GOOD SECOND QUARTER PROFITS IN DIFFICULT MARKET CONDITIONS
OUTOKUMPU OYJ STOCK EXCHANGE RELEASE JULY 26, 2005 AT 1.00 PM
GOOD SECOND QUARTER PROFITS IN DIFFICULT MARKET CONDITIONS
Outokumpus sales for April-June amounted to EUR 1 589 million, an
increase of 9% compared to the previous quarter. Stainless steel
deliveries were 5% lower than in the first quarter. Despite
weakened growth in demand and decreasing base prices for stainless
steel, the Groups operating profit totaled EUR 157 million
(I/2005: EUR 118 million, II/2004: EUR 121 million). Net profit
for the period from continuing operations amounted to EUR 105
million (I/2005: EUR 89 million, II/2004: EUR 107 million).
Earnings per share from continuing operations totaled EUR 0.57 and
from discontinued operations EUR 0.04 negative.
THE SECOND QUARTER IN BRIEF
- The Groups operating profit increased by EUR 39 million to EUR
157 million. Operating profit for General Stainless increased by
EUR 25 million and for Specialty Stainless by EUR 6 million as a
result of an improved market and product mix as well as
significant inventory gains due to timing differences between the
alloy surcharge and inventory turnover. Technologys operating
profit turned positive following a typical first-quarter loss. The
impact of market price gains and losses in operating profit was
EUR 19 million positive (I/2005: EUR 5 million).
- Net cash generated from operating activities totaled EUR 51
million (I/2005: EUR 70 million). At the end of June, net interest-
bearing debt stood at EUR 1 822 million, an increase of EUR 127
million compared with the end of March due to dividend payments
and increased working capital. Gearing was 80.6%.
- Sale of the Groups fabricated copper products business to Nordic
Capital was finalized on June 7, 2005.
- In June, Outokumpu signed a five-year EUR 1 billion revolving
credit facility. The facility is a committed credit facility and
it replaces the comparable EUR 875 million facility of May 2003.
- The Tornio ramp-up is completed and the expansion comprising the
steel melt shop, the hot rolling mill and the new cold rolling
mill, is technically available.
- Global demand for stainless steel increased only marginally from
the first quarter in 2005 and by some 5% compared with the second
quarter in 2004. Due to the current de-stocking phase the markets
were oversupplied and growth in demand slowed especially in Europe
and Asia. Both base and transaction prices declined during the
second quarter whereas raw material prices continued to increase.
- During the third quarter, difficult market situation is likely to
continue, particularly in Europe where the holiday season is
slowing down the business activity. To balance its own production,
Outokumpu has decided to cut production in all of its melt shops
by a total of some 100 000 tonnes in the third quarter. Further
actions will be subject to market development. Consequently, the
increase in Outokumpus deliveries of finished products in 2005
will be more modest than previously announced.
- Based on the weak demand outlook for the third quarter and
Outokumpus planned production cuts, the Groups operating profit
for the third quarter is expected to be clearly lower than in the
third quarter of 2004. Therefore, operating profit for the whole
year is estimated to fall short of 2004. However, once the market
is more balanced, Outokumpu is well positioned to meet its
financial targets.
CEO Juha Rantanen comments: "The Tornio expansion is now
technically available. Once the market is more balanced, it will
deliver a significant profitability improvement. Despite the
current quite gloomy market sentiment, the longer-term market
fundamentals are still healthy. Under current circumstances our
focus is now on internal improvements as well as tight cost and
working capital management."
MANAGEMENT ANALYSIS OF THE SECOND-QUARTER OPERATING RESULT
Group key figures
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05
Sales
General Stainless 1 080 1 178 1 014 1 213 4 485 1 342 1 219
Specialty 570 638 531 670 2 409 718 750
Stainless
Technology 81 104 91 146 423 65 158
Other operations 55 50 56 57 218 55 64
Intra-group sales (590) (687) (549) (586) (2 413)(724) (603)
The Group 1 196 1 283 1 143 1 500 5 122 1 456 1 589
Operating profit
General Stainless 88 81 46 80 295 75 100
Specialty 41 38 33 42 154 55 61
Stainless
Technology 9 (1) 2 20 30 (8) 4
Other operations (4) (10) (4) (14) (33) 0 (10)
Intra-group items (6) 13 0 0 7 (4) 2
The Group 128 121 77 128 453 118 157
Stainless steel
deliveries
1 000 tonnes I/04 II/04 III/04 IV/04 2004 I/05 II/05
Cold rolled 239 221 213 217 890 233 226
White hot strip 103 99 74 157 432 135 126
Other 138 124 87 116 464 117 106
Total deliveries 479 444 374 490 1 786 485 459
Market prices and
exchange rates
I/04 II/04 III/04 IV/04 2004 I/05 II/05
Market prices 1)
Stainless steel
Transaction EUR/t 2 122 2 280 2 257 2 350 2 252 2 207 2 173
price
Base price EUR/t 1 397 1 433 1 442 1 425 1 424 1 332 1 217
Nickel USD/t 14 737 12 503 13 998 14 080 13 852 15 348 16 411
EUR/t 11 792 10 379 11 455 10 850 11 136 11 704 13 031
Ferrochrome
(Cr-content) USD/lb 0.61 0.69 0.73 0.73 0.69 0.78 0.78
EUR/kg 1.08 1.26 1.32 1.24 1.22 1.31 1.37
Molybdenum USD/lb 8.20 14.61 16.91 25.85 16.39 32.02 35.62
EUR/kg 14.46 26.49 30.50 43.92 29.05 53.84 62.35
Iron scrap USD/t 231 211 238 265 236 240 209
EUR/t 185 176 195 204 190 183 166
Exchange rates
EUR/USD 1.250 1.200 1.220 1.298 1.244 1.311 1.259
EUR/SEK 9.184 9.150 9.150 9.013 9.124 9.074 9.208
EUR/GBP 0.680 0.667 0.672 0.695 0.679 0.694 0.679
1) Sources of market prices:
Stainless steel: CRU - German transaction and base prices (2 mm
cold rolled 304 sheet),
estimates for deliveries during the period.
Nickel: London Metal Exchange (LME) cash quotation.
Ferrochrome: Metal Bulletin - Ferrochrome lumpy chrome charge,
basis 52% chrome.
Molybdenum: Metal Bulletin - Molybdenum oxide - Europe.
Iron Scrap: Metal Bulletin - Iron scrap HMS1 fob Rotterdam.
World economic growth continued healthy during the second quarter,
driven by China with a growth rate of 9%. In Europe, growth was
modest and averaged to some 1.5%. The global economic growth is
estimated to stay rather stable for the rest of 2005.
The development of the stainless steel market was disappointing.
Global stainless steel market moved to oversupply, putting strong
downward pressure on prices. Growth in demand for stainless steel
weakened markedly in Europe and in Asia, whereas in the US demand
performed better. De-stocking continued in all markets and high
transaction prices, caused by the record-high price level of the
alloying materials nickel, ferrochrome and molybdenum affected
adversely on demand. The exports from Europe to Asian markets
faced growing problems as the growth in Chinese demand slowed and
local production in China continued to increase strongly. The
European base price for CR 304 sheet fell by 115 EUR/tonne in the
second quarter. In order to restore balance in the market, Asian
and European production was cut in the period.
The prices of the alloying materials for stainless steel remained
exceptionally high in the period and the alloy surcharges of
stainless steel rose to record levels. Nickel markets were
undersupplied and the price averaged 16 411 USD/tonne in the
quarter, a 7% increase from the previous quarter. The lower than
earlier estimated stainless steel production and the better
availability of stainless scrap are expected to help in balancing
the nickel markets in the latter half of 2005. Ferrochrome markets
were undersupplied and the price remained historically high. The
contract price for the period was 0.78 USD/lb, unchanged from the
previous quarter. The contract price for the third quarter of 2005
was agreed to 0.73 USD/lb. A general expectation is that
ferrochrome markets would move to a slight oversupply in the
second half of 2005. The price of iron scrap fell 13% in the
period and the price of molybdenum rose 11% accordingly.
In the second quarter, the euro weakened by 4% against the US
dollar and by 2% against the British pound but strengthened by 2%
against the Swedish krona. The strengthening of the US dollar had
a positive impact on operating profit mainly through sales of
stainless steel to Asian markets. A substantial amount of the cost
base of Specialty Stainless is in the Swedish krona and some of
General Stainless in the British pound, whereas major part of the
revenue is generated in euros. Consequently, the weakening in the
Swedish krona had a positive impact on operating profit, whereas
the strengthening of the British pound had a negative impact.
Outokumpus sales totaled EUR 1 589 million in the second quarter,
an increase of 9% from the previous quarter and an increase of 24%
compared with the corresponding period last year. Stainless steel
deliveries were 5% lower than in the previous quarter, but 3%
higher than in April-June 2004. Operating profit totaled EUR 157
million, an increase of EUR 39 million (33%) from January-March.
All businesses improved their profits, General Stainless by EUR 25
million, Specialty Stainless by EUR 6 million and Technology by
EUR 12 million. Operating profit for the second quarter had a
significant positive impact from inventory gains due to timing
differences between the alloy surcharge and inventory turnover,
whereas the corresponding impact on first quarter profits was
negative. Market price gains and losses improved operating profit
by EUR 19 million in the second quarter compared with EUR 5
million in the first quarter.
The Commercial and Production Excellence programs to improve
operational performance are progressing. Commercial Excellence
emphasizes a customer-focused business approach, in which the goal
is to continuously improve the management of customer relations
and achieve a leading position in customer service that
distinguishes Outokumpu from its competitors. Production
Excellence is a consistent way of acting, improving occupational
safety, enhancing efficiency and productivity as well as reducing
costs at all Outokumpu´s mills. It includes very practical ways of
identifying issues in the normal everyday work that need
correction or improvement. The Production Excellence program will
cover all Outokumpus stainless steel operations. The findings and
methods of improvement gained from this program are being compared
and best practices are selected for application throughout the
organization.
During the third quarter, the difficult market situation is likely
to continue particularly in Europe, where the holiday season is
slowing down the business activity. To balance its own production,
Outokumpu has decided to cut production in all of its melt shops
by a total of some 100 000 tonnes in the third quarter. Further
actions will be subject to market development. Due to the current
market situation and planned production cuts, the increase in
Outokumpus deliveries of finished products in 2005 will be more
modest than previously announced.
General Stainless profit improved in spite of weakened demand
General Stainless
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05
Sales 1 080 1 178 1 014 1 213 4 485 1 342 1 219
of which Tornio Works 522 578 471 613 2 183 699 657
Operating profit 88 81 46 80 295 75 100
of which Tornio Works 70 67 47 57 241 59 74
Operating capital
at the end of period 2 734 2 854 2 928 2 988 2 988 3 021 3 026
Deliveries of main
products (1 000 tonnes)
Cold rolled 215 195 195 191 796 205 180
White hot strip 77 72 54 116 320 97 82
Other 238 251 173 198 860 246 205
Total deliveries of the 529 518 422 506 1 976 547 467
division
General Stainless sales in the second quarter decreased by 9%
compared with January-March. Despite lower deliveries and base
prices, operating profit was EUR 100 million, an increase of EUR
25 million from the previous quarter. This was primarily the
result of an improved product and market mix as well as inventory
gains due to timing differences between the alloy surcharge and
inventory turnover. The share of sales to Europe and of molybdenum
grades both increased. In the second quarter, Tornio Works
operating profit amounted to EUR 74 million in spite of the
decreased delivery volumes. In Coil Products Sheffield,
restructuring negotiations were completed and 35 jobs will be made
redundant in the third quarter. Sheffield Primary Products
benefited from inventory gains and improved recovery of scrap from
the process. Outokumpu Stainless Tubular Products operating
profit was satisfactory despite reductions in production volumes
made to reduce inventories.
The Tornio ramp-up is completed. The final part of the scheduled
ramp-up was the new cold rolling mill (RAP5). By the end of June,
RAP5 has achieved the capability to produce all the steel grades
and dimensions originally specified. The expansion covering the
steel melt shop, the hot rolling mill and the new cold rolling
mill is technically available. In June, a new cold rolled
production record, which was above the original target, was
achieved at RAP5.
Production cuts in Tornio and Sheffield together low base prices
will significantly reduce General Stainless´ operating profit in
the third quarter. However, when the excess stocks in the market
are stripped down, demand and prices are expected to improve.
Specialty Stainless delivered good profits
Specialty Stainless
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05
Sales 570 638 531 670 2 409 718 750
Operating profit 41 38 33 42 154 55 61
Operating capital
at the end of period 1 038 1 107 1 094 1 143 1 143 1 137 1 232
Deliveries of main
products (1 000 tonnes)
Cold rolled 51 50 33 45 178 46 57
White hot strip 65 61 42 62 231 65 50
Other 133 138 121 126 517 132 132
Total deliveries of the 249 249 195 233 926 243 239
division
Specialty Stainless sales increased by 4% compared to the
previous quarter. Operating profit improved to EUR 61 million. The
slightly decreased delivery volume was offset by improved product
and market mix as well as inventory gains due to timing
differences between the alloy surcharge and inventory turnover.
Prices for Specialty Stainless products have not declined at the
same pace as the prices for standard products. Also, the weakening
of the Swedish krona against the euro improved profits of
Specialty Stainless Swedish units.
In March, a comprehensive business capacity review aimed at
improved profitability was initiated in Sheffield Special Strip.
As a result, 100 jobs have been made redundant during the second
quarter.
In July, Outokumpu signed an agreement to sell the Stainless
Welding business, Avesta Welding, including its distribution
channels, to Böhler-Uddeholm of Austria. The welding business has
its main operations in Sweden, Indonesia and in the US and employs
some 160 people. Sales for the business in 2004 were EUR 38
million. The deal has no significant impact on Outokumpus
results.
In project and contract businesses, prices stayed at fairly good
level in the second quarter. However, many customers are still
postponing their decision-making where they can because of the
high prices. The holiday season in Europe slows down business
activity in the third quarter after which order intake for
projects is expected to pick up.
Technologys profit improved order backlog record high
Technology
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05
Sales 81 104 91 146 423 65 158
Operating profit 9 (1) 2 20 30 (8) 4
Operating capital
at the end of period 27 45 29 39 39 40 32
Order backlog
at the end of period 390 336 423 458 458 490 520
Outokumpu Technologys sales were strong in the second quarter and
the sales more than doubled from the first quarter. This was due
to good progress in the projects under implementation.
Consequently, operating profit also improved considerably. In the
first half of 2005, sales have increased by 21% on the previous
year.
Technologys order backlog continued to grow and reached a record
high of EUR 520 million at the end of June. Order intake in the
second quarter was strong at EUR 172 million. Some of the most
significant new orders booked were an alumina calciner to Alcan
Gove in Australia, EUR 14 million, copper technology to Mopani
smelter in Zambia, EUR 13 million, and ferrous technology to Moma
Sands in Mozambique, EUR 13 million. Outokumpu Technology also
made breakthroughs in industrial minerals technologies as well as
in oil sands technology in Canada. Negotiations relating to
several new contracts are well advanced.
The market situation is good. Investment activity within the
metals and mining industry is expected to remain robust and
Outokumpu Technologys order backlog is forecast to remain strong
throughout the year. Investment activity in the copper industry is
also improving. Based on the strong order backlog, operating
profit for the whole year is expected to improve from last year,
excluding the non-recurring gains.
Other operations
Other operations
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05
Sales 55 50 56 57 218 55 64
Operating profit (4) (10) (4) (14) (33) 0 (10)
Operating capital
at the end of period 89 83 113 58 58 43 44
Other operations consists of activities outside the Group´s
primary businesses as well as industrial holdings. Business
development costs and Corporate Management expenses not allocated
to the businesses are also reported under Other operations.
Operating profit for the first quarter included a EUR 25 million
non-recurring gain on the sale of the Boliden shares. Market price
gains and losses improved operating profit by EUR 12 million in
the second quarter (I/2005: EUR 5 million negative).
The attachments present the interim review by the Board of
Directors as well as accounts.
For further information, please contact:
Kari Lassila, SVP IR and Communications, tel. +358 9 421 2555,
kari.lassila@outokumpu.com
Vesa-Pekka Takala, SVP Corporate Controller, tel. +358 9 421
4134,
vesa-pekka.takala@outokumpu.com
Eero Mustala, SVP Corporate Communications, tel. +358 9 421
2435, eero.mustala@outokumpu.com
News conference and live web cast today at 3.00 pm
A combined news conference, conference call and live webcast
concerning the second-quarter interim report will be held today on
July 26, 2005 at 3.00 pm Finnish time (8.00 am US EST, 1.00 pm UK
time, 2.00 pm CET) at Hotel Kämp, conference room Akseli Gallen-
Kallela, Pohjoisesplanadi 29, 00100 Helsinki, Finland.
To participate via a conference call, please dial in 5-10 minutes
before the beginning of the event:
+44 20 7162 0090 (UK) or +1 334 323 6201 (US & Canada). The
password is Outokumpu.
The news conference can be viewed live via the Internet at
www.outokumpu.com. Stock exchange release and presentation
material will be available before the news conference at
www.outokumpu.com -> Investors -> Downloads.
An on-demand webcast of the news conference will be available at
www.outokumpu.com as of July 26, 2005 at 5.00 pm. An instant reply
service of the conference call will be available until Friday,
July 29, 2005 in the following numbers: +44 20 7031 4064 (UK) or
+1 954 334 0342 (US & Canada). The access code is 665496.
OUTOKUMPU OYJ
Corporate Management
Eero Mustala
SVP-Corporate Communications
tel. +358 9 421 2435, mobile +358 40 504 5146, fax +358 9 421 2125
e-mail: eero.mustala@outokumpu.com
www.outokumpu.com
INTERIM REVIEW BY THE BOARD OF DIRECTORS
New business structure in place
In Outokumpus new organizational structure effective on April 1,
2005, the Groups main business, stainless steel, has been
organized according to product types into two divisions and into a
separate Outokumpu Stainless Tubular Products business unit. The
General Stainless division comprises three business units: Tornio
Works, Coil Products Sheffield and Sheffield Primary Products.
Outokumpu Stainless Tubular Products is reported as part of the
General Stainless division. The Specialty Stainless division
consists of five business units: Avesta Works, Thin Strip, Hot
Rolled Plate, Long Products and Sheffield Special Strip.
Outokumpu Technology is managed at arms-length as a stand-alone
business through Technology´s board of directors, and reported as
a separate business. The Group´s Other operations consists of
industrial holdings as well as activities outside the divisions,
such as Corporate Management and support functions. The divested
fabricated copper products business and the Tube and Brass
business, to be divested at a later date, are reported as
discontinued operations.
Changes in accounting principles implemented in the second quarter
Based on the revised IAS 1 standard, Outokumpu presents from
second quarter 2005 onwards market price gains and losses above
operating profit. Comparative figures have been restated
accordingly. The reclassification has no effect on the Group´s net
profits for the financial periods.
In June 2005, the International Accounting Standards Board (IASB)
decided to withdraw IFRIC Interpretation 3 in accounting for
carbon dioxide emission allowances. Following the decision
Outokumpu has changed the accounting treatment of emission
allowances. The effect of IFRIC 3 on the reported first quarter
operating profit was EUR 0.2 million negative. This amount has
been reversed in June 2005.
Solid financial results
The Groups sales in the first half of 2005 increased by 23%
compared with January-June 2004 and amounted to EUR 3 044 million
(I-II/2004: EUR 2 479 million). The increase was primarily
attributable to higher average prices received as delivery volumes
were only marginally higher than in the first half of 2004.
Operating profit amounted to EUR 274 million (I-II/2004: EUR 248
million). The main contributor to the improved profit was
Specialty Stainless with a significant EUR 37 million improvement
due to better product mix.
Non-recurring items amounting to EUR 25 million (I-II/2004: EUR 17
million) comprise the gain from the sale of the Boliden shares. In
2004, the non-recurring gain related to the sale of the Group´s
filter business. The share of results in associated companies was
EUR 1 million (I-II/2004: EUR 24 million). The decrease compared
with the previous year is due to Boliden, which is no longer
accounted for as an associated company in 2005. Net financial
expenses totaled EUR 23 million (I-II/2004: EUR 18 million). Net
profit for the period from continuing operations amounted to EUR
193 million (I-II/2004: EUR 206 million) and the net loss from
discontinued operations to EUR 341 million. Earnings per share
from continuing operations amounted to EUR 1.06 and from
discontinued operations EUR 1.88 negative. Return on capital
employed was 12.2% (I-II/2004: 11.1%).
Capital structure
Net cash generated from operating activities was EUR 121 million
(I-II/2004: EUR 263 million negative). Net interest-bearing debt
fell to EUR 1 822 million (Dec. 31, 2004: EUR 2 435 million), but
was EUR 127 million higher than at the end of the first quarter.
Divestiture of the Group´s fabricated copper products businesses
and the sale of shares in Boliden reduced indebtedness during the
first quarter. In the second quarter, dividend payments and higher
working capital increased indebtedness.
At the end of June, the Groups equity-to-assets ratio stood at
37.2% (Dec. 31, 2004: 35.8%) and gearing ratio at 80.6% (Dec. 31,
2004: 97.2%).
Tornio expansion completed
The Tornio ramp-up is now completed. By the end of June, the new
cold rolling mill (RAP5) has achieved the capability to produce
all the steel grades and dimensions originally specified. The
expansion covering the steel melt shop, the hot rolling mill and
the new cold rolling mill is technically available.
In January - June, capital expenditure amounted to EUR 78 million
(I-II/2004: EUR 209 million). The expansion project of the
stainless steel cold rolling mill in Kloster, Sweden, is
proceeding according to plan. The Groups capital expenditure for
2005 is expected to be EUR 250-300 million.
EUR 1 billion revolving credit facility signed
In June, Outokumpu signed a five-year revolving credit facility of
EUR 1 billion. The facility was oversubscribed and its initial
launch amount of EUR 800 million was subsequently increased to EUR
1 billion. The facility is a committed credit facility and it
replaces the comparable EUR 875 million facility of May 2003.
Sale of fabricated copper products business finalized
Sale of the Group´s fabricated copper products business to Nordic
Capital was finalized on June 7, 2005. After final adjustments,
the total consideration was EUR 612 million and the loss from the
disposal amounted to EUR 246 million. The scope of the transaction
comprised the following divisions and businesses of the Outokumpu
Copper business area: Americas, Europe, Automotive Heat
Exchangers, Appliance Heat Exchangers & Asia, including 100% of
Outokumpu Heatcraft, and the Forming equipment businesses.
Sales by the sold businesses in 2004 amounted to EUR 1 664 million
and the number of personnel employed totaled 6 400 at the end of
the year. Personnel continue with Nordic Capital under their
existing employment terms and conditions. It has also been agreed
by the parties that the sold businesses will continue to use the
name Outokumpu Copper Products Oy during a transition period of up
to 12 months after closing.
The Tube and Brass business excluded from the transaction
comprises the European sanitary and industrial tubes, including
air-conditioning and refrigeration tubes in Europe, as well as
brass rod.
The EUR 341 million loss from discontinued operations comprises
the result of fabricated copper products business in the first
quarter, the EUR 246 million loss from the sale to Nordic Capital,
the impairment loss of EUR 83 million recognized on the Tube and
Brass business as well as its result for the first half of 2005.
The assets and liabilities of Tube and Brass business have been
presented as held for sale. Tube and Brass posted an operating
loss of EUR 5 million in the first half of 2005 and the operating
capital at the end of June was EUR 140 million.
As earlier announced, Outokumpu Copper (USA), Inc. has been served
with a complaint in a case filed in federal district court in
Memphis, Tennessee, the US by plaintiff American Copper & Brass,
Inc. The complaint alleges claims and damages under the US
antitrust laws and purports to be a class action on behalf of all
direct purchasers of copper plumbing tubes in the US from 1988 to
March 31, 2001. Outokumpu believes that the allegations in this
case are groundless and will defend itself in any such proceeding.
In connection with the transaction to sell the fabricated copper
products business to Nordic Capital, Outokumpu has agreed to
indemnify and hold harmless Nordic Capital with respect to this
class action.
Stainless Welding business sold
In July, Outokumpu signed an agreement to sell the Stainless
Welding business, Avesta Welding, including its distribution
channels, to Böhler-Uddeholm of Austria. Sales for the business in
2004 were EUR 38 million and it employs some 160 people. Closing
of the transaction is subject to the customary regulatory
clearances. The deal has no significant impact on Outokumpus
results.
Environment, health and safety
The EU emissions trading system started in January 2005. In
February, carbon dioxide allowances and associated permits were
granted to the Tornio site in Finland and steel making and casting
plants in Avesta and Degerfors in Sweden. In Finland and in Sweden
the national registers for allowances have been set up. The
Sheffield melt shop utilized the opt-out possibility for the
period 2005 to 2007 provided by the British Climate Change Levy
system. This opt-out has now been approved and formal notification
of it is expected shortly. As a consequence of this, a new energy
efficiency performance target will be set for 2005. Preparations
for applying allowances in 2006 for the Kyoto period 2008-2012
have been started. At most of the Group´s sites, emissions and
discharges were well below permission levels. However, some minor
breaches against permit levels occurred at Sheffield and Tornio.
The group-wide safety theme year has continued with a variety of
activities at different locations. A safety target for the Group
of no more than 5 accidents per million man-hours before 2009 has
been set. During January-June, the accident rate was 19 per
million man-hours (I-II/2004: 19). In the stainless steel business
the rate was 17 per million man-hours (I-II/2004: 22). No major
accidents were reported during the first half of 2005.
Visibility weak beyond the third quarter
The outlook for stainless steel markets in the immediate future is
rather depressed. Slow European economic growth does not support a
recovery in European demand and the base prices are still seen
drifting lower in Europe in the third quarter. Another factor
causing pressure on prices is the still ongoing inventory
adjustment process. Although de-stocking is continuing, it takes
some time to restore the supply-demand balance to the market. In
spite of the current market conditions, longer-term market
fundamentals are expected to remain healthy.
During the third quarter, difficult market situation is likely to
continue particularly in Europe, where the holiday season is
slowing down the business activity. To balance its own production,
Outokumpu has decided to cut production in all of its melt shops
by a total of some 100 000 tonnes in the third quarter. Further
actions will be subject to market development. Consequently, the
increase in Outokumpus deliveries of finished products in 2005
will be more modest than previously announced.
Based on the weak demand outlook for the third quarter and
Outokumpus planned production cuts, the Groups operating profit
for the third quarter is expected to be clearly lower than in the
third quarter of 2004. Therefore, operating profit for the whole
year is estimated to fall short of 2004. However, once the market
is more balanced, Outokumpu is well positioned to meet its
financial targets.
Espoo July 26, 2005
Board of Directors
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Condensed Income Statement
Jan- Jan- Jan-
June June Dec
EUR million 2005 2004 2004
Continuing operations:
Sales 3 044 2 479 5 122
Other operating income 30 46 73
Costs and expenses (2 799) (2 273)(4 733)
Other operating expenses (1) (4) (9)
Operating profit 274 248 453
Share of results in associated companies 1 24 78
Financial income and expenses
Net interest expenses (34) (30) (66)
Market price gains and losses 9 9 (29)
Other financial income and expenses 2 3 4
Profit before taxes 252 254 440
Income taxes (59) (48) (61)
Net profit for the period
from continuing operations 193 206 379
Discontinued operations:
Net (loss), profit for the period
from discontinued operations (341) 21 7
Net (loss), profit for the period (147) 227 386
Attributable to:
Equity holders of the Company (149) 225 382
Minority interest 1 3 4
Earnings per share for profit attributable
to the equity holders of the Company:
Earnings per share, EUR (0.82) 1.25 2.12
Earnings per share, EUR - diluted (0.82) 1.25 2.12
Earnings per share from continuing
operations
attributable to the equity holders of the
Company:
Earnings per share, EUR 1.06 1.14 2.08
Earnings per share from discontinued
operations
attributable to the equity holders of the
Company:
Earnings per share, EUR (1.88) 0.12 0.04
All figures in the accounts have been rounded and consequently
the sum of individual figures can deviate from the presented sum
figure.
Condensed Balance Sheet
June June Dec
30 30 31
EUR million 2005 2004 2004
ASSETS
Non-current assets
Intangible assets 591 608 620
Property, plant and 2 227 2 708 2 743
equipment
Non-current financial
assets
Interest-bearing 243 616 409
Non interest-bearing 48 56 55
3 109 3 989 3 827
Current assets
Inventories 1 466 1 633 1 579
Current financial assets
Interest-bearing 236 95 70
Non interest-bearing 1 027 1 390 1 390
Cash and cash equivalents 102 137 211
2 831 3 255 3 250
Receivables related
to assets held for sale 228 - -
Total assets 6 167 7 244 7 077
EQUITY AND LIABILITIES
Equity
Equity attributable to
the
equity holders of the 2 246 2 304 2 468
Company
Minority interest 16 39 38
2 262 2 343 2 506
Non-current liabilities
Interest-bearing 1 721 2 034 1 975
Non interest-bearing 397 532 442
2 117 2 566 2 417
Current liabilities
Interest-bearing 822 1 310 1 150
Non interest-bearing 878 1 024 1 003
1 700 2 334 2 153
Liabilities related
to assets held for sale 88 - -
Total equity and 6 167 7 244 7 077
liabilities
Consolidated statement of changes in equity
Attributable to equity holders of the
Company
Un-
registered Share Fair
Share share premium Other value
capital capital fund reserves reserves
EUR million
Equity on December 31, 2003 304 0 681 14 -
Cash flow hedges - - - - (2)
Fair value gains on
available-for-sale
financial assets - - - - 16
Net investment hedges - - - - -
Change in
translation differences - - - - -
Items recognised
directly in equity - - - - 15
Net profit for
the financial year - - - - -
Total recognised
income and expenses - - - - 15
Dividends paid - - - - -
Transfers from
unregistered share capital 0 (0) - - -
Shares subscribed with 4 - 15 - -
options
Converted bonds 1 - 3 - -
Outokumpu Oyj shares owned
by associated companies - - - - -
Management stock option
program:
value of received services - - - - -
Transfer of treasury shares - - 0 - -
Other changes - - 1 (1) -
Equity on December 31, 2004 308 - 700 13 15
Cash flow hedges - - - - 4
Fair value gains on
available-for-sale
financial assets - - - - (4)
Net investment hedges - - - - -
Change in
translation differences - - - - -
Items recognised
directly in equity - - - - 0
Net profit for the period - - - - -
Total recognised
income and expenses - - - - 0
Dividends paid - - - - -
Management stock option
program:
value of received services - - - - -
Transfer of treasury shares - - 1 - -
Effect of the sale
of the fabricated copper
products business - - - - -
Other changes - - - (1) -
Equity on June 30, 2005 308 - 701 12 15
Attributable to
equity holders of
the Company
Cumulative
Treasury translation Retained Minority Total
shares differences earnings interesy equity
EUR million
Equity on December 31, 2003 (12) (61) 1 122 35 2 083
Cash flow hedges - - - - (2)
Fair value gains on
available-for-sale
financial assets - - - - 16
Net investment hedges - (2) - - (2)
Change in
translation differences - 4 - 0 4
Items recognised
directly in equity - 2 - 0 17
Net profit for
the financial year - - 382 4 386
Total recognised
income and expenses - 2 382 4 403
Dividends paid - - (36) - (36)
Transfers from
unregistered share capital - - - - 0
Shares subscribed with - - - - 19
options
Converted bonds - - - - 4
Outokumpu Oyj shares owned
by associated companies - - 26 - 26
Management stock option
program:
value of received services - - 1 - 1
Transfer of treasury shares 6 - - - 6
Other changes - - 1 (1) 0
Equity on December 31, 2004 (5) (59) 1 496 38 2 506
Cash flow hedges - - - - 4
Fair value gains on
available-for-sale
financial assets - - - - (4)
Net investment hedges - 0 - - 0
Change in
translation differences - 13 - 1 14
Items recognised
directly in equity - 13 - 1 14
Net profit for the period - - (149) 1 (148)
Total recognised
income and expenses - 13 (149) 1 (135)
Dividends paid - - (91) - (91)
Management stock option
program:
value of received services - - 2 - 2
Transfer of treasury shares 3 - - - 4
Effect of the sale
of the fabricated copper
products business - - - (24) (24)
Other changes - - - - (1)
Equity on June 30, 2005 (2) (46) 1 258 16 2 262
Condensed Statement of Cash Flows
Jan- Jan- Jan-Dec
June June
EUR million 2005 2004 2004
Net profit for the period (147) 227 386
Adjustments 456 118 196
Change in working capital (188) (608) (710)
Net cash generated
from operating activities 121 (263) (128)
Purchases of assets (78) (246) (473)
Proceeds from asset disposal 596 18 327
Change in other investing activities (1) (65) (6)
Cash flow before financing activities 638 (556) (279)
Net cash generated
from financing activities (735) 475 235
Adjustments (12) (15) 26
Decrease in cash and cash equivalents (109) (96) (19)
Key figures
Jan- Jan- Jan-Dec
June June
EUR million 2005 2004 2004
Operating profit margin, % 9.0 10.0 8.8
Return on capital employed, % 12.2 11.1 10.0
Return on equity, % (12.4) 20.5 16.8
Return on equity from continuing operations, % 16.2 18.6 16.5
Capital employed at end of period 4 084 4 839 4 941
Net interest-bearing debt at end of period 1 822 2 496 2 435
Equity-to-assets ratio at end of period, % 37.2 32.7 35.8
Debt-to-equity ratio at end of period, % 80.6 106.5 97.2
Earnings per share, EUR (0.82) 1.25 2.12
Earnings per share from continuing operations, 1.06 1.14 2.08
EUR
Earnings per share from discontinued (1.88) 0.12 0.04
operations, EUR
Average number of shares outstanding, in 181 002 179 350 180 057
thousands 1)
Fully diluted earnings per share, EUR (0.82) 1.24 2.12
Fully diluted average number of shares, in 181 045 180 722 180 172
thousands 1)
Equity per share at end of period, EUR 12.41 12.75 13.65
Number of shares outstanding at end of period,
in thousands 1) 181 032 180 752 180 752
Capital expenditure, continuing operations 78 209 414
Depreciation, continuing operations 107 93 191
Average personnel for the period, continuing 11 654 11 839 11 787
operations
1) The number of own shares repurchased is excluded.
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This report is prepared in accordance with IAS 34 (Interim
Financial Reporting). Outokumpu has applied the following new
International Financial Reporting Standards (IFRS) as of January
1, 2005: IFRS 2 (Share-based Payment) and IFRS 5 (Discontinued
Operations). IFRS 5 has been applied to Outokumpu Copper and it is
specified in a separate note: Discontinued operations and assets
held for sale. Based on the revised IAS 1 standard, Outokumpu
presents from second quarter 2005 onwards market price gains and
losses above operating profit instead of financial income and
expenses. Furthermore, application of International Financial
Reporting Interpretation Committee's (IFRIC) interpretation IFRIC
3 (Emission Rights) has been reversed in June 2005.
Share-based payment
IFRS 2 has been applied for the 2003 option program and
comparative figures have been restated. The terms and conditions
of the option program are described in detail in the annual report
2004 and below under the note Shares and share capital. The
options are valued at fair value on the grant date by using the
Black-Scholes-Merton option pricing model. The total estimated
value of the program is EUR 7.2 million. This value is recognized
as an expense in the income statement during the vesting periods.
Grant date is the date at which the entity and another party agree
to a share-based payment arrangement, being when the entity and
the counter party have a shared understanding of the terms and
conditions of the arrangement. Grant dates for the option program
are as follows: 2003A June 12, 2003, 2003B February 10, 2004 and
2003C March 22, 2005.
Vesting period is the period during which all the specified
vesting conditions of a share-based payment arrangement are to be
satisfied. The vesting periods of the option program are: for
2003A June 12, 2003 to August 31, 2006, for 2003B February 10,
2004 to August 31, 2007 and for 2003C March 22, 2005 to August 31,
2008. Applying the IFRS 2 has reduced operating profit by EUR 0.4
million in 2003, EUR 1.7 million in 2004 and EUR 1.0 million in
the first half of 2005.
Reclassification of market price gains and losses
Based on the revised IAS 1 standard, Outokumpu presents from the
second quarter 2005 onwards gains and losses on derivative
instruments above operating profit, and in financial income and
expenses only when the derivative instrument is assigned to
financial assets or liabilities. Exchange gains and losses from
accounts receivable and payable will also be presented above
operating profit. The comparative figures have been restated
accordingly. The reclassification has no effect on the Group´s net
profits for the financial periods.
Emission allowances
As of January 1, 2005 Outokumpu applied IFRIC Interpretation 3 in
accounting for carbon dioxide (CO2) emission allowances. In June
2005, the International Accounting Standards Board (IASB) decided
to withdraw IFRIC 3 with immediate effect. Following the decision
Outokumpu has changed the accounting treatment for emission
allowances. Accounting for CO2 allowances is based on current IFRS
standards where purchased CO2 allowances are accounted for as
intangible assets at cost, whereas CO2 emission allowances
received free of charge are accounted for at nominal value, i.e.
at zero. A provision to cover the obligation to return emission
allowances is recognized provided that emission allowances
received free of charge will not cover the actual emissions.
Consequently the possible effect in operating profit will reflect
the difference between what has been emitted and the received
emission allowances. The effect of IFRIC 3 on the reported first
quarter operating profit was negative EUR 0.2 million. This amount
has been reversed in June 2005. At the end of June, emission
allowances are not reflected in Outokumpu's financial statements
because no allowances have been purchased or sold and because it
is estimated that actual emissions will not exceed the amount of
received allowances in 2005.
Shares and share capital
The total number of Outokumpu Oyj shares was 181 250 555 and the
share capital amounted to EUR 308.1 million on June 30, 2005.
Outokumpu Oyj held 218 603 treasury shares on June 30, 2005 with a
total account equivalent value of EUR 0.4 million. This
corresponded to 0.1% of the share capital and the total voting
rights of the Company on June 30, 2005.
The Annual General Meeting held in 2003 passed a resolution on a
stock option program for management. Under the terms and
conditions of the stock option program, a total of 5 100 000 stock
options may be issued, entitling holders thereof to subscribe for
5 100 000 new shares in the Company in the period 2006 to 2011.
In February 2004, the Board of Directors confirmed that a total of
742 988 stock options 2003A be distributed to 116 persons in
management positions of Outokumpu. The maximum number of 2003A
stock options was 1 700 000. Members of the Group Executive
Committee received 62% and other key persons 45.25% of the maximum
number of 2003A stock options. The number of 2003A stock options
distributed was decided on the basis of the earnings criteria
established in June 2003, and which were the Groups earnings per
share and share price performance outperforming the share price
trend of peer companies. The additional earnings criterion for
Group Executive Committee members was the Groups gearing.
Currently altogether 700 030 Outokumpu Oyj shares can be
subscribed for with the 2003A stock options between September 1,
2006 and March 1, 2009. In accordance with the terms and
conditions of the option program, the subscription price for a
stock option was EUR 10.70 per share, with annual dividends being
deducted.
On February 16, 2005, the Board of Directors confirmed that a
total of 1 148 820 stock options 2003B be distributed to 130
persons in management positions in Outokumpu. The maximum number
of 2003B stock options was 1 700 000. Members of the Group
Executive Committee received 55.2% and other key persons 75% of
the maximum number of 2003B stock options. The number of 2003B
stock options distributed was decided on the basis of the earnings
criteria established in February 2004, and which were the Groups
earnings per share and share price performance outperforming the
share price trend of peer companies. The additional earnings
criterion for Group Executive Committee members was the Groups
gearing. Currently altogether 1 130 070 Outokumpu Oyj shares can
be subscribed for with the 2003B stock options between September
1, 2007 and March 1, 2010. In accordance with the terms and
conditions of the option program, the subscription price for a
stock option was EUR 13.56 per share, with annual dividends being
deducted.
In March 2005, the Board of Directors established the earnings
criteria on the basis of which stock options 2003C will be
distributed to 158 key persons of the Outokumpu Group in spring
2006. The earnings criteria comprise the development of the
Groups total shareholders return (TSR) compared to a peer group,
operating profit (EBIT), and additionally gearing for Group
Executive Committee members. A total maximum of 1 700 000
Outokumpu Oyj shares can be subscribed for with the 2003 stock
options between September 1, 2008 and March 1, 2011. The current
maximum number of 2003C stock options to be distributed is 1 190
000 shares. Subscription price for a 2003C stock option will be
the trading volume weighted average of the Outokumpu share on the
Helsinki stock exchange between December 1, 2005 and February 28,
2006.
As a result of the share subscriptions with the 2003 stock
options, and if the 2003C stock options are fully exercised,
Outokumpu Oyjs share capital may be increased by a maximum of EUR
5 134 170 and the number of shares by a maximum of 3 020 100
shares. The shares that can be subscribed with the 2003 stock
options correspond to 1.7% of the Company's shares and voting
rights.
Authorizations of the Board of Directors
During the first quarter, the Board of Directors utilized once its
authorization to transfer the Companys own shares granted by the
Annual General Meeting in 2004. On February 14, 2005, Outokumpu
Oyj transferred a total of 279 930 of treasury shares to the
persons participating in the share remuneration scheme for
management.
The Board of Directors has a valid authorizations granted by the
Annual General Meeting of April 5, 2005 to increase the Companys
share capital by issuing new shares, stock options or convertible
bonds. The share capital may be increased on one or several
occasions by no more than EUR 30 800 000 in total. Accordingly, an
aggregate maximum of 18 117 647 shares, having the account
equivalent value of EUR 1.70 each, may be issued. The Board of
Directors is authorized to decide who will have the right to
subscribe for the new shares, stock options or convertible bonds.
The Board of Directors may deviate from the shareholders' pre-
emptive subscription right, provided that such deviation is
justified by an important financial reason for the Company, such
as strengthening the Company's capital structure or financing
corporate acquisitions or restructurings. The Board of Directors
decides the subscription price and the other terms and conditions
of the issue of shares, stock options or convertible bonds. The
Board of Directors may decide that the subscription price for new
shares be paid by means of contribution in kind, set-off or
otherwise subject to specific terms and conditions determined by
the Board of Directors. The authorization is valid until the
Annual General Meeting in 2006, however not longer than one year
from the decision of the General Meeting. By July 26, 2005 the
Board of Directors had not used this authorization.
The Board of Directors has a valid authorizations granted by the
Annual General Meeting of April 5, 2005 to repurchase the
Companys own shares. Shares may be repurchased for improving of
the Company's capital structure or to be used as consideration
when acquiring assets for the Company's business or as
consideration in possible corporate acquisitions, in the manner
and to the extent decided by the Board of Directors. Repurchased
shares may also be used as a part of incentive and bonus schemes
directed to the personnel of the Company. The maximum number of
shares to be repurchased is 9 000 000. The number of own shares in
the Companys possession may not exceed 5 % of the total amount of
the Companys shares. Shares may be repurchased pursuant to a
decision of the Board of Directors through purchases in public
trading at the Helsinki stock exchange at the prevailing market
price. The purchase price shall be paid to the sellers within the
time limit provided in the rules of the Helsinki stock exchange
and the Finnish Central Securities Depository Ltd. The shares
shall be repurchased with distributable funds and accordingly
repurchasing will reduce distributable equity of the Company. As
the number of shares to be repurchased is limited as explained
above and as the Company has only one class of shares, repurchases
of own shares are not likely to have a significant impact on the
relative holdings or voting rights between shareholders of the
Company. Since shares will be repurchased in public trading at the
Helsinki stock exchange without knowledge of the sellers'
identity, it is not possible to determine whether and to what
extent the repurchase could affect the proportionate holdings of
persons that are closely connected to the Company in the meaning
of chapter 1, section 4, subsection 1 of the Finnish Companies
Act. The Board of Directors is authorized to decide on other
matters and measures related to the repurchasing of own shares.
The authorization is valid until the Annual General Meeting in
2006, however not longer than one year from the decision of the
General Meeting. By July 26, 2005 the Board of Directors had not
used this authorization.
The Board of Directors has a valid authorizations granted by the
Annual General Meeting of April 5, 2005 to transfer the Companys
own shares. The maximum number of shares to be transferred is 9
300 000. Shares may be transferred on one or several occasions.
The Board of Directors shall be authorized to decide on the
recipients of the shares and the procedure and terms to be
applied. The Board of Directors may decide to transfer shares in
deviation of the pre-emptive right of the shareholders to the
Companys shares. Shares can be transferred as consideration when
acquiring assets for the Company's business or as consideration in
possible corporate acquisitions, in the manner and to the extent
decided by the Board of Directors. The Board of Directors may
decide to sell shares through public trading at the Helsinki stock
exchange in order to obtain funds for the Company for investments
and possible corporate acquisitions. Shares can also be
transferred as a part of incentive and bonus schemes directed to
the personnel of the Company, including the Chief Executive
Officer and his/her deputy. Except as separately authorized, the
Board of Directors may not deviate from the shareholders' pre-
emptive right to shares in favor of persons that are closely
connected to the Company in the meaning of chapter 1, section 4,
subsection 1 of the Finnish Companies Act. The transfer price may
not be less than the fair market value of the shares at the time
of the transfer set in public trading at the Helsinki stock
exchange. The consideration can be paid by means of contribution
in kind, set-off or otherwise subject to specific terms and
conditions determined by the Board of Directors. The Board of
Directors is authorized to decide on other matters and measures
related to the transfer of own shares. The authorization is valid
until the Annual General Meeting in 2006, however not longer than
one year from the decision of the General Meeting. By July 26,
2005 the Board of Directors had not used this authorization.
Discontinued operations and assets held for sale
On April 5, 2005 Outokumpu and Nordic Capital signed a sales and
purchase agreement according to which Outokumpu sold its
fabricated copper products business to Nordic Capital. The sale
was finalized on June 7, 2005. The scope of the transaction
comprised the following divisions and businesses of the Outokumpu
Copper business area: Americas, Europe, Automotive Heat
Exchangers, Appliance Heat Exchanger & Asia, including 100% of
Outokumpu Heatcraft, and the Forming equipment businesses. The
2004 sales of the sold businesses were EUR 1 689 million and the
number of personnel was
6 400 at the end of the year. The Tube and Brass business that is
excluded from the transaction comprises the European sanitary and
industrial tubes, including air-conditioning and refrigeration
tubes in Europe, as well as brass rod. Outokumpus intention is to
divest the business at a later date.
The total consideration for the transaction, EUR 612 million,
comprised a cash component of EUR 512 million and a USD-
denominated long-term subordinated vendor note of EUR 100 million.
Outokumpu recognized a capital loss of EUR 246 million from the
disposal. Furthermore, an EUR 83 million impairment loss on the
remaining Tube and Brass business has been recognized based on the
managements valuation of the business. As a result of the Finnish
participation exemption tax rules, the losses are not tax
deductible. The whole Outokumpu Copper segment was classified as
discontinued operations on March 31, 2005. Loss from discontinued
operations, EUR 341 million, comprise the net result of the sold
fabricated copper products business for the first quarter, the EUR
246 million loss from the sale to Nordic Capital and the
impairment loss of EUR 83 million recognized on the Tube and Brass
business as well as its result for the first half of 2005. The
loss from discontinued operations has been recorded in the income
statement on single line after the profit from continuing
operations. The assets and liabilities of Tube and Brass are
reported as held for sale.
Specification of discontinued operations and assets held for sale
Income statement
Jan- Jan- Jan-
June June Dec
EUR million 2005 2004 2004
Sales 662 1 045 2 050
Expenses (661) (999) (1 978)
Operating profit 1 46 72
Net financial items (7) (12) (35)
Profit before taxes (6) 34 37
Taxes (5) (10) (26)
(Loss), profit after taxes (11) 24 11
Impairment loss recognized
on the fair valuation of the Tube
and
Brass division's assets and (83) - -
liabilities
Loss on the sale of the
fabricated copper products business (246) - -
Taxes - - -
After-tax loss recognized
on the measurement of assets and (329) - -
liabilities of the disposal group
Minority interest (1) (2) (3)
Net (loss), profit for the
period from discontinued operations (341) 21 7
Cash flows
Jan-
June
EUR million 2005
Operating cash flows (76)
Investing cash flows (15)
Financing cash flows 77
Total cash flows (14)
Balance sheet
June 30
EUR million 2005
Assets
Tangible assets 12
Inventories 111
Other current assets 105
228
Liabilities
Provisions 26
Other non-current liabilities 3
Trade payables 41
Other current liabilities 18
88
Major non-recurring items in operating profit
Jan- Jan- Jan-
June June Dec
EUR million 2005 2004 2004
Gain/loss on the sale of the Boliden
shares 25 - (19)
Release of the Finnish
TEL disability pension liability - - 22
Gain on the sale of the filter - 17 16
business
25 17 19
Income taxes Jan- Jan- Jan-
June June Dec
2005 2004 2004
EUR million (36) (25) (50)
Current taxes (23) (23) (11)
Deferred taxes (59) (48) (61)
Commitments
June 30 June 30 Dec 31
EUR million 2005 2004 2004
Mortgages and pledges
To secure borrowings of Group
companies 88 137 112
Guarantees
On behalf of associated companies 4 4 4
On behalf of other parties 49 47 38
53 51 42
Minimum future lease
payments on operating leases 121 149 146
Open derivative instruments
June Dec June Dec
30 31 30 31
2005 2004 2005 2004
EUR million Net fair Contract
values amounts
Currency and interest rate
derivatives
Currency forwards 8 26 1 620 1 247
Currency options
Purchased - 0 - 7
Written - 0 - 8
Currency swaps - (1) - 21
Interest rate swaps (0) (2) 125 172
Tonnes Tonnes
Metal derivatives
Copper forward and futures (3) 3 46 900 50 150
contracts
Copper options
Purchased - 0 - 20 522
Nickel forward and futures 0 1 1 548 1 758
contracts
Zinc forward and futures (0) 0 22 025 39 000
contracts
Aluminium forward and futures 0 0 1 050 2 550
contracts
TWh TWh
Electricity derivatives
Traded electricity forwards and 1 0 0.1 0.1
futures
Other financial contracts 6 0 4.8 5.0
Income statement by quarter
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05
Continuing operations:
Sales 1 196 1 283 1 143 1 500 5 122 1 456 1 589
Operating profit 128 121 77 128 453 118 157
Share of results
in associated companies 16 8 31 24 78 (1) 2
Financial income and expenses (13) (4) (33) (41) (92) (8) (15)
Profit before taxes 130 124 75 111 440 108 144
Income taxes (31) (17) (17) 4 (61) (20) (39)
Net profit for the period
from continuing operations 99 107 58 115 379 89 105
Net profit, (loss) for the
period
from discontinued operations 33 (12) (5) (9) 7 (333) (8)
Net profit, (loss) for the 132 96 53 106 386 (244) 97
period
Attributable to:
Equity holders of the Company 130 95 52 105 382 (245) 96
Minority interest 2 1 0 0 4 1 (1)
Major non-recurring
items in operating profit
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05
General Stainless
Release of the Finnish
TEL disability pension - - - 13 13 - -
liability
Technology
Release of the Finnish
TEL disability pension - - - 5 5 - -
liability
Gain on the sale
of the filter business 18 (1) - (1) 16 - -
Other operations
Release of the Finnish
TEL disability pension - - - 4 4 - -
liability
Gain/loss on the sale
of the Boliden shares - - - (19) (19) 25 -
18 (1) - 2 19 25 -
Key figures by quarter
EUR million I/04 II/04 III/04 IV/04 I/05 II/05
Operating profit margin, 10.7 9.4 6.8 8.5 8.1 5.1
%
Return on capital 11.8 10.3 6.3 10.4 10.6 15.6
employed, %
Return on equity, % 24.1 16.5 8.9 17.2 (41.0) (26.1)
Return on equity,
continuing operations, % 18.1 18.6 9.7 18.7 14.9 18.6
Capital employed
at end of period 4 543 4 839 4 919 4 941 3 953 4 084
Net interest-bearing
debt at end of period 2 261 2 496 2 515 2 435 1 695 1 822
Equity-to-assets ratio
at end of period, % 33.1 32.7 33.6 35.8 35.5 37.2
Debt-to-equity ratio
at end of period, % 99.0 106.5 104.6 97.2 75.0 80.6
Earnings per share, EUR 0.73 0.52 0.29 0.58 (1.35) 0.53
Earnings per share from
continuing operations, 0.54 0.59 0.32 0.63 0.49 0.57
EUR
Earnings per share from
discontinued operations, 0.19 (0.07) (0.03) (0.05) (1.84) (0.04)
EUR
Average number of shares
outstanding, in 178 081 180 742 180 752 180 752 180 901 181 032
thousands 1)
Equity per share
at end of period, EUR 12.43 12.75 13.08 13.65 12.39 12.41
Number of shares
outstanding at end of period,
in thousands *) 178 914 180 752 180 752 180 752 181 032 181 032
Capital expenditure,
continuing operations 133 76 91 114 37 41
Depreciation,
continuing operations 44 48 48 50 53 54
Average personnel
for the period,
continuing operations 11 681 11 997 11 960 11 513 11 475 11 833
1) The number of own shares repurchased is excluded.
