OUTOKUMPU?S COMPARATIVE IFRS INFORMATION
OUTOKUMPU OYJ STOCK EXCHANGE RELEASE October 11, 2004 at 4.00 pm
OUTOKUMPUS COMPARATIVE IFRS INFORMATION
The Outokumpu Group is starting to apply International Financial
Reporting Standards (IFRS) in its third-quarter interim report,
which will be published on October 26, 2004. The following
comparative IFRS figures are now published in order to provide
information on the material effects of the adoption of IFRS on the
consolidated income statement and balance sheet. From Outokumpus
point of view, the most significant effects of the transition to
IFRS relate to the treatment of positive and negative goodwill,
pension and inventory accounting, recognition of financial
instruments and presentation of market price gains and losses. The
transition to IFRS does not affect the Groups free cash flow.
Outokumpus date of transition to IFRS is January 1, 2003.
However, for the adoption of IAS 39 (Financial Instruments:
Recognition and Measurement) and IAS 32 (Financial Instruments:
Disclosure and Presentation), the date of transition is January
1, 2004. As for financial instruments, Outokumpu utilizes the
exemption for a first-time adopter of IFRS not to restate
comparative information for 2003. IFRS 2 (Share-based Payment)
will not be applied until January 1, 2005 onwards. Prior to IFRS,
Outokumpus financial reporting was based on Finnish Accounting
Standards (FAS).
The table below shows the main changes to the Group key figures
following the adoption of IFRS.
Jan-Jun Jan-Mar
2004 2004
GROUP KEY FIGURES FAS IFRS FAS IFRS
Operating profit,
EUR million 265 262 133 134
Net profit for the
period, EUR million 197 219 99 124
Earnings per share, EUR 1.09 1.21 0.55 0.69
Shareholders equity at
end of period, EUR million 2 145 2 309 2 082 2 249
Net interest-bearing debt
at end of period, EUR million 2 515 2 496 2 225 2 250
Capital employed at
end of period, EUR million 4 698 4 844 4 344 4 537
Return on
shareholders' equity, % 19.5 20.1 19.8 23.1
Return on capital employed, % 12.2 11.7 12.8 12.4
Equity-to-assets ratio
at end of period, % 31.7 32.8 32.1 33.1
Debt-to-equity ratio
at end of period, % 115.2 106.3 105.0 98.4
Jan-Dec
2003
FAS IFRS
Operating profit,
EUR million 206 220
Net profit for the
period, EUR million 92 116
Earnings per share, EUR 0.54 0.68
Shareholders equity at
end of period, EUR million 1 924 2 058
Net interest-bearing debt
at end of period, EUR million 2 013 2 016
Capital employed at
end of period, EUR million 3 972 4 109
Return on
shareholders' equity, % 4.7 5.7
Return on capital employed, % 5.0 5.2
Equity-to-assets ratio
at end of period, % 32.3 33.1
Debt-to-equity ratio
at end of period, % 102.8 96.3
Adoption of IFRS has had both positive and negative effects on the
Groups operating profit since January 1, 2003. Positives relate
mainly to ceased goodwill amortization and changes in inventory
valuation. The Boliden transaction that took place in December
2003 has been adjusted to comply with IFRS. Consequently, EUR 25
million excess of Outokumpus interest in the net fair value of
the acquired fabrication operations identifiable assets,
liabilities and contingent liabilities over cost has been
recognized in the income statement in December 2003. Also, the
gain from the sale of the mining and smelting assets to Boliden
has increased by EUR 13 million as a result of IFRS adjustments
made to the sold companies financial statements.
As to the negatives, abolishment of negative goodwill amortization
and changes in pension obligations, have had negative effects on
the Groups operating profit. Contrary to previous guidance, the
EUR 36 million provision related to the copper sanitary tubes
cartel fine by the European Commission has, in connection with the
IFRS transition, been recognized already in the December 2003
income statement.
Following the fair value measurement and recognition of financial
instruments under IFRS as of January 1, 2004, both net profit for
the period and earnings per share have improved during January-
June 2004.
At the opening IFRS balance sheet as per January 1, 2003,
Outokumpus shareholders equity has increased by EUR 106 million
due to recognition of negative goodwill in equity, changes in
inventory valuation and decrease in deferred taxes related to the
IFRS adjustments. On the other hand, increases in pension
obligations and provisions have decreased equity and increased
liabilities. The Groups balance sheet structure has strengthened
and the gearing ratio improved significantly as a result of the
IFRS transition.
Attachment 1 presents comparative IFRS information with
explanatory notes for the periods January-June 2004, January-March
2004 and January-December 2003. Attachment 2 presents quarterly
comparable operating profit after the transition to IFRS by
business (i.e. operating profit excluding unusual items and LIFO-
FIFO inventory adjustment of Outokumpu Copper) for management
discussion purposes.
For further information, please contact:
Vesa-Pekka Takala, EVP - Corporate Controller, tel. +358 9 421
4134, vesa-pekka.takala@outokumpu.com
Kari Lassila, SVP - Investor Relations and Economic Research, tel.
+358 9 421 2555, kari.lassila@outokumpu.com
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
www.outokumpu.com
ATTACHMENT 1:
Comparative IFRS information with explanatory notes for the
periods January-June 2004, January-March 2004 and January-December
2003 (Unaudited)
General information
The Outokumpu Group is converting from Finnish Accounting
Standards (FAS) to International Financial Reporting Standards
(IFRS) in its third-quarter 2004 interim report. Outokumpus date
of transition to IFRS is January 1, 2003. However, for the
adoption of IAS 39 (Financial Instruments: Recognition and
Measurement) and IAS 32 (Financial Instruments: Disclosure and
Presentation), the date of transition is January 1, 2004. The
financial statements for 2003 and the first and second quarter
interim reports in 2004 were originally reported in accordance
with FAS.
The purpose of this review is to present the major changes in
accounting principles and effects of the transition to IFRS on
Outokumpus consolidated financial statements. A comprehensive set
of the Outokumpu Groups accounting principles under FAS are
presented in the Annual Report 2003 and the new IFRS accounting
principles will be presented in the Annual Report 2004. Outokumpu
has adopted IFRS 1 (First-time Adoption of IFRS) and used the
exemptions from the requirements of IAS 19 (Employee Benefits),
IFRS 3 (Business Combinations), IAS 39 and IAS 32. From
Outokumpus point of view, the most significant effects of the
transition to IFRS relate to the treatment of positive and
negative goodwill, pension and inventory accounting, recognition
of financial instruments and presentation of market price gains
and losses.
Reconciliations of shareholders equity and net profit for the
period are presented in the following tables.
Reconciliation of shareholders' equity
Dec. 31, Jan. 1,
EUR million 2003 2003
according to FAS 1 924 1 906
Effects of adopting IFRS
Recognition of negative
goodwill in equity 151 190
Reversal of goodwill
amortization 44 -
Restatement of
business combinations 26 -
Inventory valuation 26 28
Pension obligations (96) (128)
Provisions (42) (13)
Deferred taxes on
IFRS adjustments 25 22
Other 0 7
Shareholders' equity
according to IFRS 2 058 2 012
Reconciliation of net profit for the period
Jan- Jan- Jan-
EUR million Jun 2004 Mar 2004 Dec 2003
Net profit for the period
according to FAS 197 99 92
Effects of adopting IFRS
Reversal of goodwill
amortization 18 9 44
Reversal of amortization
of negative goodwill (25) (11) (40)
Restatement of business
combinations - - 26
Inventory valuation 20 11 (1)
Adjustment to the gain
from the Boliden
transaction - - 13
Financial instruments 22 16 -
Change in pension
obligations (3) (1) (1)
Change in provisions - - (29)
Change in deferred
taxes on IFRS adjustments (14) (5) 11
Other 4 6 1
Net profit for the
period according to IFRS 219 124 116
CONSOLIDATED FINANCIAL STATEMENTS
Jan-Jun
2004
Effect of
INCOME STATEMENT transition
EUR million Note FAS to IFRS IFRS
Sales 1,7 3 531 (25) 3 506
Costs and expenses 1,2,3 (3 302) 28 (3 274)
Unusual items 4 16 - 16
Other operating 7
income and expenses 14 0 14
Amortization of positive
and negative goodwill 5 6 (6) -
Operating profit 265 (3) 262
Share of results in
associated companies 22 2 24
Financial income
and expenses 1
Net interest expenses (44) 0 (44)
Market price
gains and losses 3 31 34
Other financial income
and expenses 3 (1) 2
Profit before taxes
and minority interest 249 29 278
Income taxes 6 (48) (7) (55)
Minority interest (4) 0 (4)
Net profit for the period 197 22 219
Jan-Mar
2004
Effect of
transitio
n
EUR million Note FAS to IFRS IFRS
Sales 1,7 1 690 (10) 1 680
Costs and expenses 1,2,3 (1 589) 17 (1 572)
Unusual items 4 17 - 17
Other operating 7
income and expenses 13 (4) 9
Amortization of positive
and negative goodwill 5 2 (2) -
Operating profit 133 1 134
Share of results in
associated companies 15 0 15
Financial income
and expenses 1
Net interest expenses (24) (1) (25)
Market price
gains and losses 6 28 34
Other financial income
and expenses 1 0 1
Profit before taxes
and minority interest 131 28 159
Income taxes 6 (30) (2) (32)
Minority interest (2) (1) (3)
Net profit for the period 99 25 124
Jan-Dec
2003
Effect of
transitio
n
EUR million Note FAS to IFRS IFRS
Sales 1,7 5 921 1 5 922
Costs and expenses 1,2,3 (5 836) (1) (5 837)
Unusual items 4 119 11 130
Other operating 7
income and expenses 6 (1) 5
Amortization of positive
and negative goodwill 5 (4) 4 -
Operating profit 206 14 220
Share of results in
associated companies (15) - (15)
Financial income
and expenses 1
Net interest expenses (98) (1) (99)
Market price
gains and losses (0) (1) (1)
Other financial income
and expenses 7 2 9
Profit before taxes
and minority interest 100 14 114
Income taxes 6 (8) 11 3
Minority interest 0 (1) (1)
Net profit for the period 92 24 116
Jan-Jun
2004
KEY FIGURES FAS IFRS
Operating
profit margin, % 7.5 7.5
Return on capital
employed, % 12.2 11.7
Return on
shareholders' equity, % 19.5 20.1
Capital employed at
end of period, EUR million 4 698 4 844
Net interest-bearing
debt at end of
period, EUR million 2 515 2 496
Equity-to-assets ratio
at end of period, % 31.7 32.8
Debt-to-equity ratio
at end of period, % 115.2 106.3
Earnings per share, EUR 1.09 1.21
Average number of shares
outstanding, in thousands 1) 180 652 180 652
Shareholders' equity per
share at end of period, EUR 11.87 12.77
Number of shares
outstanding at end of period,
in thousands 1) 180 752 180 752
Capital expenditure,
EUR million 249 249
Depreciation, EUR million 125 123
1) The number of own shares repurchased is excluded.
Jan-Mar
2004
FAS IFRS
Operating
profit margin, % 7.9 8.0
Return on capital
employed, % 12.8 12.4
Return on
shareholders' equity, % 19.8 23.1
Capital employed at
end of period, EUR million 4 344 4 537
Net interest-bearing
debt at end of
period, EUR million 2 225 2 250
Equity-to-assets ratio
at end of period, % 32.1 33.1
Debt-to-equity ratio
at end of period, % 105.0 98.4
Earnings per share, EUR 0.55 0.69
Average number of shares
outstanding, in thousands 1) 178 081 178 081
Shareholders' equity per
share at end of period, EUR 11.53 12.46
Number of shares
outstanding at end of period,
in thousands 1) 178 914 178 914
Capital expenditure,
EUR million 156 156
Depreciation, EUR million 60 59
1) The number of own shares repurchased is excluded.
Jan-Dec
2003
FAS IFRS
Operating
profit margin, % 3.5 3.7
Return on capital
employed, % 5.0 5.1
Return on
shareholders' equity, % 4.7 5.7
Capital employed at
end of period, EUR million 3 972 4 109
Net interest-bearing
debt at end of
period, EUR million 2 013 2 016
Equity-to-assets ratio
at end of period, % 32.3 33.1
Debt-to-equity ratio
at end of period, % 102.8 96.3
Earnings per share, EUR 0.54 0.68
Average number of shares
outstanding, in thousands 1) 171 623 171 623
Shareholders' equity per
share at end of period, EUR 10.84 11.60
Number of shares
outstanding at end of period,
in thousands 1) 177 451 177 451
Capital expenditure,
EUR million 622 622
Depreciation, EUR million 307 304
1) The number of own shares repurchased is excluded.
Definitions of key financial indicators
Earnings per share =Net profit for the period
_____________________________
Adjusted average number
of shares during the period
Shareholders'
equity per share =Shareholders' equity
_________________________________
Adjusted number of
shares at the end of period
Return on
shareholders' equity =Profit before taxes and
minority interest income taxes
_________________________________ X 100
Shareholders' equity + minority interest
(averages for period)
Return on capital employed =Operating profit
________________________ x 100
Capital employed
(average for period)
Capital employed =Equity + minority interest
+ net interest-bearing debt
Net interest-bearing debt =Interest-bearing debt
interest-bearing assets
Equity-to-assets ratio =Shareholders'
equity + minority interest
________________________________ x 100
Total assets advances received
Debt-to-equity ratio =Net interest-bearing debt
___________________________ x 100
Shareholders'
equity + minority interest
BALANCE SHEET Jun. 30,
2004
Effect
of
transiti
on
EUR million Note FAS to IFRS IFRS
ASSETS
Non-current assets
Intangible assets 5 392 216 608
Property, plant and 7
equipment 2 708 0 2 708
Long-term
financial assets
Interest-bearing 1,7 612 4 616
Deferred tax assets 6 44 0 44
Other non 2,4,7
interest-bearing 15 (4) 11
3 771 216 3 987
Current assets
Inventories 3 1 587 46 1 633
Receivables
Interest-bearing 1,7 67 28 95
Non interest-bearing 7 1 396 (7) 1 389
Cash and cash 7
equivalents 137 0 137
3 187 67 3 254
Total assets 6 958 283 7 241
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders equity 2 145 164 2 309
Minority interest 38 1 39
Non-current
liabilities
Interest-bearing 1,7 2 039 (5) 2 034
Deferred tax
liabilities 6 253 (4) 249
Pension obligations 2 - 166 166
Provisions 4 - 65 65
Other non 2,4,7
interest-bearing 162 (117) 45
2 454 105 2 559
Current liabilities
Interest-bearing 1,7 1 293 17 1 310
Provisions 4 - 32 32
Other non
interest-bearing 2,4,7 1 028 (36) 992
2 321 13 2 334
Total shareholders
equity and liabilities 6 958 283 7 241
Mar. 31,
2004
Effect
of
transiti
on
EUR million Note FAS to IFRS IFRS
ASSETS
Non-current assets
Intangible assets 5 386 215 601
Property, plant and 7
equipment 2 687 5 2 692
Long-term
financial assets
Interest-bearing 1,7 630 (12) 618
Deferred tax assets 6 47 2 49
Other non 2,4,7
interest-bearing 12 (2) 10
3 762 208 3 970
Current assets
Inventories 3 1 414 50 1 464
Receivables
Interest-bearing 1,7 44 51 95
Non interest-bearing 7 1 302 (12) 1 290
Cash and cash 7
equivalents 171 0 171
2 931 89 3 020
Total assets 6 693 297 6 990
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders equity 2 082 167 2 249
Minority interest 37 1 38
Non-current
liabilities
Interest-bearing 1,7 1 767 4 1 771
Deferred tax
liabilities 6 258 (12) 246
Pension obligations 2 - 164 164
Provisions 4 - 62 62
Other non 2,4,7
interest-bearing 135 (95) 40
2 160 123 2 283
Current liabilities
Interest-bearing 1,7 1 294 69 1 363
Provisions 4 - 37 37
Other non 2,4,7
interest-bearing 1 120 (100) 1 020
2 414 6 2 420
Total shareholders
equity and liabilities 6 693 297 6 990
Dec. 31,
2003
Effect
of
transiti
on
EUR million Note FAS to IFRS IFRS
ASSETS
Non-current assets
Intangible assets 5 380 221 601
Property, plant and 7
equipment 2 665 2 2 667
Long-term
financial assets
Interest-bearing 1,7 490 (10) 480
Deferred tax assets 6 68 1 69
Other non 2,4,7
interest-bearing 13 (2) 11
3 616 212 3 828
Current assets
Inventories 3 1 181 38 1 219
Receivables
Interest-bearing 1,7 68 17 85
Non interest-bearing 7 1 036 (4) 1 032
Cash and cash 7
equivalents 236 (5) 231
2 521 46 2 567
Total assets 6 137 258 6 395
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders equity 1 924 134 2 058
Minority interest 34 1 35
Non-current
liabilities
Interest-bearing 1,7 1 782 (5) 1 777
Deferred tax
liabilities 6 272 (28) 244
Pension obligations 2 - 162 162
Provisions 4 - 67 67
Other non 2,4,7
interest-bearing 112 (65) 47
2 166 131 2 297
Current liabilities
Interest-bearing 1,7 1 016 19 1 035
Provisions 4 - 43 43
Other non 2,4,7
interest-bearing 997 (70) 927
2 013 (8) 2 005
Total shareholders
equity and liabilities 6 137 258 6 395
Jan. 1,
2003
Effect of
transition
EUR million Note FAS to IFRS IFRS
ASSETS
Non-current assets
Intangible assets 5 373 184 557
Property, plant and 7
equipment 3 088 5 3 093
Long-term
financial assets
Interest-bearing 1,7 166 (4) 162
Deferred tax assets 6 82 13 95
Other non 2,4,7
interest-bearing 22 (6) 16
3 731 192 3 923
Current assets
Inventories 3 1 235 39 1 274
Receivables
Interest-bearing 1,7 76 7 83
Non interest-bearing 7 1 059 3 1 062
Cash and cash 7
equivalents 226 (5) 221
2 596 44 2 640
Total assets 6 327 236 6 563
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders equity 1 906 106 2 012
Minority interest 40 3 43
Non-current
liabilities
Interest-bearing 1,7 1 493 (9) 1 484
Deferred tax
liabilities 6 320 (9) 311
Pension obligations 2 - 231 231
Provisions 4 - 44 44
Other non 2,4,7
interest-bearing 147 (116) 31
1 960 141 2 101
Current liabilities
Interest-bearing 1,7 1 352 20 1 372
Provisions 4 - 35 35
Other non 2,4,7
interest-bearing 1 069 (69) 1 000
2 421 (14) 2 407
Total shareholders
equity and liabilities 6 327 236 6 563
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Unregis-
tered Share
Share share premium
EUR million capital capital fund
Shareholders' equity at
December 31, 2002, FAS 293 0 630
Effect of transition to IFRS
Shareholders' equity at
January 1, 2003, IFRS 293 0 630
Transfers from
unregistered share capital 0 (0)
Shares subscribed
with options 1 0 4
Converted bonds 1 2
Share offering 9 45
Outokumpu Oyj shares
owned by associated
companies
Transfer of treasury shares
Change in
translation difference
Dividends paid
Other changes (0)
Net profit for the period
Shareholders' equity at
December 31, 2003, IFRS 304 0 681
Shares subscribed
with options 3 15
Converted bonds 1 3
Cash flow hedges, recorded
in shareholders' equity
Available-for-sale
investments
Change in
translation difference
Transfer of treasury shares
Other changes
Dividends paid
Net profit for the period
Shareholders' equity at
June 30, 2004, IFRS 308 0 699
Fair
value
Other and other
EUR million funds reserves
Shareholders' equity at
December 31, 2002, FAS 15 -
Effect of transition to IFRS
Shareholders' equity at
January 1, 2003, IFRS 15 -
Transfers from
unregistered share capital
Shares subscribed
with options
Converted bonds
Share offering
Outokumpu Oyj shares
owned by associated
companies
Transfer of treasury shares
Change in
translation difference (0)
Dividends paid
Other changes (1)
Net profit for the period
Shareholders' equity at
December 31, 2003, IFRS 14 -
Shares subscribed
with options
Converted bonds
Cash flow hedges, recorded
in shareholders' equity 0
Available-for-sale
investments 7
Change in
translation difference
Transfer of treasury shares
Other changes
Dividends paid
Net profit for the period
Shareholders' equity at
June 30, 2004, IFRS 14 7
Retained
EUR million earnings Total
Shareholders' equity at
December 31, 2002, FAS 968 1 906
Effect of transition to IFRS 106 106
Shareholders' equity at
January 1, 2003, IFRS 1 074 2 012
Transfers from
unregistered share capital 0
Shares subscribed
with options 5
Converted bonds 3
Share offering 54
Outokumpu Oyj shares
owned by associated
companies (26) (26)
Transfer of treasury shares 2 2
Change in
translation difference (43) (43)
Dividends paid (69) (69)
Other changes 5 4
Net profit for the period 116 116
Shareholders' equity at
December 31, 2003, IFRS 1 059 2 058
Shares subscribed
with options 18
Converted bonds 4
Cash flow hedges, recorded
in shareholders' equity 0
Available-for-sale
investments 7
Change in
translation difference 33 33
Transfer of treasury shares 7 7
Dividends paid (36) (36)
Other changes (1) (1)
Net profit for the period 219 219
Shareholders' equity at
June 30, 2004, IFRS 1 281 2 309
Notes
1. Financial instruments
Outokumpu applies the December 2003 versions of IAS 39 (Financial
Instruments: Recognition and Measurement) and IAS 32 (Financial
Instruments: Disclosure and Presentation) as of January 1, 2004.
Outokumpu utilizes the exemption for a first-time adopter of IFRS
not to restate comparative information for 2003. Accordingly,
recognition and measurement of financial instruments and treatment
of cash flow hedges for 2003 are presented according to FAS
principles.
Under FAS, Outokumpus foreign exchange, interest rate and most
metal derivatives were measured at fair value in the balance
sheet, whereas all electricity derivatives and unrealized gains on
certain metal derivatives were presented only in the notes to the
financial statements. Under IFRS and as of January 1, 2004, all
derivative contracts have been reported at fair value under
financial assets and liabilities. Some commercial contracts
include embedded derivatives, which under IFRS have been separated
from their host contracts and are treated as financial
instruments.
Market price gains and losses are caused by changes in currency
and interest rates as well as in metal, electricity and security
prices. After January 1, 2004 market price gains and losses on
financial instruments have been reported under financial items in
the income statement. This has led to reclassification from sales
as well as from costs and expenses to financial items in the
income statement. Presentation of market price gains and losses
under sales or costs and expenses is done only in connection with
effective hedge accounting that meets the requirements of IAS 39.
Under IFRS, receivables and debt are accounted for at amortized
cost using the effective interest rate method. Amortized costs are
included in the calculation of the effective interest rate over
the expected life of the instrument. The costs may include e.g.
fees, premiums or discounts and transaction costs.
Investments in equity instruments, except for investments in
associated companies and joint ventures, are classified as
available-for-sale assets. These investments are measured at fair
value. Unlisted securities, for which the values cannot be
measured reliably, are recognized at cost. Unrealized gains and
losses on available-for-sale assets are recognized directly in
equity. When the investment is sold, the accumulated fair value
adjustment is recognized in income.
Investments in money market instruments and fixed income
securities are classified in financial assets at fair value
through profit and loss.
2. Employee benefits
Outokumpu has various pension plans in accordance with local
practices in the countries where it operates. Under FAS, the
Groups pension liabilities were reported according to local
regulations. In the IFRS financial statements, pension obligations
are treated in accordance with IAS 19 (Employee Benefits).
The Finnish pension scheme (TEL) has been accounted for as a
defined contribution plan under FAS. Under IFRS, the disability
element of TEL is calculated as a defined benefit plan. Outokumpu
has utilized the exemption given in IFRS 1 (First-time Adoption of
IFRS) to recognize the cumulative actuarial gains and losses of
all defined benefit pension plans in the balance sheet at the date
of transition to IFRS. The corridor method under IAS 19 is applied
to actuarial gains and losses arising after the date of
transition.
At the date of transition to IFRS, the Groups pension obligations
have increased by EUR 128 million. The largest increases by
country were as follows: Finland EUR 52 million, the US EUR 33
million, Ireland EUR 26 million, Britain EUR 9 million and Norway
EUR 6 million.
Pension obligations reported under FAS have been reclassified in
the IFRS balance sheet.
3. Inventories
According to IAS 2 (Inventories), inventories are valued using the
first-in-first-out (FIFO) valuation method. Under FAS, Outokumpu
has used FIFO except for Outokumpu Copper, whose raw material
inventories have been valued using the last-in-first-out (LIFO)
valuation method. Under IFRS, all Outokumpu inventories are valued
using the FIFO method. This is likely to result in larger
fluctuations in inventory values and operating results in the
future. At the date of transition to IFRS, the Groups inventory
value has increased by EUR 28 million.
From Outokumpu managements point of view, the FIFO valuation
method results in inaccurate matching of revenues and expenses for
the copper fabrication business and therefore the LIFO valuation
method will, also in the future, be used for Outokumpu Coppers
management reporting purposes.
4. Provisions
As a result of the adoption of IFRS, an environmental provision of
EUR 13 million has been recognized at the date of transition. The
provision relates to the closing of old dumping areas and removal
of problem waste in Tornio. Contrary to previous guidance, the EUR
36 million provision related to the copper sanitary tubes cartel
fine by the European Commission has, in connection with the IFRS
transition, been recognized already in the December 2003 income
statement.
Under FAS, provisions were reported in other non interest-bearing
liabilities.
5. Business combinations
Business combinations before the date of transition to IFRS are
reported as they were recognized under FAS. This is in line with
the exemption given to a first-time adopter not to apply IFRS 3
(Business Combinations) retrospectively to past business
combinations. Acquisitions after January 1, 2003, are recognized
in accordance with IFRS 3. Hence, the EUR 25 million excess of
Outokumpus interest in the net fair value of the acquired Boliden
fabrication operations identifiable assets, liabilities and
contingent liabilities over the acquisition cost has been
recognized in the income statement in December 2003. The
previously recognized goodwill, EUR 50 million, from the
acquisition of the quarto plate business of ThyssenKrupp Nirosta
in February 2003 has been reclassified as intangible asset under
IFRS.
Goodwill is no longer amortized but is instead tested annually for
impairment. Goodwill amortization entries after the date of
transition to IFRS have been reversed. At the IFRS opening balance
sheet the total amount of goodwill is EUR 522 million.
Goodwill has been allocated to the business areas or divisions and
tested for impairment based on their discounted future cash flows.
The cash generating units for goodwill impairment testing have
been defined based on how Outokumpu management monitors the
Groups business operations. Outokumpus cash generating units are
as follows. Outokumpu Stainless: Coil Products, Special Products
and North America; Outokumpu Copper: Americas, Europe, Tube and
Brass, Automotive Heat Exchangers, Appliance Heat Exchangers &
Asia; and Outokumpu Technology.
As a result of impairment tests performed at the date of
transition to IFRS and at the end of 2003, no impairment losses
were recognized.
Under IFRS 3, the concept of negative goodwill is abolished.
Previously recognized negative goodwill has been de-recognized
with a corresponding adjustment to equity at the opening IFRS
balance sheet. Negative goodwill amortization entries after the
date of transition to IFRS have been reversed.
According to IFRS 3, a part of the negative goodwill from the
formation of AvestaPolarit in 2001 has been allocated to the
minority interest, and consequently EUR 154 million of the
negative goodwill has been netted against the goodwill arising
from the acquisition of the AvestaPolarit minority interest in
2002. The rest of the negative goodwill, EUR 190 million, has been
recognized in equity at the date of transition to IFRS.
6. Income taxes
Deferred taxes have been entered in accordance with IAS 12 (Income
Taxes) for IFRS adjustments causing temporary differences.
Consequently deferred taxes are not recognized for items, such as
goodwill and negative goodwill and other permanently tax free or
non-deductible items. The decrease in deferred taxes on IFRS
adjustments at the date of transition amounted to EUR 22 million.
7. Other changes
The other changes relate mainly to the treatment and reporting of
finance leases. The income statement and balance sheet also
include minor reclassifications between account groups.
QUARTERLY INFORMATION ACCORDING TO FAS
FAS FAS FAS
EUR million I/03 II/03 III/03
Sales
Outokumpu Stainless
Coil Products 683 667 626
Special Products 349 327 273
North America 64 59 64
Others (219) (202) (112)
Outokumpu Stainless
total 877 851 851
Outokumpu Copper
Regional businesses 185 173 171
Global businesses 180 191 173
Others 44 38 60
Outokumpu Copper
total 409 402 404
Outokumpu Technology 89 81 98
Zinc 93 95 98
Other operations 63 65 59
Intra-group sales (48) (55) (46)
The Group 1 483 1 439 1 464
Operating profit
Outokumpu Stainless
Coil Products 45 34 1
Special Products 0 2 (8)
North America (1) 0 4
Others 6 (1) 13
Outokumpu Stainless
total 50 35 10
Outokumpu Copper
Regional businesses (3) 1 (1)
Global businesses 5 11 5
Others 2 (3) 0
Outokumpu Copper
total 4 9 4
Outokumpu Technology (9) (3) (1)
Zinc 5 2 4
Other operations (23) (17) 11
Intra-group items 1 (1) 1
The Group 28 25 29
Share of results in
associated companies (3) (3) (4)
Financial income
and expenses (29) (28) (16)
Profit (loss) before taxes
and minority interest (4) (6) 9
Income taxes (1) (5) (9)
Minority interest 0 (1) 1
Net profit (loss)
for the period (5) (12) 1
FAS FAS FAS
EUR million IV/03 I/04 II/04
Sales
Outokumpu Stainless
Coil Products 653 851 897
Special Products 348 363 460
North America 65 78 94
Others (195) (189) (283)
Outokumpu Stainless
total 871 1 103 1 168
Outokumpu Copper
Regional businesses 191 304 326
Global businesses 163 205 246
Others 57 (14) (18)
Outokumpu Copper
total 411 495 554
Outokumpu Technology 137 81 104
Zinc 110 - -
Other operations 74 48 46
Intra-group sales (68) (37) (31)
The Group 1 535 1 690 1 841
Operating profit
Outokumpu Stainless
Coil Products 2 107 93
Special Products 4 7 26
North America 1 5 5
Others 0 5 3
Outokumpu Stainless
total 7 124 127
Outokumpu Copper
Regional businesses (2) 10 2
Global businesses 6 11 5
Others (14) (3) 2
Outokumpu Copper
total (10) 18 9
Outokumpu Technology 11 7 (2)
Zinc 5 - -
Other operations 112 (17) (2)
Intra-group items (1) 1 0
The Group 124 133 132
Share of results in
associated companies (5) 15 7
Financial income
and expenses (18) (17) (21)
Profit (loss) before taxes
and minority interest 101 131 118
Income taxes 7 (30) (18)
Minority interest 0 (2) (2)
Net profit (loss)
for the period 108 99 98
GROUP KEY FIGURES BY
QUARTER
I/03 II/03 III/03
Operating profit
margin, % 1.9 1.8 2.0
Return on capital
employed, % 2.5 2.2 2.4
Return on shareholders'
equity, % neg. neg. 0.6
Capital employed at
end of period,
EUR million 4 528 4 687 4 673
Net interest-bearing debt
at end of period, 2 624 2 873 2 847
EUR million
Equity-to-assets ratio
at end of period, % 29.9 28.3 28.2
Debt-to-equity ratio
at end of period, % 137.8 158.3 155.9
Earnings per share, EUR (0.03) (0.07) 0.01
Average number of shares
outstanding,
in thousands 1) 171 375 171 534 171 719
Shareholders' equity per
share at end
of period, EUR 10.86 10.34 10.42
Number of shares
outstanding at
end of period,
in thousands 1) 171 534 171 540 171 613
Capital expenditure,
EUR million 178 124 116
Depreciation, EUR million 75 75 75
1) The number of own shares repurchased is excluded.
IV/03 I/04 II/04
Operating profit
margin, % 8.1 7.9 7.1
Return on capital
employed, % 11.5 12.8 11.6
Return on shareholders'
equity, % 22.9 19.8 20.9
Capital employed at
end of period,
EUR million 3 972 4 344 4 698
Net interest-bearing debt
at end of period,
EUR million 2 013 2 225 2 515
Equity-to-assets ratio
at end of period, % 32.3 32.1 31.7
Debt-to-equity ratio
at end of period, % 102.8 105.0 115.2
Earnings per share, EUR 0.63 0.55 0.54
Average number of shares
outstanding,
in thousands 1) 172 138 178 081 180 742
Shareholders' equity per
share at end
of period, EUR 10.84 11.53 11.87
Number of shares
outstanding at
end of period,
in thousands 1) 177 451 178 914 180 752
Capital expenditure,
EUR million 204 156 93
Depreciation, EUR million 82 60 65
1) The number of own shares repurchased is excluded.
QUARTERLY INFORMATION ACCORDING TO IFRS
IFRS IFRS IFRS
EUR million I/03 II/03 III/03
Sales
Outokumpu Stainless
Coil Products 704 697 661
Special Products 349 327 273
North America 64 59 64
Others (241) (231) (148)
Outokumpu Stainless
total 876 852 850
Outokumpu Copper
Regional businesses 185 174 172
Global businesses 180 191 172
Others 44 38 61
Outokumpu Copper
total 409 403 405
Outokumpu Technology 89 81 98
Zinc 93 95 98
Other operations 67 61 61
Intra-group sales (51) (53) (48)
The Group 1 483 1 439 1 464
Operating profit
Outokumpu Stainless
Coil Products 45 35 1
Special Products 0 2 (8)
North America 0 0 4
Others 2 (4) 10
Outokumpu Stainless
total 47 33 7
Outokumpu Copper
Regional businesses (2) (1) 2
Global businesses 5 10 4
Others 2 (3) 0
Outokumpu Copper total 5 6 6
Outokumpu Technology (6) (1) 1
Zinc 6 3 5
Other operations (24) (20) 11
Intra-group items 1 0 1
The Group 29 21 31
Share of results in
associated companies (3) (3) (4)
Financial income
and expenses (29) (27) (18)
Profit (loss)
before taxes
and minority interest (3) (9) 9
Income taxes (1) (4) (8)
Minority interest (1) (1) 1
Net profit (loss)
for the period (5) (14) 2
IFRS IFRS IFRS
EUR million IV/03 I/04 II/04
Sales
Outokumpu Stainless
Coil Products 687 849 894
Special Products 348 363 459
North America 65 78 94
Others (228) (188) (285)
Outokumpu Stainless
total 872 1 102 1 162
Outokumpu Copper
Regional businesses 191 304 326
Global businesses 163 204 244
Others 57 (15) (18)
Outokumpu Copper
total 411 493 552
Outokumpu Technology 137 81 104
Zinc 110 - -
Other operations 74 41 39
Intra-group sales (68) (37) (31)
The Group 1 536 1 680 1 826
Operating profit
Outokumpu Stainless
Coil Products 10 102 88
Special Products 5 11 25
North America 1 5 6
Others (4) 2 (1)
Outokumpu Stainless
total 12 120 118
Outokumpu Copper
Regional businesses 2 17 7
Global businesses 6 11 4
Others (23) (4) 0
Outokumpu Copper total (15) 24 11
Outokumpu Technology 12 9 (1)
Zinc 6 - -
Other operations 123 (17) (2)
Intra-group items 1 (2) 2
The Group 139 134 128
Share of results in
associated companies (5) 15 9
Financial income
and expenses (17) 10 (18)
Profit (loss)
before taxes
and minority interest 117 159 119
Income taxes 16 (32) (23)
Minority interest (0) (3) (1)
Net profit (loss)
for the period 133 124 95
GROUP KEY FIGURES BY QUARTER
I/03 II/03 III/03
Operating profit
margin, % 2.0 1.4 2.1
Return on
capital employed, % 2.6 neg. 0.2
shareholders' equity, % neg. neg. 0.4
Capital employed at
end of period, EUR million 4 635 4 792 4 767
Net interest-bearing
debt at end of period,
EUR million 2 624 2 871 2 832
Equity-to-assets ratio
at end of period, % 30.3 28.7 28.8
Debt-to-equity ratio
at end of period, % 130.5 149.5 146.4
Earnings per share, EUR (0.03) (0.08) 0.01
Average number of shares
outstanding, in thousands 1) 171 375 171 534 171 719
Shareholders' equity per
share at end of period, EUR 11.49 10.96 11.05
Number of shares
outstanding at
end of period,
in thousands 1) 171 534 171 540 171 613
Capital expenditure,
EUR million 178 124 116
Depreciation, EUR million 74 75 74
1) The number of own shares repurchased is excluded.
IV/03 I/04 II/04
Operating profit
margin, % 9.1 8.0 7.0
Return on
capital employed, % 2.5 12.4 neg.
shareholders' equity, % 26.5 23.1 16.7
Capital employed at
end of period, EUR million 4 109 4 537 4 844
Net interest-bearing
debt at end of period, 2 016 2 250 2 496
EUR million
Equity-to-assets ratio
at end of period, % 33.1 33.1 32.8
Debt-to-equity ratio
at end of period, % 96.3 98.4 106.3
Earnings per share, EUR 0.77 0.69 0.52
Average number of shares
outstanding, in thousands 1) 172 138 178 081 180 742
Shareholders' equity per
share at end of period, EUR 11.60 12.46 12.77
Number of shares
outstanding at
end of period,
in thousands 1) 177 451 178 914 180 752
Capital expenditure,
EUR million 204 156 93
Depreciation, EUR million 82 59 64
1) The number of own shares repurchased is excluded.
ATTACHMENT 2:
Quarterly comparable operating profit after the transition to IFRS
by business
Comparable operating profit after the IFRS transition
EUR million I/03 II/03 III/03 IV/03
Comparable
operating profit
Stainless 47 33 7 19
Copper 6 11 6 9
Technology (6) (1) 1 12
Zinc 6 3 5 6
Other operations (24) (20) (15) (16)
Intra-group items 1 0 1 1
The Group 30 26 5 31
Items affecting
comparability
LIFO-FIFO inventory
adjustment of
Outokumpu Copper (1) (5) 0 4
Gain on the Boliden
transaction 120
Gain on the sale of Arctic
Platinum Partnership (49%) 26
Gain on the sale
of Inmet shares 10
Gain on the sale of the
precious metal assets 9
Provisions for the copper
tube cartel fines (54)
Provision for the
Panteg closure (7)
Restatement of
business combinations 25
Gain on the sale
of the filter business
(1) (5) 26 108
The Group, official
operating profit, IFRS 29 21 31 139
EUR million 2003 I/04 II/04
Comparable
operating profit
Stainless 106 120 118
Copper 32 13 2
Technology 6 (9) 0
Zinc 20 - -
Other operations (75) (16) (2)
Intra-group items 3 (2) 2
The Group 92 106 120
Items affecting
comparability
LIFO-FIFO inventory
adjustment of
Outokumpu Copper (2) 11 9
Gain on the Boliden
transaction 120 (1)
Gain on the sale of Arctic
Platinum Partnership (49%) 26
Gain on the sale
of Inmet shares 10
Gain on the sale of the
precious metal assets 9
Provisions for the copper
tube cartel fines (54)
Provision for the
Panteg closure (7)
Restatement of
business combinations 26
Gain on the sale
of the filter business 18 (1)
128 28 8
The Group, official
operating profit, IFRS 220 134 128
