core sector communique

Outokumpu Oyj - increased demand improved profitability

INTERIM REPORT

20 April 2011 at 9.00 am EET

First-quarter 2011 highlights

- Operating profit EUR 33 million (IV/2010: EUR -85 million) including some EUR 45 million (IV/2010: none) of raw material-related inventory gains, underlying operational result some EUR -12 million (IV/2010: EUR -68 million).

- Operational cash flow EUR -10 million (IV/2010: EUR 18 million).

- Improved demand from both distributors and end-users, deliveries at 380 000 tonnes (IV/2010: 336 000 tonnes).

- Mika Seitovirta appointed Outokumpu's CEO from 1 April 2011.

- Plan for efficiency improvement aimed at achieving EUR 25 million in cost savings announced in April.

Group key figures
		I/11	IV/10	I/10	2010
Sales	EUR million	1 371	1 162	929	4 229
Operating profit	EUR million	33	-85	-21	-83
EBITDA	EUR million	93	-4	35	172
Non-recurring items in operating profit	EUR million	-	-17	-	-17
Profit before taxes	EUR million	17	-86	-32	-143
Non-recurring items in financial income	EUR million	-	9	-	9
and expenses
Net profit for the period	EUR million	16	-91	-21	-124
Earnings per share	EUR	0.09	-0.50	-0.11	-0.68
Return on capital employed	%	3.1	-8.0	-2.3	-2.1
Net cash generated from operating activities	EUR million	-10	18	-87	-497
Capital expenditure	EUR million	42	48	28	161
Net interest-bearing debt at end of period	EUR million	1 873	1 837	1 302	1 837
Debt-to-equity ratio at end of period	%	80.4	77.3	53.9	77.3
Stainless steel deliveries	1 000 tonnes	380	336	333	1 315
Stainless steel base price 1)	EUR/tonne	1 215	1 213	1 235	1 252
Personnel at the end of period 2)		8 452	8 431	8 048	8 431
1) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet).
2) Personnel reported as headcount. Earlier reported as full-time equivalent, comparative figures restated.

The improvement in profitability compared to the fourth quarter of 2010 is primarily a result of higher delivery volumes but a somewhat improved product and geographic mix and higher prices also had an impact. Net cash from operating activities in the first quarter totalled EUR -10 million. EUR 93 million of cash was tied up in working capital mainly as a result of higher metal prices. Outokumpu's gearing at the end of the first quarter increased to 80.4% and remained above the Group's target maximum of 75%. Net interest-bearing debt increased marginally to EUR 1 873 million. Current non-interest bearing liabilities include the dividend payout of EUR 45 million, which was made in April.

SHORT-TERM OUTLOOK

Demand for standard grades of stainless steel has remained relatively stable after the improvement in early 2011. Growth in demand in the first quarter was supported by restocking among distributors. Some destocking occurred towards the end of the quarter as the nickel price declined in March. Underlying demand continued to improve and is expected to remain stable in the second quarter. While the order intake from investment-driven end-use segments has been improving, no major projects utilising special grades have materialised. Lead times for standard grades are normal at 6-8 weeks. No significant changes in distributors' inventory levels have occurred and they are currently estimated to be almost at normal levels. As summer is approaching some softness in demand from distributors may appear in the second quarter.

Outokumpu estimates that the Group's delivery volumes in the second quarter will be at a similar level to volumes in the first quarter. Average base prices for stainless steel in the second quarter are expected to be somewhat higher than average prices in the first quarter.

Outokumpu's operating profit in the second quarter is expected to be slightly positive or around break-even with no material impact from raw material-related inventory gains or losses (at current metal prices).

In addition, the Group's operating profit in the second quarter is expected to be impacted by non-recurring restructuring provisions related to on-going statutory negotiations in Europe. The extent of the provisions will be determined later in the second quarter once these personnel-related negotiations have been concluded.

CEO Mika Seitovirta:

"The first weeks at Outokumpu have proven to be a great learning experience. I am energised and encouraged while going forward and gaining further knowledge of this great company and fascinating industry. Our immediate actions will be focused on profitability, cash flow and improving the balance sheet. Most of the management attention this year will be spent on the implementation of the short-term agenda, which is currently being prepared."