OUTOKUMPU DEFINES STRATEGIC STEPS TOWARDS BECOMING THE UNDISPUTED NUMBER ONE IN STAINLESS
OTUOKUMPU OYJ STOCK EXCHANGE RELEASE JANUARY 11, 2005 AT 3.00 PM
OUTOKUMPU DEFINES STRATEGIC STEPS TOWARDS BECOMING THE UNDISPUTED NUMBER ONE IN STAINLESS Outokumpu announced on August 31, 2004 that the Groups future strategic direction will be based on leadership in stainless steel, and that Outokumpu is looking at various options to exit from its fabricated copper products business. The Board of Directors has now further outlined the new vision for the company, modified financial objectives and decided on a new organizational structure. At the same time, a decision has been made to continue developing the technology business as a part of the Outokumpu Group. The role of the technology business will, however, be more independent and from the Groups perspective the business will be managed through the board work of Outokumpu Technology Oy. New vision statement and key strategic objectives Outokumpu is an international stainless steel and technology company. Outokumpus vision is to be the undisputed number one in stainless, with success based on operational excellence. To this end, Outokumpu has defined two key strategic objectives: Value creation through building superior production and distribution capabilities in all major markets globally and Value realization through production and commercial excellence. The ultimate goal is to secure a significant and sustained increase in shareholder value. Work has been started to detail the path towards the vision. Today the priority is to deliver the promises from the previous strategic phase of growth and transformation in 20002004. At the same time, new ambitions are being set for the coming five-year period to ensure the number one stainless position in Europe. Outokumpus future success will be achieved by building and strengthening operational excellence, both in commercial and production arena. The final step is to multiply operational excellence in other regions to achieve global leadership, i.e., to reach the undisputed number one position globally in stainless in the coming ten years. In the light of Outokumpus target to continue to grow faster than the market, the operational excellence efforts will be supported by further development of the Groups current asset-base, value chain and product offering. Financial objectives modified, dividend policy unchanged The Board of Directors has also approved modified financial objectives reflecting the new vision. Outokumpus overall financial objective is to generate maximum sustainable economic value added. Specific group-level financial objectives aligned with the vision to become the number one in stainless for growth, profitability and financial strength are: - Continue to grow faster than the market - Return on capital employed to be more than 13% and always the best among peers - Gearing to be below 75% Outokumpus dividend policy remains unchanged. The dividend pay-out ratio over a business cycle should be at least one-third of the periods net profit. In its annual dividend proposal, the Board will, in addition to financial results, take into consideration the Groups investment and development needs. Commercial and production operations established as top management roles In order to build and strengthen commercial and production excellence as well as to lead the excellence programs, two new positions, Executive Vice President - Commercial Operations and Executive Vice President - Production Operations, will be established in the Group Executive Committee as of April 1, 2005. For Outokumpu, commercial excellence will be a customer-driven approach to operations. The objective is to become the industry benchmark in managing customer relationships, thus enabling value creation and realization as well as differentiating Outokumpu from its peers. Production excellence, on the other hand, will be a common way of working in order to reduce variances in performance and thus improving safety, enhancing efficiency and productivity and lowering costs at all units. The excellence programs will involve personnel broadly in the effort. The commercial and production excellence programs will be detailed in the coming months and their implementation will start in early April. Management system and business organization trimmed towards operational excellence The new organizational structure, which will be effective as of April 1, 2005, also supports the new vision. The Group Executive Committee focuses on running the stainless business directly, and the roles of functional leaders for commercial and production operations will be essential in driving the operational excellence efforts together with the business units. The stainless business will be organized into two divisions according to product types as well as into a separate Tubular Products business unit (incl. the US pipe operations). The current North America division will be dissolved. The new General Stainless division will comprise three business units: Tornio Works and Ferrochrome, Coil Products Sheffield, and Sheffield Primary Products. The new Specialty Stainless division will consist of four business units: Avesta Works, Thin Strip (Nyby/Kloster and Sheffield Special Strip), Hot Rolled Plate (incl. the US plate operations), and Long Products (incl. the US long products operations). Corporate Management and support functions will be realigned to support the new management system and business organization. In the new structure, Outokumpu Technology will from the Group perspective be managed at arms-length as a stand-alone business through its board work. Until the divestment of the fabricated copper products business is completed, Outokumpu Copper will be managed separately. Both the technology and copper businesses will report to the Deputy CEO. The new external reporting structure, effective in the second-quarter interim report, will be announced in the coming months. Commenting on these strategic changes, CEO Juha Rantanen said: Our vision to become the undisputed number one in stainless with success based on operational excellence is a bold, ambitious and inspiring goal. Our programs on operational excellence mark our move into a new era that offers considerable opportunities for a company such as Outokumpu. I am convinced that these programs will form a sound platform for our future global expansion and they will gradually start to yield significant financial benefits. Outokumpu OYJ Corporate Management Johanna Sintonen Vice President - Investor Relations Tel. +358 9 421 2438, mobile +358 40 530 0778, fax +358 9 421 2125 E-mail: johanna.sintonen@outokumpu.com