a total of 38 000 Outokumpu Oyj
shares on the basis of 2003C stock option programme. On June 30, 2010, only
stock options 2003C had remaining share subscription period and an aggregate
maximum of 62 500 shares can be subscribed with the remaining 2003C stock
options. In accordance with the terms and conditions of the option programme,
the dividend adjusted share price for a stock option 2003C was EUR 10.09 on June
30, 2010. As a result of the remaining share options, Outokumpu Oyj's share
capital may be increased by a maximum of EUR 106 250 and the number of shares by
a maximum of 62 500 shares. This corresponds to 0.0% of the Company's shares and
voting rights.
Outokumpu has also two share-based incentive programmes for years 2006-2010 and
2009-2013 as part of the key employee incentive and commitment system of the
Company. The second earnings period for 2006-2010 incentive programme was ended
on December 31, 2009. The set targets for the earnings period were not met and
thus no reward was paid to the participants.
Outokumpu Board approved on February 2, 2010 134 employees to be in the scope of
the share incentive programme 2009-2013 second earnings period (2010-2012). The
amount of reward will be determined and paid to the participants on the basis of
the achievement of performance targets after the financial statements of the
last year of earnings period have been prepared. If persons covered by both
share-based incentive programmes were to receive the number of shares in
accordance with the maximum reward, currently a total of 1 050 580 shares, their
shareholding obtained via the programme would amount to 0.6% of the Company's
shares and voting rights.
Detailed information on the option programme and of the share-based incentive
programmes can be found in the annual report of Outokumpu
fromhttp://ar.outokumpu.com/2009.
Discontinued operations
and assets held for sale
Jan-June Jan-June Jan-Dec
EUR million 2010 2009 2009
------------------------------------------------------
Sales 27 15 31
Operating profit 2 0 -1
Net profit for the period
from discontinued operations 1 -2 -4
Assets
Non-current 9 4 4
Current 24 10 16
Liabilities
Non-current 3 3 3
Current 10 4 5
Operating cash flows -4 8 3
------------------------------------------------------
Outokumpu Brass produces brass rods for applications in the construction,
electrical and automotive industries. The brass rod plant is located in Drünen
in the Netherlands and the unit also has a 50% stake in a brass rod company in
Gusum, Sweden. Outokumpu Brass employs some 160 employees. The assets and
liabilities of brass rod business are presented as held for sale. Outokumpu
intends to divest the brass rod business.
Major non-recurring items
in operating profit
Jan-June Jan-June Jan-Dec
EUR million 2010 2009 2009
-----------------------------------------------------------
Write-down of Avesta
melt-shop investment - - -15
Redundancy provisions - -5 -5
--------------------------
- -5 -20
Property, plant and equipment
Jan 1 - Jan 1 - Jan 1 -
June 30 June 30 Dec 31
EUR million 2010 2009 2009
-----------------------------------------------------------
Historical cost at the
beginning of the period 4 309 4 021 4 021
Translation differences 126 23 69
Additions 67 109 246
Disposals -21 -5 -23
Reclassifications -3 -2 -4
--------------------------
Historical cost at
the end of the period 4 478 4 146 4 309
Accumulated depreciation at
the beginning of the period -2 212 -1 994 -1 994
Translation differences -69 -14 -38
Disposals 17 3 20
Reclassifications 0 0 0
Depreciation -100 -91 -185
Impairments - - -15
Accumulated depreciation at
--------------------------
the end of the period -2 363 -2 095 -2 212
Carrying value at
the end of the period 2 115 2 051 2 097
Carrying value at the
beginning of the period 2 097 2 027 2 027
Commitments
June 30 June 30 Dec 31
EUR million 2010 2009 2009
-----------------------------------------------------------
Mortgages and pledges
Mortgages on land 229 189 185
Other pledges 21 1 1
Guarantees
On behalf of subsidiaries
for commercial commitments 35 19 22
On behalf of associated companies
for financing 1 5 1
Other commitments 48 56 53
Minimum future lease payments
on operating leases 57 62 62
-----------------------------------------------------------
Group's off-balance sheet investment commitments totalled EUR 63 million on June
30, 2010 (June 30, 2009: EUR 86 million, Dec 31, 2009: EUR 62 million).
Related party transactions
Outokumpu's ownership in Outokumpu Industriunderhåll AB (previously ABB
Industriunderhåll AB) increased from 49% to 51% on March 1, 2010 and since then
the company has been consolidated as a subsidiary. Non-controlling interest is
presented separately from the net profit and disclosed as a separate item in the
equity. The acquisition price for the 2% increase in the ownership was EUR
22 000.
At June 30, 2010, remaining material related party transactions were loan
receivables from associated companies totalling EUR 12 million (June 30, 2009:
EUR 7 million, Dec 31, 2009: EUR 11 million).
Fair values and nominal
amounts of
derivative instruments
June 30 June 30 June 30 Dec 31 June 30 Dec 31
2010 2010 2010 2009 2010 2009
Positive Negative Net Net
fair fair fair fair Nominal Nominal
EUR million value value value value amounts amounts
---------------------------------------------------------------------------
Currency and interest
rate derivatives
Currency forwards 17 29 -12 -42 2 221 1 784
Interest rate swaps - 5 -5 -3 203 199
Cross-currency swaps 1 27 -26 -8 221 212
Currency options, bought 1 - 1 1 10 30
Currency options, sold - 0 -0 -0 10 31
Interest options, bought 1 - 1 2 84 78
Interest options, sold - 3 -3 -2 84 78
Tonnes Tonnes
---------------------------------------------------------------------------
Metal derivatives
Nickel options, bought 2 - 2 2 5 760 13 290
Nickel options, sold - 1 -1 -4 4 800 13 290
Forward and futures
copper contracts 1 0 0 -0 1 900 1 275
Forward and futures
zinc contracts 0 0 0 -0 1 150 400
Emission allowance
derivatives 1 0 0 0 605 000 404 000
TWh TWh
---------------------------------------------------------------------------
Electricity
derivatives 2 6 -5 -8 0.9 0.8
---------------------------------------------------------------------------
24 72 -48 -63
Segment information
General Stainless
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------
Sales 476 501 496 592 2 065
of which Tornio Works 270 300 303 420 1 292
Operating profit -157 -52 -38 -12 -259
of which Tornio Works -129 -33 -44 22 -183
Operating capital at
the end of period 2 390 2 379 2 355 2 421 2 421
Average personnel
for the period 3 917 3 848 3 820 3 752 3 834
Deliveries of main
products (1 000 tonnes)
Cold rolled 114 132 112 128 486
White hot strip 57 64 64 62 248
Semi-finished products 39 51 45 61 196
-----------------------------------------------------
Total deliveries
of the division 210 248 221 250 929
-----------------------------------------------------
EUR million I/10 II/10
-----------------------------------------------------
Sales 754 962
of which Tornio Works 481 653
Operating profit -2 75
of which Tornio Works -7 63
Operating capital at
the end of period 2 484 2 718
Average personnel
for the period 3 780 4 278
Deliveries of main
products (1 000 tonnes)
Cold rolled 151 160
White hot strip 84 74
Semi-finished products 70 76
-----------------------------------------------------
Total deliveries
of the division 304 309
-----------------------------------------------------
Specialty Stainless
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------
Sales 371 278 258 332 1 239
Operating profit -82 -37 -21 -10 -149
Operating capital at
the end of period 1 007 906 965 1 035 1 035
Average personnel
for the period 3 892 3 656 3 433 3 372 3 588
Deliveries of main
products (1 000 tonnes)
Cold rolled 25 19 19 24 86
White hot strip 23 25 21 24 92
Quarto plate 20 19 15 18 71
Tubular products 14 12 10 11 47
Long products 9 8 10 10 38
-----------------------------------------------------
Total deliveries
of the division 92 82 75 87 335
-----------------------------------------------------
EUR million I/10 II/10
-----------------------------------------------------
Sales 367 469
Operating profit -21 22
Operating capital at
the end of period 1 109 1 245
Average personnel
for the period 3 319 3 412
Deliveries of main
products (1 000 tonnes)
Cold rolled 35 36
White hot strip 30 34
Quarto plate 21 22
Tubular products 12 12
Long products 13 14
-----------------------------------------------------
Total deliveries
of the division 111 119
-----------------------------------------------------
Other operations
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------
Sales 66 58 56 62 243
Operating profit -12 -5 -4 -9 -31
Operating capital at
the end of period 108 252 233 240 240
Average personnel
for the period 527 526 521 497 518
-----------------------------------------------------
EUR million I/10 II/10
-----------------------------------------------------
Sales 89 86
Operating profit 2 -15
Operating capital at
the end of period 172 284
Average personnel
for the period 503 510
-----------------------------------------------------
Income statement by quarter
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------------
Continuing operations:
Sales
General Stainless 476 501 496 592 2 065
of which intersegment sales 97 100 107 117 421
Specialty Stainless 371 278 258 332 1 239
of which intersegment sales 75 67 64 87 293
Other operations 66 58 56 62 243
of which intersegment sales 61 52 52 55 221
Intra-group sales -233 -220 -224 -259 -935
-----------------------------------------------------------
Total sales 679 617 587 728 2 611
Operating profit
General Stainless -157 -52 -38 -12 -259
Specialty Stainless -82 -37 -21 -10 -149
Other operations -12 -5 -4 -9 -31
Intra-group items 2 0 -3 2 1
-----------------------------------------------------------
Total operating profit -249 -94 -65 -29 -438
Share of results
in associated companies -3 -0 -6 -3 -12
Financial income and expenses 0 -11 -11 -4 -25
-----------------------------------------------------------
Profit before taxes -252 -105 -81 -36 -474
Income taxes 64 20 26 32 142
-----------------------------------------------------------
Net profit for the period
from continuing operations -188 -85 -55 -4 -332
Net profit for the period
from discontinued
operations 0 -2 -1 -2 -4
-----------------------------------------------------------
Net profit for the period -187 -87 -56 -6 -336
-----------------------------------------------------------
Attributable to:
The owners of the parent -187 -87 -55 -7 -336
Non-controlling interests -0 -0 -0 0 -0
EUR million I/10 II/10
-----------------------------------------------------------
Continuing operations:
Sales
General Stainless 754 962
of which intersegment sales 138 214
Specialty Stainless 367 469
of which intersegment sales 91 122
Other operations 89 86
of which intersegment sales 65 70
Intra-group sales -294 -407
-----------------------------------------------------------
Total sales 916 1 110
Operating profit
General Stainless -2 75
Specialty Stainless -21 22
Other operations 2 -15
Intra-group items -1 -10
-----------------------------------------------------------
Total operating profit -22 71
Share of results
in associated companies -7 -3
Financial income and expenses -4 -6
-----------------------------------------------------------
Profit before taxes -33 63
Income taxes 12 -20
-----------------------------------------------------------
Net profit for the period
from continuing operations -21 43
Net profit for the period
from discontinued
operations 0 1
-----------------------------------------------------------
Net profit for the period -21 44
-----------------------------------------------------------
Attributable to:
The owners of the parent -21 44
Non-controlling interests -0 0
Major non-recurring
items in operating profit
EUR million I/09 II/09 III/09 IV/09 2009
-----------------------------------------------------------
Specialty Stainless
Write-down of Avesta
melt-shop investment - - -15 - -15
Redundancy provisions -5 - - - -5
-----------------------------------------------------------
-5 - -15 - -20
EUR million I/10 II/10
-----------------------------------------------------------
Specialty Stainless
Write-down of Avesta
meltshop investment - -
Redundancy provisions - -
-----------------------------------------------------------
- -
Key figures by quarter
EUR million I/09 II/09 III/09 IV/09
---------------------------------------------------------------------
Sales 679 617 587 728
Operating profit -249 -94 -65 -29
Operating profit margin, % -37 -15 -11 -4
EBITDA -198 -42 2 26
Return on capital employed, % -28 -11 -8 -3
Return on equity, % -28 -14 -9 -1
Return on equity,
continuing operations, % -28.1 -13.5 -8.9 -0.7
Capital employed at end of period 3 376 3 423 3 459 3 634
Net interest-bearing
debt at end of period 825 926 1 014 1 183
Equity-to-assets ratio
at end of period, % 51.3 52.2 50.8 50.6
Debt-to-equity ratio
at end of period, % 32.3 37.1 41.4 48.2
Earnings per share, EUR -1.04 -0.48 -0.31 -0.04
Earnings per share from
continuing operations, EUR -1.04 -0.47 -0.30 -0.03
Earnings per share from
discontinued operations, EUR 0.00 -0.01 -0,00 -0.01
Average number of shares
outstanding, in thousands 1) 180 413 180 955 180 963 180 963
Equity per share
at end of period, EUR 14.09 13.79 13.51 13.54
Number of shares outstanding
at end of period, in thousands 1) 180 953 180 963 180 963 180 970
Capital expenditure,
continuing operations 62 45 55 82
Depreciation, continuing operations 52 52 52 55
Deliveries, continuing operations,
1 000 tonnes 247 268 238 277
Average personnel for the period,
continuing operations 8 336 8 031 7 774 7 621
---------------------------------------------------------------------
EUR million I/10 II/10
---------------------------------------------------------------------
Sales 916 1 110
Operating profit -22 71
Operating profit margin, % -2.4 6.4
EBITDA 34 128
Return on capital employed, % -2.4 7.2
Return on equity, % -3.4 7.1
Return on equity,
continuing operations, % -3.5 7.0
Capital employed at end of period 3 709 4 173
Net interest-bearing
debt at end of period 1 293 1 683
Equity-to-assets ratio
at end of period, % 47.3 43.6
Debt-to-equity ratio
at end of period, % 53.5 67.6
Earnings per share, EUR -0.12 0.24
Earnings per share from
continuing operations, EUR -0.12 0.24
Earnings per share from
discontinued operations, EUR 0.00 0.00
Average number of shares
outstanding, in thousands 1) 181 245 181 907
Equity per share
at end of period, EUR 13.28 13.68
Number of shares outstanding
at end of period, in thousands 1) 181 897 181 915
Capital expenditure,
continuing operations 28 40
Depreciation, continuing operations 56 57
Deliveries, continuing operations,
1 000 tonnes 333 339
Average personnel for the period,
continuing operations 7 601 8 199
---------------------------------------------------------------------
1) The number of own shares repurchased is excluded.
Definitions of key financial figures
EBITDA = Operating profit before depreciation,
amortisation and impairments
Capital employed = Total equity + net interest-bearing debt
Operating capital = Capital employed + net tax liability
Return on equity = Net profit for the financial period × 100
------------------------------------------
Total equity (average for the period)
Return on capital = Operating profit × 100
------------------------------------------
employed (ROCE) Capital employed (average for the period)
Net interest- Total interest-bearing debt
bearing debt = - total interest-bearing assets
Equity-to-assets ratio = Total equity × 100
------------------------------------------
Total assets - advances received
Debt-to-equity ratio = Net interest-bearing debt × 100
------------------------------------------
Total equity
Net profit for the financial period
Earnings per share = attributable to the owners of the parent
------------------------------------------
Adjusted average number
of shares during the period
Equity attributable to
Equity per share = the owners of the parent
------------------------------------------
Adjusted number of shares
at the end of the period
[HUG#1433338]
