core sector communique

Outokumpu Oyj - heavy restructuring actions taken, stainless market weaker

INTERIM REPORT

20 July 2011 at 9.00 am EET

Second-quarter 2011 highlights

- Underlying operational result some EUR -5 million (I/2011: EUR -12 million).

- Raw material-related inventory losses of some EUR 26 million (I/2011: gains of some EUR 45 million) and non-recurring items of EUR -138 million (I/2011: none).

- Operating loss EUR -169 million (I/2011: profit of EUR 33 million)

- Capital gains of EUR 242 million reported under net financial items, a positive impact of EUR 162 million on cash flow.

- Net profit positive at EUR 50 million (I/2011: EUR 16 million)

- Operational cash flow EUR -66 million (I/2011: EUR -10 million).

- Customers destocking due to declining nickel price, deliveries at 348 000 tonnes (I/2011: 380 000 tonnes).

- Implementation of the short-term agenda initiated.

Group key figures
		II/11	I/11	II/10	2010
Sales	EUR million	1 281	1 371	1 125	4 229
Operating profit	EUR million	-169	33	72	-83
EBITDA	EUR million	-4	93	129	172
Non-recurring items
in operating profit	EUR million	-138	-	-	-17
Profit before taxes	EUR million	21	17	64	-143
Non-recurring items
in financial income
and expenses	EUR million	229	-	-	9
Net profit for the period	EUR million	50	16	44	-124
Earnings per share	EUR	0,28	0,09	0,24	-0,68
Return on capital employed	%	-16,1	3,1	7,3	-2,1
Net cash generated from
operating activities	EUR million	-66	-10	-317	-497
Capital expenditure	EUR million	50	42	45	161
Net interest-bearing debt
at end of period	EUR million	1 885	1 873	1 696	1 837
Debt-to-equity ratio at
end of period	%	82,0	80,4	68,1	77,3
Stainless steel deliveries	1 000 tonnes	348	380	339	1 315
Stainless steel
base price 1)	EUR/tonne	1 223	1 215	1 317	1 252
Personnel at the
end of period 2)		9 474	8 452	9 082	8 431
1) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
2) Personnel reported as head count. Up to 31 December 2010 reported as
full-time equivalent. Comparative figures restated.

The underlying operational result in the second quarter improved marginally to EUR -5 million. Operating loss in the second quarter included some EUR 26 million of raw material-related inventory losses and some EUR -138 million of non-recurring impairments and restructuring costs. Net financial items of EUR 191 million included capital gains of EUR 242 million from financial asset divestments. Net profit was positive at EUR 50 million.

Outokumpu's gearing at the end of the second quarter increased to 82.0%. While the divestments had a positive effect on Group gearing, adverse impacts resulted from impairments, working capital increase and dividends.

SHORT-TERM OUTLOOK

Demand for standard grades of stainless steel slowed in Europe as summer approached and the nickel price began to decline. This led to destocking among customers. While normal seasonality resulting from the holiday season in Europe has affected the distributors' buying behaviour underlying demand continues to be relatively stable globally. Lead times for standard grades continue to be normal at 6-8 weeks.

As a result of the slowdown in demand during the European holiday season and annual maintenance breaks at Group mills, Outokumpu expects that its stainless steel delivery volumes in the third quarter will be slightly lower than in the second quarter. Outokumpu's average base prices for stainless steel in the third quarter are expected to be somewhat lower than average prices in the second quarter.

Lower delivery volumes and lower average base prices are expected to lead to negative underlying operational result in the third quarter. Additionally, declined metal prices are expected to result in raw material-related inventory losses (at current metal prices). Outokumpu therefore estimates the Group's third-quarter operating profit to be clearly negative.

CEO Mika Seitovirta:

"During my first months much of our attention has been on the Group's short-term agenda, and this has provided us with quick sources of cash and helped attack the most critical factors burdening Outokumpu's profitability. In the stainless business, improving sales, generating cash and reducing costs are part of a never-ending race. Current market circumstances mean that the pressure to move even faster with this work and related actions is higher."

The attachments present the Management analysis for the second quarter operating result and the Interim review by the Board of Directors for January-June 2011, the accounts and notes to the interim accounts. This report is unaudited.