Rautaruukki Interim report Q1-Q3/2012: Third-qu...

Rautaruukki Corporation Stock exchange release 23 October 2012 at 9am EEST

Rautaruukki Corporation Interim report Q1-Q3/2012: Third-quarter loss due to the steel business -  comparable operating profit for the second half of the year estimated to be weaker than for the first. Cash flow improved clearly.

July-September 2012 (Q3/2011)
- Order intake was down 1 per cent at EUR 675 million (678).
- Comparable net sales were EUR 674 million (674).
- Comparable operating profit was -EUR 18 million (1), equating to -3 per cent of comparable net sales.
- Comparable result before income taxes was -EUR 29 million (-4).
- Net cash from operating activities was EUR 44 million (-62).

January-September 2012 (Q1-Q3/2011)
- Order intake was up 5 per cent at EUR 2,116 million (2,024).
- Comparable net sales were up 2 per cent at EUR 2,113 million (2,079).
- Comparable operating profit was -EUR 26 million (96), equating to -1 per cent of comparable net sales.
- Comparable result before income taxes was -EUR 55 million (72).
- Net cash from operating activities was EUR 93 million (-49).

Guidance for 2012 changed: Revised guidance: Net sales in 2012 are estimated to remain at the same level as the previous year. Comparable operating profit for the second half of the year is estimated to be weaker than for the first half. Cash flow for the whole year is expected to be clearly better than the previous year. Earlier guidance: Net sales in 2012 are estimated to remain at the same level as the previous year. Comparable operating profit for the second half of the year is estimated to remain at the same level as for the first half. This means negative comparable operating profit for the whole year. Cash flow for the whole year is expected to improve on the situation at the end of June and to be clearly better than the previous year.

KEY FIGURES
	Q3/12	Q3/11	Q1-Q3/12	Q1-Q3/11	2011
Comparable figures
Comparable net sales, EUR m	674	674	2,113	2,079	2,797
Comparable operating profit, EUR m	-18	1	-26	96	56
Comparable operating profit as % of net sales	-2.7	0.1	-1.2	4.6	2.0
Comparable result before income tax, EUR m	-29	-4	-55	72	22
Reported figures
Reported net sales, EUR m	675	675	2,119	2,080	2,798
Reported operating profit, EUR m	-20	-24	-41	69	22
Reported result before income tax, EUR m	-31	-29	-70	45	-12
Net cash from operating activities, EUR m	44	-62	93	-49	114
Net cash before financing activities, EUR m	20	-119	22	-182	-57
Earnings per share, EUR	-0.21	-0.15	-0.43	0.22	-0.07
Return on capital employed (rolling 12 months), %			-3.9	3.3	1.3
Return on capital employed (annualised), %			-3.8	4.5	1.3
Gearing ratio, %			71.4	68.2	60.4
Equity ratio, %			45.6	47.5	48.5
Personnel on average	11,345	12,111	11,462	11,930	11,821

President & CEO Sakari Tamminen:

The global economic outlook darkened during the third quarter. The uncertainty resulting from the European sovereign debt crisis continued and economic growth slowed in China. A downgrading of global economic growth forecasts has reduced confidence in the economy and fuelled uncertainty. At Ruukki, this was reflected especially in the fall in investment-decision-driven demand. As regards Ruukki's important market areas, economic growth in Russia is likely to continue to be favourable also for the rest of the year. Likewise, economic growth also in Ruukki's home markets, the Nordic countries, is expected to remain relatively stronger than in many European countries.

Ruukki posted a loss for the third quarter mainly because of weak performance in the steel business, but also the results of our other business areas were below those reported a year earlier. Comparable operating profit during the previous quarter became a EUR 18 million operating loss during the third quarter. However, on a brighter note, cash flow from operations was good and showed clear improvement year on year at EUR 93 million and was EUR 22 million positive after capital expenditure. Consolidated net sales were at the same level as a year earlier.

Order intake was practically at the same level as a year earlier, but was 11 per cent down compared to the previous quarter. This was due to a weakening of the growth outlook also in the main construction market areas during the third quarter. We have also focused on higher margin orders in building projects, which has been reflected in lower order volumes.

In the prevailing uncertain market environment, the past quarter clearly shows the necessity of the efficiency improvement projects we initiated earlier in the year in our steel and construction businesses. The projects have continued to progress somewhat better than we previously anticipated and we currently expect to achieve the targeted savings of around EUR 100 million through efficiency actions. On top of the efficiency programme already underway, we have initiated analyses to improve efficiency also in corporate administration.

We now estimate the new supply contracts for raw materials will result in cost benefits totalling over EUR 30 million, instead of EUR 20 million as stated earlier. These cost benefits will be reflected in full during the second half of the year. During the third quarter, however, the benefits were still minor.

Whereas the downgrading of economic growth was reflected in commercial and industrial construction, which depends on investment decisions, this was not the case in residential construction, which depends on consumer demand. Order intake and net sales of our roofing products were up 16 per cent year on year. The decrease in building permits granted in Finland and Sweden during the spring was visible as a clear fall in infrastructure construction orders and deliveries. This had a negative impact also on the profitability of our construction business. Order intake in the commercial and industrial construction project business was strong during the first half of the year and the margin level in new orders shows a clear improvement compared to a year earlier. However, this is not yet visible in the figures for the third quarter because delivery of most of these projects is scheduled to begin during the fourth quarter of this year and the first quarter of next.

After the July-August holiday period, buyers have traditionally returned to the steel market and as a result delivery volumes have picked up. This has not been the case in this year's very uncertain market environment and with falling prices of raw materials, and thus customers were mostly destocking. Selling prices were slightly down compared to the second quarter of the year. Weak market conditions and normal seasonality meant that production and delivery volumes were below those seen during the second quarter. Especially as far as standard steels are concerned, customer's order behaviour continued to be uncertain and order times remained very short. Because of weakened market conditions and normal July maintenance shutdowns, the capacity utilisation rate in our steel business averaged 76 per cent.

As we announced in our stock exchange release last week, in future we intend to focus on developing our construction and special steels businesses. Our agreement with CapMan to combine units in our engineering business with Komas to form a new company, Fortaco, was a natural step for us. Engineering industry sub-suppliers are expected to provide increasingly stronger cost-competitiveness in component deliveries as well as specialised know-how. This new combination will have efficient component production units located near the customers' markets. It will be Europe's leading actor in its field. For us, success of the new company is important as regards both the development in steel volumes and the expected return on invested capital.

The construction market offers substantial growth potential, especially in Russia and in Eastern Europe. We also see good business opportunities in residential roofing and the construction of energy-efficient buildings, particularly in Northern Europe. In the special steels business, we will continue to expand our international distribution and service network.

Our guidance for the current year has been changed. Net sales in 2012 are estimated to remain at the same level as the previous year. Comparable operating profit for the second half of the year is now estimated to be weaker than for the first half. Cash flow for the whole year is expected to be clearly better than the previous year.

Rautaruukki Corporation's full interim report for January-September 2012 is attached to this release.

For further information, please contact:
Sakari Tamminen, President & CEO. tel. [phone]
Markku Honkasalo, CFO, tel. [phone]

News conference for analysts and the media

A joint news conference in English both for analysts and the media will be hosted on Tuesday 23 October at 10.30am at Ruukki, Suolakivenkatu 1, 00810 Helsinki.

A live webcast of the event and the presentation by the company's President & CEO Sakari Tamminen may be followed online on the company website at www.ruukki.com/Investors starting at 10.30am EEST. This event can also be attended through a conference call by dialling the number below 5-10 minutes before the scheduled time:
[phone] (calls outside Finland)
[phone] (calls inside Finland)
Access code: 914151

A replay of the webcast can be viewed on the company website at approximately 4pm EEST. A replay of the conference call will be available until 30 October 2012 at:
[phone] (calls outside Finland)
[phone] (calls inside Finland)
Access code: 914151

Rautaruukki Corporation
Taina Kyllönen
SVP, Marketing and Communications

Ruukki provides its customers with energy-efficient steel solutions for better living, working and moving. Ruukki operates in some 30 countries and employs around 11,800 people. Net sales in 2011 totalled EUR 2.8 billion. The company's share is quoted on NASDAQ OMX Helsinki (Rautaruukki Oyj: RTRKS).

DISTRIBUTION:
NASDAQ OMX Helsinki
Main media
www.ruukki.com

Rautaruukki_interimreport_Q3_2012

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