AI assistant
Outokumpu Oyj — Earnings Release 2012
Jul 20, 2012
3234_10-q_2012-07-20_7d72d6a5-ea9c-425a-a5fd-62adfcc78b6c.pdf
Earnings Release
Open in viewerOpens in your device viewer
20 July 2012 at 9.00 am EET
OUTOKUMPU'S SECOND QUARTER 2012 – WEAKER PROFITABILITY, CONTINUED POSITIVE CASH FLOW
Second-quarter 2012 highlights
- Underlying operational result was some EUR -39 million (I/2012: EUR 2 million)
- Operating loss was EUR 80 million (I/2012: profit of EUR 3 million) including raw material-related inventory losses of some EUR 8 million (I/2012: gains of EUR 14 million) and net non-recurring items totalling EUR -33 million (I/2012: EUR -13 million)
- Operating loss excluding non-recurring items was EUR 47 million (I/2012: profit of EUR 15 million)
- Positive operating cash flow of EUR 23 million (I/2012: EUR 116 million)
- Total external deliveries at 402 000 tonnes (I/2012: 418 000 tonnes)
- Divestment of remaining Brass operations and part of the Group's stainless steel stock locations
Group key figures
| II/12 | I/12 | II/11 | 2011 | ||
|---|---|---|---|---|---|
| Sales | EUR million | 1 254 | 1 304 | 1 281 | 5 009 |
| EBITDA | EUR million | -12 | 60 | -4 | 80 |
| Adjusted EBITDA 1) | EUR million | 19 | 59 | 55 | 169 |
| Operating result | EUR million | -80 | 3 | -169 | -260 |
| excluding non-recurring items | EUR million | -47 | 15 | -31 | -109 |
| underlying operational result 2) | EUR million | -39 | 2 | -5 | -66 |
| Result before taxes | EUR million | -130 | 6 | 21 | -253 |
| excluding non-recurring items | EUR million | -97 | 19 | -70 | -318 |
| Net result for the period | EUR million | -122 | 12 | 50 | -186 |
| excluding non-recurring items | EUR million | -89 | 24 | -33 | -244 |
| Earnings per share 3) | EUR | -0.09 | 0.04 | 0.18 | -0.64 |
| excluding non-recurring items 3) | EUR | -0.06 | 0.08 | -0.12 | -0.85 |
| Return on capital employed | % | -8.6 | 0.3 | -16.1 | -6.5 |
| excluding non-recurring items | % | -5.0 | 1.6 | -2.9 | -2.7 |
| Net cash generated from operating activities | EUR million | 23 | 116 | -66 | 338 |
| Capital expenditure | EUR million | 93 | 79 | 50 | 255 |
| Net interest-bearing debt at the end of period 4) | EUR million | 1 691 | 1 644 | 1 885 | 1 720 |
| Debt-to-equity ratio at the end of period 4) | % | 84.8 | 78.4 | 82.0 | 82.5 |
| External deliveries | 1 000 tonnes | 402 | 418 | 365 | 1 449 |
| Stainless steel external deliveries | 1 000 tonnes | 380 | 399 | 348 | 1 391 |
| Stainless steel base price 5) | EUR/tonne | 1 182 | 1 185 | 1 223 | 1 181 |
| Personnel at the end of period | 8 453 | 7 968 | 9 474 | 8 253 | |
| 1) EBITDA excluding raw -material related inventory gains/losses and non-recurring items, unaudited. 2) Operating result excluding raw material-related inventory gains/losses and non-recurring items, unaudited. |
3) Calculated based on the rights-issue-adjusted w eighted average number of shares. Comparative figures adjusted accordingly.
4) 30 June 2012 and 31 March 2012 adjusted to exclude the effect of the rights issue. Debt-to-equity ratio, including the effect of the rights
issue, on 30 June 2012 is 24.1% (31 March 2012: 66.6%).
5) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet). Raw -material related inventory gains or losses
The realised timing gain or loss per tonne of stainless steel is estimated based on the difference betw een the purchase price and invoice price of each metal in EUR per tonne times the average metal content in stainless steel. The unrealised timing impact consists of the change in net realisable value ─ NRV during each quarter. If there is a significant negative change in metal prices during the quarter, inventories are w ritten dow n to NRV at the end of the period to reflect low er expected transaction prices for stainless steel in the future. As this timing impact is expected to be realised in the cash flow of Outokumpu only after the raw material has been sold, it is referred to as being unrealised at the time of the booking.
Outokumpu Oyj
Corporate Management
Riihitontuntie 7 B, P.O. Box 140, FIN-02201 Espoo, Finland Tel. +358 9 4211, Fax +358 9 421 3888, www.outokumpu.com Domicile Espoo, Finland, Business ID 0215254-2, VAT FI02152542
SHORT-TERM OUTLOOK
The economic uncertainty in Europe has increased resulting in shorter visibility for future stainless steel demand with underlying demand expected to be flat or slightly softer. Normal seasonality and the declining nickel price have had an adverse effect on distributors buying behaviour. Lead times for standard grades continue to be normal at 6–8 weeks and distributor inventories are estimated to be at or below normal levels.
Mainly impacted by normal seasonality, Outokumpu's average base prices for stainless steel in the third quarter are expected to be slightly lower than in the second quarter. As a result of the slowdown in demand during the European holiday season and annual maintenance breaks at Group mills, Outokumpu's third-quarter external delivery volumes (stainless and ferrochrome) are expected to be clearly lower than in the second quarter. On the other hand, compared to the second quarter, the Group's product and geographic mix in the third quarter is expected to improve. The production cost increase in the second quarter is expected to be partly reversed in the third quarter.
Outokumpu's underlying operational result*) in the third quarter is therefore expected to be approximately at the same level or slightly weaker than in the second quarter. At current metal prices, marginal raw material-related inventory losses are expected as a result of the decline in the nickel price. Outokumpu's operating result in the third quarter could be impacted by small non-recurring items associated with the Inoxum transaction and the Group's on-going cost-cutting programmes.
*) Underlying operational result=operating result excluding raw material-related inventory gains/losses and non-recurring items.
CEO Mika Seitovirta:
"After a solid start of the year, demand for stainless steel slowed during the second quarter. Economic uncertainty in Europe, a declining nickel price and consequent destocking by distributors all had a negative impact. Even though our average prices were rather stable and our on-going cost reduction programmes had a positive impact, the weaker product mix and lower volumes resulted in unsatisfactory results. Despite our weaker than expected performance we were still able to deliver positive operational cash flow for the fourth consecutive quarter. Our focus in the third quarter will continue to be on customers, cash flow and cost efficiency.
Outokumpu's on-going EUR 100 million cost-saving programme is progressing as planned and its full effects will be visible in Group results from the beginning of 2013. I am also pleased with our progress in reducing levels of working capital. We have released some EUR 650 million of cash from working capital over the last twelve months.
We expect the Inoxum acquisition to be finalised by the end of this year. To ensure that the targeted significant synergy savings are delivered as quickly as possible, preparations for the integration process are already under way. I am confident that the combined entity will be well positioned to deliver excellent service to our customers, while achieving cost-efficiency that enables us to return to sustainable profitability."
The attachments present the Management analysis for the second quarter 2012 operating result and the Interim Review by the Board of Directors for January-June 2012, the accounts and notes to the interim accounts. The report is unaudited.
For further information, please contact:
Ingela Ulfves, Investor Relations tel. +358 9 421 2438, mobile +358 40 515 1531 [email protected]
Saara Tahvanainen - Media Relations tel. +358 9 421 3265, mobile + 358 40 589 0223 [email protected]
News conference and live webcast today at 1.00 pm EET
A combined news conference, conference call and live webcast concerning the second-quarter 2012 financial results will be held on 20 July 2012 at 1.00 pm EET (6.00 am US EST, 11.00 am UK time, 12.00 pm CET) at Hotel Kämp, conference room Akseli Gallen-Kallela (2nd floor), Kluuvikatu 2, 00100 Helsinki.
To participate via a conference call, please dial in 5-10 minutes before the beginning of the event:
| UK | +44 203 043 2436 |
|---|---|
| US & Canada | +1 866 458 4087 |
| Sweden | +46 8 505 598 53 |
| Password | Outokumpu |
The news conference can be viewed live via the Internet. Please find a direct link to the webcast at the end of this announcement.
The 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 as of 20 July 2011 at around 3.00 pm EET at http://www.outokumpu.com/en/Investors/Pages/Webcasts.aspx.
OUTOKUMPU OYJ Corporate Management
MANAGEMENT ANALYSIS – SECOND QUARTER OPERATING RESULT
Group key figures
| EUR million | I/11 | II/11 | I-II/11 | III/11 | IV/11 | 2011 | I/12 | II/12 | I-II/12 |
|---|---|---|---|---|---|---|---|---|---|
| Sales | |||||||||
| General Stainless | 892 | 800 | 1 692 | 770 | 688 | 3 150 | 767 | 757 | 1 523 |
| Specialty Stainless | 597 | 611 | 1 208 | 511 | 497 | 2 216 | 564 | 499 | 1 062 |
| Ferrochrome | 65 | 54 | 119 | 56 | 53 | 228 | 66 | 51 | 117 |
| Other operations | 165 | 172 | 337 | 185 | 180 | 702 | 158 | 164 | 322 |
| Intra-group sales | -349 | -356 | -704 | -290 | -292 | -1 286 | -250 | -216 | -466 |
| The Group | 1 371 | 1 281 | 2 653 | 1 231 | 1 125 | 5 009 | 1 304 | 1 254 | 2 559 |
| EBITDA | 93 | -4 | 89 | 4 | -13 | 80 | 60 | -12 | 48 |
| Adjusted EBITDA 1) | 48 | 55 | 103 | 42 | 24 | 169 | 59 | 19 | 78 |
| Operating result | 33 | -169 | -136 | -53 | -71 | -260 | 3 | -80 | -77 |
| Underlying operational result 2) | -12 | -5 | -17 | -15 | -34 | -66 | 2 | -39 | -37 |
| Non-recurring items in operating result | - | -138 | -138 | - | -13 | -151 | -13 | -33 | -46 |
| 1) EBITDA excluding raw -material related inventory gains/losses and non-recurring items, unaudited. |
|||||||||
| 2) Operating result excluding raw material-related inventory gains/losses and non-recurring items, unaudited. |
External Deliveries
| 1 000 tonnes | I/11 | II/11 | I-II/11 | III/11 | IV/11 | 2011 | I/12 | II/12 | I-II/12 |
|---|---|---|---|---|---|---|---|---|---|
| Cold rolled | 201 | 179 | 380 | 187 | 172 | 740 | 212 | 181 | 393 |
| White hot strip | 85 | 76 | 161 | 76 | 72 | 309 | 94 | 82 | 176 |
| Quarto plate | 28 | 29 | 57 | 26 | 23 | 106 | 26 | 23 | 49 |
| Long products | 18 | 14 | 33 | 15 | 13 | 60 | 16 | 16 | 32 |
| Semi-finished products | 49 | 54 | 103 | 40 | 44 | 187 | 56 | 88 | 144 |
| Stainless steel 3) | 34 | 37 | 71 | 25 | 33 | 129 | 37 | 67 | 104 |
| Ferrochrome | 15 | 17 | 32 | 15 | 11 | 58 | 19 | 21 | 40 |
| Tubular products | 13 | 13 | 26 | 11 | 11 | 48 | 14 | 12 | 25 |
| Total external deliveries | 395 | 365 | 760 | 355 | 334 | 1 449 | 418 | 402 | 819 |
| Stainless steel external deliveries | 380 | 348 | 728 | 340 | 323 | 1 391 | 399 | 380 | 779 |
3) Black hot rolled, slabs, billets and other stainless steel products
Market prices and exchange rates
| I/11 | II/11 | III/11 | IV/11 | 2011 | I/12 | II/12 | ||
|---|---|---|---|---|---|---|---|---|
| Market prices 4) | ||||||||
| Stainless steel | ||||||||
| Base price | EUR/t | 1 215 | 1 223 | 1 150 | 1 137 | 1 181 | 1 185 | 1 182 |
| Alloy surcharge | EUR/t | 1 900 | 1 839 | 1 601 | 1 418 | 1 690 | 1 466 | 1 434 |
| Transaction price | EUR/t | 3 115 | 3 063 | 2 751 | 2 555 | 2 871 | 2 651 | 2 616 |
| Nickel | USD/t | 26 903 | 24 298 | 22 069 | 18 307 | 22 894 | 19 651 | 17 146 |
| EUR/t | 19 666 | 16 884 | 15 614 | 13 582 | 16 440 | 14 991 | 13 385 | |
| Ferrochrome (Cr-content) | USD/lb | 1.25 | 1.35 | 1.20 | 1.20 | 1.25 | 1.15 | 1.35 |
| EUR/kg | 2.01 | 2.07 | 1.88 | 1.96 | 1.98 | 1.93 | 2.32 | |
| Molybdenum | USD/lb | 17.43 | 16.70 | 14.61 | 13.41 | 15.53 | 14.26 | 13.80 |
| EUR/kg | 28.08 | 25.58 | 22.86 | 21.94 | 24.62 | 23.97 | 23.72 | |
| Recycled steel | USD/t | 447 | 432 | 439 | 402 | 430 | 414 | 394 |
| EUR/t | 327 | 300 | 311 | 298 | 309 | 316 | 308 | |
| Exchange rates | ||||||||
| EUR/USD | 1.368 | 1.439 | 1.413 | 1.348 | 1.392 | 1.311 | 1.281 | |
| EUR/SEK | 8.864 | 9.015 | 9.145 | 9.091 | 9.030 | 8.853 | 8.913 | |
| EUR/GBP | 0.854 | 0.883 | 0.878 | 0.857 | 0.868 | 0.835 | 0.810 |
4) Sources of market prices:
Stainless steel: CRU - German base price, alloy surcharge and transaction price (2 mm cold rolled 304 sheet), estimates for deliveries during the period;
Nickel: London Metal Exchange (LME) settlement quotation; Ferrochrome: Metal Bulletin - Quarterly contract price, Ferrochrome lumpy chrome charge, basis 52% chrome; Molybdenum: Metal Bulletin - Molybdenum oxide - Europe; Recycled steel: Metal Bulletin - Steel scrap HMS 1&2 fob Rotterdam
Stainless steel markets
Markets for stainless steel softened during the second quarter as the summer season approached and were characterised by destocking activity among distributors, primarily driven by the decline in the nickel price. Towards the end of the second quarter, economic uncertainty in Europe increased. Compared to the first quarter, apparent consumption of flat products in the second quarter is estimated to have decreased by 1% globally and by 9% in Europe. In China, apparent consumption was down by 2%.
According to CRU, the average base price for 2mm cold rolled 304 stainless steel sheet in Germany was 1 182 EUR/tonne in the second quarter (I/2012: 1 185 EUR/tonne) and the alloy surcharge declined to 1 434 EUR/tonne (I/2012: 1 466 EUR/tonne). The average transaction price during the second quarter decreased to 2 616 EUR/tonne (I/2012: 2 651 EUR/tonne). Compared to the first quarter, the differential between Chinese and European transaction prices narrowed somewhat in the second quarter. (CRU)
The average nickel price in the second quarter was 17 146 USD/tonne (I/2012: 19 651 USD/tonne), 13% lower than in the first quarter. The quarterly contract price for ferrochrome in the second quarter was 1.35 USD/lb (I/2012: 1.15 USD/lb) and was settled at 1.25 USD/lb for the third quarter of 2012. The price of molybdenum in the second quarter averaged 13.80 USD/lb (I/2012: 14.26 USD/lb) and the price of recycled steel averaged 394 USD/tonne (I/2012: 414 USD/tonne) in the second quarter.
Negative underlying operational result, positive cash flow
Group sales in the second quarter totalled EUR 1 254 million (I/2012: EUR 1 304 million), 4% down on the first quarter. Outokumpu's external deliveries declined by 4% to 402 000 tonnes (I/2012: 418 000 tonnes) of which stainless steel deliveries totalled 380 000 tonnes (I/2012: 399 000 tonnes) and ferrochrome deliveries totalled 21 000 tonnes (I/2012: 19 000 tonnes).
Outokumpu's underlying operational result in the second quarter was EUR -39 million (I/2012: EUR 2 million). Weaker profitability resulted from a weaker product and geographic mix, higher production costs and slightly lower delivery volumes of stainless steel. Ramping up production at the new concentration plant in Kemi in connection with the Group's on-going ferrochrome investment project also had a negative impact on profitability. Outokumpu's operating loss in the second quarter totalled EUR 80 million (I/2012: profit of EUR 3 million) and included some EUR 8 million of raw materialrelated inventory losses resulting from lower metal prices (I/2012: EUR 14 million gains) as well as EUR -33 million of non-recurring items (I/2012: EUR -13 million). Non-recurring items incurred in the second quarter of 2012 consist of losses totalling EUR 18 million from the divestment of the Outokumpu's Brass operations, EUR 5 million of costs connected with the Inoxum acquisition and impairments totalling EUR 10 million from the Group's divestment of stock locations. Excluding nonrecurring items, the Group's operating loss in the second quarter totalled EUR 47 million (I/2012: profit of EUR 15 million).
Outokumpu's average base prices for all flat products realised in the second quarter were approximately 20 EUR/tonne higher than in the first quarter 2012, and below the base prices reported by CRU for German 304 sheet.
Net financial income and expenses in the second quarter totalled EUR -50 million (I/2012: EUR 4 million). This figure includes a negative impact of EUR 34 million (I/2012: EUR 20 million positive) resulting from the fair valuation of Outokumpu's remaining 16% stake in Talvivaara Sotkamo Ltd - a consequence of the decrease in the share price of Talvivaara Mining Company Plc in the second quarter.
Group net loss in the second quarter totalled EUR 122 million (I/2012: profit of EUR 12 million) and earnings per share totalled EUR -0.09 (I/2012: EUR 0.04). Excluding non-recurring items, earnings per share totalled EUR -0.06 (I/2012: EUR 0.08). Return on capital employed in the second quarter was - 8.6% (I/2012: 0.3%). Excluding non-recurring items, return on capital employed was -5.0% (I/2012: 1.6%).
Net cash from operating activities in the second quarter totalled EUR 23 million (I/2012: EUR 116 million) and remained positive for the fourth consecutive quarter. The main contributor to positive cash flow was reduced levels of working capital. A total of EUR 74 million was released from working capital in the second quarter (I/2012: EUR 87 million).
Excluding proceeds from the rights offering, Outokumpu's gearing was 84.8% (I/2012: 78.4%) at the end of the second quarter, above Outokumpu's maximum target level of 75%. Excluding proceeds from the rights offering, net interest-bearing debt increased to EUR 1 691 million (I/2012: EUR 1 644 million). The remaining EUR 827 million of net proceeds from the EUR 1 billion rights offering conducted in March-April 2012 were booked in the second quarter (I/2012: EUR 148 million). Including proceeds from the rights offering, gearing was 24.1% at the end of the second quarter. Costs of EUR 29 million (I/2012: EUR 2 million) connected with the rights offering were booked to equity in the second quarter.
Capital expenditure and investment projects
Capital expenditure in the second quarter totalled EUR 93 million (I/2012: EUR 79 million) with the majority of costs being connected with the Group's project to expand ferrochrome production capacity at Tornio in Finland. The ferrochrome expansion project proceeded as planned and on budget in the second quarter. In addition to continued construction and installation work, production at the new concentration plant in Kemi was ramped up and the former concentration plant was closed. Raw material from existing inventories was used in the Group's ferrochrome production in the second quarter. Completion of the ramp-up of production at Kemi is expected in the third quarter.
Turnaround of loss-making units is progressing as planned
Actions to return Outokumpu's thin and precision strip mill in Kloster in Sweden to sustainable profitability continued in the second quarter. The Kloster thin strip mill operated at lower production levels with a focus on optimising both the product mix and material flows, as well as on achieving reduced cost levels. Further price increases were implemented in the second quarter. The operating loss at the Kloster thin strip unit in the second quarter totalled EUR 2 million (I/2012: EUR -2 million).
Restructuring actions at OSTP (the Outokumpu tubular operations' joint venture) continued in the second quarter. Cost savings will have a gradual impact throughout 2012 with full effect expected from the beginning of 2013. Restructuring measures, reduced overhead costs and increased sales all contributed to OSTP achieving a break-even operating profit of EUR 0 million (I/2012: EUR 2 million) in the second quarter.
On-going cost-cutting and working capital reduction programmes
Initiated in October 2011, actions to reach sustainable profitability, improve cash generation and strengthen the balance sheet continue to be implemented. Compared to the situation in June 2011, Group targets include reducing annual costs by EUR 100 million by the end of 2012 (the P100 costsavings programme) and reducing the amount of working capital tied up in inventories by EUR 250 million by mid-2013 (the P250 working capital reduction programme) with focus also on accounts payables and accounts receivables.
Further progress in the cost-reduction programme was achieved in the second quarter as planned.
In June, statutory negotiations were initiated within General Stainless, in certain functions at Tornio in Finland and at the Group's Terneuzen unit in The Netherlands. Finalisation of these measures is expected in September 2012.
In June, Outokumpu sold its brass-rod plant in Drünen in The Netherlands, the last of the Group's brass operations. Both the consideration received and the impact on cash flow resulting from this transaction were marginal and a loss of approximately EUR 18 million was booked in the Group's second quarter accounts.
The P100 cost-savings are showing a gradual impact throughout the year 2012 with full effects expected from the beginning of 2013. Actions already taken and on-going negotiations are expected to result in a reduction of 1 100–1 300 jobs in global terms by the end of 2012.
The P250 working capital reduction programme is progressing extremely well. The target of reducing inventory days in the Group's supply chain to a figure close to 90 days was achieved already in the first quarter of 2012 and maintained in the second quarter. For comparison, the corresponding figure in June 2011 was some 110 days. Outokumpu's target is to maintain the reduced level of inventory days. More than EUR 400 million of cash has been released from inventory-related working capital during the last twelve months and some EUR 650 million of cash has been released from working capital when including accounts payables and accounts receivables.
An agreement to divest part of the Group's stock operations in Europe was signed in July. Further details can be found in the section titled "Outokumpu divests part of its European stock operations" in the "Events after the end of the review period" section of this interim report.
EUR 1 billion rights offering successfully completed
In March-April, Outokumpu successfully conducted a fully-underwritten rights offering as part of the consideration to be paid to ThyssenKrupp for Inoxum. Total gross proceeds amounted to approximately EUR 1 006 million. The subscription price was EUR 0.79 per share with every old share entitling the holder to subscribe for seven new shares. The subscription period ran from 15 March to 4 April 2012. The rights offering was oversubscribed by 22% and a total of 1 274 020 027 new shares were issued. No underwriting was utilised as the rights offering was oversubscribed. Following the rights offering, the total number of Outokumpu shares is 1 457 038 776.
New EUR 400 million revolving credit facility signed
In April, Outokumpu signed a EUR 400 million committed multicurrency revolving credit facility to cover the Group's working capital requirements. Available after completion of the Inoxum acquisition, this credit facility matures in June 2013 and includes a financial covenant based on gearing at a level of 115%. Following issuance of a EUR 150 million bond in June 2012, the amount of this revolving credit facility was reduced to EUR 250 million.
EUR 150 million 4-year bond issued
In June, a EUR 150 million 4-year bond with an annual coupon of 5.875% was issued by Outokumpu and listed on the NASDAQ OMX Helsinki exchange. This bond offering extends the maturity profile of the Group's loan portfolio and expands Outokumpu's investor base. The proceeds were used for refinancing and general corporate purposes.
Outokumpu's acquisition of Inoxum is waiting for regulatory approval
Filing to the European Commission for regulatory approval of the Inoxum acquisition was made in April and, as expected, the approval process entered into Phase II at the end of May. The review period was extended by 20 days in June. Outokumpu expects to receive regulatory approval for the transaction by the end of 2012.
Events after the end of the review period
Outokumpu divests part of its European stock operations
In July, Outokumpu signed an agreement with Amari, a privately-owned group of companies focusing on multi-metal distribution, to sell 10 of its stainless steel stock operations in nine countries to Amari, thereby halving the number of the Group's own stock locations. Approximately 100 Outokumpu employees will transfer to Amari in conjunction with the transaction.
Subject to approval by the Outokumpu Board and the customary closing conditions, completion of this sale transaction is expected during the third quarter of 2012. Depending on the inventory value at the closing of the transaction, the cash consideration of the transaction is expected to be EUR 15-20 million. Related to the divestment, Outokumpu booked a non-recurring impairment of EUR 10 million in the Group's second quarter accounts.
INTERIM REVIEW BY THE BOARD OF DIRECTORS – JANUARY-JUNE 2012
Stainless steel markets
Demand for stainless steel improved during the first quarter of the year supported by restocking among distributors, but softened during the second quarter as distributors were destocking as a result of the decreasing nickel price and approaching summer season. Compared to the first half of 2011, apparent global consumption of stainless steel in the first half of 2012 is estimated to have been up by 2%, mainly driven by growth in consumption of 6% in China. Consumption in Europe is estimated to have been down by 8% reflecting the economic uncertainty in Europe. In the first half of 2012, the average base price for 2mm cold rolled 304 stainless steel sheet in Germany was 1 184 EUR/tonne (I-II/2011: 1 219 EUR/tonne). The average transaction price during the review period was 2 634 EUR/tonne (I-II/2011: 3 089 EUR/tonne). (CRU)
Prices for all alloying elements during January–June 2012 were clearly lower than in the corresponding period in 2011. The nickel price averaged 18 438 USD/tonne in the first half of 2012 (I-II/2011: 25 600 USD/tonne), 28% lower than in the corresponding period in the previous year. The quarterly contract price for ferrochrome in the first half of 2012 averaged 1.25 USD/lb (I-II/2011: 1.30 USD/lb), the average price of molybdenum was 14.04 USD/lb (I-II/2011: 17.06 USD/lb) and the price of recycled steel was 404 USD/tonne (I-II/2011: 439 USD/tonne).
Underlying profitability weakened
Compared to the first six months of 2011, Group sales in the first half of 2012 were down by 4% to EUR 2 559 million (I-II/2011: EUR 2 653 million) mainly impacted by lower transaction prices. Total external deliveries in the first half of 2012 were up by 8% and totalled 819 000 tonnes (I-II/2011: 760 000 tonnes). Stainless steel deliveries totalled 779 000 tonnes (I-II/2011: 728 000 tonnes), up by 7%.
Underlying operational result in the first half of 2012 weakened and totalled EUR -37 million (I-II/2011: EUR -17 million) compared to the first half of 2011. This lower level of profitability was primarily a result of lower base prices, a weaker product and geographic mix and weaker profitability in the Group's ferrochrome operations while lower cost levels and higher delivery volumes had a positive impact. Group operating loss was EUR 77 million (I-II/2011: EUR -136 million) and include some EUR 6 million of raw material-related inventory gains (I-II/2011: gains of some EUR 19 million) as well as EUR -46 million of non-recurring items (I-II/2011: EUR -138 million). Non-recurring items in the first half of 2012 include EUR 17 million of costs connected with the Inoxum acquisition, EUR 18 million of losses associated with the divestment of Outokumpu's Brass operations and impairments of EUR 10 million from the divestment of stock locations. Non-recurring items in the first half of 2011 totalled EUR -138 million and included impairments of EUR 125 million related to the Kloster thin strip and OSTP operations and EUR 13 million of restructuring provisions. Excluding non-recurring items, operating loss totalled EUR 31 million (I-II/2011: profit of EUR 2 million).
Net financial income and expenses in the first half of 2012 totalled EUR -46 million (I-II/2011: EUR 176 million). This figure includes the negative impact of EUR 14 million resulting from fair valuation of Outokumpu's remaining 16% stake in Talvivaara Sotkamo Ltd as a result of the decline in the Talvivaara share price in the first half of 2012. In June 2011, Outokumpu granted an option to Talvivaara Mining Company Plc to purchase the Group's remaining 16% stake. The option was not taken up and expired at the end of the first quarter of 2012. Loss before taxes totalled EUR 123 million (I-II/2011: profit of EUR 38 million).
Net loss for the review period totalled EUR 110 million (I-II/2011: profit of EUR 66 million) and earnings per share totalled EUR -0.13 (I-II/2011: EUR 0.24). Return on capital employed in the first six months of 2012 was -4.1% (I-II/2011: -6.5%).
Operating cash flow
Net cash generated from operating activities in the first six months was positive at EUR 139 million (I-II/2011: EUR -76 million). Excluding proceeds from the rights offering, net interest-bearing debt at the end of June 2012 totalled EUR 1 691 million, a reduction of EUR 194 million compared to the end of the first half 2011 (30 June 2011: EUR 1 885 million). Outokumpu's gearing, excluding the proceeds from the rights offering, was 84.8 % on 30 June 2012 (30 June 2011: 82.0%), above the Group's target maximum of 75%. Net proceeds totalling EUR 975 million from the EUR 1 billion rights offering conducted in March-April were booked in the first half of 2012. Costs of EUR 31 million connected with the rights offering were booked in equity. Including proceeds from the rights offering, Outokumpu's gearing on 30 June 2012 was 24.1%.
Capital expenditure and investment projects
In addition to annual maintenance capital expenditure, on-going major investment projects are: the expansion of ferrochrome production at Kemi and Tornio in Finland and increased quarto plate production capability and capacity at Degerfors in Sweden.
Capital expenditure by Outokumpu in the first half of 2012 totalled EUR 172 million (I-II/2011: EUR 92 million) with the majority of costs associated with the Group's project to expand ferrochrome production capacity at Tornio in Finland. In 2012, Outokumpu's capital expenditure including maintenance investments is expected to total approximately EUR 300 million.
Both the ferrochrome expansion project and the quarto plate investment progressed as planned and on budget in the first half of 2012. In addition to continued construction and installation work in connection with the expansion of ferrochrome production capacity, the former concentration plant in Kemi was closed and production of the new concentration plant was ramped up.
On-going cost-cutting and working capital reduction programmes
Initiated in October 2011, actions to reach sustainable profitability, improve cash generation and strengthen the balance sheet continue to be implemented. Compared to the situation in June 2011, the Group's targets are to cut annual costs by EUR 100 million by the end of 2012 (P100) and to reduce the amount of working capital tied up in inventories by EUR 250 million by mid-2013 (P250) with focus also on accounts payables and accounts receivables.
Further progress in the cost-cutting programme was achieved in the first half of 2012. Measures taken include a reduction of production shifts, streamlining of Outokumpu's organisation, divestment of part of the Group's stock locations and the outsourcing of some support functions. P100 cost savings are showing a gradual impact throughout the year 2012 with full effects expected from the beginning of 2013. Compared to the situation in June 2011, actions already taken and on-going negotiations are expected to result in a reduction of 1 100–1 300 jobs in global terms by the end of 2012.
In June, Outokumpu sold its brass rod plant in Drünen in The Netherlands. The Group has now divested all of its brass operations.
Outokumpu's P250 programme aiming to reduce the levels of working capital is progressing extremely well. The target of reducing inventory days in the Group's supply chain to a figure close to 90 days was
achieved already in the first quarter of 2012 and maintained in the second quarter. For comparison, the corresponding figure in June 2011 was some 110 days. Outokumpu's target is to maintain the reduced level of inventory days. More than EUR 400 million of cash has been released from inventory-related working capital during the last twelve months and some EUR 650 million of cash has been released from working capital when including accounts payables and receivables.
An agreement to divest part of the Group's stock operations in Europe was signed in July. Further details can be found in the section titled "Outokumpu divests part of its European stock operations" in the "Events after the end of the review period" section of this interim report.
Outokumpu and ThyssenKrupp to combine their stainless steel operations
In January, the proposed combination of Outokumpu and Inoxum was approved by Outokumpu's Board of Directors. Operating under the Outokumpu name, the company will be a new global leader in stainless steel with annualised sales totalling approximately EUR 11.6 billion, around 19 000 employees, annual cold rolling capacity totalling approximately 3.5 million tonnes and a global market share of 14%. Based on initial estimates, the transaction is expected to yield significant cost synergy savings of approximately EUR 225-250 million by 2017, with approximately half the related savings being achieved already by the end of 2014.
The consideration for Inoxum comprises a cash payment, certain Inoxum liabilities, a loan note issued to ThyssenKrupp and new shares to be issued to ThyssenKrupp. ThyssenKrupp will hold a 29.9% stake in Outokumpu following a directed share issue at the closing of the transaction.
Filing to the European Commission for regulatory approval of the Inoxum acquisition was made in April and, as expected, the approval process entered into Phase II at the end of May. The review period was extended by 20 days in June. Outokumpu expects to receive regulatory approval for the transaction by the end of 2012.
As Outokumpu and Inoxum have product offerings that are highly complementary, the combination will have a well-balanced, global customer base covering all key end-use segments in the stainless steel sector. The combination will also enable the strategic optimisation of production capacities, production locations and supply routes, allowing for higher utilisation rates at the three primary integrated production facilities in which the focus is on standard stainless steel grades: Tornio in Finland, Terni in Italy and Calvert in Alabama, USA. Plans call for a reduction of approximately 1.4 million tonnes of melting capacity in Germany through closure of the Krefeld melt shop in 2013 and the Bochum melt shop in 2016 (pending specific reviews in 2015). The new Outokumpu will also focus on special stainless products and grades such as duplex grades, quarto plate and long products, and also on high performance alloys incorporating nickel, titanium and zirconium nickel.
The combination of Outokumpu and Inoxum will also allow the new Outokumpu to take full advantage of several opportunities for future growth:
- The on-going doubling of the Group's ferrochrome production capacity in Tornio in Finland,
- Expansion of business in the Americas based on ramping up the integrated and cost-competitive stainless steel production facility in Alabama, USA,
- Investment in cold rolling and high-quality ferritic grades in Krefeld, Germany,
- Expansion in the High Performance Alloys operations,
- Expansion of capacity and capability in quarto plate operations at Degerfors in Sweden,
- An expanded presence in the rapidly-growing Asian markets.
Plans for the new Outokumpu Leadership Team
In April, Outokumpu announced preliminary plans concerning the new Outokumpu Leadership Team. These plans will take effect after regulatory approval for the combination of Outokumpu and Inoxum has been received and the transaction has been closed.
The proposed new Outokumpu Leadership Team would include the following individuals:
- Mika Seitovirta, CEO
- Esa Lager, CFO
- Ulrich Albrecht-Früh, Head of Stainless Coil EMEA
- Kari Parvento, Head of Stainless Coil Americas and head of Ferrochrome
- Jarmo Tonteri, Head of Specialty Stainless and Alloys
- Austin Lu, Head of Stainless Asia
- Reinhard Florey, Head of Strategy and Integration
- Kari Tuutti, Head of Marketing, Communications and IR
- Head of HR (to be nominated later)
Until completion of the transaction, Outokumpu and Inoxum will continue to operate as separate and independent business operations. The current Outokumpu Group Executive Committee members continue to operate with full authority in their current roles.
Extraordinary General Meeting in March 2012
In connection with the Inoxum acquisition, an Extraordinary General Meeting (EGM) was held in Helsinki on 1 March 2012. The EGM authorised the Board of Directors to decide on both a share issue and a directed share issue.
The EGM authorised the Board of Directors to decide to issue a maximum of 5 000 000 000 new shares through a share issue pursuant to shareholders' pre-emptive subscription right. Based on the authorisation, a EUR 1 billion rights offering was conducted and successfully completed in March-April 2012. The rights offering was oversubscribed by 22%.
The EGM also authorised the Board of Directors to decide on a directed share issue to ThyssenKrupp AG. Pursuant to this authorisation, the Board of Directors is entitled to decide on the issuance of a maximum of 2 200 000 000 new shares in a manner such that ThyssenKrupp AG, or its order, is entitled to subscribe for new shares in deviation from shareholders' pre-emptive subscription right. ThyssenKrupp AG will consequently hold a maximum of 29.9% of Outokumpu's issued and outstanding shares after completion of the directed share issue. The authorisation for the directed share issue remains in force until 31 December 2013 and does not revoke the share issue authorisation in connection with the rights offering.
EUR 1 billion rights offering successfully completed
In March-April, Outokumpu successfully conducted a fully underwritten rights offering as part of the consideration to be paid to ThyssenKrupp for Inoxum. Total gross proceeds amounted to approximately EUR 1 006 million. The subscription price was EUR 0.79 per share with every old share entitling the holder to subscribe for seven new shares. The subscription period ran from 15 March to 4 April 2012. The rights offering was oversubscribed by 22% and a total of 1 274 020 027 new shares were issued. No underwriting was utilised as the rights offering was oversubscribed. Following the rights offering, the total number of Outokumpu shares is 1 457 038 776.
New EUR 400 million revolving credit facility signed
In April, Outokumpu signed a EUR 400 million committed multicurrency revolving credit facility to cover the Group's working capital requirements. Available after completion of the Inoxum acquisition, this credit facility matures in June 2013 and includes a financial covenant based on gearing at a level of 115%. Following issuance of a EUR 150 million bond in June 2012, the amount of this revolving credit facility was reduced to EUR 250 million.
EUR 150 million 4-year bond issued
In June, a EUR 150 million 4-year bond with an annual coupon of 5.875% was issued by Outokumpu and listed on the NASDAQ OMX Helsinki exchange. This bond offering extends the maturity profile of the Group's loan portfolio and expands Outokumpu's investor base. The proceeds were used for refinancing and general corporate purposes.
People and the environment
Outokumpu's personnel headcount totalled 8 453 at the end of June 2012 (30 June 2011: 9 474) and averaged 8 121 during the first half of 2012 (I-II/2011: 8 724). The increase in the number of personnel was primarily a result of employing summer trainees. Excluding these summer trainees, the Group's personnel headcount totalled 7 656 at the end of June 2012 (30 June 2011: 8 524).
Lost-time injury rate (i.e. lost-time accidents per million working hours) in the second quarter improved to 5.1 and was 6.7 (I-II/2011: 5.1) in the first half of 2012, and did not meet the Group's 2012 target of less than 4.0. No severe accidents occurred in the first half of 2012.
Emissions to air and discharges to water remained within permitted limits and the breaches that occurred were temporary, were identified and caused only minimal environmental impact. Outokumpu is not a party in any significant juridical or administrative proceedings concerning environmental issues, nor is it aware of any realised environmental risks that could have an adverse material effect on the Group's financial position.
Emissions trading activities have been conducted in accordance with obligations, agreed procedures and the Group's financial risk policy. Emissions under the EU Emission Trading Scheme during the first six months of 2012 totalled approximately 392 000 tonnes (I-II/2011: 427 000 tonnes). No external trading of emission allowances was conducted during the first half of 2012. Outokumpu's carbon dioxide allowances in Finland, Sweden and the UK were sufficient for the Group's planned production in the review period.
Risks and uncertainties
Outokumpu operates in accordance with the risk management policy approved by the Board of Directors. This policy defines the objectives, approaches and areas of responsibility in risk management activities and was reviewed and updated during the second quarter of 2012. As well as supporting Outokumpu's strategy, risk management aims to identify, evaluate and mitigate risks from the perspective of shareholders, customers, suppliers, personnel, creditors and other stakeholders. Key risks are assessed and updated on a regular basis.
Strategic risks for Outokumpu are primarily associated with the Group's business portfolio and strategic decision making. Business risks are related to the economic outlook, to markets for stainless steel and to behaviour by customers, suppliers and competitors. Important risks currently faced by Outokumpu include: the Group's ability to implement its chosen strategy, structural overcapacity and weak markets
for stainless steel; risks associated with continued economic downturn in Europe; business risks connected with special stainless steel products; Outokumpu's ability to expand the Group's business in growth markets and in the ferrochrome sector; adverse political actions affecting trade or changes that have an impact on environmental legislation; and the increased cost of inputs.
Operational risks include inadequate or failed internal processes, employee actions, systems, or events such as natural catastrophes and misconduct or crime. Key operational risks for Outokumpu are: a major fire or accident, IT dependence, a lack of harmonised business processes and information systems; project implementation risks and personnel-related risks. No significant operational risks were realised during the second quarter.
Outokumpu is currently implementing cost reduction and restructuring programmes and is involved in two major investment projects. Failures or delays in these activities could have a negative impact on the implementation of Group strategy, the achievement of financial targets and a successful transition to sustainable profitability. Outokumpu manages the associated risks by investing dedicated resources in overall project management, support and monitoring activities.
Key financial risks for Outokumpu include changes in the price of nickel, molybdenum, electricity and fuels; currency risks associated with the euro; the Swedish krona and the US dollar; interest rate risks connected with the Swedish krona and the euro; risks related to Talvivaara and certain other equity prices; risks associated with a loan receivable from Luvata; other credit risks; limitations on financial flexibility and the risk of financial distress.
The acquisition of Inoxum, ThyssenKrupp's stainless steel business, was announced during the first quarter of 2012. Outokumpu is exposed to several risks associated with Inoxum's financial and operational performance. Additional risks and uncertainties relate to completion of the acquisition, subsequent business integration, and the implementation of actions required to achieve the anticipated synergy benefits. The Outokumpu share price has a significant impact on the total transaction value and therefore possibly also on Group net earnings.
The decline in the nickel price continued during the second quarter and had a negative impact on Outokumpu's overall financial performance. The reduction in the value of the Group's stake in Talvivaara Sotkamo Ltd also had a negative impact on earnings. The continuing debt crisis in Europe is a clear risk, with potential negative impacts on both European markets for stainless steel and the overall business environment in Europe, including loan markets and markets for debt capital.
Annual General Meeting 2012
The Annual General Meeting (AGM) was held on 14 March 2012 in Helsinki. In accordance with a proposal by the Board of Directors, the AGM decided that no dividend will be paid for the 2011 financial year.
The AGM authorised the Board of Directors to decide to repurchase the Group's own shares. The maximum number of shares to be repurchased is 18 000 000. The AGM also authorised the Board of Directors to decide on the issuance of shares as well as other special rights entitling to shares. The maximum number of new shares to be issued is 18 000 000 and the maximum number of treasury shares to be transferred is 18 000 000. These authorisations are valid until the end of the next AGM, but no longer than 31 May 2013. To date the authorisations have not been used.
The AGM decided that the number of Board members, including the Chairman and Vice Chairman, be seven. Ole Johansson, Olli Vaartimo, Elisabeth Nilsson and Siv Schalin were re-elected as members of the Board of Directors, and Iman Hill, Harri Kerminen and Heikki Malinen were elected as new
members. The AGM re-elected Ole Johansson as Chairman and Olli Vaartimo as Vice Chairman of the Board. As a complementary measure, the AGM also decided that from the day following the completion of the Inoxum acquisition, the number of Board members would be eight and Guido Kerkhoff would be elected as the eight Board member.
The AGM also resolved to establish a Nomination Board for an indefinite period to prepare proposals on the composition and remuneration of the Board of Directors for the next AGM. The AGM also adopted a charter for the Shareholders' Nomination Board.
At its first meeting, the Outokumpu Board of Directors appointed two permanent committees: the Board Audit Committee and the Board Remuneration Committee.
Customs investigation of exports to Russia by Outokumpu's Tornio site
In March 2007, Finnish Customs authorities initiated a criminal investigation into export practices to Russia by Outokumpu's Tornio site. It was suspected that a forwarding agency based in south-eastern Finland had prepared defective and/or forged invoices regarding the export of stainless steel to Russia.
The case involved charges against Outokumpu and five of its employees for alleged money laundering in connection with export practices to Russia and was heard at the District Court in March 2011. In a judgement released in June 2011, all the claims were dismissed and the Finnish State was ordered to pay a total of EUR 1.2 million in compensation. In August 2011, the State Prosecutor lodged an appeal against the District Court judgement. Legal proceedings in the Kouvola Court of Appeal were initiated in February 2012 and all charges against Outokumpu and its employees were dismissed in April 2012. In June 2012, Finland's state prosecutor filed a petition for leave to appeal to the Finnish Supreme Court.
Civil actions regarding the divested fabricated copper products business
In connection with the EU investigation into an industrial copper tubes cartel, completed in May 2009, Outokumpu has since 2004 been in the process of addressing several civil complaints raised against the company and its former fabricated copper products business. The last pending civil complaint in the USA, filed by Carrier Corporation in 2006 against Outokumpu Oyj and Outokumpu Copper Franklin, Inc. i.e. in the federal district court in Memphis, Tennessee, seeks an unstated amount of damages.
This complaint by Carrier Corporation alleges a world-wide price-fixing and market-allocation cartel with respect to copper tubing for air conditioning and heat exchangers and related applications (ACR Tube) for at least the period from 1989 to 2001. Following dismissal of the complaint in July 2007, Carrier subsequently filed an appeal. In March 2012, the United States Court of Appeals for the Sixth Circuit reversed the decision dismissing the complaint and referred the case to the United States District Court for the Western District of Tennessee. Outokumpu believes that the related allegations are groundless and intends to defend itself in these proceedings.
In 2010, certain companies in the Carrier Group brought a civil action in the UK courts against Outokumpu (and two other defendant groups). The claimants maintain that they suffered losses across Europe as a result of alleged cartel activities and are seeking recovery from the three main defendant groups either jointly or jointly and severally. The claimants' initial claim for alleged losses is some GBP 20 million excluding interest. Outokumpu challenged the jurisdiction of courts in England and Wales to hear the claim. The High Court of Justice, Chancery Division, rejected Outokumpu's application to contest jurisdiction. All defendants applied for permission to appeal to the Court of Appeal.
In January 2012, the Court of Appeal granted permission to appeal. Outokumpu believes that the allegations regarding damages caused by the alleged cartel activities are groundless and, if pursued, Outokumpu will defend itself in any proceedings. In March 2012, the Court announced that Carrier had
reached a settlement with one defendant group. Details of this settlement have not been made public. The Court of Appeal hearing in connection with Outokumpu's application to contest the jurisdiction of UK courts took place in June 2012. A decision is expected by the end of 2012.
No provisions have been booked by Outokumpu in connection with these claims.
Shares and shareholders
Information regarding shares and shareholders is updated daily on Outokumpu's Internet pages: http://www.outokumpu.com/en/Investors/Share-info/Shareholders/Pages/Shareholders.aspx.
Largest shareholders
| 30 June | |
|---|---|
| % | 2012 |
| Finnish corporations | 35.6 |
| Finnish public sector institutions | 19.6 |
| Finnish private households | 18.7 |
| Foreign investors | 16.6 |
| Finnish financial insurance institutions | 7.7 |
| Finnish non-profit organisations | 1.8 |
| Shareholders with over 5% of shares and voting rights | |
| Solidium Oy (owned by the Finnish State) | 31.15 |
| Ilmarinen Mutual Pension Insurance Company | 6.19 |
Share information
| Jan–June | Jan–June | ||
|---|---|---|---|
| 2012 | 2011 | ||
| Fully paid share capital at the end of the period | EUR million | 311.1 | 311.1 |
| Number of shares at the end of the period 1) | 1 457 038 776 | 183 018 749 | |
| Average number of shares outstanding 2) | 707 003 009 | 181 962 646 | |
| Average number of shares outstanding, rights-issue-adjusted 2) | 842 453 304 | 280 514 677 | |
| Number of shares outstanding at the end of the period 1) 2) | 1 456 022 888 | 181 977 861 | |
| Number of treasury shares held at the end of the period | 1 015 888 | 1 040 888 | |
| Share price at the end of the period 3) | EUR | 0.77 | 2.39 |
| Average share price 3) | EUR | 1.19 | 3.06 |
| Highest price during the period 3) | EUR | 2.10 | 3.78 |
| Lowest price during the period 3) | EUR | 0.72 | 2.20 |
| Market capitalisation at the end of period | EUR million | 1 122 | 1 673 |
| Share turnover 4) | million shares | 655.5 | 151.0 |
| Value of shares traded 4) | EUR million | 1 282.6 | 1 764.1 |
| Source of share information: NASDAQ OMX Helsinki (only includes OMX Helsinki trading) | |||
| 1) The rights-issue-adjusted number of shares on 30 June 2011 is 281 579 021 shares of w | hich 280 538 133 shares are outstanding. | ||
2) The number of ow n shares repurchased is excluded. There are currently no programmes w ith diluting effect in place.
3) Comparative share prices adjusted regarding the effect of the rights issue.
4) Jan–June 2012 figures include the effect of share subsciption rights traded during 15 March–28 March 2012.
Events after the end of the review period
Outokumpu divests part of its European stock operations
In July, Outokumpu signed an agreement with Amari, a privately-owned group of companies focusing on multi-metal distribution, to sell 10 of its stainless steel stock operations in nine countries to Amari, thereby halving the number of the Group's own stock locations. Approximately 100 Outokumpu employees will transfer to Amari in conjunction with the transaction.
Subject to approval by the Outokumpu Board and the customary closing conditions, completion of this sale transaction is expected during the third quarter of 2012. Depending on the inventory value at the closing of the transaction, the cash consideration of the transaction is expected to be EUR 15-20 million. As a result of the divestment, Outokumpu booked a non-recurring impairment of EUR 10 million in the Group's second quarter accounts.
SHORT-TERM OUTLOOK
The economic uncertainty in Europe has increased resulting in shorter visibility for future stainless steel demand with underlying demand expected to be flat or slightly softer. Normal seasonality and the declining nickel price have had an adverse effect on distributors buying behaviour. Lead times for standard grades continue to be normal at 6–8 weeks and distributor inventories are estimated to be at or below normal levels.
Mainly impacted by normal seasonality, Outokumpu's average base prices for stainless steel in the third quarter are expected to be slightly lower than in the second quarter. As a result of the slowdown in demand during the European holiday season and annual maintenance breaks at Group mills, Outokumpu's third-quarter external delivery volumes (stainless and ferrochrome) are expected to be clearly lower than in the second quarter. On the other hand, compared to the second quarter, the Group's product and geographic mix in the third quarter is expected to improve. The production cost increase in the second quarter is expected to be partly reversed in the third quarter.
Outokumpu's underlying operational result*) in the third quarter is therefore expected to be approximately at the same level or slightly weaker than in the second quarter. At current metal prices, marginal raw material-related inventory losses are expected as a result of the decline in the nickel price. Outokumpu's operating result in the third quarter could be impacted by small non-recurring items associated with the Inoxum transaction and the Group's on-going cost-cutting programmes.
*) Underlying operational result=operating result excluding raw material-related inventory gains/losses and non-recurring items.
In Espoo, 19 July 2012
Board of Directors
Outokumpu is a global leader in stainless steel with the vision to be the undisputed number one. Customers in a wide range of industries use our stainless steel and services worldwide. Being fully recyclable, maintenance-free, as well as very strong and durable material, stainless steel is one of the key building blocks for sustainable future. Outokumpu employs some 8 000 people in more than 30 countries. The Group's head office is located in Espoo, Finland. Outokumpu is listed on the NASDAQ OMX Helsinki. www.outokumpu.com
CONDENSED FINANCIAL STATEMENTS
Condensed statement of comprehensive income
Condensed income statement
| April–June | Jan–March | April–June | Jan–June | Jan–June | Jan–Dec | |
|---|---|---|---|---|---|---|
| EUR million | 2012 | 2012 | 2011 | 2012 | 2011 | 2011 |
| Sales | 1 254 | 1 304 | 1 281 | 2 559 | 2 653 | 5 009 |
| Cost of sales | -1 235 | -1 231 | -1 255 | -2 466 | -2 520 | -4 882 |
| Gross margin | 20 | 73 | 26 | 93 | 133 | 127 |
| Other operating income | 3 | 6 | 4 | 8 | 6 | 47 |
| Costs and expenses | -74 | -76 | -84 | -150 | -163 | -321 |
| Other operating expenses | -28 | -0 | -115 | -28 | -113 | -113 |
| Operating result | -80 | 3 | -169 | -77 | -136 | -260 |
| Share of results in associated companies | -0 | 0 | -1 | -0 | -2 | -5 |
| Financial income and expenses | ||||||
| Interest income | 3 | 3 | 2 | 6 | 6 | 13 |
| Interest expenses | -18 | -19 | -19 | -36 | -37 | -77 |
| Market price gains and losses | -33 | 22 | -14 | -12 | -12 | -120 |
| Other financial income | 0 | 0 | 242 | 0 | 248 | 248 |
| Other financial expenses | -3 | -2 | -20 | -5 | -29 | -52 |
| Result before taxes | -130 | 6 | 21 | -123 | 38 | -253 |
| Income taxes | 8 | 5 | 29 | 13 | 29 | 67 |
| Net result for the period | -122 | 12 | 50 | -110 | 66 | -186 |
| Attributable to: | ||||||
| Equity holders of the Company | -122 | 11 | 50 | -111 | 67 | -181 |
| Non-controlling interests | 0 | 0 | -0 | 0 | -0 | -5 |
| Earnings per share for result attributable | ||||||
| to the equity holders of the Company (basic and diluted), EUR 1) | -0.09 | 0.04 | 0.18 | -0.13 | 0.24 | -0.64 |
Consolidated statement of other comprehensive income
| April–June | Jan–March | April–June | Jan–June | Jan–June | Jan–Dec | |
|---|---|---|---|---|---|---|
| EUR million | 2012 | 2012 | 2011 | 2012 | 2011 | 2011 |
| Net result for the period | -122 | 12 | 50 | -110 | 66 | -186 |
| Other comprehensive income: | ||||||
| Exchange differences on translating foreign operations | 18 | -5 | 2 | 13 | -15 | 12 |
| Available-for-sale financial assets | ||||||
| Fair value changes during the period | -2 | -2 | -16 | -4 | -17 | -23 |
| Reclassification adjustments from other | ||||||
| comprehensive income to profit or loss | - | - | -65 | - | -65 | -65 |
| Income tax relating to available-for-sale financial assets | 1 | 1 | 10 | 1 | 10 | 11 |
| Cash flow hedges | ||||||
| Fair value changes during the period | 3 | 3 | -12 | 6 | -11 | -4 |
| Reclassification adjustments from other | ||||||
| comprehensive income to profit or loss | -1 | -1 | 0 | -1 | -0 | 1 |
| Income tax relating to cash flow hedges | 1 | 5 | 3 | 5 | 3 | 1 |
| Share of other comprehensive income of associated companies | - | - | -2 | - | -2 | -2 |
| Other comprehensive income for the period, net of tax | 20 | -0 | -80 | 19 | -98 | -68 |
| Total comprehensive income for the period | -102 | 11 | -30 | -91 | -32 | -255 |
| Attributable to: | ||||||
| Equity holders of the Company | -102 | 11 | -30 | -91 | -32 | -249 |
| Non-controlling interests | 0 | 0 | 0 | 0 | -0 | -5 |
| 1) Calculated based on the rights-issue-adjusted w eighted average number of shares. Comparative figures adjusted accordingly. |
Condensed statement of financial position
| 30 June | 31 March | 30 June | 31 Dec | |
|---|---|---|---|---|
| EUR million | 2012 | 2012 | 2011 | 2011 |
| ASSETS | ||||
| Non-current assets | ||||
| Intangible assets | 537 | 546 | 565 | 554 |
| Property, plant and equipment | 2 073 | 2 033 | 1 925 | 2 005 |
| Loan receivables and other interest-bearing assets | 229 | 220 | 230 | 230 |
| Other receivables | 63 | 61 | 56 | 61 |
| Deferred tax assets | 69 | 65 | 56 | 63 |
| Total non-current assets | 2 971 | 2 925 | 2 831 | 2 914 |
| Current assets | ||||
| Inventories | 1 164 | 1 275 | 1 553 | 1 264 |
| Loan receivables and other interest-bearing assets | 1 095 | 308 | 263 | 140 |
| Trade and other receivables | 797 | 848 | 930 | 761 |
| Cash and cash equivalents | 195 | 181 | 125 | 168 |
| Total current assets | 3 251 | 2 612 | 2 871 | 2 333 |
| Assets of disposal group classified as held for sale | 18 | - | - | - |
| TOTAL ASSETS | 6 240 | 5 537 | 5 702 | 5 247 |
EQUITY AND LIABILITIES
Equity
| Equity attributable to the equity holders of the Company | 2 951 | 2 230 | 2 297 | 2 070 |
|---|---|---|---|---|
| Non-controlling interests | 18 | 14 | 2 | 14 |
| Total equity | 2 969 | 2 244 | 2 299 | 2 084 |
| Non-current liabilities | ||||
| Interest-bearing liabilities | 1 523 | 1 270 | 1 335 | 1 196 |
| Deferred tax liabilities | 18 | 26 | 71 | 38 |
| Defined benefit and other long-term employee benefit obligations | 64 | 62 | 66 | 62 |
| Provisions | 18 | 20 | 20 | 22 |
| Trade and other payables | 57 | 52 | 10 | 45 |
| Total non-current liabilities | 1 679 | 1 430 | 1 502 | 1 364 |
| Current liabilities | ||||
| Interest-bearing liabilities | 730 | 935 | 1 169 | 1 061 |
| Provisions | 20 | 30 | 26 | 42 |
| Trade and other payables | 841 | 898 | 707 | 695 |
| Total current liabilities | 1 591 | 1 863 | 1 902 | 1 799 |
| Liabilities directly associated with the disposal group | ||||
| classified as held for sale | 1 | - | - | - |
| TOTAL EQUITY AND LIABILITIES | 6 240 | 5 537 | 5 702 | 5 247 |
Statement of changes in equity
| Attributable to the owners of the parent | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Share | Share | Other | Fair value | Treasury | Cumulative | Retained | Non | Total | |
| capital | premium | reserves | reserves | shares | translation | earnings | controlling | equity | |
| EUR million | fund | differences | interests | ||||||
| Equity on 1 Jan 2011 | 311 | 713 | 7 | 100 | -25 | -89 | 1 356 | 2 | 2 376 |
| Result for the period | - | - | - | - | - | - | 67 | -0 | 66 |
| Other comprehensive income | - | - | - | -84 | - | -15 | - | 0 | -98 |
| Total comprehensive income for the period | - | - | - | -84 | - | -15 | 67 | 0 | -32 |
| Dividends | - | - | - | - | - | - | -45 | - | -45 |
| Share-based payments | - | - | - | - | - | - | 1 | - | 1 |
| Share options exercised | 0 | 0 | - | - | - | - | - | - | 0 |
| Equity on 30 June 2011 | 311 | 714 | 7 | 17 | -25 | -104 | 1 378 | 2 | 2 299 |
| Equity on 1 Jan 2012 | 311 | 714 | 7 | 19 | -25 | -76 | 1 121 | 14 | 2 084 |
| Result for the period | - | - | - | - | - | - | -111 | 0 | -110 |
| Other comprehensive income | - | - | - | 7 | - | 13 | - | -0 | 19 |
| Total comprehensive income for the period | - | - | - | 7 | - | 13 | -111 | 0 | -91 |
| Rights issue 1) | - | - | 975 | - | - | - | - | - | 975 |
| Share-based payments | - | - | - | - | -0 | - | 0 | - | 0 |
| OSTP reorganisation | - | - | - | - | - | - | -4 | 4 | - |
| Equity on 30 June 2012 | 311 | 714 | 982 | 25 | -25 | -63 | 1 007 | 18 | 2 969 |
1) Shares issued in relation to the Outokumpu rights issue.
Condensed statement of cash flows
| April–June | Jan–March | April–June | Jan–June | Jan–June | Jan–Dec | |
|---|---|---|---|---|---|---|
| EUR million | 2012 | 2012 | 2011 | 2012 | 2011 | 2011 |
| Net result for the period | -122 | 12 | 50 | -110 | 66 | -186 |
| Adjustments | ||||||
| Depreciation, amortisation, and impairments | 67 | 58 | 178 | 125 | 240 | 360 |
| Other non-cash adjustments | 29 | -26 | -179 | 3 | -161 | -73 |
| Change in working capital | 74 | 87 | -89 | 162 | -182 | 310 |
| Dividends received | 0 | - | 0 | 0 | 5 | 5 |
| Interests received | 1 | 1 | 1 | 1 | 1 | 3 |
| Interests paid | -25 | -15 | -28 | -40 | -43 | -75 |
| Income taxes paid | -2 | -0 | 2 | -2 | -2 | -6 |
| Net cash from operating activities | 23 | 116 | -66 | 139 | -76 | 338 |
| Purchases of assets | -88 | -65 | -42 | -153 | -88 | -204 |
| Proceeds from the sale of assets | 5 | 1 | 4 | 6 | 6 | 90 |
| Net cash from investing activities | -82 | -64 | -38 | -146 | -82 | -114 |
| Cash flow before financing activities | -59 | 51 | -104 | -8 | -158 | 224 |
| Rights issue | 827 | 148 | - | 975 | - | - |
| Share options exercised | - | - | - | - | 0 | 0 |
| Borrowings of long-term debt | 324 | 96 | 19 | 420 | 87 | 178 |
| Repayment of long-term debt | -233 | -51 | -127 | -284 | -139 | -378 |
| Change in current debt | -31 | -81 | 84 | -112 | 72 | -123 |
| Dividends paid | - | - | -45 | - | -45 | -45 |
| Proceeds from the sale of Talvivaara | ||||||
| and Tibnor shares | - | - | 162 | - | 162 | 162 |
| Other financing cash flow | -814 | -147 | 0 | -961 | 0 | 1 |
| Net cash from financing activities | 72 | -35 | 93 | 37 | 138 | -206 |
| Net change in cash and cash equivalents | 13 | 16 | -11 | 29 | -20 | 19 |
| Cash and cash equivalents | ||||||
| at the beginning of the period | 181 | 168 | 139 | 168 | 150 | 150 |
| Foreign exchange rate effect | 1 | -3 | -3 | -2 | -5 | 0 |
| Net change in cash and cash equivalents | 13 | 16 | -11 | 29 | -20 | 19 |
| Cash and cash equivalents | ||||||
| at the end of the period | 195 | 181 | 125 | 195 | 125 | 168 |
NOTES TO THE INTERIM FINANCIAL STATEMENTS (unaudited)
This interim report is prepared in accordance with IAS 34 (Interim Financial Reporting). The same accounting policies and methods of computation have been followed in this interim report as in the financial statements for 2011.
All presented figures in this interim report have been rounded and consequently, the sum of individual figures can deviate from the presented sum figure. Key figures have been calculated using exact figures.
The net sales, profits and working capital of Outokumpu are subject to seasonal fluctuations as a result of industry demand, the number of working days, weather conditions and vacation periods. For example, production and shipment volumes with respect to stainless steel products are generally higher in the spring and fall seasons and generally lower in the winter and summer seasons. These seasonal fluctuations have a direct impact on the use of working capital and, therefore, also on net financial debt and cash flows of Outokumpu.
The following amendments to IFRS standards and interpretations were adopted from 1 January 2012 but had no impact on the Group financial statements;
Amendment to IFRS 7 Financial Instruments: Disclosures
Use of estimates
The preparation of the interim report in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, and the reported amounts of income and expenses during the reporting period. Accounting estimates are employed in the interim report to determine reported amounts, including the realisability of certain assets, the useful lives of tangible and intangible assets, income taxes, inventories, provisions, pension obligations, impairment of goodwill and other items. These are those interim report items that are mostly affected by management judgments made. Although these estimates are based on management's best knowledge of current events and actions at the end of the reporting period, actual results may differ from the estimates and assumptions. The management estimates and judgments are continuously monitored and they are based on prior experience and other factors, such as future expectations assumed to be reasonable considering the circumstances.
Changes in segment information
From 1 January 2012 onwards, Outokumpu's new organisation is based on three Business Areas: General Stainless, Specialty Stainless and Ferrochrome. The new Business Areas consist of:
- General Stainless: stainless steel operations in Tornio and the finishing plant in Terneuzen,
- Specialty Stainless: Special Coil (Avesta Works and Nyby), Special Plate, Kloster and Long Products including the Sheffield melt shop, and
- Ferrochrome: the Kemi Chrome Mine and ferrochrome production in Tornio.
Each of the Business Areas has full accountability for sales, profit and assets, and each have a segment leader responsible to Outokumpu's Chief Operating Decision Maker – CEO. These three Business Areas form Outokumpu's operating segments.
Outokumpu's operations consist of manufacturing and sales of stainless steel and each Business Area's operations are capital intensive. Production processes are similar, with Ferrochrome being an essential raw material in the production process and to a significant extent; the end products have the same customers. The Business Areas also share Outokumpu's production, procurement and marketing functions. Sales and distribution are primarily managed through Outokumpu's common distribution channels and, in principle, all sales companies manage the sales of all end products. Outokumpu believes that segment reporting by Business Area would not provide investors with a fair view of its performance. Accordingly, due to the operating segments' similar economic characteristics, Outokumpu has aggregated its operating segments into one reportable segment from January 1, 2012 onwards. All comparative segment figures have been restated.
Rights Issue
On 1 March, 2012, the Extraordinary General Meeting of Outokumpu Oyj authorized the Board of Directors to decide on a share issue in which the shareholders were granted pre-emptive rights to subscribe for new shares in proportion to their shareholdings in Outokumpu Oyj.
On 7 March, 2012, the Board of Directors resolved to issue a maximum of 1,274,020,027 new shares and raise gross proceeds of approximately EUR 1 billion in a rights offering to fund the cash payments related to the acquisition of Inoxum.
According to the terms of the rights issue, one Subscription Right entitled its holder to subscribe for seven Offer Shares at the subscription price of EUR 0.79 per Offer Share. Subscription Period started on 15 March, 2012 and ended on 4 April, 2012. The rights issue was fully underwritten through shareholder subscription commitments and bank underwriting.
The rights offering was oversubscribed by 22% and no underwriting was utilised. Outokumpu's total number of shares amount to 1 457 038 776 after the rights offering.
New EUR 400 million revolving credit facility signed
In April, Outokumpu signed a EUR 400 million committed multicurrency revolving credit facility to cover working capital requirements. The credit facility will become available after completion of the Inoxum transaction. This credit facility matures in June 2013 and includes a financial covenant based on gearing at the level of 115%. Following the issuance of the EUR 150 million bond in June 2012, the amount of this revolving credit facility was reduced to EUR 250 million.
EUR 150 million bond Issue
On 1 June, 2012 Outokumpu issued a EUR 150 million 4-year bond with an annual coupon of 5.875% which was listed on the NASDAQ OMX Helsinki. The bond offering extends the maturity profile of the Group's loan portfolio and expands its investor base. The proceeds were used for refinancing and general corporate purposes.
Share-based payment and stock option programmes
The Board has approved a new share-based incentive plan –Performance Share Plan 2012, to be offered to the key management, and a Restricted Share Pool programme which enables the long-term rewarding of selected individual employees.
The targets set for the earnings period 2009–2011 under the current share-based incentive scheme 2009–2013 were not met. Therefore, no reward was paid to participants for this earnings period. The EPS criterion previously applied in the current share-based incentive scheme 2009–2013 is for the year 2012 replaced with the EBIT criterion in its on-going earnings periods 2010–2012 and 2011–-2013 to be in line with the criteria applied in the new Performance Share Plan 2012.
In addition, The Board of Directors of Outokumpu Oyj has approved the granting of 25 000 Outokumpu shares as a special incentive scheme to the Group's CEO, Mika Seitovirta. The reward shares are subject to a restriction according to which the reward shares may not be transferred or in any other manner disposed of before 31 March 2015. The reward shares are also subject to a restriction according to which the CEO forfeits the reward shares if his service is terminated or a notice for the termination of the service is given prior to the end of the above restriction period. The reward shares are, in addition, subject to a claw-back provision during the above restriction period.
Detailed information of the share-based incentive programmes can be found in Outokumpu's home page www.outokumpu.com.
The Talvivaara option
On 1 June 2011 Outokumpu granted an option to Talvivaara Mining Company Plc to purchase its remaining 16% ownership in Talvivaara Sotkamo Ltd. The option was valid until 31 March 2012 when it expired unused.
Sale of Brass operations
Outokumpu sold its brass rod plant in Drünen in the Netherlands. In 2011, the brass rod plant had a turnover of approximately EUR 75 million, and it currently employs approximately 170 people.
The consideration and cash flow impact of this transaction were marginal. However, Outokumpu booked a loss of EUR 18 million from this transaction. After the sale, Outokumpu has divested all its brass operations.
Sale of the European stock operations
On 4 July 2012, Outokumpu announced that it had signed an agreement to sell 10 of its stock operations in nine countries to Amari. The sale has been accounted under IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. Assets are classified as "Held for Sale" when it is highly probable that the carrying amount of the assets will be recovered through a sale transaction rather than continuing use. These assets and liabilities have been measured at fair value less costs to sell and the assets mainly consist of inventories and PPE. In connection with the classification an impairment of EUR 10 million
has been recorded as a non-recurring item. Subject to Outokumpu Board approval and customary closing conditions, the transaction is expected to be completed during the third quarter of 2012. The cash consideration of the transaction is expected to be EUR 15-20 million, depending on the stock value at the closing of the transaction.
Restatement of defined benefit and other long-term employee benefit obligations
Outokumpu will change its accounting policy related to defined benefit and other long-term employee benefit obligations after the closure of Inoxum transaction. The change is due to the difference in accounting policy compared to that of Inoxum. Currently, Outokumpu applies the corridor method for recognising actuarial gains and losses arising from defined benefit arrangements, while Inoxum recognises such actuarial gains and losses in other comprehensive income and thus, follows already the principles that are according to the revised IAS 19 Employee Benefits standard, which will come effective 1 January 2013 This amendment will affect Outokumpu's financial statements as the so called corridor approach is waived. Outokumpu estimates that based on 31 December 2011 defined benefit obligations; the amendment has approximately EUR 49 million negative impact on the Group's equity in 2012 without tax effect. Additionally, Outokumpu currently recognises the entire cost related to the defined benefit and other long-term employee benefit obligations in operating result, while Inoxum recognises the interest cost and expected return on plan assets components of the cost in financial income and expenses. The impact of this amendment is estimated to be marginal in 2012.
Non-recurring items in operating result
| 1 Jan– | 1 Jan– | 1 Jan– | |
|---|---|---|---|
| EUR million | 30 June 2012 | 30 June 2011 | 31 Dec 2011 |
| Losses from divestment of the Group's Brass operations | -18 | - | - |
| Costs related to Inoxum transaction | -17 | - | - |
| Impairment of stock locations divestment | -10 | - | - |
| OSTP impairment and redundancy provision | - | -66 | -71 |
| Kloster impairment | - | -60 | -60 |
| Redundancy provisions | - | -11 | -43 |
| Gain on the sale of Forrestania resources royalty rights | - | - | 23 |
| -46 | -138 | -151 |
Non-recurring items in financial income and expenses
| 1 Jan– | 1 Jan– | 1 Jan– | |
|---|---|---|---|
| EUR million | 30 June 2012 | 30 June 2011 | 31 Dec 2011 |
| Gain on the sale and fair valuation of Talvivaara shares | - | 206 | 206 |
| Gain on the sale of Tibnor shares | - | 36 | 36 |
| Impairment of Luvata loan receivable | - | -13 | -13 |
| Loss from the sale of Nordic Brass Gusum shares | - | - | -13 |
| - | 229 | 216 |
Property, plant and equipment
| 1 Jan– | 1 Jan– | 1 Jan– | |
|---|---|---|---|
| EUR million | 30 June 2012 | 30 June 2011 | 31 Dec 2011 |
| Carrying value at the beginning of the period | 2 005 | 2 054 | 2 054 |
| Translation differences | 12 | -19 | 9 |
| Additions | 169 | 92 | 320 |
| Disposals | -5 | -1 | -73 |
| Reclassifications | -0 | -1 | -5 |
| Depreciation and impairments | -107 | -200 | -301 |
| Carrying value at the end of the period | 2 073 | 1 925 | 2 005 |
Write-down of inventory to net realisable value (NRV)
During January–June 2012 Outokumpu recognised a write-down reversal of EUR 6 million (January–June 2011: writedown of EUR 32 million, January–December 2011: write-down of EUR 6 million) due to NRV calculations. The write-down or reversal bookings are included in cost of sales in the condensed income statement.
Provisions
On 31 December 2011 Outokumpu reported restructuring provisions totalling EUR 39 million. Of these provisions, EUR 5 million was reversed as unused during January–June 2012.
| Commitments | |||
|---|---|---|---|
| 30 June | 30 June | 31 Dec | |
| EUR million | 2012 | 2011 | 2011 |
| Mortgages and pledges | |||
| Mortgages on land | 277 | 255 | 247 |
| Other pledges | 8 | 12 | 9 |
| Guarantees | |||
| On behalf of subsidiaries for commercial commitments | 35 | 37 | 34 |
| On behalf of associated companies for financing | 0 | 1 | 0 |
| Other commitments | 35 | 42 | 38 |
| Minimum future lease payments on operating leases | 73 | 76 | 76 |
Group's off-balance sheet investment commitments totalled EUR 132 million on 30 June 2012 (30 June 2011: EUR 220 million, 31 December 2011: EUR 169 million).
Related party transactions
Material related party transactions during January–June 2012 comprise of purchases from associated companies totalling EUR 2 million (January–June 2011: purchases totalling EUR 3 million, at 30 June 2011: loan receivables totalling EUR 7 million and January–December 2011: purchases totalling EUR 5 million).
On 30 June 2012 the material related party transactions also include a purchase price receivable of EUR 2 million (31 December 2011: EUR 2 million). The receivable relates to the sale of 36% of the Outokumpu Stainless Tubular Products (OSTP) business on 30 September 2011 to Tubinoxia, a company controlled by the managing director of OSTP.
Segment information
| 1 Jan– | 1 Jan– | 1 Jan– | |
|---|---|---|---|
| EUR million | 30 June 2012 | 30 June 2011 | 31 Dec 2011 |
| External sales | |||
| Operating segments | 2 442 | 2 598 | 4 821 |
| Operating result | |||
| Operating segments | -14 | -56 | -190 |
| Other operations | -63 | -79 | -72 |
| Intra-group items | -1 | -1 | 2 |
| Total operating result | -77 | -136 | -260 |
| Operating capital at the end of the period | |||
| Operating segments | 3 502 | 4 013 | 3 614 |
Fair values and nominal amounts of derivative instruments
| 30 June | 31 Dec | 30 June | 31 Dec | |
|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |
| Net | Net | Nominal | Nominal | |
| EUR million | fair value | fair value | amounts | amounts |
| Currency and interest rate derivatives | ||||
| Currency forwards | 16 | 10 | 1 525 | 1 605 |
| Currency options, bought | 0 | 0 | 20 | 10 |
| Currency options, sold | -0 | -0 | 21 | 10 |
| Interest rate swaps | -7 | -11 | 596 | 335 |
| Cross-currency swaps | -17 | -38 | 68 | 229 |
| Interest rate options, bought | 0 | 0 | 191 | 190 |
| Interest rate options, sold | -3 | -3 | 91 | 90 |
| Forward rate agreements | -0 | - | 150 | - |
| Tonnes | Tonnes | |||
| Metal derivatives | ||||
| Nickel options, bought | - | 0 | - | 1 200 |
| Nickel options, sold | - | -0 | - | 900 |
| Forward and futures nickel contracts | -2 | -1 | 2 964 | 750 |
| Forward and futures molybdenum contracts | - | -0 | - | 60 |
| Forward and futures copper contracts | - | 0 | - | 2 375 |
| Forward and futures zinc contracts | - | 0 | - | 825 |
| Emission allowance derivatives | -1 | -0 | 676 000 | 226 000 |
| Fuel derivatives | -1 | -0 | 20 000 | 5 000 |
| TWh | TWh | |||
| Electricity derivatives | -1 | -1 | 0.0 | 0.2 |
| Granted share options | - | -0 | ||
| -16 | -44 |
Key figures
| EUR million | I/11 | II/11 | I-II/11 | III/11 | IV/11 | 2011 | I/12 | II/12 | I-II/12 |
|---|---|---|---|---|---|---|---|---|---|
| EBITDA | 93 | -4 | 89 | 4 | -13 | 80 | 60 | -12 | 48 |
| Operating result margin, % | 2.4 | -13.2 | -5.1 | -4.3 | -6.3 | -5.2 | 0.2 | -6.4 | -3.0 |
| Return on capital employed, % | 3.1 | -16.1 | -6.5 | -5.3 | -7.4 | -6.5 | 0.3 | -8.6 | -4.1 |
| Return on equity, % | 2.8 | 8.7 | 5.7 | -24.1 | -22.1 | -8.3 | 2.1 | -18.7 | -8.7 |
| Long-term debt | 1 527 | 1 300 | 1 300 | 1 196 | 1 161 | 1 161 | 1 242 | 1 492 | 1 492 |
| Current debt | 928 | 1 122 | 1 122 | 1 108 | 998 | 998 | 881 | 701 | 701 |
| Other interest-bearing payables | 20 | 11 | 11 | 12 | 17 | 17 | 17 | 9 | 9 |
| Derivative financial instruments | -2 | 28 | 28 | 31 | 44 | 44 | 34 | 16 | 16 |
| Investments in associated companies | -146 | -49 | -49 | -46 | -39 | -39 | -39 | -39 | -39 |
| Available-for-sale financial assets | -152 | -33 | -33 | -30 | -23 | -23 | -22 | -21 | -21 |
| Investments at fair value through | |||||||||
| profit or loss | -1 | -219 | -219 | -126 | -106 | -106 | -274 | -1 047 | -1 047 |
| Other interest-bearing receivables | -162 | -150 | -150 | -161 | -164 | -164 | -162 | -182 | -182 |
| Net assets of disposal group classified as held for sale |
- | - | - | - | - | - | - | -17 | -17 |
| Cash and cash equivalents | -139 | -125 | -125 | -253 | -168 | -168 | -181 | -195 | -195 |
| Net interest-bearing debt at the end of period | 1 873 | 1 885 | 1 885 | 1 730 | 1 720 | 1 720 | 1 495 | 716 | 716 |
| Capital employed at the end of period | 4 202 | 4 184 | 4 184 | 3 902 | 3 804 | 3 804 | 3 739 | 3 685 | 3 685 |
| Equity-to-assets ratio at the end of period, % | 39.9 | 40.4 | 40.4 | 40.4 | 39.8 | 39.8 | 40.6 | 47.6 | 47.6 |
| Debt-to-equity ratio at the end of period, % | 80.4 | 82.0 | 82.0 | 79.7 | 82.5 | 82.5 | 66.6 | 24.1 | 24.1 |
| Earnings per share, EUR 1) | 0.06 | 0.18 | 0.24 | -0.48 | -0.40 | -0.64 | 0.04 | -0.09 | -0.13 |
| Equity per share at the end of period, EUR 2) | 12.79 | 12.62 | 12.62 | 11.85 | 11.38 | 11.38 | 11.44 | 2.03 | 2.03 |
| Capital expenditure | 42 | 50 | 92 | 67 | 95 | 255 | 79 | 93 | 172 |
| Depreciation and amortisation | 60 | 59 | 120 | 58 | 57 | 235 | 58 | 57 | 115 |
| Average personnel for the period | 8 437 | 9 011 | 8 724 | 8 860 | 8 296 | 8 651 | 8 026 | 8 217 | 8 121 |
| 1) Calculated based on the rights-issue-adjusted w | eighted average number of shares. Comparative figures adjusted accordingly. | ||||||||
| 2) 31 March 2012 adjusted to exclude the effect of the Outokumpu rights issue. 30 June 2012 includes the shares offered and net proceeds raised in the rights issue. |
2) 31 March 2012 adjusted to exclude the effect of the Outokumpu rights issue. 30 June 2012 includes the shares offered and net proceeds raised in the rights issue.
Definitions of key financial figures
| EBITDA | = | Operating result before depreciation, amortisation and impairments | ||
|---|---|---|---|---|
| Capital employed | = | Total equity + net interest-bearing debt | ||
| Operating capital | = | Capital employed + net tax liability | ||
| Return on equity | = | Net result for the financial period Total equity (average for the period) |
× 100 | |
| Return on capital employed (ROCE) | = | Operating result Capital employed (average for the period) |
× 100 | |
| Net interest-bearing debt | = | Total interest-bearing debt – total interest-bearing assets | ||
| Equity-to-assets ratio | = | Total equity Total assets – advances received |
× 100 | |
| Debt-to-equity ratio | = | Net interest-bearing debt × 100 Total equity |
||
| Earnings per share | = | Net result for the financial period attributable to the owners of the parent Adjusted average number of shares during the period |
||
| Equity per share | = | Equity attributable to the owners of the parent Adjusted number of shares at the end of the period |