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Outokumpu Oyj (0FJ8)

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Wednesday 23 April, 2008

Outokumpu Oyj

Outokumpu's first quarter 2008 interim report -...





Interim Report
April 23, 2008 at 1.00 p.m.
 
OUTOKUMPU'S FIRST QUARTER 2008 INTERIM REPORT - IMPROVED PROFITS IN
RECOVERING STAINLESS STEEL MARKETS
 
First quarter highlights
 
- Operating profit at EUR 100 million including nickel-related
inventory losses of some EUR 60 million, underlying operational
result about EUR 160 million.
- End-user demand for stainless steel healthy with improved demand
from the distributor sector, gradual base price increases achieved
during the quarter
- Production close to capacity, stainless deliveries up by 28% to 449
000 tons (IV/2007: 352 000 tons).
- Good net cash flow from operating activities of EUR 107 million.
- In line with strategy of selling more to end-users, Outokumpu
decided to acquire the Italian stainless steel distributor SoGePar
for EUR 335 million.
 

                                                                     
Group key figures                                                    
                                            I/08  IV/07  I/07  2007  
Sales                         EUR million  1 689  1 465 2 129 6 913  
Operating profit              EUR million    100     15   424   589  
Non-recurring items                                                  
in operating profit           EUR million      -      -     -    14  
Profit before taxes           EUR million     80      7   416   798  
Non-recurring items                                                  
in financial income                                                  
and expenses                  EUR million    -12      -     -   252  
Net profit for the period                                            
from continuing operations    EUR million     61      7   311   660  
Net profit for the period     EUR million     63    -16   307   641  
Earnings per share                                                   
from continuing operations            EUR   0.34   0.04  1.71  3.63  
Earnings per share                    EUR   0.35  -0.09  1.69  3.52  
Return on capital employed              %   10.0    1.4  38.8  13.9  
Net cash generated from                                              
operating activities          EUR million    107    299    85   676  
Capital expenditure,                                                 
continuing operations         EUR million     41     43    25   190  
Net interest-bearing debt                                            
at end of period              EUR million    737    788 1 189   788  
Debt-to-equity ratio at                                              
end of period                           %   23.3   23.6  37.3  23.6  
Stainless steel deliveries     1 000 tons    449    352   430 1 419  
Stainless steel                                                      
base price 1)                     EUR/ton  1 243  1 058 1 930 1 304  
Personnel at the                                                     
end of period,                                                       
continuing operations                      8 137  8 108 8 098 8 108  
                                                                     
1) Stainless steel: CRU - German base price (2 mm cold rolled 304
sheet).
Please note: Between July - October 2007, European prices for some   
stainless grades were quoted on a transaction price basis,
therefore                                                            
base prices are the calculated value of transaction price minus
alloy                                                                
surcharge for this time period (CRU).                                

 
 
SHORT-TERM OUTLOOK
 
Underlying demand for stainless steel remains healthy. End-user
demand, demand for special grades and projects and demand for
standard grades from the distribution sector are expected to continue
to be at a good level.
 
Uncertainty resulting from the global economic turmoil has increased
but has so far not had any major impact on stainless steel
fundamentals. There is however an increasing risk that the
uncertainty might affect both demand and price development of
stainless steel going forward.
 
Distributors' inventories for standard grades are currently at normal
level and Outokumpu is now selling for deliveries in June. Deliveries
are estimated to be slightly below capacity in the second quarter due
to short, additional maintenance breaks at Tornio Works in March.
 
Gradual base price increases have been achieved in the second quarter
and the German base price for 2mm cold rolled 304 stainless steel
sheet is targeted to reach a level of EUR 1 350 towards the end of
June.
 
Outokumpu's operating profit for the second quarter 2008 is expected
to be clearly better than in the first quarter. In addition to the
gradual base price increases achieved, significantly higher prices of
ferrochrome will improve Group operating profit in the second
quarter. The current estimate is that the timing differences between
raw material prices (nickel and ferrochrome) and alloy surcharge will
be slightly positive in the second quarter.
 
CEO Juha Rantanen:
 
"After a very volatile year, we are glad to see a quarter with
gradual and controlled development in positive direction. This we
also expect to continue in the second quarter.
 
More stability and predictability is what we aim for with our
strategy as well. One important part of the strategy is to sell more
to end-users and project customers. The acquisition of the Italian
stainless steel distributor, SoGePar, which we announced today, is a
major step ahead. It accelerates our end-user sales compared to our
own organic investment plan. Additionally, we get access to already
existing capacity, well-functioning organization and a solid customer
base."
 
 
The attachments present Management analysis of the first quarter
operating result and the Interim review by the Board of Directors for
January-March 2008, the accounts and notes to the interim accounts.
This interim report is unaudited.
 
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@outokoumpu.com
 
Esa Lager, CFO
tel +358 9 421 2516
esa.lager@outokumpu.com
 
News conference and live web-cast today at 3.00 pm
 
A combined news conference, conference call and live webcast
concerning the first-quarter 2008 financial results will be held on
April 23, 2008 at 3.00 pm Finnish time (8.00 am US EST, 1.00 pm UK
time, 2.00 pm CET) at Hotel Kämp, conference room Mirror Room,
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 7162 0025
US & Canada +1 334 323 6201
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 -> Downloads
 
An on-demand webcast of the news conference will be available at
www.outokumpu.com as of April 23, 2008 at around 8.00 pm.
 
An instant replay service of the conference call will be available
until Monday April 28, 2008 on the following numbers:
 
UK replay number +44 20 7031 4064, access code: 792027
US & Canada replay number +1 954 334 0342, access code: 792027
 
OUTOKUMPU OYJ
Corporate Management
 
 
Ingela Ulfves
Vice President - Investor Relations & Financial Communications
tel. + 358 9 421 2438, mobile +358 40 515 1531, fax +358 9 421 2125
e-mail: ingela.ulfves@outokumpu.com
www.outokumpu.com
 
 
 
 
 
MANAGEMENT ANALYSIS - FIRST QUARTER OPERATING RESULT
 

Group key figures                                                    
                                                                     
EUR million                       I/07   II/07 III/07  IV/07   2007  
Sales                                                                
General Stainless                1 700   1 670    879  1 073  5 321  
Specialty Stainless              1 003   1 028    687    738  3 456  
Other operations                    64      63     53     57    237  
Intra-group sales                 -638    -669   -391   -403 -2 101  
The Group                        2 129   2 092  1 227  1 465  6 913  
                                                                     
Operating profit                                                     
General Stainless                  245     188   -224     11    220  
Specialty Stainless                182     196    -51      9    337  
Other operations                     1      19      8     -6     21  
Intra-group items                   -4       2     11      2     11  
The Group                          424     406   -256     15    589  
                                                                     
EUR million                       I/08                               
Sales                                                                
General Stainless                1 304                               
Specialty Stainless                786                               
Other operations                    64                               
Intra-group sales                 -465                               
The Group                        1 689                               
                                                                     
Operating profit                                                     
General Stainless                   81                               
Specialty Stainless                 42                               
Other operations                   -20                               
Intra-group items                   -3                               
The Group                          100                               
                                                                     
Stainless steel                                                      
deliveries                                                           
                                                                     
1 000 tons                        I/07   II/07 III/07  IV/07   2007  
Cold rolled                        220     186    117    180    703  
White hot strip                     94      94     49     78    314  
Quarto plate                        39      41     30     36    146  
Tubular products                    20      17     13     15     65  
Long products                       16      15     10     12     54  
Semi-finished                                                        
products                            40      46     21     31    137  
Total deliveries                   430     399    238    352  1 419  
                                                                     
1 000 tons                        I/08                               
Cold rolled                        228                               
White hot strip                    120                               
Quarto plate                        33                               
Tubular products                    19                               
Long products                       15                               
Semi-finished                                                        
products                            34                               
Total deliveries                   449                               
                                                                     
Market prices and                                                    
exchange rates                                                       
                                                                     
                                  I/07   II/07 III/07  IV/07   2007  
Market prices 1)                                                     
Stainless steel                                                      
  Base price          EUR/t      1 930   1 518    710  1 058  1 304  
  Alloy surcharge     EUR/t      2 277   2 913  2 967  1 939  2 524  
  Transaction price   EUR/t      4 207   4 432  3 677  2 997  3 828  
                                                                     
Nickel                USD/t     41 440  48 055 30 205 29 219 37 230  
                      EUR/t     31 619  35 646 21 983 20 175 27 161  
Ferrochrome                                                          
(Cr-content)          USD/lb      0.77    0.82   1.00   1.05   0.91  
                      EUR/kg      1.30    1.34   1.60   1.60   1.46  
Molybdenum            USD/lb     26.69   30.97  31.97  32.66  30.57  
                      EUR/kg     44.90   50.65  51.30  49.71  49.17  
Recycled steel        USD/t        278     287    271    283    280  
                      EUR/t        212     213    197    195    204  
                                                                     
Exchange rates                                                       
EUR/USD                          1.311   1.348  1.374  1.448  1.371  
EUR/SEK                          9.189   9.257  9.264  9.288  9.250  
EUR/GBP                          0.671   0.679  0.680  0.708  0.684  
                                                                     
                                  I/08                               
Market prices 1)                                                     
Stainless steel                                                      
  Base price          EUR/t      1 243                               
  Alloy surcharge     EUR/t      1 702                               
  Transaction price   EUR/t      2 945                               
                                                                     
Nickel                USD/t     28 957                               
                      EUR/t     19 335                               
Ferrochrome                                                          
(Cr-content)          USD/lb      1.21                               
                      EUR/kg      1.78                               
Molybdenum            USD/lb     33.81                               
                      EUR/kg     49.77                               
Recycled steel        USD/t        393                               
                      EUR/t        262                               
                                                                     
Exchange rates                                                       
EUR/USD                          1.498                               
EUR/SEK                          9.400                               
EUR/GBP                          0.757                               
1) 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.
Please note: Between July-October 2007, European prices for some
stainless
grades were quoted on a transaction price basis, therefore base
prices are the
calculated value of transaction price minus alloy surcharge          
for this time period (CRU).                                          
Nickel: London Metal Exchange (LME) cash quotation                   
Ferrochrome: Metal Bulletin - Ferrochrome lumpy chrome charge, basis
52% chrome
Molybdenum: Metal Bulletin - Molybdenum oxide - Europe               
Recycled steel: Metal Bulletin - Steel scrap HMS 1&2 fob Rotterdam

 
Positive sentiment in the stainless steel market in Europe
 
In the first quarter, growth in the apparent consumption of stainless
steel flat products is estimated to have been 6% in Europe and 5%
globally compared with IV/2007. European stainless steel markets
continued to develop positively in the review period. Distributor
purchases of stainless steel returned to normal levels and nickel
price development became less volatile. In Europe, deliveries of cold
rolled stainless steel increased by 25% from the fourth quarter of
2007. According to CRU, distributors' inventories are at normal level
and lead times have increased.
 
The average base price for 2mm cold rolled 304 stainless steel sheet
in Germany was 1 243 EUR/ton in I/2008, up by 17% from IV/2007. In
March, the base price was 1 290 EUR/ton. The average alloy surcharge
for the quarter decreased by 12% to 1 702 EUR/ton primarily as a
result from the lower nickel price in December. From the beginning of
2008, producers have been applying a new calculation method for raw
materials in the alloy surcharge that uses a shorter reference period
than that employed earlier - the period for raw material prices is
closer to the delivery month, giving distributors less visibility on
future prices. The average transaction price in the first quarter was
2 945 EUR/ton, almost flat compared with IV/2007. (CRU) There has
been growing concerns that the gap between European and Asian prices
is widening, which may again attract imports from Asia.
 
Among the alloying elements, the price of nickel averaged 28 957
USD/ton in I/2008 (IV/2007: 29 219 USD/t). During the quarter, nickel
prices were fairly stable at around 26 400 - 33 300 USD/t. Shortages
of electrical power in South Africa resulted in a significant
tightening of ferrochrome markets and producers were forced to cut
production, which restricted supply. One consequence of the power
shortages is that ferrochrome producers have announced that they will
postpone some scheduled projects. In the quarter, demand for
ferrochrome was 5% higher than in IV/2007 but production was down by
1%. The average contract price was 1.21 USD/lb in I/2008, 15% up on
IV/2007. One result of the shortages of electricity in South Africa,
and to some extent increases in raw material and labor costs and a
higher ratio of non-nickel containing ferritic stainless steel, is
that spot prices for ferrochrome have risen to 2.35 - 3.00 USD/lb. As
a consequence, the quarterly contract price for II/2008 has so far
been settled in the range 1.92 - 2.05 USD/lb. Molybdenum markets
remained tight in the period mainly due to lower export quotas in
China, and the average price increased by 4% to 33.81 USD/lb. The
price of recycled steel increased to 393 USD/ton, 39% up on the
previous quarter.
 
Recovery in demand improved delivery volumes and operating profit
 
Group sales in the first quarter totaled EUR 1 689 million, 15% up on
IV/2007. Production was close to capacity and stainless steel
deliveries improved by 28% to 449 000 tons (IV/2007: 352 000 tons).
Short maintenance breaks in the melt shop and hot rolling mill at
Tornio Works resulted in slightly reduced delivery volumes. The main
reason for improvement in delivery volumes was the recovery in demand
for standard grades from the distribution sector.
 
Operating profit for the quarter totaled EUR 100 million and included
some EUR 60 million of nickel-related inventory losses. In IV/2007,
inventory losses were higher at some EUR 100 million. Outokumpu's
underlying operational result improved to some EUR 160 million
(IV/2007: EUR 115 million). Majority of the improvement in
profitability is attributable to increased delivery volumes and lower
nickel-related inventory losses. The gradual improvement in base
prices was to some extent offset by less favorable product and market
mix. The impact from the higher ferrochrome price was minor in the
quarter. Return on capital employed was 10.0% (IV/2007: 1.4%).
Earnings per share totaled EUR 0.35 (IV/2007: EUR -0.09) and earnings
per share from continuing operations totaled EUR 0.34 (IV/2007: EUR
0.04).
 
Sales by General Stainless totaled EUR 1 304 million (IV/2007: EUR 1
073 million) and deliveries increased by 31% to 398 000 tons.
Operating profit improved to EUR 81 million (IV/2007: EUR 11 million)
of which Tornio Works posted EUR 67 million (IV/2007: EUR 3 million).
 
Outokumpu's chromium mine in Kemi and the ferrochrome production
plant in Tornio cover some 60-65% of the Group's total ferrochrome
needs which corresponds to demand from Tornio Works. The remainder of
the ferrochrome required is purchased in the market, mostly in the
form of recycled stainless. As with all other raw materials, the
price of chrome is charged to the customer through the alloy
surcharge mechanism by using the quarterly contract price for
ferrochrome (Metal Bulletin). As the price of ferrochrome rises,
Outokumpu's operating profit improves. Every 5 USc/lb increase in the
quarterly contract price for ferrochrome improves Group operating
profit by some EUR 10 million on an annual basis. In 2008, part of
this benefit will be offset by the increase of energy prices from the
beginning of the year.
 
Sales by Specialty Stainless totaled EUR 786 million (IV/2007: EUR
738 million) and deliveries increased by 21% to 161 000 tons.
Operating profit rose to EUR 42 million (IV/2007: EUR 9 million).
 
Operating loss by Other operations was EUR 20 million (IV/2007: EUR 6
million loss) and included costs related to unrealized losses from
electricity derivatives.
 
New investment decisions taken
 
In January 2008, a decision to invest EUR 370 million over three
years to broaden the product range of Tornio Works was made.
Outokumpu will start producing high-quality ultra-clean ferritic
stainless steel grades, as well as bright-annealed austenitic and
ferritic stainless products. This investment, together with the
on-going replacement of the No. 2 annealing and pickling line, will
increase Tornio Works' total installed capacity for finished products
by 100 000 tons to some 1.3 million tons by the end of 2010. The
investment also includes a service center (from 2010-) near Stuttgart
in Southern Germany which will have an annual processing capacity of
60 000 tons especially for bright-annealed austenitic and ferritic
products.
 
Outokumpu will expand and relocate its stock and processing
capability in central France by investing some EUR 14 million over a
two-years period. Combined annual coil and plate processing capacity
in standard and special stainless steel grades will be 40 000 tons
and is scheduled to be in place by the end of 2009.
 
Outokumpu and Al-Hejailan join forces in the Middle East
 
In February, Outokumpu OSTP and the Saudi Arabian tube manufacturer
Armetal, a company of Al-Hejailan Group, agreed to form Outokumpu
Armetal Stainless Pipe Co., Ltd., a 51/49 stainless steel tubular
joint venture, in Riyadh. The company's annual capacity will be some
10 000 tons in full operation.
 
Events after the period
 
Today, Outokumpu signed an agreement to acquire the SoGePar Group, an
Italian distributor of stainless steel. Outokumpu will pay EUR 195
million in cash and take on debt in the company in the amount of EUR
140 million. As a result of the transaction, the earlier announced
EUR 70 million investment to expand Group's current stock and
processing operations in Italy will not take place.
 
SoGePar operates stainless steel service centers in Castelleone in
Italy  and in Rotherham in the UK. SoGePar also has stock operations
in Italy, the UK, Belgium, Ireland, Finland and France, as well as a
commercial office in Germany and a representative office in Turkey.
Sales by the SoGePar Group totaled EUR 560 million in 2007, with an
operating profit of EUR 44 million and deliveries of 134 000 tons.
 
As a result of this acquisition, Outokumpu's Stock & Processing
capacity in Italy and the UK will be in excess of 240 000 tons. In
total, with the SoGePar acquisition and the service center
investments announced recently, Outokumpu's global annual stock and
processing capacity will increase from the current 300 000 tons to
over 740 000 tons by 2010.
 
INTERIM REVIEW BY THE BOARD OF DIRECTORS - JANUARY-MARCH 2008
(Unaudited)
 
Demand for stainless steel at a healthy level
 
Demand for stainless steel continued to be healthy during the first
quarter of 2008. Growth in the apparent consumption of stainless
steel flat products in I/2008 is estimated to have been some 6% in
Europe and some 5% globally compared to the previous quarter. The
average German base price for 2mm 304  cold rolled sheet was EUR 1
243 EUR/t in the first quarter, 17% higher than at the end of 2007
but 36% lower than in I/2007. The transaction price of stainless
steel averaged 2 945 EUR/t in the first quarter, 30% lower than in
I/2007. (CRU)
 
The price of nickel, the main alloying material in stainless steel,
stabilized in the quarter and fluctuated in the range 26 400 - 33 300
USD/t. The average price in the first quarter was 28 957 USD/t.
Markets for ferrochrome, however, tightened significantly. The
average contract price for ferrochrome was 1.21 USD/lb, (I/2007: 0.77
USD/lb). Prices for recycled steel continued to rise in the period
and averaged 393 USD/t. The average price for molybdenum was 33.81
USD/lb. 
 
Operating profit improved
 
Group sales in the quarter totaled EUR 1 689 million (I/2007: EUR 2
129 million), 21% lower than in I/2007. Stainless steel deliveries
increased to 449 000 tons (I/2007: 430 000 tons). 
 
Operating profit totaled EUR 100 million (I/2007: EUR 424 million)
and included some EUR 60 million of nickel-related inventory losses.
Operating profit was higher than in the previous quarter (IV/2007:
EUR 15 million) as a result of improved deliveries and lower
nickel-related inventory losses. The gradual improvement in base
prices was to some extent offset by less favorable product and market
mix. The impact from the higher ferrochrome price was minor in the
quarter. Operating profit was however significantly lower than in
I/2007 (I/2007: EUR 424 million), when some EUR 50 million of
nickel-related inventory gains were recorded. Underlying operating
profit for I/2008 improved to some EUR 160 million (IV/2007 EUR 115
million). Profit before taxes totaled EUR 80 million (I/2007: EUR 416
million).
 
Net financial income and expenses was EUR 20 million negative
(I/2007: EUR 10 million negative). An impairment loss of EUR 12
million was booked in other financial expenses on the shares of
Belvedere Resources Ltd, classified as available-for-sale financial
asset, due to the decline in the company's share price. In June 2007,
the Hitura mine was sold to Belvedere and the payment was settled in
the shares of Belvedere. Net profit for the period from continuing
operations totaled EUR 61 million (I/2007: EUR 311 million). Earnings
per share totaled EUR 0.35 (I/2007: EUR 1.69) and earnings per share
from continuing operations EUR 0.34 (I/2007: EUR 1.71). Return on
capital employed for I/2008 was 10.0% (I/2007: 38.8%).
 
Net cash generated from operating activities totaled EUR 107 million
(I/2007: EUR 85 million). Some further EUR 21 million was tied up in
working capital in the first quarter of 2008. Net interest-bearing
debt fell by EUR 51 million compared to year-end and was EUR 737
million at the end of March (Dec. 31, 2007: EUR 788 million).
Outokumpu's balance sheet is strong with gearing at 23.3% (Dec. 31,
2007: 23.6%) providing good financial flexibility.
 
Major investment projects approved
 
Capital expenditure for I/2008 on continuing operations totaled EUR
41 million (I/2007: EUR 25 million). New investment projects approved
for 2008-2010 are detailed below.
 
In January 2008, a decision to invest EUR 370 million over three
years to broaden the product range of Tornio Works was made.
Outokumpu will start producing high-quality ultra-clean ferritic
stainless steel grades, as well as bright-annealed austenitic and
ferritic stainless products. This investment, together with the
on-going replacement of the No. 2 annealing and pickling line, will
increase Tornio Works' total installed capacity for finished products
by 100 000 tons to some 1.3 million tons by the end of 2010. The
investment also includes a service center (from 2010-) near Stuttgart
in Southern Germany which will have an annual processing capacity of
60 000 tons especially for bright-annealed austenitic and ferritic
products.
 
Outokumpu will expand and relocate its stock and processing
capability in central France by investing some EUR 14 million over a
two-years period. Combined annual coil and plate processing capacity
in standard and special stainless steel grades will be 40 000 tons
and is scheduled to be in place by the end of 2009.
 
In February, Outokumpu OSTP and the Saudi Arabian tube manufacturer
Armetal, a company of Al-Hejailan Group, agreed to form Outokumpu
Armetal Stainless Pipe Co., Ltd., a 51/49 stainless steel tubular
joint venture, in Riyadh. The company's annual capacity will be some
10 000 tons in full operation.
 
Outokumpu's corporate responsibility theme for 2008 has started
 
Within Outokumpu, 2008 has been named "Corporate responsibility theme
year". Concrete targets in the field of environmental and social
responsibility have been set, and the aim is for everyone in
Outokumpu to participate. Targets for environmental responsibility
include reducing landfill waste from production operations and
reducing energy consumption in both production plants and office
facitilites. Targets for social responsibility include reducing the
number of accidents by a third and improving well-being at work.
 
Risks and uncertainties
 
Outokumpu operations are conducted in accordance with the
Board-approved risk management policy, which defines the objectives,
approaches and areas of responsibility in risk management. Outokumpu
categorizes risks as strategic/business, operational or financial.
Risks and uncertainties may, if materialized, substantially impact
earnings and cash flows in the current year.
 
Important strategic and business risks include overcapacity in
stainless steel production, product substitution and the cyclical
nature of stainless steel demand. New stainless steel production
capacity is being built in China and this may lead to overcapacity in
cold rolled stainless production. To mitigate risk related to the
cyclical nature of the stainless steel business and the risk of
product substitution, Outokumpu is aiming to increase sales to
end-users and to widen the Group's product offering.
 
Operational risks arise as a consequence of inadequate or failed
internal processes, employee actions, systems or other events such as
natural catastrophes, and misconduct or crime. Outokumpu currently
has a number of investment and change projects underway and failures
or delays in these projects may negatively impact strategy
implementation and achievement of financial targets. Outokumpu
manages these risks by having dedicated resources for overall project
support and for monitoring the whole project portfolio.
 
Property damage and business interruption caused by fire at some
major site is a key risk concern for the Group. Outokumpu has
systematic fire and security audit programs in place and part of
hazard risk is covered by insurances. The annual insurance renewal
process was successfully finalized in the first quarter.
 
Financial risks include exposure to market prices, the capability to
maintain adequate liquidity and exposure to risk of default. The most
important market risks for Outokumpu include variation in the nickel
price, variations in the exchange rate of the Swedish krona and the
euro and the value of the US dollar. Outokumpu also has significant
exposure to equity and loan security prices. Part of the Group's
market risks are mitigated through the use of financial derivative
contracts. Liquidity and refinancing risk are taken into account in
capital management decisions. It is Outokumpu's aim to mitigate
significant part of credit risk with insurances and other
arrangements.
 
Outokumpu has closely monitored the turbulence in global financial
markets and management has assessed that the current market situation
is not likely to impose significant restrictions on implementation of
the Group's current decisions and plans. The increases in credit
margins have not had any major impact on Outokumpu's funding costs.
However, the market spreads are part of the valuation models used to
estimate fair values for interest-bearing receivables and therefore
they have some impact on these assessments. 
 
In the first quarter, the impact of the weaker dollar on Outokumpu's
earnings was offset by e.g. higher ferrochrome price. The new alloy
surcharge calculation method was applied in most markets from the
beginning of this year and as one consequence of this, is that the
Group's exposure to nickel price changes has increased somewhat. On
the other hand, changes negotiated in part of the raw material
purchase contracts have mitigated the increase in nickel exposure to
certain degree. Outokumpu is currently assessing the principles and
processes for managing nickel price and related currency risks.
 
Environment, health and safety
 
In the European Union, the governments finalized the carbon dioxide
allowance distribution for the Kyoto-period 2008-2012 in Sweden and
in Finland. The total amounts allocated to the installations in the
UK, Sweden and Finland are estimated as being sufficient for the
Group's planned production. In Finland and Sweden, in addition to the
melt shops, the emissions trading also covers heat treatment
installations, in the UK only melt shop operations are included.
 
Emissions to air and discharges to water remained mostly within
permitted limits and the breaches that occurred were temporary, were
identified quickly and caused only minimal environmental impact.
Outokumpu is not a party in any significant juridical or
administrative proceeding concerning environmental issues, nor is it
aware of any environmental risks that could have a material adverse
effect on the Group's financial position.
 
Environmental and  energy savings targets for the Corporate
Responsibility theme year were published. For energy saving, the
target is a 2% reduction in energy consumed per ton of processed
steel. For materials efficiency, the target is a 10% reduction in
land fill waste per ton of processed steel.
 
Occupational safety is a major and continuing area of focus within
the Group. In I/2008, the lost-time injury rate (i.e. lost-time
accidents per million working hours) increased to 13 (I/2007: 11) and
was higher than the Group's target for 2008 of less than 8. Thus,
corrective actions within the Group are taken in order to reach the
targets. In 2009, the target will be less than five. No severe
accidents were reported during the review period.
 
Personnel
 
The Group's continuing operations employed an average of 8 140 people
 during January-March 2008 (I/2007: 8 129) and there were 8 137
employees at the end of March (Dec. 31, 2007: 8 108).
 
Class actions regarding the sold fabricated copper products business
 
The fabricated copper products business sold in 2005, comprised among
others Outokumpu Copper (USA), Inc. This company has been served with
several complaints in cases filed in federal district courts and
state courts in the US by various plaintiffs. The complaints allege
claims and damages under US antitrust laws and purport to be class
actions on behalf of all direct and indirect purchasers of copper
plumbing tubes and ACR tubes in the US. Except for one individual ACR
Tube claim, all these class actions and claims have been now ended
and the latest dismissals in Outokumpu's favor remain final.
Outokumpu believes that the allegations in the remaining case are
groundless and will defend itself in any such proceeding. In
connection with the transaction to sell the fabricated copper
products business to Nordic Capital, Outokumpu has agreed to
indemnify and hold harmless Nordic Capital with respect to these
class actions.
 
Customs investigation of exports to Russia by Outokumpu Tornio Works

In March 2007, Finnish Customs authorities initiated a criminal
investigation into the Group's Tornio Works' export practices to
Russia. The preliminary investigation is connected with another
preliminary investigation concerning a forwarding agency based in
South-eastern Finland. It is suspected that defective and/or forged
invoices have been prepared at the forwarding agency as regards
export of stainless steel to Russia. The preliminary investigation is
focusing on possible complicity by Outokumpu Stainless Oy in the
preparation of defective and/or forged invoices by the forwarding
agency in question. The investigation is expected to last until the
summer of 2008. Directly after the Finnish Customs authorities
started their investigations, Outokumpu initiated its own
investigation into the trade practices connected with stainless steel
exports from Tornio to Russia. In June 2007, after carrying out its
investigation, the leading Finnish law firm Roschier Attorneys Ltd.,
concluded that it had not found evidence that any employees of Tornio
Works or the company had committed any of the crimes alleged by the
Finnish Customs.
 
Organizational change and appointments
 
To facilitate the new phase in the Group's strategy development
introduced in September 2007, Outokumpu has re-aligned its
organization using an integrated model. This new model was
implemented on January 1, 2008 and is designed to serve customers in
an optimal way. The new organizational structure became fully
operational on April 1, 2008.
 
Jamie Allan was appointed Executive Vice President - Supply Chain
Management and a member of Outokumpu's Group Executive Committee as
of January 1, 2008. Mr. Allan's responsibility includes supply chain
management operations, Production Excellence program and procurement.
 
Annual General Meeting of March 27, 2008
 
The Annual General Meeting (AGM) approved a dividend of EUR 1.20 per
share for 2007. Dividends totaling EUR 216 million were paid on April
8, 2008.
 
The AGM authorized the Board of Directors to decide to repurchase the
Company's own shares as follows. The maximum number of shares to be
repurchased is 18 000 000, currently representing 9.93% of the
Company's total number of registered shares. Based on earlier
authorizations the Company currently holds 1 218 603 of its own
shares. The AGM authorized the Board of Directors to decide to issue
shares and granting special rights entitling to shares. The maximum
number of new shares to be issued through the share issue and/or by
granting special rights entitling to shares is 18 000 000, and, in
addition, the maximum number of treasury shares to be transferred is
18 000 000. The authorization includes the right to resolve upon
directed share issue. These authorizations are valid until the next
Annual General Meeting, however no longer than May 31, 2009. To date
the authorizations have not been used.
 
The AGM decided on the number of the Board members, including
Chairman and Vice Chairman, to be eight. Evert Henkes, Ole Johansson,
Victoire de Margerie, Anna Nilsson-Ehle, Leo Oksanen and Leena
Saarinen were re-elected as members to the Board of Directors, and
Jarmo Kilpelä and Anssi Soila were elected as new members. The Annual
General Meeting elected Ole Johansson as Chairman and Anssi Soila as
Vice Chairman of the Board of Directors. The AGM also resolved to
form a Shareholders' Nomination Committee to prepare proposals on the
composition and remuneration of the Board of Directors for
presentation to the next AGM.
 
KPMG Oy Ab, Authorized Public Accountants, was re-elected as the
Company's auditor for the term ending at the close of the next AGM.
 
The Board of Directors of Outokumpu appointed at its first meeting
two permanent committees consisting of Board members. Leena Saarinen
(Chairman), Jarmo Kilpelä, Victoire de Margerie and Anssi Soila were
elected as members of the Board Audit Committee. Ole Johansson
(Chairman), Evert Henkes and Anna Nilsson-Ehle were elected as
members of the Board Nomination and Compensation Committee.
 
Shares and shareholders
 
According to the Nordic Central Securities Depository, Outokumpu's
shareholders by group at the end of I/2008 were the Finnish State
(31.1%), foreign investors (42.9%), Finnish public sector
institutions (14.1%), Finnish private households (6.9%), Finnish
financial and insurance institutions (1.8%), Finnish corporations
(1.7%) and Finnish non-profit organizations (1.5%). The list of
largest shareholders is updated regularly on Outokumpu's internet
pages www.outokumpu.com.
 
At the end of March, Outokumpu's closing share price was EUR 28.81.
The average share price during I/2008 was EUR 23.45 (I/2007: EUR
28.54).  At the end of I/2008, the market capitalization of Outokumpu
Oyj shares totaled EUR 5 225 million (I/2007: EUR 4 665 million).
During the quarter, 141.6 (I/2007: 120.0) million shares were traded
on the OMX Nordic Exchange Helsinki. At the end of March, Outokumpu's
fully paid share capital totaled EUR 308 287 074.60 and consisted of
181 345 338 shares. The average number of shares outstanding during
I/2008 was 180 112 135.
 
Events after the review period
 
Today, Outokumpu signed an agreement to acquire the SoGePar Group, an
Italian distributor of stainless steel. Outokumpu will pay EUR 195
million in cash and take on debt in the company in the amount of EUR
140 million As a result of the transaction, the earlier announced EUR
70 million investment to expand Group's current stock and processing
operations in Italy will not take place.
 
SoGePar operates stainless steel service centers in Castelleone in
Italy and in Rotherham in the UK. SoGePar also has stock operations
in Italy, the UK, Belgium, Ireland, Finland and France, as well as a
commercial office in Germany and a representative office in Turkey.
Sales by the SoGePar Group totaled EUR 560 million in 2007, with an
operating profit of EUR 44 million and deliveries of 134 000 tons.
 
As a result of this acquisition, Outokumpu's Stock & Processing
capacity in Italy and the UK will be in excess of 240 000 tons. In
total, with the SoGePar acquisition and the service center
investments announced recently, Outokumpu's global annual stock and
processing capacity will increase from the current 300 000 tons to
over 740 000 tons by 2010.
 
Short-term outlook
 
Underlying demand for stainless steel remains healthy. End-user
demand, demand for special grades and projects and demand for
standard grades from the distribution sector are expected to continue
to be at a good level.
 
Uncertainty resulting from the global economic turmoil has increased
but has so far not had any impact on stainless steel fundamentals.
There is however an increasing risk that the uncertainty might affect
both demand and price development of stainless steel going forward.
 
Distributors' inventories for standard grades are currently at normal
level and Outokumpu is now selling for deliveries in June. Deliveries
are estimated to be slightly below capacity in the second quarter due
to short, additional maintenance breaks at Tornio Works in March.
 
Gradual base price increases have been achieved in the second quarter
and the German base price for cold rolled 304 2mm stainless steel
sheet is targeted to reach a level of EUR 1 350 towards the end of
June.
 
Outokumpu's operating profit for the second quarter 2008 is expected
to be clearly better than in the first quarter. In addition to the
gradual base price increases achieved, significantly higher prices of
ferrochrome will improve Group operating profit in the second
quarter. The current estimate is that the timing differences between
raw material prices (nickel and ferrochrome) and alloy surcharge will
be slightly positive in the second quarter.
 
 
In Espoo, April 23, 2008
 
Board of Directors
 

CONSOLIDATED FINANCIAL                         
STATEMENTS (unaudited)                         
                                               
Condensed income statement                     
                                  Jan-   Jan-   Jan-
                                 March  March    Dec
EUR million                       2008   2007   2007
Continuing operations:                         
Sales                            1 689  2 129  6 913
Other operating income               1     11     82
Costs and expenses              -1 583 -1 714 -6 364
Other operating expenses            -7     -2    -43
Operating profit                   100    424    589
                                                    
Share of results in                                 
associated companies                 0      2      4
Financial income and expenses                       
  Interest income                    5      6     25
  Interest expenses                -16    -21    -82
  Market price gains and losses     -7     -2      0
  Other financial income            10     10    268
  Other financial expenses         -13     -3     -5
Profit before taxes                 80    416    798
                                                    
Income taxes                       -19   -105   -138
Net profit for the period                           
from continuing operations          61    311    660
                                                    
Discontinued operations:                            
Net profit for the period                           
from discontinued operations         2     -4    -18
                                               
Net profit for the period           63    307    641
                                                    
Attributable to:                                    
Equity holders of the Company       63    305    638
Minority interest                    -      2      4
                                                    
Earnings per share                                  
for profit attributable                             
to the equity                                       
holders of the Company:                             
Earnings per share, EUR           0.35   1.69   3.52
Diluted earnings per share, EUR   0.35   1.68   3.50
                                                    
Earnings per share from                             
continuing operations                               
attributable to the equity                          
holders of the Company:                             
Earnings per share, EUR           0.34   1.71   3.63
                                                    
Earnings per share from                             
discontinued operations                             
attributable to the equity                          
holders of the Company:                             
Earnings per share, EUR           0.01  -0.02  -0.10
                                               

 
 
 
 

Condensed balance sheet                          
                              March 31 March 31 Dec 31
EUR million                       2008     2007   2007
ASSETS                                           
Non-current assets                               
Intangible assets                  472      487    475
Property, plant and equipment    1 966    2 030  1 980
Non-current financial assets                          
  Interest-bearing                 436      400    453
  Non interest-bearing              78       84     77
                                 2 953    3 001  2 986
Current assets                                        
Inventories                      1 511    1 858  1 630
Current financial assets                              
  Interest-bearing                  52       74     50
  Non interest-bearing           1 126    1 461    975
Cash and cash equivalents          107      140     86
                                 2 796    3 533  2 740
                                                      
Assets held for sale               198      222    184
                                                      
Total assets                     5 947    6 756  5 910
                                                      
EQUITY AND LIABILITIES                                
Equity                                                
Equity attributable to the                            
equity holders of the Company    3 162    3 170  3 337
Minority interest                    -       18      -
                                 3 162    3 188  3 337
Non-current liabilities                               
Interest-bearing                 1 030    1 271  1 046
Non interest-bearing               336      344    337
                                 1 366    1 615  1 382
Current liabilities                                   
Interest-bearing                   434      687    464
Non interest-bearing               919    1 199    675
                                 1 353    1 886  1 139
                                                      
Liabilities related to                                
assets held for sale                66       67     52
                                                      
Total equity and liabilities     5 947    6 756  5 910
                                                 

 
 

Consolidated
statement                                                     
of changes in equity                                          
                      Attributable to the equity holders of the
                      Company
                         Share Unregister-    Share    Other     Fair
                                                                value
                       capital    ed share  premium reserves reserves
EUR million                        capital     fund                  
Equity on December
31, 2006                   308           0      701       11      144
Cash flow hedges             -           -        -        -       -1
Fair value changes on                                         
available-for-sale                                            
financial assets             -           -        -        -       29
Net investment hedges        -           -        -        -        -
Change in translation                                                
differences                  -           -        -        -       -1
Items recognised                                                     
directly in equity           -           -        -        -       28
Net profit for the
period                       -           -        -        -        -
Total recognised                                                     
income and expenses          -           -        -        -       28
Transfers within
equity                       0          -0        -        -        -
Dividend distribution        -           -        -        -        -
Shares subscribed
with options                 0           -        0        -        -
Management stock
option program:                                                      
value of received
services                     -           -        -        -        -
Equity on March 31,
2007                       308           -      701       11      171
                                                                     
Equity on December
31, 2007                   308           -      701       16       57
Cash flow hedges             -           -        -        -       -4
Fair value changes on                                         
available-for-sale                                            
financial assets             -           -        -        -       20
Available-for-sale                                                   
financial assets                                                     
recognized through
P&L                          -           -        -        -       -5
Net investment hedges        -           -        -        -        -
Change in translation                                                
differences                  -           -        -        -       -0
Items recognised                                                     
directly in equity           -           -        -        -       11
Net profit for the
period                       -           -        -        -        -
Total recognised                                                     
income and expenses          -           -        -        -       11
Dividend distribution        -           -        -        -        -
Shares subscribed
with options                 0           -        0        -        -
Management stock
option program:                                                      
value of received
services                     -           -        -        -        -
Equity on March 31,
2008                       308           -      702       16       68
                                                              
                                                              
                      Attributable to the equity holders of the
                      Company
                      Treasury  Cumulative Retained Minority    Total
                        shares translation earnings interest   equity
EUR million                    differences                           
Equity on December
31, 2006                    -2         -35    1 927       17    3 071
Cash flow hedges             -           -        -        -       -1
Fair value changes on                                         
available-for-sale                                            
financial assets             -           -        -        -       29
Net investment hedges        -           3        -        -        3
Change in translation                                         
differences                  -         -22        -        0      -23
Items recognised                                              
directly in equity           -         -19        -        0        9
Net profit for the
period                       -           -      305        2      307
Total recognised                                              
income and expenses          -         -19      305        2      316
Tranfers within
equity                       -           -        -        -        -
Dividend distribution        -           -     -199        -     -199
Management stock
option program:                                                      
value of received
services                     -           -        1        -        1
Equity on March 31,
2007                        -2         -53    2 034       18    3 188
                                                              
Equity on December
31, 2007                   -27         -82    2 364 -           3 337
Cash flow hedges             -           -        -        -       -4
Fair value changes on                                         
available-for-sale                                            
financial assets             -           -        -        -       20
Available-for-sale                                            
financial assets                                              
recognized through
P&L                          -           -        -        -       -5
Net investment hedges        -           0        -        -        0
Change in translation                                         
differences                  -         -33        -        -      -33
Items recognised                                              
directly in equity           -         -33        -        -      -22
Net profit for the
period                       -           -       63        -       63
Total recognised                                              
income and expenses          -         -33       63        -       41
Dividend distribution        -           -     -216        -     -216
Shares subscribed
with options                 -           -        -        -        0
Management stock
option program:                                                      
value of received
services                     -           -        0        -        0
Equity on March 31,
2008                       -27        -115    2 211        -    3 162
                                                              

 
 
 

Condensed statement of cash flows                              
                                          Jan-March Jan-March Jan-Dec
EUR million                                    2008      2007    2007
Net profit for the period                        63       307     641
Adjustments                                                          
  Depreciation and amortization                  50        51     204
  Impairments                                    16         2       1
  Gain on the sale                                                   
  of Outotec shares                               -         -    -142
  Gain on the Talvivaara                                             
  transaction                                     -         -    -110
  Other adjustments                               1       128     199
Change in working capital                       -21      -349     181
Dividends received                               10         9      13
Interests received                                2         2      10
Interests paid                                  -15       -15     -83
Income taxes paid                                 2       -51    -239
Net cash from                                                        
operating activities                            107        85     676
Purchases of assets                             -47       -32    -163
Purchase of Talvivaara shares                     -         -     -32
Acquisition of the minority in OSTP               -         -     -22
Proceeds from the sale                                               
of subsidiaries                                   -         4       1
Proceeds from the sale                                               
of other assets                                   1         2      15
Net cash from other                                                  
investing activities                             -0         2       4
Net cash from                                                        
investing activities                            -46       -24    -197
Cash flow before                                                     
financing activities                             61        61     479
Purchase of treasury shares                       -         -     -25
Borrowings of long-term debt                      -         -     151
Repayment of long-term debt                      -8        -3    -388
Change in current debt                          -30        -1    -180
Dividends paid                                    -         -    -199
Proceeds from the sale of Outotec shares          -         -     158
Proceeds from the sale                                               
of other financial assets                         -         -       6
Other financing cash flow                        -0         0       1
Net cash from                                                        
financing activities                            -38        -4    -477
Net change in cash                                                   
and cash equivalents                             22        56       2
                                                                     
Cash and cash equivalents at                                         
the beginning of the period                      86        85      85
Foreign exchange rate effect                     -1        -1      -1
Net change in cash                                                   
and cash equivalents                             22        56       2
Cash and cash equivalents                                            
at the end of the period                        107       140      86
                                                               
                                                               
Key figures                                                       
                                          Jan-March Jan-March Jan-Dec
EUR million                                    2008      2007    2007
Operating profit margin, %                      5.9      19.9     8.5
Return on capital employed, %                  10.0      38.8    13.9
Return on equity, %                             7.7      39.3    20.0
Return on equity from                                                
continuing operations, %                        7.5      39.8    20.6
                                                                     
Capital employed at end of period             3 899     4 377   4 125
Net interest-bearing                                                 
debt at end of period                           737     1 189     788
Equity-to-assets ratio                                               
at end of period, %                            53.2      47.2    56.5
Debt-to-equity ratio                                                 
at end of period, %                            23.3      37.3    23.6
                                                                     
Earnings per share, EUR                        0.35      1.69    3.52
Earnings per share from                                              
continuing operations, EUR                     0.34      1.71    3.63
Earnings per share from                                              
discontinued operations, EUR                   0.01     -0.02   -0.10
Average number of shares                                             
outstanding, in thousands 1)                180 112   181 061 180 922
Fully diluted earnings                                               
per share, EUR                                 0.35      1.68    3.50
Fully diluted average number                                         
of shares, in thousands 1)                  181 050   182 087 181 920
Equity per share at end                                              
of period, EUR                                17.56     17.51   18.53
Number of shares outstanding                                         
at end of period,                                                    
in thousands 1)                             180 127   181 082 180 103
                                                                     
Capital expenditure,                                                 
continuing operations                            41        25     190
Depreciation,                                                        
continuing operations                            50        51     204
Average personnel for the                                            
period, continuing operations                 8 140     8 129   8 270
                                                               
1) The number of own shares repurchased is
excluded.                                                      

 
 
 
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
 
This interim financial report is prepared in accordance with IAS 34
(Interim Financial Reporting). Mainly the same accounting policies
and methods of computation have been followed in the interim
financial statements as in the annual financial statements for 2007.
 
Inventories are stated at the lower of cost or net realizable value.
Outokumpu changed its calculation method for the cost of inventories
from first-in, first-out (FIFO) method to weighted average method in
2008.  Also Outokumpu adopted amended standard IAS 23 Borrowing Costs
in 2008. These changes have not had any material impact on the
interim financial statements.
 
Use of estimates
 
The preparation of the financial statements 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 at the date of the financial
statements, and the reported amounts of income and expenses during
the reporting period. Accounting estimates are employed in the
financial statements to determine reported amounts, including the
realizability of certain assets, the useful lives of tangible and
intangible assets, income taxes, provisions, pension obligations,
impairment of goodwill and other items. Although these estimates are
based on management's best knowledge of current events and actions,
actual results may differ from the estimates.
 
Shares and share capital
 
The total number of Outokumpu Oyj shares was 181 345 338 and the
share capital amounted to EUR 308.3 million on March 31, 2008.
Outokumpu Oyj held 1 218 603 treasury shares on March 31, 2008.  This
corresponded to 0.7% of the share capital and the total voting rights
of the Company on March 31, 2008.
 
The Annual General Meeting held in 2003 passed a resolution on a
stock option program for management (2003 option program). The stock
options have been allocated as part of the Group's incentive programs
to key personnel of Outokumpu. Trading with Outokumpu Oyj's stock
options 2003A has commenced on the Main List of the OMX Nordic
Exchange Helsinki as of September 1, 2006. On March 31, 2008 a total
of 69 217 Outokumpu Oyj shares had been subscribed for on the basis
of 2003A stock option program. An aggregate maximum of 590 085
Outokumpu Oyj shares can be subscribed for with the remaining 2003A
stock options. In accordance with the terms and conditions of the
option program, the dividend adjusted share price for a stock option
was EUR 8.45 on March 31, 2008. The share subscription period for the
2003A stock options is September 1, 2006 - March 1, 2009. Trading
with Outokumpu Oyj's stock options 2003B has commenced on the Main
List of the OMX Nordic Exchange Helsinki as of September 3, 2007. On
March 31, 2008 a total of 25 566 Outokumpu Oyj shares had been
subscribed for on the basis of 2003B stock option program. An
aggregate maximum of 1 003 254 Outokumpu Oyj shares can be subscribed
for with the remaining 2003B stock options. In accordance with the
terms and conditions of the option program, the dividend adjusted
share price for a stock option was EUR 11.51 on March 31, 2008. The
share subscription period for the 2003B stock options is September 3,
2007 - March 1, 2010. The current amount that Outokumpu Oyj shares
could be subscribed for with the 2003C stock options is 102 500
shares. The subscription period for shares with stock option 2003C is
from September 1, 2008 to March 1, 2011. As a result of the share
subscriptions with the 2003 stock options, Outokumpu Oyj's share
capital may be increased by a maximum of EUR 2 882 926 and the number
of shares by a maximum of 1 695 839 shares. This corresponds to 0.9%
of the Company's shares and voting rights. Outokumpu's Board of
Directors confirmed on February 2, 2006 a share-based incentive
program for years 2006-2010 as part of the key employee incentive and
commitment system of the Company. If persons covered by the program
were to receive the number of shares in accordance with the maximum
reward, currently a total of 858 525 shares, their shareholding
obtained via the program would amount to 0.5% of the Company's shares
and voting rights.
 
The detailed information of the 2003 option program and of the
share-based incentive program for 2006-2010 can be found in the
annual report 2007.
 
Non-current assets held for sale and discontinued operations
 
Outokumpu Copper Tube and Brass
 
The assets and liabilities of Outokumpu Copper Tube and Brass are
presented as held for sale. Outokumpu Copper Tube and Brass business
comprises European sanitary and industrial tubes, including
air-conditioning and refrigeration tubes in Europe, as well as brass
rod. Outokumpu is implementing a vigorous improvement project in this
business and it is Outokumpu's intention to divest the tube and brass
business.
 
 

Specification of non-current
assets held for sale
and discontinued operations

 
 

Income statement                                    
                               Jan-March Jan-March Jan-Dec
EUR million                         2008      2007    2007
Sales                          145             175     599
Expenses                            -138      -176    -607
Operating profit                       7        -1      -8
Net financial items                   -1        -2      -6
Profit before taxes                    6        -3     -15
Taxes                                 -1        -1      -1
Profit after taxes                     5        -4     -15
                                                    
Impairment loss recognized                                
on the fair valuation of                            
the Tube and Brass division's                       
assets and liabilities                -3        -0      -3
Taxes                                  -         -       -
After-tax result from the                                 
disposal and impairment loss           2        -4     -18
                                                          
Minority interest                      -         -       -
Net profit for the period                                 
from discontinued operations           2        -4     -18
                                                    
Balance sheet                                       
                                March 31  March 31  Dec 31
EUR million                         2008      2007    2007
Assets                                              
Intangible and tangible assets         6         6       6
Other non-current assets               4         4       4
Inventories                           97       100      91
Other current non                                         
interest-bearing assets               92       113      83
                                     198       222     184
Liabilities                                               
Provisions                             5         3       4
Other non-current non                                     
interest-bearing liabilities           4         4       5
Trade payables                        45        46      32
Other current non                                         
interest-bearing liabilities          12        15      11
                                      66        67      52
                                                    
Cash flows                                          
                               Jan-March Jan-March Jan-Dec
EUR million                         2008      2007    2007
Operating cash flows                   0         1      18
Investing cash flows                  -3        -1      -3
Financing cash flows                   6        -1     -19
Total cash flows                       2        -1      -4

 
 

Major non-recurring items                                 
in operating profit                                       
                                     Jan-March Jan-March Jan-Dec
EUR million                               2008      2007    2007
Gain on the sale of                                             
Hitura mine in Finland                       -         -      25
Thin Strip restructuring in the UK           -         -     -11
                                             -         -      14
                                                                
Major non-recurring                                             
items in financial income                                 
and expenses                                              
                                     Jan-March Jan-March Jan-Dec
EUR million                               2008      2007    2007
Impairment loss on                                              
Belvedere shares                           -12         -       -
Gain on the sale                                                
of Outotec shares                            -         -     142
Gain on the Talvivaara transaction           -         -     110
                                           -12         -     252
                                                                
Income taxes                                                    
                                     Jan-March Jan-March Jan-Dec
EUR million                               2008      2007    2007
Current taxes                              -19       -99    -107
Deferred taxes                               0        -6     -31
                                           -19      -105    -138
                                                          
Property, plant                                           
and equipment                                             
                                        Jan 1,    Jan 1,  Jan 1,
                                        2008 -    2007 -  2007 -
                                     March 31, March 31, Dec 31,
EUR million                               2008      2007    2007
Historical cost at the                                          
beginning of the period                  3 984     4 009   4 009
Translation differences                    -22       -38     -76
Additions                                   40        26     137
Disposal of subsidiaries                     -        -6     -20
Disposals                                   -4        -2     -67
Reclassifications                           -1        -0       0
Historical cost at                                              
the end of the period                    3 997     3 989   3 984
                                                          
Accumulated depreciation at                               
the beginning of the period             -2 004    -1 939  -1 939
Translation differences                     16        21      47
Disposal of subsidiaries                     -         5      19
Disposals                                    4         0      56
Reclassifications                            0         0      -0
Depreciation                               -47       -47    -190
Impairments                                  -         -       3
Accumulated depreciation at                                     
the end of the period                   -2 030    -1 959  -2 004
                                                          
Carrying value at                                         
the end of the period                    1 966     2 030   1 980
Carrying value at the                                     
beginning of the period                  1 980     2 069   2 069
                                                          
Commitments                                               
                                      March 31  March 31  Dec 31
EUR million                               2008      2007    2007
Mortgages and pledges                                     
Mortgages on land                          121       132     122
Other pledges                                0         0       0
                                                                
Guarantees                                                      
On behalf of subsidiaries                                 
  For commercial commitments                36        90      41
On behalf of associated companies                               
  For financing                              4         5       5
                                                                
Other commitments                           63        58      64
                                                                
Minimum future lease                                            
payments on                                                     
operating leases                            53        66      56
                                                          
Group's major off-balance sheet investment commitments totaled
EUR 48 million on March 31, 2008 (Dec 31, 2007: EUR 37 million).

 
 

Fair values and nominal                                        
amounts of                                                     
derivative instruments                                         
                   March 31 March 31 March 31 Dec 31 March 31  Dec 31
                       2008     2008     2008   2007     2008    2007
                   Positive Negative      Net    Net                 
                       fair     fair     fair   fair  Nominal Nominal
EUR million           value    value    value  value  amounts amounts
Currency and
interest                                                             
rate derivatives                                               
  Currency
forwards                 24       23        2      8    2 176   1 992
  Interest rate
swaps                     7        -        7     10      282     282
                                                               
                                                       Number  Number
                                                           of      of
                                                      shares, shares,
                                                      million million
Stock options                                                  
  Belvedere
Resources Ltd.            1        -        1      3      3.7     3.7
                                                               
                                                         Tons    Tons
Metal derivatives                                              
  Forward and
futures                                                        
  copper contracts        2        0        1     -2    6 275  11 775
  Forward and
futures                                                        
  nickel contracts        2        1        1      0    2 510   3 114
  Forward and
futures                                                        
  zinc contracts          0        0        0     -0    1 275   1 100
  Forward                                                      
  molybdenum
contracts                 -        -        -     -0        -       5
  Nickel options          -        -        -      0        -      24
                                                               
Emission allowance                                             
derivatives               -        0       -0      0   80 000  80 000
                                                               
                                                          TWh     TWh
Electricity                                                    
derivatives              11        6        5     16      1.7     2.3
                         47       30       17     35           

 
 

Segment information                              
                                                 
General Stainless                                
                                                 
EUR million             I/07 II/07 III/07 IV/07  2007
Sales                  1 700 1 670    879 1 073 5 321
of which Tornio Works  1 206 1 038    516   708 3 468
                                                     
Operating profit         245   188   -224    11   220
of which Tornio Works    227   143   -195     3   178
                                                     
Operating capital at                                 
the end of period      3 047 3 007  2 789 2 607 2 607
                                                     
Average personnel                                    
for the period         3 506 3 794  3 807 3 549 3 682
                                                     
Deliveries of main                                   
products (1 000 tons)                                
Cold rolled              187   151     94   155   587
White hot strip           81    82     41    66   270
Semi-finished products   117   118     64    85   383
Total deliveries                                 
of the division          386   350    198   305 1 240
                                                 
EUR million             I/08                     
Sales                  1 304                     
of which Tornio Works    905                     
                                                 
Operating profit          81                     
of which Tornio Works     67                     
                                                 
Operating capital at                             
the end of period      2 722                     
                                                 
Average personnel                                
for the period         3 578                     
                                                 
Deliveries of main                               
products (1 000 tons)                            
Cold rolled              196                     
White hot strip          102                     
Semi-finished products   100                     
Total deliveries                                 
of the division          398                     
                                                 
Specialty Stainless                              
                                                 
EUR million             I/07 II/07 III/07 IV/07  2007
Sales                  1 003 1 028    687   738 3 456
                                                     
Operating profit         182   196    -51     9   337
                                                     
Operating capital at                                 
the end of period      1 668 1 871  1 657 1 513 1 513
                                                     
Average personnel                                    
for the period         4 146 4 188  4 185 4 107 4 135
                                                     
Deliveries of main                                   
products (1 000 tons)                                
Cold rolled               51    52     33    38   174
White hot strip           43    38     23    31   135
Quarto plate              41    43     30    38   151
Tubular products          20    17     12    15    63
Long products             16    15     11    11    52
Total deliveries                                     
of the division          170   164    109   133   574
                                                 
EUR million             I/08                     
Sales                    786                     
                                                 
Operating profit          42                     
                                                 
Operating capital at                             
the end of period      1 430                     
                                                 
Average personnel                                
for the period         4 115                     
                                                 
Deliveries of main                               
products (1 000 tons)                            
Cold rolled               46                     
White hot strip           45                     
Quarto plate              35                     
Tubular products          19                     
Long products             14                     
Total deliveries                                 
of the division          161                     
                                                 
Other operations                                 
                                                     
EUR million             I/07 II/07 III/07 IV/07  2007
Sales                     64    63     53    57   237
                                                     
Operating profit           1    19      8    -6    21
                                                     
Operating capital at                                 
the end of period       -125   101    184   236   236
                                                     
Average personnel                                    
for the period           477   459    424   431   453
                                                 
EUR million             I/08                     
Sales                     64                     
                                                 
Operating profit         -20                     
                                                 
Operating capital at                             
the end of period        -20                     
                                                 
Average personnel                                
for the period           447                     
                                                 

 

Income statement by quarter                                     
                                                                     
EUR million                            I/07 II/07 III/07 IV/07   2007
Continuing operations:                                          
Sales                                                           
General Stainless                     1 700 1 670    879 1 073  5 321
of which intersegment sales             421   430    230   234  1 315
Specialty Stainless                   1 003 1 028    687   738  3 456
of which intersegment sales             169   193    119   124    605
Other operations                         64    63     53    57    237
of which intersegment sales              48    45     43    45    181
Intra-group sales                      -638  -669   -391  -403 -2 101
Total sales                           2 129 2 092  1 227 1 465  6 913
                                                                
Operating profit                                                
General Stainless                       245   188   -224    11    220
Specialty Stainless                     182   196    -51     9    337
Other operations                          1    19      8    -6     21
Intra-group items                        -4     2     11     2     11
Total operating profit                  424   406   -256    15    589
                                                                
Share of results                                                
in associated companies                   2     4     -2    -1      4
Financial income and expenses           -10   242    -19    -7    206
Profit before taxes                     416   652   -277     7    798
Income taxes                           -105  -100     67    -0   -138
Net profit for the period                                       
from continuing operations              311   553   -210     7    660
                                                                
Net profit for the period                                       
from discontinued                                               
operations                               -4    12     -4   -23    -18
Net profit for the period               307   565   -214   -16    641
                                                                
Attributable to:                                                
Equity holders of the Company           305   563   -214   -16    638
Minority interest                         2     2     -0    -0      4
                                                                     
EUR million                            I/08                          
Continuing operations:                                               
Sales                                                                
General Stainless                     1 304                          
of which intersegment sales             284                          
Specialty Stainless                     786                          
of which intersegment sales             124                          
Other operations                         64                          
of which intersegment sales              57                          
Intra-group sales                      -465                          
Total sales                           1 689                          
                                                                     
Operating profit                                                     
General Stainless                        81                          
Specialty Stainless                      42                          
Other operations                        -20                          
Intra-group items                        -3                          
Total operating profit                  100                          
                                                                     
Share of results                                                     
in associated companies                   0                          
Financial income and expenses           -20                          
Profit before taxes                      80                          
Income taxes                            -19                          
Net profit for the period                                            
from continuing operations               61                          
                                                                     
Net profit for the period                                            
from discontinued                                                    
operations                                2                          
Net profit for the period                63                          
                                                                     
Attributable to:                                                     
Equity holders of the Company            63                          
Minority interest                         -                          
                                                                     
Major non-recurring                                                  
items in operating profit                                            
                                                                     
EUR million                            I/07 II/07 III/07 IV/07   2007
Specialty Stainless                                             
Thin Strip restructuring                                        
in the UK                                 -     -    -11     -    -11
Other operations                                                
    Gain on sale of                                             
Hitura mine in Finland                    -    25      -     -     25
                                          -    25    -11     -     14
                                                                     
EUR million                            I/08                          
Specialty Stainless                                                  
Thin Strip restructuring                                             
in the UK                                 -                          
Other operations                                                     
    Gain on sale of                       -                          
Hitura mine in Finland                    -                     
                                                                
                                                                
Major non-recurring                                             
items in financial income and expenses                               
                                                                
EUR million                            I/07 II/07 III/07 IV/07   2007
Impairment loss on                                                   
Belvedere shares                          -     -      -     -      -
Gain on the sale of                                             
Outotec shares                            -   142      -     -    142
Gain on the Talvivaara                                               
transaction                               -   110      -     -    110
                                          -   252      -     -    252
                                                                
EUR million                            I/08                     
Impairment loss on of Belvedere
shares                                  -12                     
Gain on the sale of                                             
Outotec shares                            -                     
Gain on the Talvivaara                                          
transaction                               -                     
                                        -12                     

 
 

Key figures by quarter                                               
                                                                     
EUR million                         I/07    II/07   III/07    IV/07  
Operating profit margin, %          19.9     19.4    -20.9      1.0  
Return on capital employed, %       38.8     35.5    -22.3      1.4  
Return on equity, %                 39.3     66.2    -24.3     -2.0  
Return on equity,                                                    
continuing operations, %            39.8     64.8    -23.9      0.8  
                                                                     
Capital employed at end of                                           
period                             4 377    4 753    4 421    4 125
Net interest-bearing                                                 
debt at end of period              1 189    1 119    1 016      788  
Equity-to-assets ratio                                               
at end of period, %                 47.2     50.9     54.6     56.5  
Debt-to-equity ratio                                                 
at end of period, %                 37.3     30.8     29.8     23.6  
                                                                     
Earnings per share, EUR             1.69     3.11    -1.19    -0.09  
Earnings per share from                                              
continuing operations, EUR          1.71     3.04    -1.17     0.04  
Earnings per share from                                              
discontinued operations, EUR       -0.02     0.07    -0.02    -0.13  
Average number of shares                                             
outstanding, in thousands 1)     181 067  181 082  181 084  180 680  
Equity per share                                                     
at end of period, EUR              17.51    20.07    18.81    18.53  
Number of shares outstanding                                         
at end of period, in thousands                                       
1)                               181 082  181 082  181 084  180 103
                                                                     
Capital expenditure,                                                 
continuing operations                 25       75       47       43  
Depreciation, continuing                                             
operations                            51       50       51       52
Average personnel for the                                            
period,                                                            
continuing operations              8 129    8 441    8 416    8 086  
                                                                     
EUR million                         I/08                             
Operating profit margin, %           5.9                             
Return on capital employed, %       10.0                             
Return on equity, %                  7.7                             
Return on equity,                                                    
continuing operations, %             7.5                             
                                                                     
Capital employed at end of                                           
period                             3 899                           
Net interest-bearing                                                 
debt at end of period                737                             
Equity-to-assets ratio                                               
at end of period, %                 53.2                             
Debt-to-equity ratio                                                 
at end of period, %                 23.3                             
                                                                     
Earnings per share, EUR             0.35                             
Earnings per share from                                              
continuing operations, EUR          0.34                             
Earnings per share from                                              
discontinued operations, EUR        0.01                             
Average number of shares                                             
outstanding, in thousands 1)     180 112                             
Equity per share                                                     
at end of period, EUR              17.56                             
Number of shares outstanding                                         
at end of period, in thousands                                       
1)                               180 127                           
                                                                     
Capital expenditure,                                                 
continuing operations                 41                             
Depreciation, continuing                                             
operations                            50                           
Average personnel for the                                            
period,                                                            
continuing operations              8 140                             
                                                                     
1) The number of own shares repurchased is                           
excluded.                                                   
                                                                     
Definitions of key                                               
figures                                                          
                                                                 
                                                                 
                            Total equity + net interest-bearing
Capital employed        =   debt                                 
                                                                 
                            Capital employed + net tax
Operating capital       =   liability                            
                                                                 
Return on equity        =   Net profit for the financial year   × 100
                            Total equity (average for the
                            period)                                
                                                                 
Return on capital       =   Operating profit                    × 100
employed (ROCE)             Capital employed (average for the period)
                                                                 
                                                                 
Net interest-               Total interest-bearing debt          
bearing debt            =   - total interest-bearing assets      
                                                                 
Equity-to-assets ratio  =   Total equity                        × 100
                            Total assets - advances received     
                                                                 
Debt-to-equity ratio    =   Net interest-bearing debt           × 100
                            Total equity                         
                                                                 
                            Net profit for the financial year    
Earnings per share      =   attributable to the equity holders   
                            Adjusted average number              
                            of shares during the period          
                                                                 
                            Equity attributable to               
Equity per share        =   the equity holders                   
                            Adjusted number of shares            
                            at the end of the period