OUTOKUMPU ANNUAL ACCOUNTS 2002 - PROFITS
OUTOKUMPU OYJ STOCK EXCHANGE RELEASE February 17, 2003 at 1.00 pm
OUTOKUMPU ANNUAL ACCOUNTS 2002 - PROFITS IMPROVED ON PREVIOUS
YEAR
The Groups operating profit increased to EUR 267 million
(2001: EUR 183 million). This was mainly due to higher
stainless steel deliveries and conversion margins as well as
reduced losses in mining. Profit for the financial year
amounted to EUR 159 million (2001: EUR 76 million) and share
issue adjusted earnings per share was EUR 1.15 (2001: share
issue adjusted EUR 0.55). Cash flow from operating activities
came to EUR 334 million (2001: EUR 346 million). The Board
proposes a dividend of EUR 0.40 per share.
Oct-Dec Jul-Sep
Group key figures 2002 2002
Net sales EUR million 1 391 1 260
Operating profit EUR million 15 6
Profit (loss) before
extraordinary items EUR million (12) (18)
Profit for the period EUR million 10 20
Earnings per share
(excl. extraordinary items) EUR 0.06 0.15
Dividend per share EUR - -
Return on capital employed % 1.3 0.7
Net interest-bearing debt EUR million 2 385 2 414
Equity-to-assets ratio % 31.1 27.7
Debt-to-equity ratio % 122.6 144.7
Capital expenditure EUR million 299 1 403
Personnel, average
for the period 21 173 20 886
Jan-Dec Jan-Dec
Group key figures 2002 2001
Net sales EUR million 5 558 5 324
Operating profit EUR million 267 183
Profit (loss) before
extraordinary items EUR million 213 147
Profit for the period EUR million 159 76
Earnings per share
(excl. extraordinary items) EUR 1.15 0.55
Dividend per share EUR 0.40 1) 0.55
Return on capital employed % 7.0 6.7
Net interest-bearing debt EUR million 2 385 1 175
Equity-to-assets ratio % 31.1 41.6
Debt-to-equity ratio % 122.6 56.2
Capital expenditure EUR million 2 042 914
Personnel, average
for the period 20 196 19 010
1) Board's proposal to the Annual General Meeting.
YEAR 2002 IN BRIEF
- The world economic growth was slower than expected in 2002
and the long-awaited recovery was delayed. Demand for metals
and metal products remained moderate, despite the sluggish
global economy.
- The Groups net sales totaled EUR 5 558 million. The growth
of good 4% was mainly due to larger delivery volumes of
stainless steel and the acquisition of the heat transfer coils
manufacturer Heatcraft in August 2002.
- The Groups operating profit rose to EUR 267 million and the
operating profit margin was 4.8%. The profits were up
particularly due to AvestaPolarits improved results and a
substantial reduction in Minings losses. Growth in operating
profit was slowed by a fall in copper products conversion
margins and treatment and refining charges for zinc and copper
concentrates. Operating profit of EUR 15 million was generated
in the fourth quarter (III/2002: EUR 6 million).
- Total capital expenditure rose to EUR 2 042 million, of which
EUR 1 118 million was used for the acquisition of the
AvestaPolarit minority interest. In November-December an EUR
300 million rights offering was implemented to partly finance
the acquisition of the AvestaPolarit minority interest. At year-
end, equity-to-assets ratio was 31.1% and debt-to-equity ratio
122.6%. The Group aims for an equity-to-assets ratio of at
least 40% and a debt-to-equity ratio of at most 75%. Outokumpu
is committed to get the capital structure back to its target
level by the end of 2004.
OUTLOOK FOR 2003
Key drivers for the Groups profitability in 2003 are the
development of the market situation for stainless steel and the
successful commissioning of the new stainless steel capacity in
Tornio. The market situation for stainless steel is not
expected to improve significantly over the next few months.
During the early part of the year the market situation is
likely to remain difficult for copper products, zinc and
technology sales and no improvement is forecast until the
second half of 2003. Outokum-pus management believes that the
profit for 2003 will be better than in 2002, provided that the
world political situation will not cause any disturbances in
the global economy and the demand for metals.
CEO Jyrki Juusela comments:
"We have forged ahead with our strategy and taken measures to
implement it. Our position in our core businesses, particularly
in stainless steel, has become stronger. The program to exit
base metals mining is nearing completion as well. But following
an era of significant growth we have now set a clear goal for
ourselves: to strengthen the balance sheet. The rights offering
that was implemented just before Christmas was a success and
our aim is to complete the announced divestment program by the
end of 2003. Our focus will be to maximize the benefits from
the investments coming on stream, to improve profitability, and
to generate good cash flow."
MANAGEMENT ANALYSIS ON THE OPERATING RESULTS
The Groups comparable operating profit improved in 2002
The table on the next page presents the operating profits of
the businesses excluding the inventory gains and losses
relating to metal inventory valuation and one-off items.
Operating profit excluding items affecting
comparability
Oct-Dec Jul-Sep
EUR million 2002 2002
Stainless Steel
Coil Products 32 16
Special Products (8) 1
North America (2) 1
Others 6 8
AvestaPolarit total 28 26
Amortization of
positive goodwill (7) (6)
Stainless Steel total 21 20
Copper Products
Americas 3 4
Europe 0 0
Automotive
Heat Exchangers 5 6
Appliance Heat
Exchangers & Asia (7) 0
Others 2 2
Copper Products total 3 12
Metallurgy
Zinc (1) 1
Harjavalta Metals 5 2
Technology 8 (1)
Others (1) 0
Metallurgy total 11 2
Other operations (24) (14)
Intra-group items 2 5
The Group total,
excluding items
affecting comparability 13 25
Market valuation provision
in Stainless Steel
inventories 1) 0 -
Market price adjustments
to inventories of the
non-ferrous businesses 4 (10)
Gain on the sale
of real estate in Espoo 13 -
Refund of actuarial surplus
Outokumpu Oyj 3 -
Other companies 1 -
Refund of pension surplus
from Henki-Sampo,
Outokumpu Oyj 2 -
Pension provision (the US) (6) -
Amortization of positive
goodwill arising
from the acquisition
of the AvestaPolarit
minority interest 2) (15) -
Final settlement on the
sale of Harjavalta
nickel refinery - (6)
Write down of
reactors at Kokkola - (4)
Capital gain on
AvestaPolarit
Oyj Abp shares - 1
AvestaPolarit's
insurance compensation - -
Gain on the sale of
the Pyhäsalmi mine - -
Gain on the sale of
Sampo Oyj shares - -
Gain on Okmetic Oyj's
directed share issue - -
The Group total, as reported 15 6
1) The accounting principle has been adjusted in the annual
closing. The cost of inventories is now compared with the
estimated net realizable value at balance sheet date instead of
previous practice of reporting calculated inventory valuation
gains and losses. The comparison periods have been restated
accordingly.
2) In the fourth quarter, an EUR 15 million amortization of
positive goodwill not belonging to the period was made so that
the total amount corresponds to the annual amortization level.
Jan-Dec Jan-Dec
EUR million 2002 2001
Stainless Steel
Coil Products 162 77
Special Products 13 10
North America 3 (5)
Others 34 53
AvestaPolarit total 212 135
Amortization of
positive goodwill (28) -
Stainless Steel total 184 135
Copper Products
Americas 16 7
Europe 9 34
Automotive
Heat Exchangers 23 20
Appliance Heat
Exchangers & Asia (1) 6
Others 1 0
Copper Products total 48 67
Metallurgy
Zinc 5 35
Harjavalta Metals 11 15
Technology 3 5
Others (1) 0
Metallurgy total 18 55
Other operations (33) (76)
Intra-group items 6 (2)
The Group total,
excluding items
affecting comparability 223 179
Market valuation provision
in Stainless Steel
inventories 1) 0 4
Market price adjustments
to inventories of the
non-ferrous businesses 1 (15)
Gain on the sale
of real estate in Espoo 13 -
Refund of actuarial surplus
Outokumpu Oyj 3 -
Other companies 1 -
Refund of pension surplus
from Henki-Sampo,
Outokumpu Oyj 2 -
Pension provision (the US) (6) (9)
Amortization of positive
goodwill arising
from the acquisition
of the AvestaPolarit
minority interest 2) - -
Final settlement on the
sale of Harjavalta
nickel refinery (6) 1
Write down of
reactors at Kokkola (4) -
Capital gain on
AvestaPolarit
Oyj Abp shares 14 -
AvestaPolarit's
insurance compensation 20 -
Gain on the sale of
the Pyhäsalmi mine 6 -
Gain on the sale of
Sampo Oyj shares - 22
Gain on Okmetic Oyj's
directed share issue - 1
The Group total, as 267 183
reported
1) The accounting principle has been adjusted in the annual
closing. The cost of inventories is now compared with the
estimated net realizable value at balance sheet date instead of
previous practice of reporting calculated inventory valuation
gains and losses. The comparison periods have been restated
accordingly.
2) In the fourth quarter, an EUR 15 million amortization of
positive goodwill not belonging to the period was made so that
the total amount corresponds to the annual amortization level.
The Groups comparable operating profit for 2002 was EUR 223
million (2001: EUR 179 million). Due to massive investments the
comparable return on capital employed declined to 5.9% (2001:
6.6%). Capital employed in business operations was higher
because of exceptionally large on going investments that will
only start yielding in the coming years. Operating profit in
the fourth quarter amounted to EUR 13 million.
Profitability of Stainless Steel improved clearly
The comparable operating profit of Stainless Steel improved
clearly on previous year and amounted to EUR 184 million.
Deliveries of stainless steel increased 3% and conversion
margins rose 13%. Profitability of Coil Products and North
America divisions showed a distinct improvement. The weak
result of Special Products was mainly attributable to marked
losses of Degerfors Stainless, which produces long products, as
well as low delivery volume of precision strip. The fourth
quarter comparable operating profit was weaker than expected
and amounted to EUR 21 million. More stainless steel deliveries
than initially estimated were moved up from December to 2003.
Furthermore, the performance of both Special Products and North
America was weak, and the result was affected with unrealized
exchange rate losses.
In 2003 more capacity is coming on stream in the stainless
steel market. Market outlook for cold rolled stainless steel is
rather uncertain for the first half of the year. Key drivers
for Outokumpus profitability in 2003 are the development of
the market situation for stainless steel and the successful
commissioning of the new stainless steel capacity at Tornio.
Copper Products profitability eroded due to intensified
competition
The comparable operating profit for Copper Products decreased
to EUR 48 million in 2002 because weaker product mix and
general price pressures resulted in lower average conversion
margins. The financial performance of the divisions within
Copper Products was mixed. Americas division improved its
result, Europes operating profit contracted to one-fourth and
Appliance Heat Exchangers & Asia was in the red. Automotive
Heat Exchangers division has been generating solid profits from
year to year. In the fourth quarter, the comparable operating
profit of Copper Products remained at EUR 3 million due to weak
demand. The overcapacity in the market and intensified
competition have led to increased price pressure. Short-term
market outlook is weak.
Zinc and copper treatment charges plummet to rock bottoms
Zinc treatment charges received by Outokumpu decreased 16% and
the comparable operating profit of the zinc business fell to
EUR 5 million. In the fourth quarter the zinc business recorded
an operating loss of EUR 1 million. It is estimated that zinc
treatment charges do not recover from the current level in
2003.
Copper treatment and refining charges received by Outokumpu
decreased 3% in 2002 and the comparable operating profit of the
Harjavalta copper business was EUR 11 million. The fourth
quarter operating profit amounted to EUR 5 million. It is
possible that the treatment and refining charges continue to
decline in 2003 because the competition remains tough in the
copper concentrate market.
Customers of Technology postponed their investment decisions
due to low base metals prices and general uncertainty
concerning the world economy. As a result, Technologys
operating profit came to modest EUR 3 million in 2002.
Technologys profits accumulated mainly in the last quarter and
stood at EUR 8 million. Short-term, it is unlikely that the
sales of technology would recover in the prevailing market.
Exiting base metals mining proceeds
In 2002 Outokumpu sold its Pyhäsalmi and Black Swan mines.
Production at the Nikkel og Olivin nickel mine ceased due to
the depletion of the ore in the fall 2002. There was a
production stoppage at the Tara mine from November 2001 to
September 2002. Within Other Operations the comparable
operating loss of Mining contracted substantially and amounted
to EUR 19 million in 2002 (2001: operating loss of EUR 65
million). All in all the operating loss of Other Operations
stood at EUR 24 million in the fourth quarter, of which
Minings share was EUR 19 million. The Groups targets for 2003
include the completion of its program to exit base metals
mining.
The attachments present a summary of the corporate review of
the year by the Board of Directors and accounts.
For further information, please contact:
Kari Lassila, SVP - Investor Relations and Corporate
Development, tel. +358 9 421 2555, kari.lassila@outokumpu.com
Eero Mustala, SVP - Corporate Communications, tel. +358 9 421
2435, eero.mustala@outokumpu.com
Vesa-Pekka Takala, SVP - Corporate Controller,
tel. +358 9 421 4134, vesa-pekka.takala@outokumpu.com
News conference today at 3.00 pm
A combined news conference, conference call and live web cast
concerning the 2002 financial results will be held today, on
February 17, 2003 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
Peilisali, Pohjoisesplanadi 29, 00100 Helsinki, Finland.
To participate via a conference call, please dial 5-10 minutes
before the beginning of the event: +44 207 162 0125 (UK),
+1 334 323 6203 (US & Canada). The password is Outokumpu. The
news conference can be viewed live via Internet at
www.outokumpu.com
Stock exchange release and presentation material will be
available before the news conference at www.outokumpu.com ->
Investor information -> Downloads.
An on-demand web cast of the news conference will be available
at www.outokumpu.com as of February 17, 2003 at 4.30 pm. An
instant reply service of the conference call will be available
until Wednesday, February 19, 2003 in the following numbers:
+44 20 8288 4459 (UK), +1 334 323 6222 (US & Canada). The
access code is 262232.
OUTOKUMPU OYJ
Corporate Management
Johanna Sintonen
Manager - Investor and Media Relations
tel. +358 9 421 2438, mobile +358 40 530 0778,
fax +358 9 421 2429
e-mail: johanna.sintonen@outokumpu.com
www.outokumpu.com
SUMMARY OF THE CORPORATE REVIEW OF THE YEAR 2002
Outokumpus financial result for 2002 improved on the previous
year. Growth was due to the improved market situation and
increased deliveries of stainless steel as well as to reduced
losses in mining operations. The Groups net sales totaled EUR
5 558 million (2001: EUR 5 324 million). Operating profit
improved to EUR 267 million (2001: EUR 183 million). Profit for
the financial year increased to EUR 159 million (2001: EUR 76
million) and the share issue adjusted earnings per share
increased to EUR 1.15 (2001: share issue adjusted EUR 0.55).
Cash flow from operating activities was EUR 334 million (2001:
EUR 346 million). Total capital expenditure rose to EUR 2 042
million (2001: EUR 914 million). As a result, the capital
structure fell short of the target level as expected. In the
last quarter, an EUR 300 million rights offering was
implemented to partly finance the acquisition of the
AvestaPolarit minority interest.
The Board of Directors proposes to the Annual General Meeting
that a dividend of EUR 0.40 per share be distributed for 2002.
Demand for stainless steel remained steady
Slow growth in the global economy continued in 2002. The long-
awaited economic recovery was delayed and in the prevailing
uncertainty economic growth remained at about 1.5%. Growth in
GDP in the US remained at about 2% and in Europe at about 1%.
The situation in Germany was particularly weak. Of the key
economic areas, growth continued strongly only in China.
Japans economic difficulties continued and growth there
remained at around zero. The subdued growth in the world
economy was reflected particularly in the industrial sector and
industrial investments contracted considerably from the
previous year. Growth in global industrial production remained
still negative.
Low interest rates helped to maintain private sector
consumption and industrial growth prerequisites. The Federal
funds rate in the US was at its lowest for forty years. Due to
monetary policy that supported low inflation targets, interest
rate cuts in Europe were more modest than in the US. In Japan
all possible measures to revive the economy through monetary
policy have been exhausted. Many countries have increased
public consumption and cut taxes to stimulate their economies.
A number of business and consumer confidence indicators the US
and Europe have gone down in recent months suggesting that
global economic growth will be further delayed. Political
uncertainty and the fear of war in the Middle East are also
threatening to weaken economic growth.
Demand for metal products remained moderate, despite the
sluggish global economy. China, where double-digit growth in
metals consumption continued, drove consumption. Growth in
consumption remained modest in the western industrialized
countries.
Despite the sluggish world economy, demand for stainless steel
grew following the decline in 2001. The apparent consumption of
cold rolled stainless steel was up 2% on the previous year. The
first half of the year saw rising demand, which was triggered
partly by restocking following the rise in nickel prices and
severe destocking in the second half of 2001. The market slowed
down after the summer break, as it became apparent that the
global economic recovery would be delayed and the rise in
nickel prices eased up somewhat. Regionally, demand was best in
Europe and China, despite the implementation of Chinese
safeguard measures which caused considerable confusion in the
Asian market in the second half of the year. It is estimated
that consumption of stainless steel in China rose 30% on the
previous year.
World stainless steel melted production reached almost 20
million tonnes, an increase of over 5% compared to 2001. The
stainless steel market moved slightly to oversupply towards the
end of 2002 as demand softened. The consolidation of the
stainless steel industry appeared to have had a stabilizing
effect in 2002, as the supply demand balance has been
maintained despite the general deterioration in the economy.
Stainless steel prices in Europe increased in the improved
trading environment noted during the first half of the year and
stabilized for the second half of the year. According to CRU,
the average European base price for cold rolled stainless steel
was 10% above the average for 2001.
The increase in stainless steel production improved the demand
of nickel and ferrochrome in 2002. The limited availability of
stainless steel scrap increased the need for primary nickel.
Nickel production continued to grow at a fast rate, balancing
the increase in demand. Nickel stocks remained unchanged and
the price of nickel rose 14% on 2002. The price of ferrochrome
continued to rise throughout the year, but the average price in
2002 decreased 3% compared to the previous year.
Global demand for fabricated copper products grew slightly on
the previous year, but there were large regional variations.
The pace in the construction and automotive industries remained
brisk and buoyed up demand in the US. Consumption of copper
products grew in China, but contracted in Europe. Competition
intensified in almost all customer sectors towards the end of
the year and product prices declined. Average prices
(conversion margins) of copper products were down 4% from the
previous year due to a weaker product mix and general price
pressure. Orders for fabricated copper products grew 9% from
the previous year if the effects of the Heatcraft acquisition
are excluded.
Zinc consumption grew almost 2%, but the price of zinc dropped
12% in clearly over-supplied market. Zinc consumption grew
especially in China, but declined in Europe and Japan. Average
zinc treatment charges received by Outokumpu declined 16%. In
real terms, zinc treatment charges are at their lowest levels
ever, due to deficit on the concentrate market and the low
price of zinc. Consumption of copper grew 4%, but the price of
the metal dropped 1% as stocks remained fairly high. Copper
treatment and refining charges received by Outokumpu declined
3%.
Net sales up 4%
The Groups net sales rose a good 4% from the previous year and
amounted to EUR 5 558 million. The growth was due to increased
delivery volumes of stainless steel and the acquisition of the
heat transfer coils manufacturer Heatcraft in August 2002.
Growth in net sales was slowed by the decline in prices of
copper products and base metals, by the withdrawal from base
metal mining operations and by the average 6% weakening of the
US dollar against the euro.
Net sales by business area
EUR million 2002 2001 Change, %
Stainless Steel 3 002 2 851 5
Copper Products 1 472 1 403 5
Metallurgy 1 202 1 207 0
Other Operations 328 472 (31)
Intra-group sales (446) (609) 27
The Group 5 558 5 324 4
Stainless Steels net sales were slightly up compared to the
previous year. This resulted mainly from increased stainless
steel delivery volumes. Production ran smoothly during most of
the year, with the exception of the summer period, when some
problems were experienced at the melting shops in Tornio,
Avesta and Degerfors. The production of stainless steel slab
increased 11% compared to the previous year reflecting the
commissioning of new capacity from Tornio but also improvements
in production performance at the melting shops in Avesta and
Sheffield. Cold rolling mill production was up 11%, reflecting
an improved market climate and the effect of the new
investments at Avesta and Nyby.
Growth in Copper Products net sales was mainly due to the
Heatcraft acquisition. Deliveries of copper products were up
3%, but average conversion margins decreased 4% as a result of
a weaker product mix and general price pressure. Production of
fabricated copper products ran smoothly.
Net sales of Metallurgy remained at the previous years level,
although the price of zinc decreased considerably. Zinc
production volumes increased as a result of the Norzink
acquisition and the completion of the Kokkola expansion.
Blister copper production at Harjavalta declined slightly from
the previous year while cathode copper production remained
steady. Technology sales grew as a result of acquisitions.
Net sales of Other Operations declined substantially as a
result of the sale of the Pyhäsalmi and Black Swan mines and
the stoppage at Tara, which lasted until September. Mine
production of zinc and nickel declined correspondingly.
Distribution of Group sales by market area changed slightly due
to acquisitions. Europes contribution fell to 66%, whereas
Americas share rose to 20% and Asias to 12%.
Clear improvement in profits
The Groups operating profit rose to EUR 267 million (2001: EUR
183 million) and the operating profit margin was 4.8% (2001:
3.4%). The profits were up due to AvestaPolarits improved
results, in particular, and to a substantial reduction in
Minings losses. Growth in operating profit was slowed by a
drop in conversion margins for copper products and in treatment
and refining charges for zinc and copper concentrates.
Operating profit includes EUR 49 million of unusual items
(2001: EUR 23 million).
The financial result for the last quarter improved from a
seasonally weak third quarter. Operating profit in October -
December came to EUR 15 million (III/2002: EUR 6 million and
IV/2001: EUR 34 million). The weaker than expected fourth-
quarter result was mainly due to low stainless steel delivery
volumes in December, certain one-off items, and the fact that
the market situation for non-ferrous metals remained weak.
Operating profit by business area
EUR million 2002 2001 Change
AvestaPolarit 232 139 93
Amortization of positive goodwill (28) - (28)
Stainless Steel 204 139 65
Copper Products 41 45 (4)
Metallurgy 20 54 (34)
Other Operations 18 (53) 71
Intra-group items (16) (2) (14)
The Group 267 183 84
In Stainless Steel, the improved profitability is primarily
attributable to higher deliveries and conversion margins. The
full-year result was, however, adversely affected by production
difficulties in the third quarter and a sluggish fourth quarter
due to increasing uncertainties in the world economy towards
the end of the year. Operating profit for 2002 includes an
amortization of negative goodwill amounting to EUR 41 million
(2001: EUR 45 million). The operating profit of the Stainless
Steel business area includes an EUR 28 million amortization of
positive goodwill arising from the acquisition of the
AvestaPolarit minority interest. The amortization of positive
goodwill was increased at the annual closing so that the total
amount corresponds to amortization level for the entire year.
The operating profit of AvestaPolarit includes an insurance
compensation of EUR 20 million for the fire at the Helmond site
and an EUR 32 million (2001: EUR 29 million) restructuring
provision and a corresponding amortization of negative
goodwill.
Copper Products reported operating profit for the whole year
declined from the previous year because of a decline in the
conversion margins. The operating profit includes a pensions
provision of EUR 6 million (2001: EUR 9 million) entered as
personnel expenses. The result is also affected by an EUR 1
million market price adjustment to inventories (2001: EUR 13
million).
The operating profit of Metallurgy declined from last year,
particularly because of a substantial fall in the price of zinc
and a decline in treatment charges. Low treatment and refining
charges for copper and deterioration of Technologys profits
eroded also the operating profit of Metallurgy. The operating
profit for Metallurgy includes an EUR 4 million write-down of
the reactors disposed of at Kokkola.
Other Operations turned to a profit thanks to reduced losses in
Mining from the previous year. Operating profit of Other
Operations includes an EUR 14 million capital gain on the
transfer of AvestaPolarit shares distributed as dividend, a
capital gain of EUR 13 million on the sale of real estate in
Espoo, a capital gain of EUR 6 million on the sale of the
Pyhäsalmi mine, an EUR 6 million final settlement on the sale
of the Harjavalta nickel refinery, an EUR 4 million refund of
acturial surplus from the pension foundations and an EUR 2
million refund of pension surplus from Henki-Sampo. Operating
profit for 2001 included a capital gain of EUR 22 million from
the sale of Sampo Oyj shares.
Despite the growth in the net interest-bearing debt, the
Groups net financial expenses increased only slightly due to
the low interest rates, the favorable interest rate
differential between the US dollar and the euro, the
capitalized interest at Tornio and an EUR 15 million foreign
exchange gain relating to financing (2001: EUR 9 million). The
Groups substantial hedging position against the weakening of
the US dollar relative the euro extends beyond twelve months.
The Groups profit before extraordinary items was EUR 213
million (2001: EUR 147 million).
The acquisition of the AvestaPolarit minority interest improved
the Groups earnings per share. As a result of the acquisition
only 0.2% of AvestaPolarits total net profit for 2002 was
deducted to the outstanding minority at year-end. This
corresponds to the AvestaPolarit shareholders equity belonging
to the minority in the balance sheet. Outokumpu is entitled to
a share of profit and dividend from the beginning of 2002 in
accordance with its year-end holding of 99.8%.
The Groups return on capital employed was 7.0% and the return
on shareholders equity 8.0% (2001: 6.7% and 6.9%). Capital
employed in business operations was higher because of
exceptionally large on going investments that will only start
yielding in the coming years. Profit for the financial year was
EUR 159 million and share issue adjusted earnings per share EUR
1.15 (2001: EUR 76 million and EUR 0.55).
Capital structure weakened as expected
Cash flow from operating activities remained at the previous
years level and was EUR 334 million (2001: EUR 346 million).
Despite the improved profits the increase in the working
capital, especially in AvestaPolarit, weakened the cash flow.
Due to record-high capital expenditure and increase in working
capital, the Groups net interest-bearing debt increased on the
previous year to stand at EUR 2 385 million at year-end (Dec.
31, 2001: EUR 1 175 million). The Groups equity-to-assets
ratio weakened to 31.1% (Dec. 31, 2001: 41.6%) and debt-to-
equity ratio increased to 122.6% (Dec. 31, 2001: 56.2%). The
Groups aim is to have an equity-to-assets ratio of at least
40% and a debt-to-equity ratio of at most 75%.
Measures have been initiated to get the capital structure back
to its target level by the end of 2004. These measures include
the ongoing EUR 200 million divestment program covering base
metal mining and other non-core assets, and the rights offering
that was implemented in the last quarter. In addition to these,
Outokumpu is considering divesting certain of its business
activities that do not fit within the Groups strategy and do
not meet performance targets. On the other hand, Outokumpu is
continually assessing potential acquisition or joint venture
targets that would fit within its strategy and improve the
value of the Groups business portfolio as a whole.
Furthermore, Outokumpu is examining the potential to create
value through participating in the industry consolidation in
the future.
Key financial indicators on financial position
EUR million 2002 2001
Net interest-bearing debt
Long-term debt 1 493 837
Current debt 1 338 788
Total interest-bearing debt 2 831 1 625
Interest-bearing assets (446) (450)
Net interest-bearing debt 2 385 1 175
Net interest-bearing debt
in relation to net sales, % 42.9 22.1
Shareholders' equity 1 906 1 550
Debt-to-equity ratio, % 122.6 56.2
Equity-to-assets ratio, % 31.1 41.6
Cash provided by
operating activities 334 346
Net financial expenses 46 38
Net financial expenses
in relation to net sales, % 0.8 0.7
Interest cover 3.8 3.6
The Groups liquidity remained good throughout the year. At
year-end cash and marketable securities totaled EUR 226
million. In addition, the Parent Company had access to some EUR
627 million in committed credit facilities.
Acquisition of the AvestaPolarit minority interest financed
through rights offering
Based on the authorization by the Extraordinary General Meeting
of shareholders on November 14, 2002, a rights offering was
implemented between November 28 and December 17, 2002 in order
to partially finance the acquisition of the AvestaPolarit
minority interest. Net proceeds from the rights offering were
EUR 293 million. Following the rights offering an increase in
share capital was registered on January 3, 2003 with share
capital of EUR 293 520 502.30 comprising of 172 659 119 shares.
An exceptional year for investments
As a result of a vigorous implementation of the growth
strategy, the Groups total capital expenditure rose to record
levels. Total capital expenditure was EUR 2 042 million (2001:
EUR 914 million). This figure includes the EUR 1 118 million
used for the acquisition of the AvestaPolarit minority
interest.
Capital expenditure in 2003 is estimated to decrease clearly
from the previous year, although it is expected to remain
relatively high on account of the Tornio investment program
underway. According to current estimates, the capital
expenditure in 2004 will further decrease on 2003, but will
nevertheless exceed the depreciation according to plan.
Capital expenditure by business area
EUR million 2002 2001
Stainless Steel 633 405
Aqcuisition of the AvestaPolarit
minority interest 1 118 -
Copper Products 143 110
Metallurgy 46 325
Other Operations 102 74
The Group 2 042 914
The biggest individual acquisition in the Groups history, the
acquisition of the AvestaPolarit minority interest, was carried
out during the third quarter of 2002. On June 30, 2002,
Outokumpu entered into an agreement with Corus Group plc
whereby Outokumpu purchased its entire holding of 80 882 090
shares in AvestaPolarit Oyj Abp. Furthermore, Outokumpu and
Corus made a separate agreement on the early termination of the
Shareholders Agreement concerning AvestaPolarit. Following the
clearance by the European Commission for the Corus deal,
ownership of the AvestaPolarit shares purchased from Corus was
transferred to Outokumpu on August 14, 2002.
On August 19, 2002 Outokumpu published its offer to redeem all
outstanding AvestaPolarit shares and warrants. The actual offer
period began on August 26, 2002 and ended on September 26,
2002. Outokumpu decided to extend the offer period until
October 11, 2002. Under the offer, Outokumpu redeemed a total
of 35 974 136 shares from AvestaPolarit shareholders. Together
with the shares purchased from the market, Outokumpus holding
in AvestaPolarit shares and votes rose to 99.8%. Outokumpu
redeemed 1 460 000, i.e. 100%, of the warrants subject to the
offer. Because Outokumpu owned more than nine tenths (9/10) of
the shares and votes in AvestaPolarit, Outokumpu was, on the
basis of Chapter 14, Section 19 of the Finnish Companies Act,
entitled to redeem the shares held by other shareholders in
AvestaPolarit at fair value. Outokumpu notified AvestaPolarit
on October 14, 2002 that it would use its right under the
Companies Act to redeem the remaining shareholders shares. The
redemption procedure is now underway. AvestaPolarit shares were
de-listed from the Stockholm Stock Exchange in December 2002
and the shares will be de-listed from the Helsinki Exchanges at
the latest when Outokumpu has gained ownership of all of the
shares in AvestaPolarit.
The commissioning of the expansion program at AvestaPolarits
Tornio Works in Finland proceeded well despite being some 2
months behind the original timetable. The new melting shop
produced its first melt at the end of August and the first slab
was successfully cast in early September. The subsequent ram-
ping up has progressed according to schedule. The cold rolling
mill started commissioning in February 2003 and commercial
deliveries will begin by the end of the first quarter of 2003.
The investment to increase hot rolling capacity from 1 million
tonnes to 1.7 million tonnes, is due to be commissioned in
2004. The melting shop and cold rolling mill are scheduled to
reach full production capacity during 2004 and the hot rolling
capacity should match the higher cold rolling capacity by the
end of 2004. The revised cost estimate for the entire Tornio
expansion is some EUR 1 billion, of which EUR 751 million had
been used by year-end.
In 2002, AvestaPolarits other major investment projects in
progress have been the move to underground mining at the Kemi
chromium mine (total investment EUR 73 million) in Finland, the
installation of new billet casting equipment at the Sheffield
melting shop in Britain (EUR 29 million) and the increase of
long products capacity in the US (EUR 22 million). The Kemi
mine project is scheduled to start shaft hoisting in September
2003. The Sheffield billet caster investment has been completed
and the new facility is now in a ramp-up phase. The project to
increase cold rolling capacity at Avesta (EUR 36 million) was
completed during 2002.
In October, AvestaPolarit purchased its Italian agent
Commerciale Acciai S.p.A., which has been an ex-clusive
distribution agent for the Tornio Works in the Italian market.
The purchase of the stainless steel quarto plate business of
Thyssen Krupp Nirosta GmbH announced in September was completed
on February 7, 2003.
In August, Outokumpu finalized its agreement with the US
company Lennox International Inc. (LII) to establish a joint
venture. The joint venture, which is named Outokumpu Heatcraft
and is owned 55% by Outokumpu and 45% by Lennox, is already in
operation and comprises most of Lennoxs worldwide heat
transfer coil business. The total acquisition cost was EUR 58
million and Outokumpu has the option to purchase the remainder
of the business from LII in three years time. With the joint
venture, Outokumpu is moving increasingly into the manufacture
of copper products with a higher value added. The project also
includes establishing a 50-50 technology joint venture between
Outokumpu and LII to develop innovative new applications for
the heat transfer industry. Outokumpu Heatcrafts products are
mainly heat transfer coils used in heating, ventilation, air-
conditioning, and cooling equipment.
The expansion of the Zhongshan copper tube plant in China was
inaugurated in September 2002. The investment (EUR 35 million)
comprises a new production line for the manufacture of high-
quality smooth and inner-grooved air-conditioning tube,
together with the buildings. The expansion more than doubled
the production capacity to 25 000 tonnes. A copper tube
production line, based on Outokumpu Cast & Roll technology, was
completed at the Zaratamo plant in northern Spain in January
2003. The investment (EUR 15 million) will improve productivity
at Zaratamo, extend the product range and improve the quality
of the products and the level of service.
In January 2003, Outokumpu decided to modernize the production
process at the Odda zinc plant in Norway. The plants older
roaster will be replaced by Outokumpus proprietary process
technology for direct leaching of zinc concentrates. The total
investment of some EUR 90 million will be spread over 2003 and
2004. Work at Odda started immediately and the project is due
for completion in the fall of 2004. The construction phase is
not expected to cause any significant loss of production. The
Odda plant is already within the most cost-efficient quartile
of zinc plants in the world. The modernization will increase
concentrate feed capacity at Odda by about 10% and enable a
wider range of zinc raw materials to be used.
In Ireland, Outokumpu suspended production at the Tara zinc
mine in November 2001 due to the weak market and the low price
of zinc coupled with the mines poor productivity. A technical
improvement program was commenced in March 2002 and the nearby
Bula ore reserves were acquired for a total purchase price of
EUR 37 million in August 2002. The technical improvement
program, commissioning of the southwestern ore body, and
acquisition of the Bula ore reserves are expected to improve
Taras profitability and increase its value. Production was
restarted at Tara in September 2002. The mine has, by and
large, achieved the volume and efficiency targets.
Outokumpu sold the Pyhäsalmi mine in Finland to the Canadian
Inmet Mining Corporation in January 2002 for EUR 70 million.
The Black Swan mine in Australia was sold for EUR 52 million
(including the released working capital) to a consortium formed
by the Australian company, Mining Project Investors, and the
American OM Group in July 2002. Furthermore, part of the real
estate at Niittykumpu in Espoo, Finland was sold in December
2002 to the Varma-Sampo Mutual Pension Insurance Company for
EUR 50 million.
Repurchase of the companys own shares
The Board of Directors of Outokumpu Oyj has a valid
authorization from the Annual General Meeting on April 8, 2002
to repurchase and transfer of the companys own shares.
According to a decision by the Board, repurchase could begin on
April 16, 2002 at the earliest and end on April 7, 2003 at the
latest. No shares have been repurchased on the basis of the
authorization.
R&D work focusing on new products
Expenditure on research and development increased on the
previous year to EUR 47 million, or 0.8% of net sales (2001:
EUR 41 million and 0.8%). The Group made numerous innovations
and a record number of patent applications, 68, were filed in
2002. Product development focused on increasing the value
added, new product applications as well as technology sales,
efficient manufacturing, and the importance to produce high
quality. Shortening of lead times in the production chain was
tackled with improved processes and methods. The most
significant individual development projects were
AvestaPolarits integrated cold rolling line (Rolling,
Annealing and Pickling, RAP) in Tornio and Technologys
HydroCopper, a new hydrometallurgical method to produce copper.
Exploration expenditure was halved to EUR 8 million (2001: EUR
16 million). Exploration for base metal ores outside operating
mines was terminated. Arctic Platinum Partnership, a joint
venture in which Outokumpu has a 49% stake, has continued to
investigate platinum and palladium deposits and their possible
exploitation in northern Finland. The total metal content of
mineral resources has risen to over 14 million ounces (approx.
450 000 kg) of palladium, platinum and gold. A techno-economic
feasibility study of the deposits is in progress and will
continue until 2003. Outokumpu located several promising gold
properties in Finland during 2002.
Favorable trend continues in for environmental impacts
Outokumpu's key environmental targets are to cut down water
consumption, to reduce metal emissions and discharges as well
as to improve energy-efficiency. Environmental impacts have
continuously been reduced as a result of active environmental
protection work. The Groups metal emissions and discharges
contracted in 2002 especially due to environmental investments
completed at Tornio, Harjavalta and Odda.
Outokumpu units have the necessary environmental permits in
place. Outokumpu is not a party in any significant juridical or
administrative proceeding concerning environmental issues, nor
is it aware of any environmental risks that could have a
material adverse effect on the Group's financial position.
Development of safety issues at the operating sites was
primarily positive. The goal was to halve the frequency of
accidents compared with the average for the five previous
years. The goal was not entirely reached, although the
direction was right and the program will continue. During the
year there were two fatal accidents. Furthermore, in late
January 2003 there was another fatality.
New values to guide leadership processes
In 2002, the most important achievement in human resources
management was to crystallize the Groups new identity along
the basic values. While developing the values, several things
were taken into account: the requirements set by the Group
strategy for peoples actions, the traditional strengths
derived from companys history and the expectations of
individuals regarding their work and work environment. Fitting
these aspects together revealed the cornerstones of Outokumpu's
target-oriented corporate culture: superior knowledge,
outstanding performance, individual achievement, creating
success with customers and leading the way. The new values will
be integrated into management systems and leadership processes.
Quality of leadership, as well as well-being of the work
community will be studied regularly in the future.
Reorganization of corporate human resources function clarified
responsibilities and the role of human resources management as
a whole. Expertise of the personnel was developed not only
through group-wide management development programs but also
with various local projects. Outokumpu's business units are
responsible for defining and implementing their own competitive
strategy and human resources management plays a key role in
this process. The business units are expected to build and
develop recruitment, performance assessment, remuneration and
training systems based on their own specific needs and to deal
with issues relating to employment contracts and well-being at
work.
Over the last few years Outokumpu made several acquisitions and
disposals. The focus has been on integration of the combining
entities. The aim is to carry out a Management Review process,
which systematically identifies and maps the management
resources throughout the Group, and O´People personnel survey,
which will measure job satisfaction and the realization of the
target-oriented corporate culture. In addition, a project will
be launched to modernize and harmonize compensation practices.
Personnel by business area
Dec. 31 2002 2001
Stainless Steel 9 147 9 004
Copper Products 7 128 5 229
Metallurgy 3 478 3 445
Other Operations 1 377 1 750
The Group 21 130 19 428
At year-end, there were 21 130 people on the Group payroll in
more than 40 countries. The number of personnel in Copper
Products grew as a result of the Heatcraft acquisition. The
program to exit base metals mining reduced the number of
personnel in Other Operations.
Business Support Unit established
The new Business Support Unit (BSU) started operations in the
beginning of September 2002. The unit brings together group-
wide expertise and processes supporting businesses. The BSU
includes the financial services, procurement, IT and business
processes, sales, mergers & acquisitions and legal affairs,
intellectual property, environment, health and safety (EHS),
treasury and risk management, human resources management,
financial control and tax planning, corporate communications
and investor relations. These processes are available to both
Corporate Management and individual business units. The BSU
will ensure that the group-wide synergies and the benefits
ensuing from combined purchasing power and special expertise
will be put to use in the best possible way.
In conjunction with the establishment of the Business Support
Unit, the tasks and responsibilities of Corporate Management
were re-defined and the number of personnel in Corporate
Management was reduced.
Integration of Outokumpu and AvestaPolarit administrative
functions
The integration of Outokumpu and AvestaPolarit group-level
administrative functions has been proceeding according to plan.
The integration process has focused on key areas whose
operations will eventually be transferred either to Outokumpu
or to AvestaPolarits Espoo office. AvestaPolarits Stockholm
office will be closed affecting some 40 employees. A provision
of EUR 2 million has been made in the accounts for the closing
of the Stockholm office.
Competition law issues
In March 2001, the European Commission launched an
investigation into the companys role in a suspected market
sharing and price cartel between European producers of copper
tube and tube fittings. The company has cooperated fully with
the Commission, which is at present studying material supplied
by the companies concerned. Copper tube sales in Europe
represent about 4% of the Groups total net sales. As the
process is still in progress, no provision for it has been made
in the accounts.
Short-term prospects overshadowed by uncertainty
Any significant upturn in global economic growth looks unlikely
during the early part of the year and this is also reflected in
the metal markets. Most business and consumer confidence
indicators have mainly been going down over the last few
months. Expectations of any rapid upturn in the growth of
global industrial production and industrial investment in the
near future have weakened as well. Stimulating interest rate
policy combined with fiscal policy in the US, coupled with more
moderate measures in Europe, however, provide a sound basis for
economic growth as political and economic uncertainty recedes.
Whilst waiting for recovery in the US, demand in China will
continue to grow.
The market prospects for cold rolled stainless steel look
rather uncertain for the first half of 2003. Although
underlying consumption for stainless steel is estimated to grow
long-term at a rate of at least 5% per annum, any improvement
in demand over the next few months is likely to be modest in
the current economic climate. In 2003, the key issues affecting
Stainless Steels profitability, apart from market conditions,
will be the ramp-up of the Tornio expansion, closure of
Degerfors with successful commissioning of Sheffield melt shop
billet caster and the continuation of the internal initiatives
to enhance internal efficiency.
The market for fabricated copper products was difficult in
2002. Overcapacity and severe competition have increased the
pressure on prices. Demand is not expected to improve in key
customer industries in the next few months and conversion
margins on key products are expected to remain under pressure.
Copper Products target is to improve operating profit on 2002,
even though the market situation in the beginning of the year
is weak.
The market situation for zinc is expected to remain gloomy in
the near future, although the price of zinc has shown a slight
recovery at the start of the year. Most likely zinc producers
will need to adjust their output to the scarcity of
concentrate, the low treatment charges and the low price of
zinc. This will probably speed up the long-needed structural
changes in the industry. The price of copper has also risen at
the beginning of the year, but the market for copper
concentrates is expected to remain fairly difficult in the near
future as production cuts continue. A recovery in technology
sales looks unlikely in the near future. Metallurgy is aiming
to improve its operating profit on 2002.
In 2003 the most important goal in Other Operations is to
complete the program to exit base metals mining.
Key drivers for the Groups profitability in 2003 are the
development of the market situation for stainless steel and the
successful commissioning of the new stainless steel capacity in
Tornio. The market situation for stainless steel is not
expected to improve significantly over the next few months.
During the early part of the year the market situation is
likely to remain difficult for copper products, zinc and
technology sales and no improvement is forecast until the
second half of 2003. Outokumpus management believes that the
profit for 2003 will be better than in 2002, provided that the
world political situation will not cause disturbances in the
global economy and the demand for metals.
Board of Directors proposal for profit distribution
In accordance with the Board of Directors established dividend
policy the pay-out ratio over a business cycle should be at
least one-third of the companys profit for the period. In its
annual dividend proposal to the Annual General Meeting, the
Board of Directors will, in addition to financial results, take
into consideration the companys investment and development
needs.
The Board of Directors proposes to the Annual General Meeting
that a dividend of EUR 0.40 per share be paid from the profits
of the financial year ended on December 31, 2002 and that any
remaining distributable funds be allocated to retained
earnings. The suggested dividend record date shall be April 8,
2003 and the dividend shall be paid on April 15, 2003. All new
shares issued in 2002 and all treasury shares transferred on
February 19, 2003 from the company to the persons belonging to
the managements share remuneration scheme are entitled to full
dividend from 2002.
According to the financial statements dated December 31, 2002,
the Groups distributable funds total EUR 562 million and those
of the Parent Company EUR 628 million. The proposed dividend
corresponds to 44% of the Groups profit for the financial
year.
Espoo, February 17, 2003
The Board of Directors
CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
INCOME STATEMENT Oct-Dec Jul-Sep
EUR million 2002 2002
Net sales 1 391 1 260
Costs and expenses (1 376) (1 241)
Unusual items 19 (9)
Other operating income
and expenses (2) (5)
Amortization of positive
and negative goodwill (17) 1
Operating profit 15 6
Equity earnings in
associated companies (2) (3)
Financial income and expenses
Net interest expenses (30) (21)
Exchange gains and losses (1) (0)
Other financial
income and expenses 6 0
Profit (loss) before
extraordinary items (12) (18)
Extraordinary items - -
Income taxes 19 (12)
Minority interest in earnings 3 50
Profit for the financial period 10 20
Jan-Dec Jan-Dec
EUR million 2002 2001
Net sales 5 558 5 324
Costs and expenses (5 332) (5 215)
Unusual items 49 23
Other operating income
and expenses (6) 14
Amortization of positive
and negative goodwill (2) 37
Operating profit 267 183
Equity earnings in
associated companies (7) 2
Financial income and expenses
Net interest expenses (75) (56)
Exchange gains and losses 15 9
Other financial
income and expenses 13 9
Profit (loss) before
extraordinary items 213 147
Extraordinary items - -
Income taxes (53) (19)
Minority interest in earnings (1) (52)
Profit for the financial period 159 76
BALANCE SHEET Dec 31 Sep 30 Dec 31
EUR million 2002 2002 2001
Fixed assets and
other long-term investments
Intangible assets 373 373 77
Property, plant
and equipment 3 088 2 962 2 648
Long-term
financial assets 1) 262 273 235
3 723 3 608 2 960
Current assets
Inventories 1 235 1 132 1 099
Receivables 1) 1 143 1 138 1 057
Marketable securities 31 12 55
Cash and bank 195 214 230
2 604 2 496 2 441
Total assets 6 327 6 104 5 401
Shareholders' equity 1 906 1 615 1 550
Minority interest 40 52 541
Negative goodwill on
consolidation - - 301
Long-term liabilities
Interest-bearing 1 493 1 162 837
Non interest-bearing 463 456 448
1 956 1 618 1 285
Current liabilities
Interest-bearing 1 338 1 685 788
Non interest-bearing 1 087 1 134 936
2 425 2 819 1 724
Total shareholders'
equity and liabilities 6 327 6 104 5 401
1) Includes interest-bearing assets of EUR 220 million on
December 31, 2002, EUR 207 million on September 30, 2002 and
EUR 165 million on December 31, 2001.
STATEMENT OF CASH FLOWS Oct-Dec Jul-Sep
EUR million 2002 2002
Income financing 69 92
(Increase) decrease
in working capital (131) 156
Other adjustments 4 (3)
Cash provided by
operating activities (58) 245
Capital expenditure (299) (1 403)
Other investing activities 50 1
Cash flow before
financing activities (307) (1 157)
Cash provided by
financing activities 290 1 163
Adjustments 17 (17)
(Decrease) increase
in cash and marketable
securities (0) (11)
Oct-Dec Jul-Sep
KEY FIGURES 2002 2002
Operating profit
margin, % 1.0 0.5
Return on capital
employed, % 1.3 0.7
Return on shareholders'
equity, % 1.6 neg.
Capital employed
at end of period,
EUR million 4 331 4 083
Net interest-bearing
debt at end of period,
EUR million 2 385 2 414
Equity-to-assets ratio
at end of period, % 1) 31.1 27.7
Debt-to-equity ratio
at end of period, % 122.6 144.7
Earnings per share
(excluding extraordinary
items), EUR 0.06 0.15
Earnings per share, EUR 0.06 0.15
Average number of shares
outstanding, in thousands 2) 140 498 137 138
Fully diluted
earnings per share
(excl. extraordinary
items), EUR 0.05 0.15
Fully diluted average
number of shares,
in thousands 2) 141 506 137 093
Shareholders' equity
per share at
end of period, EUR 11.14 11.78
Number of shares
outstanding at end of period,
in thousands 2) 171 111 137 168
Capital expenditure,
EUR million 3) 299 1 403
Depreciation, EUR million 4) 71 62
Average personnel
for the period 21 173 20 886
1) The negative goodwill is netted against assets.
2) The number of own shares repurchased is excluded.
3) The acquisition of AvestaPolarit shares is included.
4) The amortization of negative and positive goodwill is
excluded.
The share-related key figures have been adjusted following to
the rights offering in 2002 based on the pre-emptive
subscription rights of shareholders.
STATEMENT OF CASH FLOWS Jan-Dec Jan-Dec
EUR million 2002 2001
Income financing 450 315
(Increase) decrease
in working capital (100) 32
Other adjustments (16) (1)
Cash provided by
operating activities 334 346
Capital expenditure (2 042) (914)
Other investing activities 73 21
Cash flow before
financing activities (1 635) (547)
Cash provided by
financing activities 1 569 722
Adjustments 7 6
(Decrease) increase
in cash and marketable
securities (59) 181
Jan-Dec Jan-Dec
KEY FIGURES 2002 2001
Operating profit
margin, % 4.8 3.4
Return on capital
employed, % 7.0 6.7
Return on shareholders'
equity, % 8.0 6.9
Capital employed
at end of period,
EUR million 4 331 3 266
Net interest-bearing
debt at end of period,
EUR million 2 385 1 175
Equity-to-assets ratio
at end of period, % 1) 31.1 41.6
Debt-to-equity ratio
at end of period, % 122.6 56.2
Earnings per share
(excluding extraordinary
items), EUR 1.15 0.55
Earnings per share, EUR 1.15 0.55
Average number of shares
outstanding, in thousands 2) 137 658 137 127
Fully diluted
earnings per share
(excl. extraordinary
items), EUR 1.14 0.55
Fully diluted average
number of shares,
in thousands 2) 139 293 138 448
Shareholders' equity
per share at
end of period, EUR 11.14 11.37
Number of shares
outstanding at end of period,
in thousands 2) 171 111 136 278
Capital expenditure,
EUR million 3) 2 042 914
Depreciation, EUR million 4) 264 266
Average personnel
for the period 20 196 19 010
1) The negative goodwill is netted against assets.
2) The number of own shares repurchased is excluded.
3) The acquisition of AvestaPolarit shares is included.
4) The amortization of negative and positive goodwill is
excluded.
The share-related key figures have been adjusted following to
the rights offering in 2002 based on the pre-emptive
subscription rights of shareholders.
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
The acquisition of AvestaPolarit Oyj Abp
Outokumpu Oyj´s holding in AvestaPolarit Oyj Abp increased to
99.8% by December 31, 2002. In the financial statements, the
total acquisition cost amounted to EUR 1 118 million and the
positive goodwill to EUR 561 million. The redemption of the
remaining AvestaPolarit Oyj Abp minority interest will increase
the total acquisition cost approximately to EUR 1 122 million.
The positive goodwill arising from the acquisition will be
amortized in 20 years.
EUR million
Acquisition cost of the
AvestaPolarit minority interest
between July-December 2002 1 118
Acquired minority share 557
Positive goodwill arising from
the acquisition of the AvestaPolarit
minority interest between July-December 2002 1) 561
Goodwill in the balance sheet as per December 31, 2002
Negative net goodwill at
AvestaPolarit as reported (328)
Positive goodwill at
non-ferrous Outokumpu 92
Positive goodwill arising
from the acquisition of the
AvestaPolarit minority interest 1) 533
Total positive goodwill included
in intangible assets 297
Of which allocated to Stainless
Steel 205
Of which allocated to
non-ferrous Outokumpu 92
1) The amortization of goodwill arising from the acquisition of
the AvestaPolarit minority interest amounted to EUR 28 million
in 2002. The amortization amounted to EUR 6 million in the
third quarter and EUR 22 million in the fourth quarter.
Shares and share capital
On December 31, 2002 the total number of Company's shares was
172 516 613 and on January 3, 2003 172 659 119. The share
capital was EUR 293.3 million on December 31, 2002 and EUR
293.5 million on January 3, 2003.
The total number of shares increased to 125 572 211 and the
share capital to EUR 213.5 million on November 29, 2002
following the share subscriptions made under the 1999
convertible bonds to personnel.
On November 14, 2002 the Extraordinary General Meeting of
shareholders authorized the Board of Directors to decide on an
increase of the share capital of the Company through a rights
offering based on the pre-emptive subscription right of
shareholders. Based on the authorization the share capital can
be increased by a maximum of EUR 213 425 310. On November 22,
2002 the Board of Directors decided, based on the above
authorization, to increase the Companys share capital with no
more than EUR 80 047 743.60 through a rights offering based on
the pre-emptive subscription rights of shareholders by issuing
no more than 47 086 908 shares. The new shares issued in the
rights offering represented a maximum of 37.5% of the Companys
shares and votes before the rights offering. Through the rights
offering Outokumpu raised EUR 299 943 604 of new capital. The
fully issued and paid share capital of the Company was
registered with the Finnish Trade Register regarding the
primary subscriptions on December 23, 2002 and regarding the
secondary subscriptions on January 3, 2003.
Bonds relating to the subordinated bond loan were converted
into 1 042 551 shares by December 31, 2002. No 1998 management
option warrants were converted into shares. The number of the
Company's shares may be increased to a maximum of 176 309 298
following the share subscriptions made under the convertible
bonds to personnel and the management option program.
Based on the authorization by the Annual General Meeting of
March 21, 2001 Outokumpu Oyj has by December 31, 2002
repurchased a total number of 1 406 000 of its own shares with
an average price of EUR 9.64 per share and a total price of EUR
13.6 million. The repurchases have taken place between April 9
and November 27, 2001. The total account equivalent value of
the repurchased shares is EUR 2.4 million. Further, this equals
to 0.8% of the share capital and the total voting rights of the
Company.
Authorization of the Board of Directors
The Board of Directors of Outokumpu Oyj has a valid
authorization by the Annual General Meeting of April 8, 2002
to increase the share capital through an issue of new shares,
stock options, option warrants and/or convertible bonds. The
share capital may be increased by no more than EUR 21 199
008.50 and the aggregate maximum number of new shares shall not
exceed 12 470 005 shares. This equals 10% of the share capital
and voting rights registered on April 8, 2002.
The Board of Directors also has a valid authorization to by the
Annual General Meeting of April 8, 2002 to repurchase and
transfer the Company's own shares. Shares may be repurchased
through purchases in public trading on the Helsinki Exchanges
at the market price prevailing at the time of the purchase. The
maximum number of shares to be repurchased is 6 235 002, which
equals 5% of the total number of shares of the Company
registered on April 8, 2002. Own shares can be repurchased for
improving the Company's equity 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.
According to the Board's decision the repurchasing of Company's
own shares may start on April 16, 2002 at the earliest and end
on April 7, 2003 at the latest. By December 31, 2002 no shares
have been repurchased under this authorization.
Oct-Dec Jul-Sep
EUR million 2002 2002
Unusual items
Gain on the sale
of real estate in Espoo 13 -
Refund of actuarial surplus
Outokumpu Oyj 3 -
Other companies 1 -
Refund of pension surplus
from Henki-Sampo, Outokumpu Oyj 2 -
Final settlement on the sale
of Harjavalta nickel refinery - (6)
Write down of
reactors at Kokkola - (4)
Capital gain on
AvestaPolarit Oyj Abp shares - 1
AvestaPolarit's
insurance compensation - -
Restructuring provision
of AvestaPolarit (16) -
Additional amortization of
negative goodwill
of AvestaPolarit 16 -
Gain on the sale
of the Pyhäsalmi mine - -
Gain on the sale of
Sampo Oyj shares - -
Gain on Okmetic Oyj's
directed share issue - -
19 (9)
Income taxes
Current taxes 3 (11)
Deferred taxes 16 (1)
19 (12)
Jan-Dec Jan-Dec
EUR million 2002 2001
Unusual items
Gain on the sale
of real estate in Espoo 13 -
Refund of actuarial surplus
Outokumpu Oyj 3 -
Other companies 1 -
Refund of pension surplus
from Henki-Sampo, Outokumpu Oyj 2 -
Final settlement on the sale
of Harjavalta nickel refinery (6) -
Write down of
reactors at Kokkola (4) -
Capital gain on
AvestaPolarit Oyj Abp shares 14 -
AvestaPolarit's
insurance compensation 20 -
Restructuring provision
of AvestaPolarit (32) (29)
Additional amortization of
negative goodwill
of AvestaPolarit 32 29
Gain on the sale
of the Pyhäsalmi mine 6 -
Gain on the sale of
Sampo Oyj shares - 22
Gain on Okmetic Oyj's
directed share issue - 1
49 23
Income taxes
Current taxes (53) (64)
Deferred taxes 0 45
(53) (19)
Commitments Dec 31 Dec 31
EUR million 2002 2001
Mortgages and pledges
To secure borrowings
of Group companies 119 105
Guarantees
On behalf of
associated companies 7 8
On behalf of other parties 41 19
48 27
Minimum future lease
payments on operating leases 133 131
Open derivative instruments
Carrying Fair value
value
Dec 31 Dec 31
EUR million 2002 2002
Financial derivatives
Forward foreign
exchange contracts 27 27
Currency options
Purchased 3 3
Written 0 0
Currency swaps (4) (5)
Interest rate swaps (1) (2)
Metal derivatives 1)
Forward and futures
copper contracts (2) (2)
Forward and futures
nickel contracts 0 0
Forward and futures
zinc contracts 0 0
Zinc options
Purchased 0 0
Written 0 0
Forward and futures
aluminium contracts 0 0
Forward and futures
gold contracts (1) (1)
Forward and futures
silver contracts 0 0
Electricity derivatives 2)
Traded electricity
forwards and futures - 3
Other financial contracts - 67
1) Contract amounts of base metal derivatives in tonnes and
precious metal derivatives in troy ounce.
2) Contract amounts of electricity derivatives in TWh.
The derivate transactions have been made for hedging purposes.
The fair value of derivatives indicates the result of those
transactions if the deals were closed at the date of the
balance sheet. The realized gains and losses of derivative
instruments are booked in the income statement according to
hedge accounting principle i.e. against the underlying
transaction.
Contract
amounts
Dec 31 Dec 31
EUR million 2002 2001
Financial derivatives
Forward foreign
exchange contracts 1 100 1 230
Currency options
Purchased 60 110
Written 60 110
Currency swaps 60 70
Interest rate swaps 70 30
Metal derivatives 1)
Forward and futures
copper contracts 121 200 62 200
Forward and futures
nickel contracts 2 200 5 600
Forward and futures
zinc contracts 197 300 116 000
Zinc options
Purchased 3 000 6 000
Written 3 000 6 000
Forward and futures
aluminium contracts 1 300 -
Forward and futures
gold contracts 63 400 48 900
Forward and futures
silver contracts 529 300 880 300
Electricity derivatives 2)
Traded electricity
forwards and futures 0.2 0.0
Other financial contracts 4.5 3.5
1) Contract amounts of base metal derivatives in tonnes and
precious metal derivatives in troy ounce.
2) Contract amounts of electricity derivatives in TWh.
The derivate transactions have been made for hedging purposes.
The fair value of derivatives indicates the result of those
transactions if the deals were closed at the date of the
balance sheet. The realized gains and losses of derivative
instruments are booked in the income statement according to
hedge accounting principle i.e. against the underlying
transaction.
METAL MARKET PRICES AND EXCHANGE RATES
Oct-Dec Jul-Sep Change %
Average prices 2002 2002 Q4/Q3 2002
Stainless steel,
market price EUR/kg 1.76 1.82 (3.3)
base price EUR/kg 1.45 1.45 0.0
conversion margin EUR/kg 1.01 1.03 (1.9)
Nickel USD/lb 3.22 3.10 3.9
EUR/kg 7.11 6.95 2.3
Ferrochrome
(Cr-content) USD/lb 0.35 0.32 9.4
EUR/kg 0.77 0.72 6.9
Copper USD/lb 0.70 0.69 1.4
EUR/kg 1.55 1.54 0.6
Zinc USD/lb 0.35 0.35 0.0
EUR/kg 0.77 0.78 (1.3)
EUR/USD average rate 1.00 0.98 2.0
EUR/USD closing rate 1.05 0.99 6.1
Jan-Dec Jan-Dec Change %
Average prices 2002 2001 2002/2001
Stainless steel,
market price EUR/kg 1.72 1.65 4.2
base price EUR/kg 1.41 1.28 10.2
conversion margin EUR/kg 0.97 0.86 12.8
Nickel USD/lb 3.07 2.70 13.7
EUR/kg 7.16 6.64 7.8
Ferrochrome
(Cr-content) USD/lb 0.31 0.32 (3.1)
EUR/kg 0.73 0.79 (7.6)
Copper USD/lb 0.71 0.72 (1.4)
EUR/kg 1.65 1.76 (6.3)
Zinc USD/lb 0.35 0.40 (12.5)
EUR/kg 0.82 0.99 (17.2)
EUR/USD average rate 0.95 0.90 5.6
EUR/USD closing rate 1.05 0.88 19.3
Sources:
Stainless steel: CRU - German conversion margin (2 mm cold
rolled 304 sheet), estimate of prices for deliveries during the
period.
Nickel, copper and zinc: London Metal Exchange (LME) cash
quotations converted into USD/lb and EUR/kg.
Ferrochrome: CRU - US imported high carbon 50-55 % Cr.
DEVELOPMENT OF RECEIVED CONVERSION MARGINS AND
TREATMENT CHARGES
Change, % Change, %
Q4/Q3 2002 2002/2001
Conversion margin of
copper products 1) (3) (4)
Zinc TC 2) (2) (20)
Copper TC/RC 3) 7 (8)
EUR-based development.
1) The average conversion margin of Outokumpu's copper
products. Includes changes in product mix.
2) Includes so-called free zinc.
3) Combined treatment and refining charges.
KEY FINANCIAL
FIGURES BY BUSINESS
AREA
Oct-Dec Jul-Sep Jan-Dec Jan-Dec
EUR million 2002 2002 2002 2 001
Net sales
Stainless Steel 739 671 3 002 2 851
Copper Products 359 348 1 472 1 403
Metallurgy 325 277 1 202 1 207
Other operations 90 63 328 472
Intra-group sales (122) (99) (446) (609)
The Group 1 391 1 260 5 558 5 324
Operating profit
Stainless Steel 6 20 204 139
Copper Products (1) 3 41 45
Metallurgy 14 (3) 20 54
Other operations (8) (19) 18 (53)
Intra-group items 4 5 (16) (2)
The Group 15 6 267 183
Operating capital at
the end of period
Stainless Steel 3 038 2 819 3 038 1 857
Copper Products 838 875 838 837
Metallurgy 513 537 513 587
Other operations 200 150 200 223
Main products Oct-Dec Jul-Sep Jan-Dec Jan-Dec
1 000 tonnes 2002 2002 2002 2001
Stainless Steel
(production) 1)
Coil Products
Steel slabs 435 337 1 594 1 435
- of which Long
Products' share 115 109 501 447
Cold rolling
mill production
- cold rolled 201 178 807 746
- white hot strip 104 75 385 324
Special Products
Ferrochrome 63 59 248 236
Tubes and
tube fittings 19 13 70 57
Quarto plate 25 19 95 61
Long products 2) 53 33 180 167
Precision strip 5 6 21 23
North America
Quarto plate,
bar and tubes 17 17 74 71
Copper Products
(deliveries)
Americas 24 25 98 95
Europe 35 34 145 143
Automotive Heat
Exchangers 21 22 88 88
Appliance Heat
Exchangers & Asia 19 21 90 82
Internal deliveries (1) (2) (6) (6)
Total deliveries 98 100 415 402
Order backlog at the
end of the period 60 60 60 62
Metallurgy
(production)
Zinc 3) 102 94 380 357
Blister copper 43 41 161 169
Cathode copper 31 27 115 115
Mining
(mine production)
Zinc in
concentrates 4), 5) 42 7 49 166
Copper in
concentrates 5) - - - 12
Nickel in
concentrates 6) 1 1 13 26
1) Avesta Sheffield included as of January 23, 2001.
2) Other long products than slabs.
3) Norzink A/S included as of April 1, 2001.
4) Tara put on care and maintenance on November 1, 2001. The
production was resumed in the beginning of September 2002.
5) Pyhäsalmi mine included until December 31, 2001. The mine
was sold to Inmet Mining Corporation on March 19, 2002.
6) Includes the production of Black Swan until June 30, 2002.
The mine was sold to a consortium consisting of Mining Project
Investors and OMG Group on July 1, 2002. Includes the
production of Nikkel og Olivin until October 2002, when the
mine was closed due to depletion of ore.
KEY FINANCIAL INDICATORS BY QUARTER
EUR million I/01 II/01 III/01 IV/01
Net sales
Stainless Steel
Coil Products 517 601 433 502
Special Products 291 396 290 300
North America 62 74 70 63
Others (166) (234) (162) (186)
Stainless Steel total 704 837 631 679
Copper Products
Americas 100 89 80 75
Europe 153 138 117 119
Automotive Heat
Exchangers 73 70 58 65
Appliance Heat
Exchangers & Asia 79 90 62 50
Others (12) 3 (5) (1)
Copper Products total 393 390 312 308
Metallurgy
Zinc 100 131 112 110
Harjavalta Metals 110 110 108 100
Technology 35 72 67 154
Others (1) 0 0 (1)
Metallurgy total 244 313 287 363
Other operations 138 138 93 103
Intra-group sales (176) (161) (143) (129)
The Group 1 303 1 517 1 180 1 324
Operating profit
Stainless Steel
Coil Products 11 41 0 25
Special Products 6 16 2 (14)
North America (1) 0 (1) (3)
Others 16 23 3 15
AvestaPolarit total 32 80 4 23
Amortization of
positive goodwill
Stainless Steel total 32 80 4 23
Copper Products
Americas 0 (1) 0 (9)
Europe 15 7 1 10
Automotive Heat
Exchangers 6 5 2 7
Appliance Heat
Exchangers & Asia 0 6 (2) (2)
Others (1) 3 (1) (1)
Copper Products total 20 20 0 5
Metallurgy
Zinc 11 8 6 8
Harjavalta Metals 5 1 8 1
Technology (7) 0 1 11
Others 0 0 0 1
Metallurgy total 9 9 15 21
Other operations (3) (10) (26) (14)
Intra-group items (4) 1 2 (1)
The Group 54 100 (5) 34
Equity earnings in
associated companies 1 1 0 0
Financial income
and expenses (15) (11) (3) (9)
Profit (loss) before
extraordinary items 40 90 (8) 25
Earnings per share
(excl. extraordinary
items), EUR 0.12 0.29 (0.04) 0.18
EUR million I/02 II/02 III/02 IV/02
Net sales
Stainless Steel
Coil Products 599 628 517 584
Special Products 325 375 299 312
North America 71 72 60 64
Others (226) (252) (205) (221)
Stainless Steel total 769 823 671 739
Copper Products
Americas 90 93 81 76
Europe 142 144 120 120
Automotive Heat
Exchangers 61 74 63 58
Appliance Heat
Exchangers & Asia 73 92 85 101
Others 0 (4) (1) 4
Copper Products total 366 399 348 359
Metallurgy
Zinc 99 120 101 98
Harjavalta Metals 96 103 87 105
Technology 71 114 90 124
Others (1) (2) (1) (2)
Metallurgy total 265 335 277 325
Other operations 87 88 63 90
Intra-group sales (111) (114) (99) (122)
The Group 1 376 1 531 1 260 1 391
Operating profit
Stainless Steel
Coil Products 54 60 16 32
Special Products 9 26 1 (8)
North America 1 3 1 (2)
Others 11 14 8 6
AvestaPolarit total 75 103 26 28
Amortization of
positive goodwill (6) (22)
Stainless Steel total 75 103 20 6
Copper Products
Americas 7 5 1 (2)
Europe 2 6 (2) 0
Automotive Heat
Exchangers 4 7 5 5
Appliance Heat
Exchangers & Asia 5 4 (2) (6)
Others (1) (0) 1 2
Copper Products total 17 22 3 (1)
Metallurgy
Zinc 4 1 (4) 2
Harjavalta Metals 8 (1) 2 5
Technology (8) 5 (1) 8
Others 0 0 (0) (1)
Metallurgy total 4 5 (3) 14
Other operations 2 43 (19) (8)
Intra-group items (3) (22) 5 4
The Group 95 151 6 15
Equity earnings in
associated companies (0) (2) (3) (2)
Financial income
and expenses (11) 10 (21) (25)
Profit (loss) before
extraordinary items 84 159 (18) (12)
Earnings per share
(excl. extraordinary
items), EUR 0.34 0.60 0.15 0.06
