20 April 2011 at 9.00 am EET 1 (21) OUTOKUMPU OYJ INCREASED DEMAND IMPROVED PROFITABILITY. First-quarter 2011 highlights

Transcription

1 OUTOKUMPU OYJ INTERIM REPORT 20 April 2011 at 9.00 am EET 1 (21) OUTOKUMPU OYJ INCREASED DEMAND IMPROVED PROFITABILITY First-quarter 2011 highlights - Operating profit EUR 33 million (IV/2010: EUR -85 million) including some EUR 45 million (IV/2010: none) of raw material-related inventory gains, underlying operational result some EUR -12 million (IV/2010: EUR -68 million). - Operational cash flow EUR -10 million (IV/2010: EUR 18 million). - Improved demand from both distributors and end-users, deliveries at tonnes (IV/2010: tonnes). - Mika Seitovirta appointed Outokumpu s CEO from 1 April Plan for efficiency improvement aimed at achieving EUR 25 million in cost savings announced in April. Group key figures I/11 IV/10 I/ Sales EUR million Operating profit EUR million EBITDA EUR million Non-recurring items in operating profit EUR million Profit before taxes EUR million Non-recurring items in financial income and expenses EUR million Net profit for the period EUR million Earnings per share EUR Return on capital employed % Net cash generated from operating activities EUR million Capital expenditure EUR million Net interest-bearing debt at end of period EUR million Debt-to-equity ratio at end of period % Stainless steel deliveries tonnes Stainless steel base price 1) EUR/tonne Personnel at the end of period 2) ) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet). 2) Personnel reported as headcount. Earlier reported as full-time equivalent, comparative figures restated. Riihitontuntie 7 B, P.O. Box 140, FIN Espoo, Finland Tel , Fax , Domicile Espoo, Finland, Business ID , VAT FI

2 2 (21) SHORT-TERM OUTLOOK Demand for standard grades of stainless steel has remained relatively stable after the improvement in early Growth in demand in the first quarter was supported by restocking among distributors. Some destocking occurred towards the end of the quarter as the nickel price declined in March. Underlying demand continued to improve and is expected to remain stable in the second quarter. While the order intake from investment-driven end-use segments has been improving, no major projects utilising special grades have materialised. Lead times for standard grades are normal at 6 8 weeks. No significant changes in distributors inventory levels have occurred and they are currently estimated to be almost at normal levels. As summer is approaching some softness in demand from distributors may appear in the second quarter. Outokumpu estimates that the Group s delivery volumes in the second quarter will be at a similar level to volumes in the first quarter. Average base prices for stainless steel in the second quarter are expected to be somewhat higher than average prices in the first quarter. Outokumpu s operating profit in the second quarter is expected to be slightly positive or around breakeven with no material impact from raw material-related inventory gains or losses (at current metal prices). In addition, the Group s operating profit in the second quarter is expected to be impacted by nonrecurring restructuring provisions related to on-going statutory negotiations in Europe. The extent of the provisions will be determined later in the second quarter once these personnel-related negotiations have been concluded. CEO Mika Seitovirta: The first weeks at Outokumpu have proven to be a great learning experience. I am energised and encouraged while going forward and gaining further knowledge of this great company and fascinating industry. Our immediate actions will be focused on profitability, cash flow and improving the balance sheet. Most of the management attention this year will be spent on the implementation of the shortterm agenda, which is currently being prepared.

3 3 (21) The attachments present the Management analysis for the first quarter operating result and the Interim review by the Board of Directors for January March 2011, the accounts and notes to the interim accounts. This report is unaudited. For further information, please contact: Päivi Lindqvist, SVP Communications and IR tel , mobile paivi.lindqvist@outokumpu.com Ingela Ulfves, VP Investor Relations and Financial Communications tel , mobile ingela.ulfves@outokumpu.com Esa Lager, CFO tel 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 first-quarter 2011 financial results will be held on 20 April 2011 at 1.00 pm EET (6.00 am US EST, am UK time, pm CET) at Restaurant Bank, meeting rooms 12 14, address Unioninkatu 20, Helsinki, Finland. To participate via a conference call, please dial in 5 10 minutes before the beginning of the event: UK US & Canada Sweden Password Outokumpu The news conference can be viewed live via Internet at Stock exchange release and presentation material will be available before the news conference at An on-demand webcast of the news conference will be available at as of 20 April 2011 at around 3.00 pm EET. OUTOKUMPU OYJ

4 4 (21) MANAGEMENT ANALYSIS FIRST QUARTER OPERATING RESULT Group key figures EUR million I/10 II/10 III/10 IV/ I/11 Sales General Stainless *) of which Tornio Works Specialty Stainless *) Other operations Intra-group sales *) The Group Operating profit General Stainless *) of which Tornio Works Specialty Stainless *) Other operations Intra-group items *) The Group *) Kloster operations, earlier under Specialty Stainless, are now reported under General Stainless. Comparative figures restated. Stainless steel deliveries tonnes I/10 II/10 III/10 IV/ I/11 Cold rolled White hot strip Quarto plate Tubular products Long products Semi-finished products Total deliveries Market prices and exchange rates I/10 II/10 III/10 IV/ I/11 Market prices 1) Stainless steel Base price EUR/t Alloy surcharge EUR/t Transaction price EUR/t Nickel USD/t EUR/t Ferrochrome (Cr-content) USD/lb EUR/kg Molybdenum USD/lb EUR/kg Recycled steel USD/t EUR/t Exchange rates EUR/USD EUR/SEK EUR/GBP ) 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

5 5 (21) Higher metal prices supported improvement in demand for stainless steel Markets for stainless steel began to improve from the beginning of 2011, supported by both restocking among distributors and some recovery in end-use consumption. Compared to the fourth quarter of 2010, apparent consumption of flat products is estimated to have increased by 12% globally and by 12% in Europe in the first quarter. In China, apparent consumption was up by 24%. First-quarter production of stainless steel is estimated to have been 5% higher globally than in the preceding quarter and 6% higher in Europe. In China, stainless production was up by only 1%. According to CRU, the average base price for 2mm cold rolled 304 stainless steel sheet in Germany was almost unchanged at EUR/tonne in the first quarter (IV/2010: EUR/tonne). As a result of the rising nickel price, the alloy surcharge increased to EUR/tonne (IV/2010: EUR/tonne) in the review period. The average transaction price during the first quarter was EUR/tonne (IV/2010: EUR/tonne). The difference between Chinese and European transaction prices increased to some extent during the first quarter. (CRU) Among alloying elements, the average nickel price was up by 14% in the first quarter compared to the fourth quarter of Nickel traded in the range USD/tonne and the average nickel price in the first quarter was USD/tonne (IV/2010: USD/tonne). The nickel price rose in January and February but fell in March from its peak levels and stood at approximately USD/tonne at the end of March. The increase in the nickel price was mainly driven by improved demand for stainless steel and markets were slightly undersupplied in the first quarter. The nickel price began to increase from the beginning of April, moving closer to USD/tonne. The ferrochrome market was almost in balance in the first quarter and consumption increased by 7%, mainly driven by improved demand for stainless steel. The quarterly contract price for ferrochrome in the first quarter was 1.25 USD/lb and has preliminarily been settled at 1.35 USD/lb for the second quarter. The price of molybdenum was up by 10% compared to the fourth quarter of 2010 and averaged USD/lb in the first quarter (IV/2010: USD/lb). The price of recycled steel was 19% higher than in the preceding quarter and averaged 447 USD/tonne (IV/2010: 375 USD/tonne). Small underlying operational loss in the first quarter Group sales in the first quarter totalled EUR million (IV/2010: EUR million). Deliveries of stainless steel increased by 13% to tonnes (IV/2010: tonnes). Capacity utilisation in Group operations was above 80% during the first quarter. Operating profit in the first quarter totalled EUR 33 million (IV/2010: EUR -85 million). As this figure includes some EUR 45 million of raw material-related inventory gains as a result of higher metal prices (IV/2010: none), the underlying operational result in the first quarter was EUR -12 million (IV/2010: EUR -68 million). The improvement in profitability compared to the fourth quarter of 2010 is primarily a result of higher delivery volumes but a somewhat improved product and geographic mix and higher prices also had an impact. Outokumpu s average base prices for flat products realised in the first quarter improved only marginally, were up by 15 EUR/tonne, and were below the base prices reported by CRU for German 304 sheet. Return on capital employed in the first quarter was 3.1% (IV/2010: -8.0%). Earnings per share totalled EUR 0.09 (IV/2010: EUR -0.50). Net cash from operating activities in the first quarter totalled EUR -10 million (IV/2010: EUR 18 million). EUR 93 million of cash was tied up in working capital (IV/2010: release of EUR 44 million) mainly as a result of higher metal prices.

6 6 (21) Outokumpu s gearing at the end of the first quarter increased to 80.4% (31 Dec 2010: 77.3%) and remained above the Group s target maximum of 75%. Net interest-bearing debt increased marginally to EUR million (31 Dec 2010: EUR million). Current non-interest bearing liabilities include the dividend payout of EUR 45 million, which was made in April. Capital expenditure in the first quarter totalled EUR 42 million (IV/2010: EUR 48 million). Sales by General Stainless in the first quarter totalled EUR million (IV/2010: EUR 951 million), and deliveries increased to tonnes (IV/2010: tonnes). Operating profit totalled EUR 38 million (IV/2010: EUR -11 million) in which the profit posted by Tornio Works totalled EUR 40 million (IV/2010: EUR 8 million). *) Sales by Specialty Stainless in the first quarter totalled EUR 558 million (IV/2010: EUR 468 million) and deliveries totalled tonnes (IV/2010: tonnes). Operating profit totalled EUR -2 million (IV/2010: EUR -57 million). *) Other operations posted an operating profit of EUR 2 million (IV/2010: EUR -13 million) in the first quarter. *) The comparative figures for General and Specialty Stainless divisions have been restated. In January 2011, it was announced that the Group s Kloster operations, previously reported as part of Specialty Stainless, are being reported under General Stainless. New CEO of Outokumpu appointed In February, Outokumpu s Board of Directors appointed Mr Mika Seitovirta as the Group s new Chief Executive Officer. He joined Outokumpu in March and assumed the position as CEO on 1 April Mr Juha Rantanen, Outokumpu s former CEO, left the CEO position on 31 March Mr Rantanen will be supporting Mr Seitovirta in his new duties until August Events after the review period Following reports in the Finnish media in April, Outokumpu confirmed that it is fully committed to the Fennovoima nuclear power project. Outokumpu has a stake of close to 10% in the project to construct a new nuclear power plant in Finland, which was granted a decision-in-principle by the Finnish Parliament last summer. The project has an important role in securing the Group s long-term costcompetitiveness. On 6 April 2011, Outokumpu announced plans to implement actions to improve profitability, further improve efficiency and remove overlapping activities in its sales, supply-chain and supporting functions in Europe. The planned actions are expected to result in a reduction of up to 350 jobs, up to 90 of which are in Finland and up to 80 in Sweden. Personnel negotiations were initiated immediately in accordance with local laws and regulations. A number of parallel activities to improve profitability are also currently ongoing in different countries. Annual cost-savings from all the announced actions are expected to total approximately EUR 25 million in 2012.

7 7 (21) INTERIM REVIEW BY THE BOARD OF DIRECTORS JANUARY MARCH 2011 Higher metal prices supported improved demand for stainless steel Stainless steel markets began to recover from the beginning of Compared to the first quarter of 2010, apparent consumption of flat products is estimated to have been up by 9% globally and by 8% in Europe while production of stainless steel in the first quarter is estimated to have increased by 9% globally and by 1% in Europe. The average base price for 2mm cold rolled 304 stainless steel sheet in Germany decreased to EUR/tonne in the first quarter (I/2010: EUR/tonne) and the average transaction price during the review period was EUR/tonne (I/2010: EUR/tonne). (CRU) Prices of all alloying elements were significantly higher in the first quarter of 2011 than in the same period in The nickel price averaged USD/tonne in the first quarter (I/2010: USD/tonne). The quarterly contract price for ferrochrome in the first quarter was 1.25 USD/lb (I/2010: 1.01 USD/lb), the average price of molybdenum was USD/lb (I/2010: USD/lb) and the price of recycled steel was 447 USD/tonne (I/2010: 323 USD/tonne). Underlying operational loss reduced in recovering markets for stainless steel Compared to the first quarter in 2010, Group sales in the first quarter increased by 48% to EUR million (I/2010: EUR 929 million) as a result of higher delivery volumes and higher transaction prices. Deliveries of stainless steel in the first quarter were up by 14% and totalled tonnes (I/2010: tonnes), and capacity utilisation in the Group s operations was above 80%. Group operating profit was positive at EUR 33 million (I/2010: EUR -21 million). As this figure includes some EUR 45 million of raw material-related inventory gains (I/2010: gains of some EUR 10 million), the underlying operational result totalled EUR -12 million (I/2010: EUR -32 million). The improvement in profitability in the first quarter 2011 compared to the first quarter of 2010 was primarily a result of higher delivery volumes. Profit before taxes totalled EUR 17 million (I/2010: EUR -32 million). Net financial income and expenses totalled EUR -14 million (I/2010: EUR -4 million). Net profit for the period totalled EUR 16 million (I/2010: EUR -21 million) and earnings per share totalled EUR 0.09 (I/2010: EUR -0.11). Return on capital employed in the first quarter was 3.1% (I/2010: -2.3%). Net cash generated from operating activities in the first quarter was slightly negative at EUR -10 million (I/2010: EUR -87 million). Net interest-bearing debt increased by EUR 571 million to EUR million by the end of the first quarter (31 March 2010: EUR million) and gearing on 31 March 2011 was 80.4% (31 March 2010: 53.9%), above the Group s target maximum of 75%. During the past 12 months some EUR 525 million has been tied up in working capital as a result of higher metal prices and somewhat higher inventory levels. Current non-interest bearing liabilities include the dividend payout of EUR 45 million, which was made in April. Capital expenditure and investment projects Capital expenditure totalled EUR 42 million (I/2010: EUR 28 million) in the first quarter of In 2011, capital expenditure including maintenance investments is expected to total EUR 300 million. The EUR 440 million investment to double the Group s ferrochrome production capacity in Tornio in Finland proceeded as planned. Detailed design planning continued and further progress in the construction work was made during the first quarter of 2011 and several new equipment supply contracts were signed. Total capital expenditure on this investment project in 2011 is expected to be of the order of EUR 150 million.

8 8 (21) The EUR 104 million investment project to increase quarto plate production capability and capacity in Degerfors in Sweden is in its initial stages and is proceeding according to plan. People and the environment At the end of the first quarter, Outokumpu s personnel headcount totalled (I/2010: 8 048) and averaged (I/2010: 8 077) during the first quarter. Full-time employees of the Group totalled (I/2010: 7 747) at the end of the first quarter and averaged (I/2010: 7 752) during the first quarter. In reporting the number of company personnel, Outokumpu will change from full-time equivalent to headcount reporting in 2011, but both figures will be provided throughout the year. In the first quarter of 2011, the lost-time injury rate (i.e. lost-time accidents per million working hours) was 5.4 (I/2010: 6.3) and did not meeting the Group s 2011 target of less than 3.5. No severe accidents occurred in the first quarter. 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 proceedings concerning environmental issues, nor is it aware of any realised environmental risks that could have an adverse material 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 quarter of 2011 totalled approximately tonnes (I/2010: tonnes). No external trading of emission allowances was conducted during the first quarter. Outokumpu s carbon dioxide allowances in Finland, Sweden and the UK were sufficient for the Group s planned production in the review period. qualified for the OMX GES Sustainability Finland index. Calculated by NASDAQ OMX in cooperation with GES Investment Services, this is a benchmark sustainability index which consists of 40 leading companies listed on the NASDAQ OMX Helsinki exchange. The index criteria are based on international guidelines for environmental, social and governance (ESG) issues. Risks and uncertainties Outokumpu operates in accordance with the risk management policy approved by the Board of Directors. This policy defines the objectives, approaches and areas of responsibility in risk management activities. As well as supporting Group strategy, risk management aims to identify, evaluate and mitigate risks from the perspective of shareholders, customers, suppliers, personnel, creditors and other stakeholders. Key risks are assessed and updated on a regular basis. Key strategic and business risks faced by Outokumpu include structural overcapacity and weak markets for stainless steel, competition in stainless steel markets, Eurocentricity in the Group s operations, the ability to implement the Group s chosen strategy and risks associated with increased input costs. Operational risks include inadequate or failed internal processes, employee actions, systems, or other events such as natural catastrophes, misconduct or crime. Key operational risks for the Group are a major fire or accident, security risks, environmental risks, and risks associated with investment projects and company personnel.

9 9 (21) Outokumpu s systematic risk management processes including arranging risk workshops. Regular reviews have also been implemented as part of project management in the expansion of Outokumpu s ferrochrome production in the Kemi/Tornio area in Finland. Negotiations connected with renewal of the Group s insurances took place in the first quarter, as the annual insurance renewal date is 1 April. Key financial risks for Outokumpu include: volatility in the price of nickel, molybdenum and fuels; currency risks associated with the euro, the Swedish krona and the US dollar; limitations on financial flexibility; risks associated with a specific loan receivable; other credit risks; and liquidity and financing risk. Both metal and fuel prices increased during the first quarter. As the Group s sourcing of fuels is partly based on fixed-price contracts, sustained higher prices could have a gradually negative impact on profitability during During the first quarter, the earthquake and subsequent tsunami in Japan was the main realised risk, but losses suffered by Outokumpu were very limited. No Group employees were harmed during the crisis and there was no damage to Group property. The Outokumpu sales office in Tokyo was closed for a short period. The indirect impact of the crisis on global energy markets was relatively significant and could have an impact on the Group in the form of higher electricity prices. Civil actions regarding the divested fabricated copper products business In connection with the EU investigation into an industrial copper tubes cartel that was completed in May 2009, Outokumpu has since 2004 addressed several civil complaints raised against the company and its former fabricated copper products business. The last pending civil complaint in the United States, filed by Carrier Corporation in 2006 against and Outokumpu Copper Franklin, Inc. i.a. in the federal district court in Memphis, Tennessee, seeks an unstated amount of damages. The complaint alleges a worldwide price fixing and market allocation cartel with respect to copper tubing for air conditioning and heat exchangers and related applications (ACR Tube) for at least the period from 1989 to In July 2007, the complaint raised by Carrier Corporation was dismissed. Carrier subsequently filed an appeal, which is still pending in the Court of Appeals. In 2010, certain companies in the Carrier Group brought a civil action in the UK courts against (and two other defendant groups). The claimants allege that they suffered losses across Europe as a result of the cartel and are seeking recovery from the three main defendant groups either jointly or jointly and severally. The claimants initial claim for alleged losses 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 prosecution authorities. The process of considering possible charges was completed in

10 10 (21) November 2010 and the public prosecutor concluded that the Customs authorities suspicions regarding possible accounting offences and forgery were groundless. The case was nevertheless taken to court in March 2011 as charges were pressed against Outokumpu and five of its employees for alleged money laundering in connection with export practices to Russia by Tornio Works during On behalf of the state, the prosecutor also presented a claim for forfeiture of the funds subject to money laundering (an unspecified amount stated by the prosecutor to lie between EUR and EUR ). Outokumpu has stated that neither the Group nor its personnel have committed the alleged offences. Court proceedings are currently ongoing and are scheduled to end in May Organisational changes and appointments In February, Outokumpu s Board of Directors appointed Mr Mika Seitovirta as the Group s new Chief Executive Officer. He joined Outokumpu in March and assumed the position as CEO on 1 April Mr Juha Rantanen, Outokumpu s former CEO, left the CEO position on 31 March Mr Rantanen will be supporting Mr Seitovirta in his new duties until August Annual General Meeting 2011 The 2011 Annual General Meeting (AGM) approved a dividend of EUR 0.25 per share for Dividends totalling EUR 45 million were paid on 5 April The AGM authorised the Board of Directors to decide to repurchase the Group s own shares. The maximum number of shares to be repurchased is , currently representing 9.84% of the total number of registered shares. Based on earlier authorisations Outokumpu currently holds of its own shares. The AGM authorised the Board of Directors to decide to issue shares and to grant special rights entitling to shares. The maximum number of new shares to be issued through the share issue and/or by granting special rights entitling to shares is , and, in addition, the maximum number of treasury shares to be transferred is The authorisation includes the right to resolve upon directed share issues. These authorisations are valid for 12 months or until the next AGM, however no longer than 31 May To date the authorisations have not been used. The AGM decided that the number of Board members, including the Chairman and Vice Chairman, should be seven. Evert Henkes, Ole Johansson, Anna Nilsson-Ehle, Jussi Pesonen and Olli Vaartimo were re-elected as members of the Board of Directors, and Elisabeth Nilsson and Siv Schalin were elected as new members. The AGM re-elected Ole Johansson as Chairman and elected Olli Vaartimo as Vice Chairman of the Board. The AGM also resolved to form a Nomination Board to prepare proposals on the composition and remuneration of the Board of Directors for presentation to the next AGM. At its first meeting, the Board of Directors of Outokumpu appointed two permanent committees consisting of Board members. Olli Vaartimo (Chairman), Anna Nilsson-Ehle and Jussi Pesonen were elected as members of the Board Audit Committee. Ole Johansson (Chairman), Evert Henkes, Elisabeth Nilsson and Siv Schalin were elected as members of the Board Remuneration Committee. KPMG Oy Ab, Authorised Public Accountants, was re-elected as the Company s auditor for the period ending at the close of the next AGM.

11 11 (21) Shares and shareholders Information regarding shares and shareholders is updated daily on Outokumpu s Internet pages: Largest shareholders 31 March % 2011 Finnish corporations 35.3 Foreign investors 20.0 Finnish public sector institutions 18.4 Finnish private households 16.1 Finnish financial insurance institutions 7.3 Finnish non-profit organisations 2.9 Shareholders with over 5% shareholding Solidium Oy (owned by the Finnish State) Finnish Social Insurance Institution 8.01 Share information Jan March Jan March Fully paid share capital at the end of the period EUR million Number of shares at the end of the period Average number of shares outstanding 1) Diluted average number of shares 1) 2) Number of shares outstanding at the end of the period 1) Number of treasury shares held at the end of the period Share price at the end of the period EUR Average share price EUR Highest price during the period EUR Lowest price during the period EUR Market capitalisation at the end of period EUR million Share turnover million shares Value of shares traded EUR million ) The number of own shares repurchased is excluded. 2) Outokumpu's stock option programme ended on 1 March Events after the review period Following reports in the Finnish media in April, Outokumpu confirmed that it is fully committed to the Fennovoima nuclear power project. Outokumpu has a stake of close to 10% in the project to construct a new nuclear power plant in Finland, which was granted a decision-in-principle by the Finnish Parliament last summer. The project has an important role in securing the Group s long-term costcompetitiveness. On 6 April 2011, Outokumpu announced plans to implement actions to improve profitability, further improve efficiency and remove overlapping activities in its sales, supply-chain and supporting functions in Europe. The planned actions are expected to result in a reduction of up to 350 jobs, up to 90 of which are in Finland and up to 80 in Sweden. Personnel negotiations were initiated immediately in accordance with local laws and regulations. A number of parallel activities to improve profitability are

12 also currently ongoing in different countries. Annual cost-savings from all the announced actions are expected to total approximately EUR 25 million in SHORT-TERM OUTLOOK 12 (21) Demand for standard grades of stainless steel has remained relatively stable after the improvement in early Growth in demand in the first quarter was supported by restocking among distributors. Some destocking occurred towards the end of the quarter as the nickel price declined in March. Underlying demand continued to improve and is expected to remain stable in the second quarter. While the order intake from investment-driven end-use segments has been improving, no major projects utilising special grades have materialised. Lead times for standard grades are normal at 6 8 weeks. No significant changes in distributors inventory levels have occurred and they are currently estimated to be almost at normal levels. As summer is approaching some softness in demand from distributors may appear in the second quarter. Outokumpu estimates that the Group s delivery volumes in the second quarter will be at a similar level to volumes in the first quarter. Average base prices for stainless steel in the second quarter are expected to be somewhat higher than average prices in the first quarter. Outokumpu s operating profit in the second quarter is expected to be slightly positive or around breakeven with no material impact from raw material-related inventory gains or losses (at current metal prices). In addition, the Group s operating profit in the second quarter is expected to be impacted by nonrecurring restructuring provisions related to on-going statutory negotiations in Europe. The extent of the provisions will be determined later in the second quarter once these personnel-related negotiations have been concluded. In Espoo, 19 April 2011 Board of Directors Outokumpu is a global leader in stainless steel with the vision to be the undisputed number one. Customers in a wide range of industries use our stainless steel and services worldwide. Being fully recyclable, maintenance-free, as well as very strong and durable material, stainless steel is one of the key building blocks for sustainable future. Outokumpu employs some people in more than 30 countries. The Group s head office is located in Espoo, Finland. Outokumpu is listed on the NASDAQ OMX Helsinki.

13 13 (21) CONDENSED FINANCIAL STATEMENTS (unaudited) Condensed statement of comprehensive income Condensed income statement Jan March Oct Dec Jan March Jan Dec EUR million Sales Cost of sales Gross margin Other operating income Costs and expenses Other operating expenses Operating profit Share of results in associated companies Financial income and expenses Interest income Interest expenses Market price gains and losses Other financial income Other financial expenses Profit before taxes Income taxes Net profit for the period Attributable to: Equity holders of the Company Non-controlling interests Earnings per share for result attributable to the equity holders of the Company Earnings per share, EUR Diluted earnings per share, EUR Consolidated statement of other comprehensive income Jan March Oct Dec Jan March Jan Dec EUR million Net profit for the period Other comprehensive income: Exchange differences on translating foreign operations Available-for-sale financial assets Fair value changes during the period Reclassification adjustments from other comprehensive income to profit Income tax relating to available-for-sale financial assets Cash flow hedges Fair value changes during the period Reclassification adjustments from other comprehensive income to profit Income tax relating to cash flow hedges Share of other comprehensive income of associated companies Other comprehensive income for the period, net of tax Total comprehensive income for the period Attributable to: Equity holders of the Company Non-controlling interests

14 14 (21) Condensed statement of financial position 31 March 31 March 31 Dec EUR million ASSETS Non-current assets Intangible assets Property, plant and equipment Loan receivables and other interest-bearing assets Other receivables Deferred tax assets Total non-current assets Current assets Inventories Loan receivables and other interest-bearing assets Trade and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to the equity holders of the Company Equity attributable to the equity holders of the Company Non-controlling interests Total equity Non-current liabilities Interest-bearing liabilities Deferred tax liabilities Pension obligations Provisions Trade and other payables Total non-current liabilities Current liabilities Interest-bearing liabilities Provisions Trade and other payables Total current liabilities TOTAL EQUITY AND LIABILITIES

15 15 (21) Statement of changes in equity Share capital Share premium fund Attributable to the owners of the parent Other reserves Fair value reserves Treasury shares Cumulative translation differences Retained earnings Noncontrolling interests EUR million Equity on 31 Dec Total comprehensive income for the period Dividends Share-based payments Share options exercised Other change Equity on 31 March Equity on 31 Dec Total comprehensive income for the period Dividends Share-based payments Share options exercised Equity on 31 March Total equity

16 16 (21) Condensed statement of cash flows Jan March Oct Dec Jan March Jan Dec EUR million Net profit for the period Adjustments Depreciation, amortisation, and impairments Other non-cash adjustments Change in working capital Dividends received Interests received Interests paid Income taxes paid Net cash from operating activities Purchases of assets Proceeds from the sale of assets Net cash from other investing activities Net cash from investing activities Cash flow before financing activities Share options exercised Borrowings of long-term debt Repayment of long-term debt Change in current debt Dividends paid Proceeds from the sale of other financial assets Other financing cash flow Net cash from financing activities Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the period Foreign exchange rate effect Net change in cash and cash equivalents Cash and cash equivalents at the end of the period

17 17 (21) 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 this interim report as in the financial statements for 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. Changes in segment information As of March, Outokumpu s Specialty Stainless has had a new organisation. New Special Coil and Special Plate business units replaced the former Special Coil & Plate and Thin Strip units. The Special Coil business unit includes the Group s Flat Products production unit at Avesta in Sweden and the former Thin Strip unit at Nyby in Sweden. The Special Plate business unit consists of the quarto plate production units at Degerfors in Sweden and New Castle in the US, the Nordic Plate Service Centre at Degerfors and the Special Plate unit at Willich in Germany. Special Coil and Special Plate units are reported in Specialty Stainless and the Kloster plant in Sweden is included in General Stainless. All comparative segment figures have been restated accordingly. Valuation of investments in energy producing units Outokumpu has valued its investments in energy producing companies at fair value as of 31 March 2011 according to IAS 39. Previously the investments have been valued at cost. The fair valuation is based on the discounted cash flow resulting from the difference between the market price of electricity and the price Outokumpu pays for the electricity. The fair value of these assets at 31 March 2011 was EUR 17 million (book value of EUR 10 million). From the difference between the fair value and book value EUR 9 million was recognised in other comprehensive income and EUR 2 million was recognised as impairment in income statement. Share based payment and stock option programmes Outokumpu s stock option programme for management ended on 1 March A total of Outokumpu Oyj shares were subscribed on the basis of the option programme during the period. Outokumpu s share-based incentive programme for years was ended on 31 December The set targets for its last earnings period were not met and thus no reward was paid to the participants. Outokumpu s share-based incentive programme for years is on-going. If persons covered by the share-based incentive programme were to receive the number of shares in accordance with the maximum reward, currently a total of 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 from

18 18 (21) Property, plant and equipment 1 Jan 1 Jan 1 Jan EUR million 31 March March Dec 2010 Carrying value at the beginning of the period Translation differences Additions Disposals Reclassifications Depreciation and impairments Carrying value at the end of the period Commitments 31 March 31 March 31 Dec EUR million Mortgages and pledges Mortgages on land Other pledges Guarantees On behalf of subsidiaries for commercial commitments On behalf of associated companies for financing Other commitments Minimum future lease payments on operating leases Group's off-balance sheet investment commitments totalled EUR 192 million on 31 March 2011 (31 March 2010: EUR 62 million, 31 December 2010: EUR 125 million). Related party transactions On 31 March 2011, material related party transactions included loan receivables from associated companies totalling EUR 7 million (31 March 2010: EUR 17 million, 31 December 2010: EUR 7 million).

19 19 (21) Fair values and nominal amounts of derivative instruments 31 March 31 Dec 31 March 31 Dec Net Net Nominal Nominal EUR million fair value fair value amounts amounts Currency and interest rate derivatives Currency forwards Interest rate swaps Cross-currency swaps Interest rate options, bought Interest rate options, sold Tonnes Tonnes Metal derivatives Nickel options, bought Nickel options, sold Forward and futures nickel contracts Forward and futures molybdenum contracts Forward and futures copper contracts Forward and futures zinc contracts Emission allowance derivatives TWh TWh Electricity derivatives

20 20 (21) Segment information EUR million I/10 II/10 III/10 IV/ I/11 Sales General Stainless *) of which intersegment sales *) Specialty Stainless *) of which intersegment sales *) Other operations of which intersegment sales Intra-group sales *) Total sales Operating profit General Stainless *) Specialty Stainless *) Other operations Intra-group items *) Total operating profit Non-recurring items in operating profit Specialty Stainless Write-down of expansion project in Avesta Non-recurring items in financial income and expenses Gain on the sale of Okmetic shares Operating capital at the end of the period General Stainless *) Specialty Stainless *) Deliveries of main products tonnes I/10 II/10 III/10 IV/ I/11 General Stainless Cold rolled *) White hot strip Semi-finished products Total deliveries of the division *) Specialty Stainless Cold rolled *) White hot strip Quarto plate Tubular products Long products Total deliveries of the division *) *) Kloster operations, earlier under Specialty Stainless, are now reported under General Stainless. Comparative figures restated.

21 21 (21) Key figures EUR million I/10 II/10 III/10 IV/ I/11 Operating profit margin, % EBITDA Return on capital employed, % Return on equity, % Long-term debt Current debt Other interest-bearing payables Derivative financial instruments Investments in associated companies Available-for-sale financial assets Other interest-bearing receivables Cash and cash equivalents Net interest-bearing debt at end of period Capital employed at end of period Equity-to-assets ratio at end of period, % Debt-to-equity ratio at end of period, % Earnings per share, EUR Equity per share at end of period, EUR Capital expenditure Depreciation and amortisation Average personnel for the period 1) ) Personnel reported as headcount. Earlier reported as full-time equivalent, comparative figures restated. 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 employed (ROCE) = Operating profit 100 Capital employed (average for the period) Net interest-bearing debt = Total interest-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 Earnings per share = Net profit for the financial period attributable to the owners of the parent Adjusted average number of shares during the period Equity per share = Equity attributable to the owners of the parent Adjusted number of shares at the end of the period