Interim report Q1/214 Sakari Tamminen, President & CEO Rautaruukki Corporation 24 April 214
Agenda Q1 in brief, key figures Financial performance Business area performance Near-term outlook and guidance 2
Q1/214 in brief Net sales at same level as year earlier 3 % net sales growth in local currencies Ruukki Metals delivery volumes grew clearly, but average selling prices were down Special steels order intake and net sales grew clearly Construction businesses improved their profitability y-o-y despite difficult market conditions Comparable operating profit was 5 million (4) Devaluation of the Ukraine hryvnia resulted in an unrealised exchange rate loss of 8 million Net cash from operating activities in Q1 was - 21 million (22) 3 24 April 214 www.ruukki.com Sakari Tamminen
Key figures Q1/214 Q1/213 213 Order intake m 56 59 2 376 Comparable net sales m 581 589 2 44 Comparable operating profit m 5 4 39 as % of net sales %.8.8 1.6 Comparable result before income taxes * m -11-4 -1 Earnings per share -.14 -.3 -.1 Net cash from operating activities m -21 22 184 Gearing ratio % 74.1 72.4 68.5 * A significant devaluation in the value of the Ukraine hryvnia against the US dollar during the first quarter of the year resulted in the recognition in the report period of an unrealised exchange rate loss of 8 million on the value of the subsidiary company s loans. 4
Financial performance
Clear growth in steel order volumes, but average selling prices down Order intake down 5% Quarterly order intake* ( m) 8 7 6 5 4 3 2 1 633 711 638 624 59 644-5% 568 574 56 +3% -41% -1% Q1/214 vs. Q1/213 Clear growth in steel order volumes, but average selling prices were down Ruukki Building Products orders were up 3% Ruukki Building Systems orders were down 41% due to weakened demand and customers pushing back investment decisions Also normal seasonal fluctuation impacted on orders in the construction business 6 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Ruukki Building Products Ruukki Metals Ruukki Building Systems * Comparable
Net sales roughly at last year s level Clear fall in Finland s share of net sales, growth in Central Eastern Europe and in markets outside Europe Quarterly net sales* ( m) 8 7 6 5 4 3 2 651 688 624 634 589 633 592 59 581 +5% -19% % Net sales by market area* Q1/214 (Q1/213) 1% = 581m ( 589m) Rest of Europe 15% (14%) Russia and Ukraine 7% (8%) Other countries 7% (5%) Finland 23% (27%) 7 1 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Ruukki Building Products Ruukki Building Systems Q2/13 Q3/13 * Comparable Q4/13 Ruukki Metals Q1/14 Central Eastern Europe 14% (13%) Other Nordic countries 34% (33%)
Profitability at previous year s level Comparable operating profit 5 million Operating profit* and EBITDA ( m) Change in operating profit * by business area ( m) Q1/13 vs. Q1/14 5 49 4 3 2 1-1 -2-3 2-11 1 35 17-15 -17 37 4 17 42 1 8 39 5 28 7 6 5 4 3 2 1 4 2-4 1 2 5-4 -34-5 Q1/12 Q2/12 Q3/12 Q4/12 Comparable operating profit Q1/13 Q2/13 Q3/13 Q4/13 Reported EBITDA * Comparable Q1/14 Q1/13 * Comparable Others Ruukki Metals Ruukki Building Products Ruukki Building Systems Q1/14 8
Increase in working capital, cash flow - 21 million 44 million (15) tied up in working capital Net cash from operating activities and before financing activities ( m) Net working capital as % of reported 12-month rolling net sales 25 15 114 172 78 184 11 25 2 22 23 21 18 18 19 2 18 2 5 22 7 15-5 -64-57 -21-36 1-15 5-25 21-226 211 Net cash from operating activities 212 213 Q1/13 Q1/14 Net cash before financing activities Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Net working capital as % of reported 12-month rolling net sales 9
Slight increase in net debt since year end Gearing ratio 74.1% m % 9 72,4 74,1 71,2 8 77 765 68,5 758 731 6,3 693 7 621 6 44,7 5 4 3 8 7 6 5 4 3 2 1 173 179 97 9 17 14 21 211 212 213 Q1/13 Q1/14 2 1 1 Net interest-bearing debt Gross capex in tangible and intangible assets Gearing ratio
Business area development
Building Products Building Products order intake rose Orders up 15 % in residential roofing products Order intake, ( m) Q1/214 vs. Q1/213 15 1 5 89 121 129 13 79 12 127 +3 % 18 81 Residential roofing products: +15% Growth in most market areas, highest growth in Finland, Poland and Baltic states Components: -4% Growth in Norway and the Baltic states, decrease in Finland Infrastructure construction orders at same level as a year earlier Growth in Norway, decrease in Finland and Sweden Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 12
Building Products Growth especially in residential roofing products Building Products net sales up 5% Net sales by product group, ( m)* 14 +5% 133 13 125 12 112 112 11 1 8 83 82 78 % Q1/214 vs. Q1/213 Residential roofing products: +12% Components: +2% Infrastructure construction net sales close to same level as a year earlier 6 +2% 4 2 +12% Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Residential roofing products * Reported Building components Infrastructure construction 13
Building Products Growth in residential construction, especially in the Nordic countries Net sales by market area Q1/214 (Q1/213)* Q1/214 vs. Q1/213 Central Eastern Europe 28% (26%) Russia and Ukraine 5% (5%) Rest of Europe 2% (3%) Finland 3% (31%) Residential roofing products: Growth especially in Finland and the other Nordic countries Components: Growth in Central Eastern European markets Net sales down slightly in Finland and the other Nordic countries, down clearly in Ukraine Infrastructure construction: Growth in Norway * Comparable Other Nordic countries 35% (35%) 14
Building Products Building Products comparable operating profit improved slightly year on year EBITDA and EBIT ( m) * Comparable EBIT m (-1) 2 15 1 5-5 -4-2 1 8 14 12 8 6-1 1 13 1 19 16 1 12 2 Operating profit improved year on year due to efficiency programme completed and improved gross margin Favourable geographical spread also had positive impact on sales Operating profit down quarter on quarter due to normal seasonality -1 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 EBIT EBITDA * Comparable EBIT, reported EBITDA 15
Building Systems Building Systems order book and order intake were down Low market activity, customers delayed investment decisions Order book, ( m) 2 Order intake, ( m) 15 15 147 136 133 14 153-25% 14 119 1 125 94-41% 1 5 97 63 8 83 7 15 65 5 58 63 67 75 63 55 44 45 41 4 43 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Nordic countries and CEE Russia 16
Building Systems Building Systems net sales clearly lower year on year Rouble-denominated net sales in Russia up 13% Net sales by market area, ( m) * 8 6 4 7 74 75 69 68 76 76-19 % 73 55-29 % -25 % Q1/214 vs. Q1/213 Net sales down clearly in Finland due to weak demand Net sales down 6% in Russia mostly due to weakening of rouble exchange rate Rouble-denominated net sales in Russia were up 13% 2-6 % Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Russia Nordic countries Central Eastern Europe * Reported 17
Building Systems Building Systems profitability improved slightly Operating result still negative EBITDA and EBIT ( m)* Comparable EBIT - 4m (-7) 5-2 1-2 -2 2 1 5-2 1-1 Operating result improved year on year based on on-going turnaround program Lower than expected project volume had a negative effect on profitability -5-4 -4-4 -7-7 -7-1 -9 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 EBIT EBITDA * Comparable EBIT, reported EBITDA 18
Metals Special steels order intake up both year on year and quarter on quarter Ruukki Metals order intake at previous year s level Order intake, ( m) 5 45 4 35 3 25 2 15 486 465 446 454 437 431-1% 378 411 435 Q1/214 vs. Q1/213 Order volumes for special steels up clearly year on year Growth in almost all main market areas Orders for strip and flat steel products down slightly Orders for tube and profile products up slightly 1 Q1/214 vs. Q4/213 5 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Order intake up 6% Clear growth in order intake for special steel products 19
Metals Net sales of special steel products up 16% Ruukki Metals net sales at previous year s level, delivery volumes up Net sales by product group*, ( m) 5 4 3 2 478 467 477 47 442 434 443 439 445 46 396 389 47 +4% % -1% Q1/214 vs. Q1/213 Average selling prices were down Delivery volumes were up Special steel products net sales: +16% Strip and flat products net sales : -1% Tube and profile products net sales : % Unfavourable changes in currencies 1 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Special steel products Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Strip and flat products Q4/13 Q1/14 +16% Tubes and profiles Q1/214 vs. Q4/213 Net sales up in al product groups by a total of 9% Delivery volumes were up, also a slight rise in average selling prices Stainless steel and aluminium * Reported 2
Metals Share of special steels 35% Target is annual net sales of 85 million in 215 Net sales of special steels and % of Metals net sales* m % 18 4 % 33 % 37 % 33 % 35 % 16 34 % 34 % 3 % 35 % 16 29 % 161 31 % 31 % 156 151 3 % 14 148 149 29 % 26 % 144 27 % 3 % 27 % 134 12 25 % 128 13 131 124 122 12 25 % 22 % 114 1 19 2 % 8 77 15 % 6 4 1 % 2 5 % % Q1/1 Q2/1 Q3/1 Q4/1 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Net sales of special steel products Share of special steels of Metals comparable net sales * Share of special steel products has been calculated based on comparable net sales, i.e. the reference figures have been restated to reflect the current corporate structure 21
Metals Metals net sales down clearly in Finland Growth in markets outside Europe and in Central Eastern Europe Net sales by market area Q1/214 (Q1/213) Rest of Europe 19% (18%) Other countries 9% (7%) Finland 24% (29%) Q1/214 vs. Q1/213 Net sales down clearly in Finland inline with overall market development Slight growth in other Nordic countries and in Western Europe Russia and Ukraine 4% (4%) Central Eastern Europe 11% (9%) * Comparable Other Nordic countries 34% (33%) 22
Metals Metals operating profit down slightly year on year Profitability negatively affected by lower selling prices EBITDA and EBIT* ( m) Comparable EBIT 12 million (16) 5 4 3 2 1-1 -2-3 -4 28 3 35 13 9-16 42 16-1 -31 34 8 23-3 6 32 12 34 Operating profit weakened by lower average selling prices for steel products EBITDA was 34 million Developing markets currencies had a negative impact on profitability Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 EBIT EBITDA * Comparable EBIT, reported EBITDA 23
Metals Metals operating profit up 7 million quarter on quarter Operating profit ( m) Q4/13 vs. Q1/14 * 15 1 12 No impact from product mix and prices 1 5 6-7 3 Impact of cost of raw materials and other costs was - 7 million Impact of improved capacity utilisation rate was 1 million -5-1 1-12/13 * Comparable End-product prices and mix Raw material and other costs Delivery volumes Utilisation rate 1-3/14 Delivery volumes were up 43 tonnes, i.e. 9%, quarter on quarter, impact was 3 million 24
Metals Capacity utilisation rate around 86% Quarterly steel production 1 tonnes Steel production was 67 7 tonnes, up 17 tonnes quarter 61 594 on quarter 59 67 6 566 565 54 535 547 Capacity utilisation rate in steel production was around 86% 5 4 * 3 2 1 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 25
Metals Raw material prices fell during early part of year No significant increase in raw material prices expected during 214 Average spot price of iron ore* USD/t 2 Average spot price of coking coal** USD/t 4 35 15 3 25 1 3/14: 111 2 15 5 1 5 3/14: 17 1/1 4/1 7/1 1/1 1/11 4/11 7/11 1/11 1/12 4/12 7/12 1/12 1/13 4/13 7/13 1/13 1/14 1/1 4/1 7/1 1/1 1/11 4/11 7/11 1/11 1/12 4/12 7/12 1/12 1/13 4/13 7/13 1/13 1/14 Source: CRU * C&F China (63.5% Fe) ** FOB Australia 26
Near-term outlook and guidance
Building Systems Fairly good growth outlook for office and commercial construction in Sweden and Norway Demand remains weak in Finland, increased uncertainty for growth in Russia Growth in Building Systems 214 / CAGR 214-216 Stock (m 2 ) per capita.8.6.4.2. Retail stock per capita Moscow Moskova Helsinki Tukholma Stockholm Oslo Prague Praha Source: Jones Lang la Salle 2 Vacancy rates in Moscow Nordics 3.% / 2.6% Russia.3% / 2.8% 28 Vacancy rate, % 15 1 5 Retail Offices Industrial and logistics 21 211 212 213 Sources: CBRE (Office, industrial and logistics) Cushman and Wakefield (Retail) Growth > 2.% 2% > Growth > 1% 1% > Growth > -1% *) The figure for Russia also includes renovation construction Source: Global Insight 3/214 and Ruukki
Building Products Moderate growth in Building Products main markets in next few years Growth forecast in Building Products 214 / CAGR 214-216 Nordics 1.% / 2.3% Russia.6% / 2.3% Baltics 3.1% / 1.5% Western Europe -2% / 1.4% CEE 1 2.6% / 1.8% CEE 2-6.4% / 1.3% 29 Growth > 2.% 2% > Growth > 1% *) The growth forecast has been adjusted to take into consideration Building Products geographical scope and segment shares. Source: Global Insight 3/214 and Ruukki 1% > Growth > -1% Growth < -1%
Metals Apparent steel demand in Europe estimated to grow by about 3% in 214 Apparent steel use in EU (million tonnes) 25 2 15-35% -.7% 3.5% 2.7% 1 5 26 27 28 29 21 211 212 213 e 214f 215f Source: Eurofer Market Outlook 4/214, ASU =Apparent Steel Use 3
Near-term outlook Ruukki Building Products Ruukki Building Systems Ruukki Metals Residential construction activity is forecast to be at the same level as the previous year in Finland and to show slight growth in the other Nordic countries In Poland and the Baltics, demand for building products is forecast to grow compared to the previous year Renovation construction will grow faster than new construction In Finland, demand for industrial and commercial construction is expected to remain weak In the other Nordic countries, demand for commercial and industrial construction activity is forecast to be at a good level In Russia, the growth outlook is slightly weaker than earlier Demand growth for special steels is outperforming demand for standard steels, especially in markets outside Europe Good prospects for sales growth in special steels Service centre sales and mill deliveries are forecast to remain steady during the second quarter A moderate recovery in construction growth is expected in Ruukki s main markets in 214 31
Guidance for 214 Net sales: Comparable net sales in 214 are estimated to grow compared to 213. Operating profit: Comparable operating profit in 214 is estimated to improve compared to 213. 32
Creating a more competitive steel company with global reach
SSAB s public share exchange offer to Rautaruukki s shareholders has begun On 22 January 214, SSAB and Rautaruukki announced a plan to combine the companies through a public share exchange offer to Rautaruukki s shareholders On 26 March 214, Rautaruukki s Board of Directors published a statement recommending shareholders to accept the share exchange offer The offer period began on 14 April 214 and will end on 12 May 214 unless offer period is extended According to a flagging notice received by Rautaruukki from SSAB AB, a total of 4.38 per cent of the total outstanding shares and votes in Rautaruukki had accepted the share offer by 22 April 214 A more competitive Nordic and US-based steel company 34
Notes
Key figures Q1/214 Q1/213 213 Net sales *) m 581 589 2 44 Operating profit *) m 5 4 39 as % of net sales *).8.8 1.6 Result before income taxes *) m -11-4 -1 Result for the period m -19-4 -14 Earnings per share, diluted -.14 -.3 -.1 Return on capital employed, (rolling 12 months) % 1.4-4.1 1.8 Gearing ratio % 74.1 72.4 68.5 Gross capex **) m 14 17 9 Net cash from operating activities m -21 22 184 Net cash before financing activities m -36 7 11 Personnel (average) 8 572 8 876 8 955 *) Comparable **) In tangible and intangible assets 37
Quarterly comparable net sales, operating profit and deliveries Comparable net sales*) ( m) Q1/214 Q4/213 Q3/213 Q2/213 Q1/213 Q4/212 Q3/212 Q2/212 Q1/212 Ruukki Building Products 82 11 13 112 78 112 133 125 83 Ruukki Building Systems 55 73 76 76 68 69 75 74 7 Ruukki Metals 445 47 389 439 443 452 419 49 498 Other -3 5 1 2-3 -2 Comparable net sales, total 581 59 592 633 589 634 624 688 651 Comparable operating profit *) ( m) Q1/214 Q4/213 Q3/213 Q2/213 Q1/213 Q4/212 Q3/212 Q2/212 Q1/212 Ruukki Building Products 1 16 1-1 6 12 8-4 Ruukki Building Systems -4-2 1-2 -7-7 -4-4 -7 Ruukki Metals 12 6-3 8 16-31 -16 13 3 Other -3-6 -4-4 -2-7 -7-4 Comparable operating profit, total 5 8 1 17 4-34 -15 1-11 *) The comparable figures exclude the divested Mo i Rana unit, the Kalajoki unit, the divested Ruukki Engineering business and non-recurring items. Deliveries, Ruukki Metals (1 tonnes) Q1/214 Q4/213 Q3/213 Q2/213 Q1/213 Q4/212 Q3/212 Q2/212 Q1/212 Deliveries 59 466 415 451 481 466 389 448 57 38