Outokumpu's first quarter 2009 - significant operating loss, very strong cash flow

PRESS RELEASE
April 23, 2009 at 9.10 am

Highlights

Operating profit EUR -249 million, underlying operational result some EUR -134 million
Low deliveries and prices due to very weak demand for stainless steel
Very strong operating cash flow EUR 301 million, gearing 32%
 

During the first quarter of 2009 Outokumpu continued to suffer severely from the global economic downturn. Low investment and construction activity and cautious consumer spending have weakened the underlying demand for stainless steel. The distributors and end-users of stainless as well as the entire value chain reduced their inventories heavily. Stainless markets remained oversupplied and all producers continued to cut production.

Outokumpu's deliveries of stainless steel declined by 45% to 247 000 tons in the first quarter compared to the rather normal first quarter of 2008. Prices were under pressure during the whole quarter. Base prices declined on average by 26% and transaction prices, which also include raw material costs, dropped by 38%. All raw material prices were significantly below their year-ago levels, nickel by 64% and ferrochrome by 25% for example. As a result, Outokumpu's sales fell by a remarkable 60% to EUR 679 million in the first quarter.

Due to the very low delivery volumes and low base prices, Outokumpu's underlying operational result was negative at EUR 134 million. Additionally, there were raw material related inventory losses of some EUR 110 million resulting in an operating loss of EUR 249 million. Due to the efficient decrease in inventory levels throughout Outokumpu's whole supply chain and due to lower metal prices, net working capital declined by EUR 555 million. Consequently, operating cash flow was very strong at EUR 301 million and despite heavy losses, gearing improved further to 32%.

Outokumpu's cost saving programmes are proceeding according to plan. Including also the latest actions Outokumpu estimates that total fixed cost savings will be in excess of EUR 100 million in 2009.

Visibility concerning the stainless steel market continues to be short. Outokumpu expects its second-quarter underlying operational loss to be at the same level or slightly smaller than in the first quarter.

CEO Juha Rantanen:

"The stainless markets were exceptionally weak and this is reflected in our loss-making first quarter. This market weakness is a result of both lower end-user demand and heavy de-stocking in the long value chain to end consumers. The de-stocking will certainly come to an end at some point.

In management, our main focus is now on maximizing cash flow by generating profitable sales, by cutting costs, limiting capital expenditure as well as reducing working capital. It is encouraging that these efforts resulted in strong cash flow generation during the first quarter. As the potential for further reductions in working capital is rather limited, increased effort is going into identifying additional cost-saving actions on top of those already being implemented."

This press release is a summary of Outokumpu's official first quarter 2009 report.

For further information, please contact:

Päivi Lindqvist, SVP - Communications and IR
tel. +358 9 421 2432, mobile +358 40 708 5351
paivi.lindqvist@outokumpu.com

Ingela Ulfves, VP - Investor Relations and Financial Communications
tel. +358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com

Esa Lager, CFO
tel +358 9 421 2516
esa.lager@outokumpu.com

News conference and live webcast today at 12.00 pm

The Outokumpu Group will publish the first-quarter 2009 financial results on
Thursday April 23, 2009 at 9.00 am Finnish time.

A combined news conference, conference call and live webcast concerning the first-quarter 2009 results will be held on April 23, 2009 at 12.00 pm Finnish time (11.00 am CET, 5.00 am US EST, 10.00 am UK time) at Hotel Kämp, conference room Akseli Gallen-Kallela, Pohjoisesplanadi 29, 00100 Helsinki, Finland.

To participate via a conference call, please dial in 5-10 minutes before the beginning of the event:

UK +44 20 3043 2436
US & Canada +1 866 458 4087
Sweden +46 8 505 598 53
Password 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/Investors.

An on-demand webcast of the news conference will be available at www.outokumpu.com as of April 23, 2009 at around 6.00 pm.

OUTOKUMPU OYJ
Corporate Management

Ingela Ulfves
Vice President - Investor Relations & Financial Communications
tel. + 358 9 421 2438, mobile +358 40 515 1531
ingela.ulfves@outokumpu.com
www.outokumpu.com