Outokumpu Annual Accounts bulletin 2008 - opera...

STOCK EXCHANGE RELEASE February 3, 2009 at 13.00 p.m. Year 2008 highlights - Operating profit was EUR -63 million, underlying operational result was some EUR 305 million positive (2007: EUR 800 million) - Strong operating cash flow of EUR 656 million (2007: EUR 676 million), gearing 38% - Excellence programs delivering benefits of some EUR 86 million in 2008 (2007: EUR 45 million) - The Board of Directors is proposing a dividend of EUR 0.50 per share (2007: EUR 1.20) Fourth quarter 2008 highlights - Operating profit of EUR -271 million including raw material-related inventory losses of about EUR 185 million, underlying operational result some EUR -69 million (III/08: EUR 60 million) - Stainless steel deliveries at 261 000 tons as a result of weak demand and significant production cuts - Good operating cash flow at EUR 205 million - Decision to postpone investments of some EUR 1.5 billion for at least 12 months - Group-wide cost saving actions taken, targeting fixed cost savings in the range of EUR 100 million in 2009 Group key figures IV/08 III/08 IV/07 2008 2007 Sales EUR million 966 1 270 1 465 5 474 6 913 Operating profit EUR million -271 -66 15 -63 589 Non-recurring items in operating profit EUR million -17 -66 - -83 14 Profit before taxes EUR million -298 -82 7 -134 798 Non-recurring items in financial income and expenses EUR million -9 - - -21 252 Net profit for the period from continuing operations EUR million -228 -73 7 -110 660 Net profit for the period EUR million -233 -74 -16 -189 641 Earnings per share from continuing operations EUR -1.27 -0.41 0.04 -0.61 3.63 Earnings per share EUR -1.30 -0.41 -0.09 -1.05 3.52 Return on capital employed % -26.8 -6.3 1.4 -1.6 13.9 Net cash generated from operating activities EUR million 205 242 299 656 676 Capital expenditure, continuing operations EUR million 129 317 43 544 190 Net interest-bearing debt at end of period EUR million 1 072 1 096 788 1 072 788 Debt-to-equity ratio at end of period % 38.4 35.0 23.6 38.4 23.6 Stainless steel deliveries 1 000 tons 261 323 352 1 423 1 419 Stainless steel base price 1) EUR/ton 1 045 1 143 1 058 1 185 1 304 Personnel at the end of period, continuing operations 8 471 8 711 8 108 8 471 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 Visibility regarding the stainless steel markets is currently very short. The deepening of the global financial crisis has a clear impact on stainless steel demand, and Outokumpu expects stainless markets to remain very weak in the first quarter of 2009. Base prices have declined further in early 2009. Current order intake represents about 50 percent of the Group's full production capacity. For the first quarter of 2009, Outokumpu's operating profit continues to be significantly negative due to the low base price level, low delivery volumes and raw material-related inventory losses that mainly result from the decline in the ferrochrome price. However, Outokumpu's financial and liquidity position remains strong. CEO Juha Rantanen: "In late 2008, the global financial crisis hit the stainless steel markets with speed and power. As we did not reach our profitability target, we cannot be satisfied with our financial performance in 2008. Actions have been taken to decrease working capital, postpone investments and reduce costs. Unfortunately, this also means that personnel adjustments are necessary. A challenging year lies ahead, but we are prepared to take decisive action and move quickly, when this is called for. Maximizing cash flow remains high on our agenda." The attachments present the Management analysis of the fourth quarter 2008 operating result and a summary of the Review by the Board of Directors for January-December 2008 as well as extracts from the financial statements. All full year figures are audited. For further information, please contact: PÃ¤ivi 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@outokumpu.com Esa Lager, CFO tel +358 9 421 2516 esa.lager@outokumpu.com News conference and live webcast today at 3.00 pm A combined news conference, conference call and live webcast concerning the 2008 annual accounts will be held on February 3, 2009 at 3.00 pm Finnish time (8.00 am US EST, 1.00 pm UK time, 2.00 pm CET) at Hotel KÃ¤mp, Akseli Gallen-Kallela conference 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 3043 2436 US & Canada: +1 866 458 40 87 Sweden: +46 8 505 598 53 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. An on-demand webcast of the news conference will be available at www.outokumpu.com as of February 3, 2009 at around 6.00 pm. OUTOKUMPU OYJ Corporate Management Ingela Ulfves VP - Investor Relations and Financial Communications tel. + 358 9 421 2438, mobile +358 40 515 1531 ingela.ulfves@outokumpu.com www.outokumpu.com MANAGEMENT ANALYSIS - FOURTH QUARTER 2008 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 II/08 III/08 IV/08 2008 Sales General Stainless 1 304 1 222 933 687 4 147 Specialty Stainless 786 778 630 512 2 705 Other operations 64 63 69 62 258 Intra-group sales -465 -514 -362 -295 -1 636 The Group 1 689 1 549 1 270 966 5 474 Operating profit General Stainless 81 125 -35 -177 -6 Specialty Stainless 42 44 -63 -123 -101 Other operations -20 4 29 25 38 Intra-group items -3 1 3 4 6 The Group 100 174 -66 -271 -63 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 II/08 III/08 IV/08 2008 Cold rolled 228 192 177 141 739 White hot strip 120 94 64 51 330 Quarto plate 33 35 27 25 120 Tubular products 19 19 16 16 70 Long products 15 15 15 11 55 Semi-finished products 34 35 25 16 109 Total deliveries 449 391 323 261 1 423 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 II/08 III/08 IV/08 2008 Market prices 1) Stainless steel Base price EUR/t 1 243 1 307 1 143 1 045 1 185 Alloy surcharge EUR/t 1 702 1 888 1 582 1 293 1 616 Transaction price EUR/t 2 945 3 195 2 725 2 338 2 801 Nickel USD/t 28 957 25 682 18 961 10 843 21 111 EUR/t 19 335 16 440 12 599 8 227 14 353 Ferrochrome (Cr-content) USD/lb 1.21 1.92 2.05 1.85 1.76 EUR/kg 1.78 2.71 3.00 3.09 2.63 Molybdenum USD/lb 33.81 33.40 33.75 17.29 29.56 EUR/kg 49.77 47.14 49.45 28.92 44.31 Recycled steel USD/t 393 565 465 181 401 EUR/t 262 361 309 138 273 Exchange rates EUR/USD 1.498 1.562 1.505 1.318 1.471 EUR/SEK 9.400 9.352 9.474 10.234 9.615 EUR/GBP 0.757 0.793 0.795 0.839 0.796 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 - Quarterly contract price Ferrochrome lumpy chrome charge, basis 52% chrome Molybdenum: Metal Bulletin - Molybdenum oxide - Europe Recycled steel: Metal Bulletin - Steel scrap HMS 1&2 fob Rotterdam Further weakening stainless steel markets with declining metal prices Global demand for stainless steel continued to weaken dramatically during the fourth quarter of 2008 and markets remained oversupplied. The whole business environment was affected by the significant weakening of financial markets. Compared to the seasonally weak third quarter 2008, apparent consumption of stainless steel in the fourth quarter is estimated to have fallen by 27% globally and by 24% in Europe. Due to the sudden and very significant drop in demand in the last quarter, all stainless producers cut production levels. Global melting production was cut by 28%, and production in Europe was 21% down on the previous quarter. In addition to end-demand weakness, the slowdown was also a result of the distribution sector postponing purchases due to the falling nickel price. Tight credit conditions resulting from general economic uncertainty also had an impact on the overall demand situation. Demand softened in all end-use segments, especially in construction and the automotive industry. Also investment activity was adversely affected by the difficult global financial situation. The average base price for 2mm cold rolled 304 stainless steel sheet in Germany in the fourth quarter declined to 1 045 EUR/ton (III/2008: 1 143 EUR/ton). As a result of the declining nickel price, the average alloy surcharge for the fourth quarter fell to 1 293 EUR/ton (III/2008: 1 582 EUR/ton). The average transaction price in the period was 2 338 EUR/ton (III/2008: 2 725 EUR/ton). (CRU) Prices of most alloying materials declined in the fourth quarter compared to the third quarter. The nickel price fell from around 17 000 USD/ton to below 10 000 USD/ton. According to CRU, the very weak demand for stainless steel resulted in a cutback of some 20% in nickel production in the fourth quarter compared to the third quarter. After the year-end, the nickel price has been 10 000 - 12 000 USD/t. Ferrochrome markets continued to be very oversupplied during the last quarter as a result of weak demand for stainless steel and global production was cut back significantly. The quarterly contract price for ferrochrome for the fourth quarter was 1.85 USD/lb (III/2008: 2.05 USD/lb). The quarterly contract price for the first quarter of 2009 has preliminary been settled at 0.79 USD/lb. The average price of molybdenum declined by some 49% to 17.29 USD/lb (III/2008: 33.75 USD/lb). The price of recycled steel fell dramatically from 465 USD/ton in the third quarter to 181 USD/ton in the fourth quarter (a decline of 61%). Operating profit turned negative in the fourth quarter of 2008 Group sales for the fourth quarter were down by 24% to EUR 966 million (III/2008: EUR 1 270 million). Deliveries totalled 261 000 tons, a decline by 19% compared to the preceding quarter. The accelerating global financial crisis led to demand of stainless steel from both distributors and end-users being clearly weaker towards the end of the year and delivery volumes were some 55-60% of full production capacity. Operating profit in the fourth quarter totaled EUR -271 million (III/2008: EUR -66 million) including some EUR 185 million (III/2008: EUR 60 million) of raw material-related inventory losses, mainly resulting from nickel and molybdenum. Excluding inventory losses and non-recurring provisions, Outokumpu's underlying operational result in the fourth quarter was EUR -69 million (III/2008: EUR 60 million). Main reasons for this negative result were very low base prices and extremely low delivery volumes. Net non-recurring costs of EUR 17 million, comprising provisions related to reductions in personnel numbers in Sweden, are included in the fourth quarter operating loss (III/2008: EUR 66 million for closure of Thin Strip business in Sheffield). Raw material-related inventory losses comprise losses related to timing differences between the alloy surcharge and inventory turnover and also write-downs on inventories. A small proportion of these losses is related to products temporarily sold at a base price plus forward alloy surcharge. As a result of the weak demand for stainless steel and declining raw material prices, delivery volumes in both the third and the fourth quarter were low. Consequently, raw material and process inventory turnover has slowed. The raw material tied up in inventory has been and will be sold as part of deliveries with a lower value. To the extent that the selling price of these deliveries is not expected to cover corresponding total production costs, a write-down to net realizable value was made at the end of the fourth quarter. Return on capital employed was -26.8% (III/2008: -6.3%). Earnings per share totaled EUR -1.30 (III/2008: EUR -0.41). Net working capital declined by EUR 424 million to EUR 1 434 million mainly as a result of lower raw material prices and reduced raw material purchase. Consequently, net cash from operating activities was strong at EUR 205 million (III/2008: EUR 242 million). Sales by General Stainless totaled EUR 687 million (III/2008: EUR 933 million) in the fourth quarter, and deliveries were 22% lower than in the third quarter at 223 000 tons (III/2008: 285 000 tons). Operating profit totaled EUR -177 million (III/2008: EUR -35 million) of which Tornio posted a EUR 93 million loss (III/2008: EUR -22 million). Majority of the raw material-related inventory losses are related to General Stainless. Sales by Specialty Stainless totaled EUR 512 million (III/2008: EUR 630 million) in the fourth quarter, and deliveries were 12% lower than in the third quarter at 106 000 tons (III/2008: 121 000 tons). Operating profit totaled EUR -123 million (III/2008: EUR -63 million). The operating loss includes non-recurring costs of EUR 17 million that are related to personnel reductions in Sweden. Operating profit in Other operations totaled EUR 25 million (III/2008: EUR 29 million). This was mainly attributable to gains from nickel and foreign currency derivatives. Investment program postponed almost entirely In October, Outokumpu decided to review its investment program because of the global financial crisis and the sudden weakening in stainless steel demand. In December, the decision was made to postpone the Group's investment program almost entirely for at least 12 months. Continuing any of the projects would be subject to a separate decision based on an updated feasibility study. The investments in high-purity ferritic and bright-annealing in Tornio, Finland, special grades in Avesta, Sweden and quarto plate in Degerfors, Sweden have been postponed. The investment to expand quarto plate production capacity at New Castle (IN), in the US, will proceed according to plan. Synergy benefits resulting from the acquisition of the SoGePar Group, an Italian independent distributor, allowed the investment program in service centers in Europe to be streamlined and optimized. Only the investment in the service center in Willich, Germany, will proceed as planned. All other service center investments in Europe (Poland, France and southern Germany) have either been reduced in scope or postponed. The service center investment in India has also been postponed. The plate service center in China will however proceed as planned. The investment in doubling ferrochrome production capacity in Tornio has also been postponed for at least 12 months. Postponed investments total some EUR 1.5 billion and capital expenditure in 2009 is estimated to be some EUR 300 million (the original plans EUR 850 million). Most spending in 2009 will be related to expansion projects that are close to being finalized and some mandatory components in started projects. EUR 100 million of the Group's capital expenditure in 2009 is maintenance related. Actions taken to adjust to the weak market for stainless steel As a result of the impact of the global financial crisis on the stainless steel market, Outokumpu started preparations for a scenario in which the markets do not improve in 2009. Several cost reducing actions were taken in the fourth quarter. In November, Outokumpu began statutory negotiations on temporary layoffs at the Tornio plant in Finland. These negotiations concerned full or part-time layoffs of a total of 1 500 employees regarding selected production lines, maintenance operations and some office work. An agreement reached in December based on cost savings resulting from cutting expensive weekend shifts, freezing the production bonus system and a general cost-cutting program allowed temporary layoffs to be avoided in the short term. In December, Outokumpu began negotiations with personnel representatives aimed at reducing some 450 jobs at the Group's Swedish production sites. Negotiations with personnel representatives to reduce costs at Outokumpu head office functions in different countries were also initiated. The negotiations in Finland resulted in about 20 job reductions and temporary lay-offs of two weeks for all employees based at the Finnish head office. Outokumpu employs some 350 people in head office functions globally, some 200 of them in Finland. Events after the review period Due to the very weak stainless steel demand Outokumpu continues to cut production and starts negotiations with personnel regarding temporary and permanent layoffs in several of its operating countries. The planned actions are expected to result in temporary layoffs of over 2000 people and reduction of about 250 jobs. At Tornio Works Outokumpu plans to temporarily cease its ferrochrome production (the Kemi mine and Ferrochrome Works), temporarily idle one of its melt-shops and reduce shifts at almost all steel production lines. Due to these production cuts the company will start new statutory negotiations on temporary layoffs at Tornio Works in Finland. The negotiations concern about 2000 people, also office and maintenance employees. In OSTP (Outokumpu Stainless Tubular Products) the total of 150 job reductions are planned in Sweden, Finland, Estonia and Canada. In Finland the negotiations concern both temporary and permanent layoffs. In Outokumpu Group Sales & Marketing organization the target is to reduce approximately 50 jobs with layoffs and voluntary arrangements. Additionally about 80 employees are planned to be temporarily laid-off. In the UK approximately 90 jobs are planned to be reduced in the coming months as a result of reduced shifts in the Sheffield melt-shop and the cost-saving measures in Outokumpu's Alloy Steel Rods (ASR) and the sales company's integration of the former SoGePar activities into its Sheffield based operation. Outokumpu is through its current actions - Group-wide general cost saving programs and personnel reductions - targeting fixed cost savings in the range of EUR 100 million in 2009. SUMMARY OF THE REVIEW BY THE BOARD OF DIRECTORS FOR 2008 The global economic crisis hit the stainless steel industry, forcing Outokumpu to take action 2008 was an exceptional year for the stainless steel industry in many ways. It started with recovering demand and rising prices for stainless steel. Towards the summer some softening in demand was visible and demand for stainless weakened further as metal prices started to fall. In the autumn, stainless steel markets were significantly affected by the accelerating global financial crisis in all end-use segments. Outokumpu's strategy is aiming at achieving a more stable and profitable business model by increasing the share of sales to end-user and project customers as well as increasing the share of value-added special products and non-nickel containing grades. The very difficult market conditions in 2008 limited progress towards these strategic targets. In late 2008, Outokumpu decided to postpone almost its entire investment program that was designed to increase production capacity for special grades and products and to expand the Group's service center network. Steps that are less capital-intensive will now be taken to implement the Group's strategy, with profitability and cash flow given the priority in the short-term. Several cost-cutting actions including personnel adjustments have been taken. Group sales for 2008 totaled EUR 5 474 million (down by 21% from the previous year) and stainless steel deliveries totaled 1 423 000 tons, almost the same level as in 2007. Operating profit totaled EUR -63 million (2007: EUR 589 million). Underlying operational result, however, was EUR 305 million (2007: EUR 800 million). Net cash from operating activities was strong at EUR 656 million (2007: EUR 676 million). Return on capital employed was -1.6% and gearing was 38.4%. Although Outokumpu's financial target of a return on capital employed higher than 13% was not reached, the target for gearing of below 75% was achieved. Earnings per share totaled EUR -1.05, and earnings per share from continuing operations totaled EUR -0.61. The Board of Directors is proposing to the Annual General Meeting 2009 that a dividend of EUR 0.50 per share be paid for 2008 (2007: EUR 1.20). Turbulence in stainless steel markets Demand for stainless steel was at a good level during the first half of 2008, but began to weaken in June as global economic growth slowed. The nickel price began to decline in May, which resulted in distributors postponing orders, and the collapse of the global financial market in the autumn led to further weakening in stainless steel demand. Following the seasonally low third quarter, demand continued to weaken in the fourth quarter with both distributors and end-use segments postponing purchases. Compared to 2007, apparent consumption of stainless steel in 2008 is estimated to have decreased by 4% in Europe and by 6% globally. The average German base price for 2mm 304 cold rolled sheet in 2008 was 1 185 EUR/ton, 9% lower than in 2007. The transaction price for stainless steel averaged 2 801 EUR/ton in 2008, 27% lower than the previous year because of the much higher nickel price in 2007. (CRU) Sales and deliveries Sales EUR million 2008 2007 2006 General Stainless 4 147 5 321 4 770 Specialty Stainless 2 705 3 456 2 723 Other operations 258 237 361 Intra-group sales -1 636 -2 101 -1 700 The Group 5 474 6 913 6 154 Stainless steel deliveries 1 000 tons 2008 2007 2006 Cold rolled 739 703 936 White hot strip 330 314 390 Quarto plate 120 146 162 Tubular products 70 65 74 Long products 55 54 59 Semi-finished products 109 137 195 Total deliveries 1 423 1 419 1 815 Group sales for 2008 declined to EUR 5 474 million (2007: EUR 6 913 million) due to lower transaction prices for stainless steel in 2008 and stainless steel deliveries totaled 1 423 000 tons, almost at the same level as the previous year (2007: 1 419 000 tons). Sales by General Stainless were down by 22%, sales by Specialty Stainless were down by 22%. The European share of Group sales was 78% in 2008 (2007: 73%). Asia and the Americas accounted for 8% (2007: 12%) and 11% (2007: 12%), respectively. Operating profit EUR million 2008 2007 2006 Operating profit General Stainless -6 220 536 Specialty Stainless -101 337 338 Other operations 38 21 -35 Intra-group items 6 11 -15 Operating profit -63 589 824 Share of results in associated companies -2 4 8 Financial income and expenses -69 206 -48 Profit before taxes -134 798 784 Income taxes 24 -138 -178 Net profit, continuing operations -110 660 606 Net profit, discontinued operations -79 -18 357 Net profit for the financial year -189 641 963 Operating profit in relation to sales, % -1.2 8.5 13.4 Return on capital employed, % -1.6 13.9 20.7 Earnings per share from continuing operations, EUR -0.61 3.63 3.34 Earnings per share, EUR -1.05 3.52 5.31 Operating profit in 2008 totaled EUR -63 million (2007: EUR 589 million). In 2008, net non-recurring costs of some EUR 83 million are included in the operating loss (EUR 66 million of provisions and write-downs related to the closure of the thin strip business in Sheffield and some EUR 17 million of provisions related to personnel reductions mainly in Sweden). In 2007, operating profit included net non-recurring gains of EUR 14 million (EUR 11 million of costs related to restructuring at Thin Strip in the UK and EUR 25 million gains on the sale of the Hitura mine in Finland). Raw material-related inventory losses of some EUR 285 million are included in the 2008 operating profit (2007: some EUR 230 million). Underlying operational result for 2008 was some EUR 305 million (2007: EUR 800 million). The primary reason for the decline in operating profit was clearly lower base prices and somewhat higher variable costs in 2008. In addition, there were less financial benefits from optimising raw material use and pricing because of clearly lower metal prices in 2008. Profit before taxes totaled EUR -134 million (2007: EUR 798 million). Excluding non-recurring items, net financial income and expenses in 2008 were EUR 47 million negative (2007: EUR 46 million negative). In 2008, an impairment loss of EUR 21 million (EUR 12 million in I/2008 and EUR 9 million in IV/2008) was booked in Other financial expenses due to the decline in the share price of Belvedere Resources Ltd which is classified as an available-for-sale financial asset. Financial income in 2007 included a EUR 142 million non-recurring gain from the sale of the remaining 12% holding in Outotec Oyj and a EUR 110 million non-recurring gain from the Talvivaara transaction. Net profit in 2008 totaled EUR -189 million (2007: EUR 641 million) and the net profit from continuing operations totaled EUR -110 million (2007: EUR 660 million). The net loss includes a capital loss of EUR 66 million from the sale of the Group's remaining copper tube assets (Discontinued operations) to the Cupori Group in June 2008. Earnings per share totaled EUR -1.05 (2007: EUR 3.52) and earnings per share from continuing operations totaled EUR -0.61 (2007: EUR 3.63). Return on capital employed in 2008 was -1.6% (2007: 13.9%). Capital structure Key financial indicators on financial position EUR million 2008 2007 2006 Net interest-bearing debt Long-term debt 1 219 1 046 1 293 Current debt 581 464 685 Total interest-bearing debt 1 800 1 510 1 977 Interest-bearing assets -711 -589 -515 Net assets held for sale -16 -132 -162 Net interest-bearing debt 1 072 788 1 300 Shareholders' equity 2 794 3 337 3 054 Return on equity, % -6.2 20.0 37.5 Debt-to-equity ratio, % 38.4 23.6 42.3 Equity-to-assets ratio, % 52.4 56.5 47.9 Net cash generated from operating activities 656 676 -35 Net interest expenses 54 58 62 During 2008, Outokumpu's net interest-bearing debt increased by EUR 284 million and totaled EUR 1 072 million at the end of December (December 31, 2007: EUR 788 million). Outokumpu's gearing at the end of December was 38.4% (December 31, 2007: 23.6%), well below the Group's target of below 75%. At the end of 2008, the Group's equity-to-assets ratio stood at 52.4%. Most of Outokumpu's debt maturities extend to the 2009-2013 period. The Group has committed undrawn credit facilities totaling some EUR 1 billion. Net cash generated from operating activities in 2008 was good and totaled EUR 656 million (2007: EUR 676 million) through the release of EUR 370 million from working capital mainly as a result of declined metal prices. Cash and cash equivalents totaled EUR 224 million (2007: EUR 86 million) at the end of the year. Capital expenditure Capital expenditure EUR million 2008 2007 2006 General Stainless 332 57 83 Specialty Stainless 170 69 95 Other operations 42 64 9 The Group 544 190 187 Depreciation 206 204 221 Capital expenditure totaled EUR 544 million. The largest investment in 2008 was the acquisition of the Italian distributor SoGePar Group for EUR 224 million. Other major investments during 2008 were the replacement of the No. 2 annealing and pickling line in Tornio and the started expansion in quarto plate production capacity. Investment program After moving to the next phase in its strategy in September 2007, Outokumpu launched an investment program totaling some EUR 2 billion. In October 2008, as a result of the global financial crisis and a sudden weakening in stainless steel demand, Outokumpu decided to review the program. In December, a decision was made to postpone the investment program almost entirely for at least 12 months. Continuing any of the projects would be subject to a separate decision based on an updated feasibility study. Investments worth some EUR 1.5 billion were postponed and capital expenditure in 2009 is expected to total some EUR 300 million (the original plans EUR 850 million). Most spending in 2009 will be related to expansion projects that are close to being finalized and some mandatory components in started projects. EUR 100 million of the Group's capital expenditure in 2009 is maintenance related. The investments in high-purity ferritic and bright-annealing in Tornio, Finland, special grades in Avesta, Sweden and quarto plate in Degerfors, Sweden have been postponed. The investment to expand quarto plate production capacity at New Castle (IN), in the US, will proceed according to plan. Synergy benefits resulting from the acquisition of the SoGePar Group, an Italian independent distributor, allowed the investment program in service centers in Europe to be streamlined and optimized. Only the investment in the service center in Willich, Germany, will proceed as planned. All other service center investments in Europe (Poland, France and southern Germany) have either been reduced in scope or postponed. The service center investment in India has also been postponed. The plate service center in China will however proceed as planned. The investment in doubling ferrochrome production capacity at Tornio has also been postponed for at least 12 months. The EUR 90 million investment project, announced on February 1, 2007, to replace the No. 2 annealing and pickling line in Tornio has been completed. The old line was decommissioned in September. Ramp-up of the new line started in December and full production capacity will be available by the end of 2009. The shutdown and ramp-up of production will not have a significant impact on the total capacity of the cold rolling plant in 2008 or 2009. The new annealing and pickling line has an annual capacity of 300 000 tons and is capable of producing both austenitic and ferritic products with minimum set-up times. In February, Outokumpu OSTP and the Saudi Arabian tube manufacturer Armetal, a company in the Al-Hejailan Group, agreed to form Outokumpu Armetal Stainless Pipe Co., Ltd., a 51/49 stainless steel tubular joint venture located in Riyadh. The joint venture began operating on October 1, 2008. In June, Outokumpu announced an investment of some 10 million in Long Products' finishing facilities in Sheffield in the UK. The new equipment is scheduled to be operational in mid 2009. This investment is creating an integrated manufacturing route for small bar and rebar, complementing the existing melt shop and wire rod mill, located in Sheffield. Closure of the Thin Strip business in Sheffield In September, Outokumpu announced its intention to close the Group's thin strip business at Meadowhall in Sheffield in the UK. The Meadowhall plant produces specialized, very thin forms of stainless steel strip products and deliveries in 2007 totaled 12 000 tons. Overcapacity in the stainless precision strip market has meant that this business has been loss-making for several years. The closure is part of performance improvement actions taken by Outokumpu to ensure the Group's global competitiveness. Closure of the Sheffield Thin Strip business is expected to take place in the first quarter of 2009. Transfer of the Group's precision strip business is proceeding according to plan and part of the business has already been transferred to the Outokumpu Kloster unit in LÃ¥ngshyttan, Sweden. The closure will result in some 230 job losses at the Meadowhall site and is expected to result in a reduction of EUR 16 million in annual fixed costs from the second quarter of 2009 onwards. Write-downs and provisions of EUR 66 million, of which EUR 28 million are cash, were recorded in the third quarter of 2008. Acquisitions and divestments In April, Outokumpu signed an agreement to acquire the SoGePar Group, an Italian distributor of stainless steel from the Borromeo family. The transaction was completed at the end of July. The final consideration was EUR 224 million in cash and EUR 87 million in debt. The SoGePar Group was consolidated into Outokumpu's accounts with effect from August 1, 2008. The former SoGePar units consist of stainless steel service centers in Castelleone in Italy and in Rotherham in the UK. It also has stock operations in Italy, the UK, Belgium, Finland, France and Ireland, as well as a commercial office in Germany and a representative office in Turkey. Sales by the SoGePar Group in 2007 totaled EUR 560 million, with an operating profit of EUR 44 million and deliveries totaling 134 000 tons. In June, Outokumpu signed an agreement to acquire the operations of Avesta Klippcenter AB in Avesta, Sweden. The transfer of ownership in connection with this transaction took place on July 1, 2008. Discontinued operations In April, Outokumpu signed an agreement under which the Group's remaining copper tube assets were sold to Cupori Group Oy. This transaction was closed on June 3, 2008 and the total purchase price was EUR 52 million. A capital loss of EUR 66 million was booked on the transaction. Assets divested comprise the copper plumbing installation and industrial tube manufacturing companies in Pori (Finland), Zaratamo (Spain), VÃ¤sterÃ¥s (Sweden) and LiÃ¨ge (Belgium), as well as copper tube sales companies in France, Germany and Italy. In 2007, these businesses generated sales totaling EUR 510 million, recorded a net loss of EUR 5 million and employed 730 people. Operational Excellence programs In 2007, the Operational Excellence programs, launched in 2005 and originally comprising Production and Commercial Excellence, were expanded to include Supply Chain Excellence. Targeted benefits have been achieved in both 2007 and 2008. The target was to improve the Group's performance by EUR 40 million in 2007 and by EUR 80 million in 2008 compared to 2005. In 2008, the Production and Commercial Excellence programs delivered benefits totaling some EUR 86 million (EUR 25 million in 2006 and EUR 45 million in 2007). The benefit target of EUR 200 million for 2009 from the programs (including Supply Chain Excellence) will not be reached with the current market outlook as benefits are highly depending on delivery volumes and raw material prices. In the short-term, the Operational Excellence program will focus on working capital reduction, raw material and other cost saving-related projects instead of on capacity enhancement. Outokumpu will continue the Excellence programs even with a stronger effort and aims at reaching the targeted benefits but with a delay. Claims 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 one individual damage claim for ACR Tubes under US antitrust laws. Outokumpu believes that the allegations in this case are groundless and will defend itself in any 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 this claim. 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 forward 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 Tornio Works in the preparation of defective and/or forged invoices by the forwarding agency in question. 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, a 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. Risk management Outokumpu operates in accordance with the risk management policy approved by its Board of Directors. This policy defines the objectives, approaches and areas of responsibility in risk management. Risk management supports the Group's strategy and also helps in defining a balanced risk profile from the perspective of shareholders as well as other stakeholders such as customers, suppliers, personnel and lenders. Outokumpu has defined risk as being anything that could have an adverse impact on activities that the company has undertaken to achieve its objectives. Risks can thus be threats, uncertainties or lost opportunities relating to present or future operations. The Group's Executive Committee reviewed and updated key risks to the Group at a workshop held during the second half of 2008. The results of this review were presented to both the Audit Committee and to the Board of Directors in the fourth quarter. In 2008, the realized, most significant risks were related to structural issues in stainless steel markets and to the global financial turmoil, which had an impact on steel markets, the availability of finance and also on the Group's ability to implement its planned investment projects. There were no significant fires, other damage to property or business interruption in 2008, which had a major impact on Outokumpu's operations. Strategic and business risks The most important strategic and business risks to Outokumpu's operations have been identified as structural overcapacity in stainless steel production, competition in stainless steel markets and Eurocentricity. New stainless steel production capacity being built in China has led to overcapacity in cold rolled stainless production. To mitigate risks related to structural overcapacity and fierce competition in stainless steel markets, Outokumpu aims to maintain the cost efficiency of its operations, broaden the Group's product offering and increase sales to end-users by, for example, developing distribution channels. This strategy is supported by the Group's new organization which ensures that customers are served in an optimal way. Eurocentricity in Group operations and sales is considered a risk to Outokumpu's growth and success. To mitigate any possible impacts, Outokumpu is also aiming to grow outside Europe. Operational risks Operational risks arise as a consequence of inadequate or failed internal processes, employee actions, systematic or other events such as natural catastrophes, misconduct or crime. Key operational risks include a major fire or accident, variations in production performance, failures in project implementation and the inability to achieve a strong corporate culture and a one-company approach. To minimize damage to property and business interruptions that could be caused by fire at some of the Group's major production sites, Outokumpu has systematic fire and security audit programs in place. Part of this type of risk is covered by insurance. Some 40 security and fire safety audits were carried out in 2008 with the Group's own resources, often jointly with technical experts provided by our insurers. A large part of the Group-wide instructions on security and crisis management were reviewed and updated during the year. While Outokumpu has been systematically developing the Group's operational performance through excellence initiatives, risks associated with excessive variations in performance between different production processes can have a serious impact on the business. Outokumpu is mitigating these types of risk by expanding its Operational Excellence programs and building on strong Group-level functions such as Supply Chain Management and Group Sales and Marketing, thus enhancing strategy implementation. Outokumpu's aim is to achieve a strong and unified corporate culture throughout its organization. The approach for all personnel is the creation of "One Outokumpu", but significant cultural change can take time. The Group has taken some actions to strengthen leadership skills and the sharing of common values to create a unified corporate culture. The Group's planned and announced major investment program was postponed almost entirely because of the financial market turmoil and the weakened stainless steel market at the end of the year. Some investments such as service center expansion in Willich, Germany and the establishment of a new plate service center in China are however being finalized. In preparation for the years ahead, Outokumpu is aiming to support the implementation of future investment projects and manage risks related to the Group's project portfolio by further developing our methods of project management. Financial risks Financial risks of the Group include exposure to market prices, the ability to maintain adequate liquidity and exposure to the risk of default. The most important financial risks are variations in the price of nickel, variations in the exchange rate between 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 risk is mitigated through the use of financial derivative contracts. In 2008, Outokumpu changed its approach to the management of nickel price risk and consequent hedging of nickel in the supply chain led to a significant positive impact on earnings in the second half of the year. Liquidity and refinancing risks are taken into account in capital management decisions and, when necessary, in making investment and other business decisions. Outokumpu's aim is to mitigate a significant proportion of the Group's credit risk through insurance and other arrangements and in 2008 most commercial receivables were either insured or secured in other ways. In addition to commercial receivables, Outokumpu is exposed to credit risk in connection with loan receivables, which may be subject to negative impact if the turmoil in the financial markets continues. It is not typical for loan receivables to be insured or otherwise secured. Environment, Health and Safety In the European Union, a new emissions trading period started in 2008. During this Kyoto-period 2008-2012 the scope of emissions trading was extended to cover also Outokumpu's heat treatment installations in Sweden and Sheffield melt shop in the UK. Outokumpu will receive 1.3 million tons emission allowances annually until 2012, which is estimated to be enough for the current production capacity within the Group's European production sites. Emission trading is expected to continue after 2012 and Outokumpu follows the development of the EU Climate and Energy package, and the renewal of the Emissions Trading Scheme. Mainly as a result of lower production volumes, the Group's carbon dioxide emissions decreased in 2008 and totaled approximately 900 000 tons. Approximately 820 000 tons were covered by emissions trading scope. During the year, the Group sold 1 022 000 tons of carbon dioxide allowances for EUR 22 million euros. Emissions to air and discharges to water-courses remained mostly within permitted limits at Outokumpu sites, but some incidents took place in 2008. 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 an adverse material effect on the Group's financial position. Outokumpu's work on long-term development for improving material efficiency was successful during 2008. Total amount of landfilled waste decreased by 40% mainly due to excellent results in utilization of by-products. In 2008, the lost-time injury rate (i.e. lost-time accidents per million working hours) improved to 9 (2007: 11), slightly above the Group's 2008 annual target of less than 8. Corporate Responsibility In September, the results of the annual review carried out for the Dow Jones Sustainability Indexes (DJSI) by the Sustainable Asset Management Group (SAM) were published. Outokumpu retained its position in the Pan-European Dow Jones STOXX Sustainability Index (DJSI STOXX) and in the Dow Jones Sustainability World Index (DJSI World). In January 2008, Outokumpu was given the title of "SAM 2008 Sector Mover" for having shown the greatest relative improvement in its sustainability performance and for its outstanding achievements in the area of sustainability. Outokumpu was also included in SAM's Sustainability Yearbook 2009. Outokumpu also retained its position in Storebrand SRI: "Best in Class: Environmental and Social performance", ASPI EurozoneÂ® index, and the Ethibel Sustainability Indexes (ESI): Ethibel Excellence Europe and Global. In the Carbon Disclosure Project (CDP), published in November, Outokumpu's score was good at 61/100. Outokumpu also received an award for being Finland's best corporate responsibility reporter in 2008. The year 2008 was named Outokumpu's corporate responsibility theme year to raise the awareness of and the attitude towards environmental and social responsibility issues among the Outokumpu personnel. Concrete, measurable targets were set for both plants and offices to improve energy and materials efficiency, reducing accidents and improving the employees' well-being. There was a clear improvement in all these areas. Targets set for Outokumpu sites were reached but in the offices, with some exceptions, targets were not fully achieved. Outokumpu has signed the ten principles of the United Nations Global Compact to show its commitment to sustainability and corporate citizenship. The principles cover human rights, labor standards, protection of the environment and the prevention of corruption. Outokumpu's corporate responsibility report - Outokumpu and our environment 2008 - is based on the Global Reporting Initiative (GRI) G3 guidelines. The report will be published together with the annual report. Research and Development Group expenditure on research and development in 2008 totaled EUR 20 million or 0.4% of sales (2007: EUR 18 million and 0.3%). Outokumpu has research centers in Tornio, Finland and in Avesta, Sweden. Some process and technology development work is also carried out in production units, and there are close links between R&D operations and the Production Excellence program. The R&D function employed almost 200 professionals in 2008. Outokumpu also conducts research in collaboration with its customers, research institutes and universities. In 2008, the main focus was on the further development of new low-nickel and nickel-free stainless steels, such as of reducing the dependence of the steel price on volatile nickel prices. A lot of effort has been put into developing duplex grades, which offer a good combination of strength and corrosion resistance. The ideal application for duplex grades is large, heavy-wall tanks, where weight savings of up to 20% can be achieved. Customers have shown growing interest in LDX 2101Â®, Outokumpu's own development of Lean Duplex and license agreements on producing this grade were made with some new partners. New applications for LDX 2101Â® are continually being developed and the production technology has been improved. Ferritics represent another opportunity to reduce the influence of the nickel price on raw material costs. Optimum process parameters and product properties for standard ferritic grades have been studied intensively at production scale. The primary focus has been on surface quality, formability and corrosion resistance. Four different grades have been launched commercially and the volume sold are increasing. These grades are mostly used for indoor applications, in kitchen utensils, domestic appliances and the transportation sector. Cr-Mn-Ni grades (200 series), a third opportunity to reduce the use of nickel, also represent an interesting alternative in many applications. The Group is now capable of producing and selling these grades. The most common grade is 201, the chemistry of which has been modified by Outokumpu. While the corrosion resistance of this grade is almost equal to that of standard Cr-Ni austenitic 304, it has higher strength. In addition to new products and new applications for stainless steel, the Group's R&D operations focus on innovative manufacturing processes that reduce costs, result in lower emissions, shorten lead times and improve quality levels. In application development, R&D experts work in close co-operation with the Group's commercial organization and provide advice for both sales personnel and customers about product properties and material selection. They also receive valuable direct feedback concerning customer needs that serves as input for further product development activity. The main subject of environmental research in 2008 was slag utilization. Studies on the properties of different slag products and the development of applications are continuing. Personnel Personnel Dec. 31 2008 2007 2006 General Stainless 3 938 3 571 3 498 Specialty Stainless 4 006 4 099 4 200 Other operations 527 439 462 The Group 8 471 8 108 8 159 In 2008, the Group's continuing operations employed an average of 8 551 people (2007: 8 270) in some 30 countries. At the end of 2008, the number of personnel employed by the Group was 8 471 (2007: 8 108). The net increase in the number of personnel employed in 2008 was 363 (2007: 51) and resulted from the acquisition of the SoGePar Group and establishment of Outokumpu's new Group Sales and Marketing function. Personnel expenses totaled EUR 520 million (2007: EUR 499 million). Outokumpu's development programs, including management development programs and the Production Excellence training program, continued during 2008. Seven new graduates started the Stainless Pro graduate program in September 2008. Almost all Group employees participated in performance and development dialogues in 2008. The Outokumpu Personnel Forum held its 17th annual meeting in Cremona, Italy. The Group Working Committee, a forum for continuous dialogue between personnel and management, met seven times during 2008. The fourth O'People personnel survey was conducted in 2008 as follow-up to the survey carried out in 2007. The purpose was to assess whether actions taken in 2008 had been successful. The results indicated an improvement compared to 2007. Organizational change and appointments As part of the second phase in its strategy development, Outokumpu realigned the organization into an integrated model that emphasizes the 'one-company' approach to customers. The new organizational structure became fully operational during 2008. Outokumpu expanded its operations in the Middle East by opening a sales company in Dubai, United Arab Emirates and will represent the complete range of Outokumpu products and services. Pii Kotilainen was appointed Executive Vice President - Human Resources and member of the Group Executive Committee as of March 1, 2009. She joined Outokumpu on January 1, 2009 and reports to CEO Juha Rantanen. Ms Kotilainen succeeds Timo Vuorio who will retire at the end of April 2009. Shares and shareholders According to the Nordic Central Securities Depository, Outokumpu's largest shareholders by group at the end of 2008 were Solidium Oy (31.1%), foreign investors (33.8%), Finnish public sector institutions (15.3%), Finnish private households (9.6%), Finnish financial and insurance institutions (4.9%), Finnish corporations (2.8%) and Finnish non-for-profit organizations (2.5%). In December 2008, The Finnish State transferred its 31.1% holding in Outokumpu to its wholly-owned company Solidium Oy. Shareholders that have more than 5% of the shares and votes in Outokumpu Oyj are Solidium Oy (31.1%) and the Finnish Social Insurance Institution (8.1%). At the year-end, Outokumpu's closing share price was EUR 8.28 (2007: EUR 21.21), down 61%. The average share price during the year was EUR 18.99 (2007: EUR 24.94) with EUR 33.99 (2007: EUR 31.65) as the year's highest price and EUR 6.33 (2007: EUR 18.48) as the year's lowest price. At the year-end, the market capitalization of Outokumpu Oyj shares totaled EUR 1 502 million (2007: EUR 3 845 million). Share turnover in 2008 was at almost the same level as it was in 2007, with 511.1 million (2007: 516.4 million) shares being traded on the Nasdaq OMX Helsinki Ltd exchange. The total value of share turnover in 2008 was EUR 9 693 million (2007: EUR 12 882 million). Outokumpu's fully paid share capital at the year-end totaled EUR 308.5 million and consisted of 181 451 883 shares. The average number of shares outstanding during 2008 was 180 184 845. Annual General Meeting 2008 The Annual General Meeting (AGM) on March 27, 2008 approved a dividend of EUR 1.20 per share for 2007. Dividends totaling EUR 216 million were paid on April 8, 2008. The AGM also 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 9.92% 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 grant 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 a 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 the 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 KilpelÃ¤ 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. 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. At its first meeting, the Board of Directors of Outokumpu appointed two permanent committees consisting of Board members. Leena Saarinen (Chairman), Jarmo KilpelÃ¤, 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. Shareholders' Nomination Committee Outokumpu's Annual General Meeting of March 27, 2008 decided to establish a Shareholders' Nomination Committee to prepare proposals on the composition of the Board of Directors and director remuneration for the following Annual General Meeting. The members represent Outokumpu's four largest shareholders, registered in the Finnish book-entry securities system as of November 3, 2008, which accepted the assignment. The Shareholders' Nomination Committee of Outokumpu consists of the following four shareholders: The Finnish State (Jarmo VÃ¤isÃ¤nen, Senior Financial Counsellor, Prime Minister's Office), The Finnish Social Insurance Institution (Jorma Huuhtanen, Director General), Ilmarinen Mutual Pension Insurance Company (Harri Sailas, Chief Executive Officer) and the OP-Delta Fund (Reijo Karhinen, Executive Chairman, OP-Pohjola Group). Jarmo VÃ¤isÃ¤nen acts as Chairman of the Committee. Ole Johansson, the Chairman of Outokumpu's Board of Directors, serves as an expert member. The Shareholders' Nomination Committee is required to submit its proposals to the company's Board of Directors by February 2, 2009. Events after the review period Due to the very weak stainless steel demand Outokumpu continues to cut production and starts negotiations with personnel regarding temporary and permanent layoffs in several of its operating countries. The planned actions are expected to result in temporary layoffs of over 2000 people and reduction of about 250 jobs. At Tornio Works Outokumpu plans to temporarily cease its ferrochrome production (the Kemi mine and Ferrochrome Works), temporarily idle one of its melt-shops and reduce shifts at almost all steel production lines. Due to these production cuts the company will start new statutory negotiations on temporary layoffs at Tornio Works in Finland. The negotiations concern about 2000 people, also office and maintenance employees. In OSTP (Outokumpu Stainless Tubular Products) the total of 150 job reductions are planned in Sweden, Finland, Estonia and Canada. In Finland the negotiations concern both temporary and permanent layoffs. In Outokumpu Group Sales & Marketing organization the target is to reduce approximately 50 jobs with layoffs and voluntary arrangements. Additionally about 80 employees are planned to be temporarily laid-off. In the UK approximately 90 jobs are planned to be reduced in the coming months as a result of reduced shifts in the Sheffield melt-shop and the cost-saving measures in Outokumpu's Alloy Steel Rods (ASR) and the sales company's integration of the former SoGePar activities into its Sheffield based operation. Outokumpu is through its current actions - Group-wide general cost saving programs and personnel reductions - targeting fixed cost savings in the range of EUR 100 million in 2009. Short-term outlook Visibility regarding the stainless steel markets is currently very short. The deepening of the global financial crisis has a clear impact on stainless steel demand, and Outokumpu expects stainless markets to remain very weak in the first quarter of 2009. Base prices have declined further in early 2009. Current order intake represents about 50 percent of the Group's full production capacity. For the first quarter of 2009, Outokumpu's operating profit continues to be significantly negative due to the low base price level, low delivery volumes and raw material-related inventory losses that mainly result from the decline in the ferrochrome price. However, Outokumpu's financial and liquidity position remains strong. Board of Directors' proposal for profit distribution In accordance with the Board of Directors' established dividend policy, the payout ratio over a business cycle should be at least one-third of the Group's profit for the period with the aim to have stable annual payments to shareholders. In its annual dividend proposal, the Board of Directors will, in addition to financial results, take into consideration the Group's investment and developing needs. The Board of Directors is proposing to the Annual General Meeting to be held on March 24, 2009 a dividend of EUR 0.50 per share to be paid from the parent company's distributable funds on December 31, 2008 and that any remaining distributable funds be allocated to retained earnings. The suggested dividend record date is March 27, 2009 and the dividend will be paid on April 3, 2009. According to the financial statements at December 31, 2008, distributable funds of the parent company totaled EUR 924 million. No material changes have taken place in the company's financial position after the balance sheet date and the proposed dividend does not compromise the company's financial standing. In Espoo, February 3, 2009 Board of Directors CONSOLIDATED FINANCIAL STATEMENTS (all full year figures are audited) income statement Jan- Jan- Oct- Oct- Dec Dec Dec Dec EUR million 2008 2007 2008 2007 Continuing operations: Sales 5 474 6 913 966 1 465 Other operating income 57 82 37 18 Costs and expenses -5 552 -6 364 -1 267 -1 447 Other operating expenses -42 -43 -8 -21 Operating profit -63 589 -271 15 Share of results in associated companies -2 4 -1 -1 Financial income and expenses Interest income 20 25 5 6 Interest expenses -74 -82 -21 -19 Market price gains and losses -2 0 -0 2 Other financial income 11 268 0 4 Other financial expenses -24 -5 -10 -1 Profit before taxes -134 798 -298 7 Income taxes 24 -138 71 -0 Net profit for the period from continuing operations -110 660 -228 7 Discontinued operations: Net profit for the period from discontinued operations -79 -18 -5 -23 Net profit for the period -189 641 -233 -16 Attributable to: Equity holders of the Company -189 638 -233 -16 Minority interest -0 4 -0 -0 Earnings per share for profit attributable to the equity holders of the Company: Earnings per share, EUR -1.05 3.52 -1.30 -0.09 Diluted earnings per share, EUR -1.04 3.50 -1.29 -0.09 Earnings per share from continuing operations attributable to the equity holders of the Company: Earnings per share, EUR -0.61 3.63 -1.27 0.04 Earnings per share from discontinued operations attributable to the equity holders of the Company: Earnings per share, EUR -0.44 -0.10 -0.03 -0.13 Condensed balance sheet Dec 31 Dec 31 EUR million 2008 2007 ASSETS Non-current assets Intangible assets 584 475 Property, plant and equipment 2 027 1 980 Investments in associated companies 1) 156 163 Available-for-sale financial assets 1) 67 125 Derivative financial instruments 1) 9 37 Deferred tax assets 37 26 Trade and other receivables Interest-bearing 1) 132 128 Non interest-bearing 55 51 Total non-current assets 3 067 2 986 Current assets Inventories 1 204 1 630 Available-for-sale financial assets 1) 8 14 Derivative financial instruments 1) 92 26 Trade and other receivables Interest-bearing 1) 25 10 Non interest-bearing 701 975 Cash and cash equivalents 1) 224 86 Total current assets 2 252 2 740 Receivables related to assets held for sale 1) 22 184 TOTAL ASSETS 5 341 5 910 EQUITY AND LIABILITIES Equity attributable to the equity holders of the Company Share capital 308 308 Premium fund 702 701 Other reserves -13 72 Retained earnings 1 984 1 617 Net profit for the financial year -189 638 2 794 3 337 Minority interest 1 - Total equity 2 795 3 337 Non-current liabilities Long-term debt 1) 1 170 1 036 Derivative financial instruments 1) 48 10 Deferred tax liabilities 216 241 Pension obligations 64 58 Provisions 28 36 Trade and other payables 2 2 Total non-current liabilities 1 529 1 382 Current liabilities Current debt 1) 501 420 Derivative financial instruments 1) 54 18 Income tax liabilities 5 22 Provisions 48 45 Trade and other payables Interest-bearing 1) 26 26 Non interest-bearing 378 609 Total current liabilities 1 012 1 139 Liabilities related to assets held for sale 1) 6 52 TOTAL EQUITY AND LIABILITIES 5 341 5 910 1) Included in net interest-bearing debt. Consolidated statement of changes in equity Attributable to the equity holders of the company Share Unregister- Share Other Fair capital ed share premium reserves value EUR million capital fund reserves Equity on December 31, 2006 308 0 701 11 144 Cash flow hedges, net of tax - - - - 3 Fair value changes on available-for-sale financial assets, net of tax - - - - 13 Available-for-sale financial assets recognized through P&L - - - - -100 Net investment hedges - - - - - Change in translation differences - - - - -2 Items recognised directly in equity - - - - -86 Net profit for the period - - - - - Total recognised income and expenses - - - - -86 Transfers within equity 0 -0 - 5 - Dividends - - - - - Treasury shares - - - - - Share-based payments - - - - - Share options exercised 0 - 0 - - Acquisition of minority in OSTP - - - - - Equity on December 31, 2007 308 - 701 16 57 Cash flow hedges, net of tax - - - - -52 Fair value changes on available-for-sale financial assets, net of tax - - - - -32 Available-for-sale financial assets recognized through P&L - - - - 5 Net investment hedges - - - - - Companies acquired - - - - - Change in translation differences - - - -0 -6 Items recognised directly in equity - - - - -85 Net profit for the period - - - - - Total recognised income and expenses - - - - -85 Transfers within equity - - - 0 - Dividends - - - - - Share-based payments - - - - - Share options exercised 0 - 1 - - Equity on December 31, 2008 308 - 702 15 -28 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, net of tax - - - - 3 Fair value changes on available-for-sale financial assets, net of tax - - - - 13 Available-for-sale financial assets recognized through P&L - - - - -100 Net investment hedges - 3 - - 3 Change in translation differences - -51 - 0 -53 Items recognised directly in equity - -48 - 0 -134 Net profit for the period - - 638 4 642 Total recognised income and expenses - -48 638 4 508 Tranfers within equity - - -5 - - Dividends - - -199 - -199 Treasury shares -25 - - - -25 Share-based payments - - 3 - 3 Share options exercised - - - - 0 Acquisition of minority in OSTP - - - -21 -21 Equity on December 31, 2007 -27 -82 2 364 - 3 337 Cash flow hedges, net of tax - - - - -52 Fair value changes on available-for-sale financial assets, net of tax - - - - -32 Available-for-sale financial assets recognized through P&L - - - - 5 Net investment hedges - 10 - - 10 Companies acquired - - - 1 1 Change in translation differences - -66 - - -72 Items recognised directly in equity - -56 - 1 -140 Net profit for the period - - -189 -0 -189 Total recognised income and expenses - -56 -189 1 -329 Tranfers within equity - - -0 - - Dividends - - -216 - -216 Share-based payments - - 2 - 2 Share options exercised - - - - 1 Equity on December 31, 2008 -27 -138 1 961 1 2 795 Condensed statement of cash flows Jan-Dec Jan-Dec EUR million 2008 2007 Net profit for the period -189 641 Adjustments Depreciation and amortization 206 204 Impairments 36 1 Loss on the sale of copper tube business 66 - Gain on the sale of Outotec shares - -142 Gain on the Talvivaara transaction - -110 Other adjustments 255 199 Change in working capital 370 181 Dividends received 12 13 Interests received 5 10 Interests paid -76 -83 Income taxes paid -30 -239 Net cash from operating activities 656 676 Purchases of assets -325 -163 Purchase of SoGePar shares -200 - Purchase of other subsidiaries -4 - Purchase of Talvivaara shares - -32 Acquisition of the minority in OSTP - -22 Proceeds from the sale of copper tube business 49 - Proceeds from the sale of subsidiaries - 1 Proceeds from the sale of other assets 31 15 Net cash from other investing activities 0 4 Net cash from investing activities -449 -197 Cash flow before financing activities 207 479 Purchase of treasury shares - -25 Borrowings of long-term debt 341 151 Repayment of long-term debt -236 -388 Change in current debt 47 -180 Dividends paid -216 -199 Proceeds from the sale of Outotec shares - 158 Proceeds from the sale of other financial assets 0 6 Other financing cash flow -1 1 Net cash from financing activities -64 -477 Net change in cash and cash equivalents 143 2 Cash and cash equivalents at the beginning of the period 86 85 Foreign exchange rate effect -5 -1 Net change in cash and cash equivalents 143 2 Cash and cash equivalents at the end of the period 224 86 Key figures Jan-Dec Jan-Dec EUR million 2008 2007 Operating profit margin, % -1.2 8.5 Return on capital employed, % -1.6 13.9 Return on equity, % -6.2 20.0 Return on equity from continuing operations, % -3.6 20.6 Capital employed at end of period 3 867 4 125 Net interest-bearing debt at end of period 1 072 788 Equity-to-assets ratio at end of period, % 52.4 56.5 Debt-to-equity ratio at end of period, % 38.4 23.6 Earnings per share, EUR -1.05 3.52 Earnings per share from continuing operations, EUR -0.61 3.63 Earnings per share from discontinued operations, EUR -0.44 -0.10 Average number of shares outstanding, in thousands 1) 180 185 180 922 Fully diluted earnings per share, EUR -1.04 3.50 Fully diluted average number of shares, in thousands 1) 181 190 181 920 Equity per share at end of period, EUR 15.50 18.53 Number of shares outstanding at end of period, in thousands 1) 180 233 180 103 Capital expenditure, continuing operations 544 190 Depreciation, continuing operations 206 204 Average personnel for the period, continuing operations 8 551 8 270 1) The number of own shares repurchased is excluded. NOTES TO THE INCOME STATEMENT AND BALANCE SHEET This annual accounts bulletin 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 181 451 883 and the share capital amounted to EUR 308.5 million on December 31, 2008. Outokumpu Oyj held 1 218 603 treasury shares on December 31, 2008. This corresponded to 0.7% of the share capital and the total voting rights of the Company on December 31, 2008. Outokumpu has 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. The option program has three parts 2003A, 2003B and 2003C. On December 31, 2008 a total of 108 498 Outokumpu Oyj shares had been subscribed for on the basis of 2003A stock option program and a total of 82 830 Outokumpu Oyj shares had been subscribed for on the basis of 2003B stock option program. An aggregate maximum of 550 804 Outokumpu Oyj shares can be subscribed for with the remaining 2003A stock options and 945 990 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 2003A was EUR 7.25 and for stock option 2003B EUR 10.31 on December 31, 2008. Trading with Outokumpu Oyj's stock options 2003C commenced on the Main List of the Nasdaq OMX Helsinki as of September 1, 2008. On December 31, 2008 a total of 10 000 Outokumpu Oyj shares had been subscribed for on the basis of 2003C stock option program. An aggregate maximum of 90 500 Outokumpu Oyj shares can be subscribed for with the remaining 2003C stock options. In accordance with the terms and conditions of the option program, the dividend adjusted share price for a stock option was EUR 10.94 on December 31, 2008. The share subscription period for the 2003C stock options is 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 2 698 400 and the number of shares by a maximum of 1 587 294 shares. This corresponds to 0.9% of the Company's shares and voting rights. Outokumpu has also 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 823 760 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 of Outokumpu. Acquisitions SoGePar In July, Outokumpu acquired all the shares in SoGePar Group with final purchase price of EUR 224 million. Outokumpu also took on debt in the company with amount of EUR 87 million. SoGePar has been consolidated into Outokumpu's accounts with effect from August 1, 2008. SoGePar is an Italian distributor of stainless steel. It 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, Finland, France and Ireland, as well as a commercial office in Germany and a representative office in Turkey. The purchase price has been allocated to the assets, liabilities and contingent liabilities at their fair value. The purchase price has been allocated to customer relationships, which are amortized during their estimated lifetime of four years. The goodwill recognised on the acquisition is attributable mainly to the skills and market knowledge of the acquired business's work force and the synergies are expected to be achieved from integrating the company into the Group's existing sales and marketing organisation. Also synergy benefits are expected when utilising Outokumpu's own production facilities to supply material to the acquired units. The purchase price allocation is provisional. Between August 1 and December 31, 2008, SoGePar sales was EUR 143 million and result for the period was EUR 37 million negative. Acquisitions Preliminary purchase price allocation EUR million Purchase price 224 Acquisition related costs 4 Fair value of acquired assets and liabilities -148 Goodwill 79 Acquired cash and cash equivalents -27 Cash impact of the acquisition 200 Acquired assets, liabilities and contingent liabilities Seller's book EUR million values Fair values Non-current assets Intangible assets 0 47 Property, plant and equipment 33 33 Non-current financial assets 11 11 Current assets Inventories 168 168 Current financial assets Interest-bearing 6 6 Non interest-bearing 156 156 Cash and cash equivalents 27 27 Non-current liabilities Interest-bearing -25 -25 Non interest-bearing -21 -33 Current liabilities Interest-bearing -95 -95 Non interest-bearing -147 -147 Total 114 148 Avesta Klippcenter In July, Outokumpu acquired the operations of Avesta Klippcenter AB in Avesta, Sweden. Avesta Klippcenter's main business is to process stainless steel material from Outokumpu's mills in Sweden for remelting in Avesta's melt shop. Through the acquisition Outokumpu's raw material handling capacity will increase, and it will secure competitive supply for the Avesta stainless steel melt shop. The total consideration is some EUR 8 million. The purchase price allocation is preliminary and is subject to finalization of the fair valuation of the acquired assets. The preliminary assumption is that the excess value will be allocated partly to intangible assets and partly to property, plant and equipment. The company has been consolidated into Outokumpu's accounts with effect from July 1, 2008. Between July 1 and December 31, 2008, Avesta Klippcenter sales was EUR 2 million and result for the period was EUR 1 million. Outokumpu Armetal Stainless Pipe Co., Ltd In February, Outokumpu OSTP and Saudi Arabian tube manufacturer Armetal, a company in the Al-Hejailan Group, agreed to form Outokumpu Armetal Stainless Pipe Co., Ltd, a 51/49 stainless steel tubular joint venture located in Riyadh, Saudi Arabia. The joint venture company was founded and has been consolidated into Outokumpu's accounts with effect from October 1, 2008. Minority interest of 49% is presented separately from the net profit and disclosed as a separate item in the equity. Outokumpu has invested in the company EUR 1 million as equity and granted loans amounting to EUR 7 million. Based on the preliminary assumption, the excess value of the acquisition of Armetal business will be allocated partly to intangible assets. The purchase price allocation is preliminary. If all the above mentioned acquisitions had occurred on January 1, 2008, management estimates that Outokumpu Group consolidated sales for the period would have been EUR 5 718 million and consolidated profit EUR -182 million. This estimate is based on the actual transactions of the acquired companies with Outokumpu and third parties. Non-current assets held for sale and discontinued operations In June, 2008 Outokumpu sold its remaining copper tube assets to Cupori Group Oy. Outokumpu received EUR 52 million as consideration of the sale. A capital loss of EUR 66 million was booked on the transaction. The assets sold comprise the copper plumbing installation and industrial tube manufacturing companies in Pori in Finland, Zaratamo in Spain, VÃ¤sterÃ¥s in Sweden and LiÃ¨ge in Belgium, as well as the copper tube sales companies in France, Germany and Italy. In 2007, these businesses generated sales of some EUR 510 million with a net loss of some EUR 5 million with a number of personnel of some 730. The remaining brass rod business produces brass rods for applications in the construction, electrical and automotive industries. The brass rod plant is located in DrÃ¼nen in the Netherlands and the unit also has a 50% stake in a brass rod company in Gusum, Sweden. Outokumpu Brass employs some 170 employees. The assets and liabilities of brass rod business are presented as held for sale. Outokumpu intends to divest also the brass rod business. Disputes and litigations In April 2007, Outokumpu was served a Statement of Objection in which it was alleged that a former Outokumpu subsidiary has been participating in cartel activities at the turn of the century. The investigations have been concluded and Outokumpu was fully released from all allegations with respect to this case. Specification of non-current assets held for sale and discontinued operations Income statement Jan-Dec Jan-Dec EUR million 2008 2007 Sales 267 599 Expenses -269 -607 Operating profit -2 -8 Net financial items -4 -6 Profit before taxes -6 -15 Taxes -0 -1 Profit after taxes -6 -15 Impairment loss recognized on the fair valuation of the Outokumpu Copper Tube and Brass division's assets and liabilities -6 -3 Loss on the sale of copper tube business -66 - Taxes - - After-tax result from the disposal and impairment loss -73 -3 Minority interest - - Net profit for the period from discontinued operations -79 -18 Balance sheet Dec 31 Dec 31 EUR million 2008 2007 Assets Intangible and tangible assets 2 6 Other non-current assets 3 4 Inventories 9 91 Other current non interest-bearing assets 8 83 22 184 Liabilities Provisions 2 4 Other non-current non interest-bearing liabilities 1 5 Trade payables 2 32 Other current non interest-bearing liabilities 1 11 6 52 Cash flows Jan-Dec Jan-Dec EUR million 2008 2007 Operating cash flows -8 18 Investing cash flows -16 -3 Financing cash flows 19 -19 Total cash flows -5 -4 Major non-recurring items in operating profit Jan-Dec Jan-Dec EUR million 2008 2007 Thin Strip restructuring in Britain -66 -11 Redundancy provisions -17 - Gain on the sale of Hitura mine in Finland - 25 -83 14 Major non-recurring items in financial income and expenses Jan-Dec Jan-Dec EUR million 2008 2007 Impairment of Belvedere shares -21 - Gain on the sale of Outotec shares - 142 Gain on the Talvivaara transaction - 110 -21 252 Income taxes Jan-Dec Jan-Dec EUR million 2008 2007 Current taxes -6 -107 Deferred taxes 30 -31 24 -138 Property, plant and equipment Jan 1, Jan 1, 2008 - 2007 - Dec 31, Dec 31, EUR million 2008 2007 Historical cost at the beginning of the period 3 984 4 009 Translation differences -190 -76 Additions 301 137 Acquisition of subsidiaries 36 - Disposal of subsidiaries - -20 Disposals -108 -67 Reclassifications -2 0 Historical cost at the end of the period 4 021 3 984 Accumulated depreciation at the beginning of the period -2 004 -1 939 Translation differences 115 47 Disposal of subsidiaries - 19 Disposals 83 56 Reclassifications -0 -0 Depreciation -188 -190 Impairments - 3 Accumulated depreciation at the end of the period -1 994 -2 004 Carrying value at the end of the period 2 027 1 980 Carrying value at the beginning of the period 1 980 2 069 Commitments Dec 31 Dec 31 EUR million 2008 2007 Mortgages and pledges Mortgages on land 189 122 Other pledges 5 0 Guarantees On behalf of subsidiaries for commercial commitments 55 41 On behalf of associated companies for financing 5 5 Other commitments 59 64 Minimum future lease payments on operating leases 52 56 Group's off-balance sheet investment commitments totaled EUR 93 million on Dec 31, 2008 (Dec 31, 2007: EUR 37 million). On July 3, 2008 Outokumpu signed a deal with Vattenfall on electricity deliveries amounting to around fifteen terawatt hours (TWh) during a ten-year period in Finland and Sweden. Related party transactions Transactions and balances with associated companies Dec 31 Dec 31 EUR million 2008 2007 Sales 0 0 Purchases -13 -9 Financial income and expenses 2 2 Loans and other receivables 7 9 Trade and other receivables 0 0 Fair values and nominal amounts of derivative instruments Dec 31 Dec 31 Dec 31 Dec 31 Dec 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 69 68 0 8 1 920 1 992 Interest rate swaps 2 - 2 10 200 282 Cross-currency swaps 7 - 7 - 46 - Number Number of of shares, shares, million million Stock options Belvedere Resources Ltd. 0 - 0 3 3.7 3.7 Tons Tons Metal derivatives Forward and futures nickel contracts 5 5 -0 0 4 729 3 114 Nickel options, bought 14 - 14 0 16 758 24 Nickel options, sold - 14 -14 - 11 478 - Forward molybdenum contracts - - - -0 - 5 Forward and futures copper contracts 2 2 -0 -2 4 925 11 775 Forward and futures zinc contracts 0 0 -0 -0 1 025 1 100 Emission allowance derivatives 1 - 1 0 270 000 80 000 TWh TWh Electricity derivatives 2 14 -11 16 1.3 2.3 101 103 -1 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 II/08 III/08 IV/08 2008 Sales 1 304 1 222 933 687 4 147 of which Tornio Works 905 833 567 396 2 701 Operating profit 81 125 -35 -177 -6 of which Tornio Works 67 114 -22 -93 66 Operating capital at the end of period 2 722 2 671 2 820 2 663 2 663 Average personnel for the period 3 578 4 000 4 163 3 989 3 933 Deliveries of main products (1 000 tons) Cold rolled 196 162 151 121 628 White hot strip 102 85 58 51 297 Semi-finished products 100 113 76 51 340 Total deliveries of the division 398 359 285 223 1 265 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 II/08 III/08 IV/08 2008 Sales 786 778 630 512 2 705 Operating profit 42 44 -63 -123 -101 Operating capital at the end of period 1 430 1 449 1 378 1 174 1 174 Average personnel for the period 4 115 4 096 4 192 4 103 4 127 Deliveries of main products (1 000 tons) Cold rolled 46 44 35 29 154 White hot strip 45 40 31 27 142 Quarto plate 35 37 28 27 126 Tubular products 19 18 14 15 66 Long products 14 14 14 10 52 Total deliveries of the division 161 153 121 106 541 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 II/08 III/08 IV/08 2008 Sales 64 63 69 62 258 Operating profit -20 4 29 25 38 Operating capital at the end of period -20 283 266 214 214 Average personnel for the period 447 487 507 525 492 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 II/08 III/08 IV/08 2008 Continuing operations: Sales General Stainless 1 304 1 222 933 687 4 147 of which intersegment sales 284 337 216 157 993 Specialty Stainless 786 778 630 512 2 705 of which intersegment sales 124 120 85 78 407 Other operations 64 63 69 62 258 of which intersegment sales 57 57 61 61 235 Intra-group sales -465 -514 -362 -295 -1 636 Total sales 1 689 1 549 1 270 966 5 474 Operating profit General Stainless 81 125 -35 -177 -6 Specialty Stainless 42 44 -63 -123 -101 Other operations -20 4 29 25 38 Intra-group items -3 1 3 4 6 Total operating profit 100 174 -66 -271 -63 Share of results in associated companies 0 1 -2 -1 -2 Financial income and expenses -20 -8 -14 -26 -69 Profit before taxes 80 166 -82 -298 -134 Income taxes -19 -36 9 71 24 Net profit for the period from continuing operations 61 130 -73 -228 -110 Net profit for the period from discontinued operations 2 -74 -1 -5 -79 Net profit for the period 63 56 -74 -233 -189 Attributable to: Equity holders of the Company 63 56 -74 -233 -189 Minority interest - - - -0 -0 Major non-recurring items in operating profit EUR million I/07 II/07 III/07 IV/07 2007 Specialty Stainless Thin Strip restructuring in Britain - - -11 - -11 Redundancy provisions - - - - - Other operations Gain on sale of Hitura mine in Finland - 25 - - 25 - 25 -11 - 14 EUR million I/08 II/08 III/08 IV/08 2008 Specialty Stainless Thin Strip restructuring in Britain - - -66 - -66 Redundancy provisions - - - -17 -17 Other operations Gain on sale of Hitura mine in Finland - - - - - - - -66 -17 -83 Major non-recurring items in financial income and expenses EUR million I/07 II/07 III/07 IV/07 2007 Impairment of Belvedere shares - - - - - Gain on the sale of Outotec shares - 142 - - 142 Gain on the Talvivaara transaction - 110 - - 110 - 252 - - 252 EUR million I/08 II/08 III/08 IV/08 2008 Impairment of Belvedere shares -12 - - -9 -21 Gain on the sale of Outotec shares - - - - - Gain on the Talvivaara transaction - - - - - -12 - - -9 -21 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 II/08 III/08 IV/08 Operating profit margin, % 5.9 11.2 -5.2 -28.1 Return on capital employed, % 10.0 17.2 -6.3 -26.8 Return on equity, % 7.7 7.0 -9.3 -31.5 Return on equity, continuing operations, % 7.5 16.3 -9.2 -30.8 Capital employed at end of period 3 899 4 166 4 228 3 867 Net interest-bearing debt at end of period 737 939 1 096 1 072 Equity-to-assets ratio at end of period, % 53.2 54.8 52.3 52.4 Debt-to-equity ratio at end of period, % 23.3 29.1 35.0 38.4 Earnings per share, EUR 0.35 0.31 -0.41 -1.30 Earnings per share from continuing operations, EUR 0.34 0.72 -0.41 -1.27 Earnings per share from discontinued operations, EUR 0.01 -0.41 -0.01 -0.03 Average number of shares outstanding, in thousands 1) 180 112 180 172 180 223 180 231 Equity per share at end of period, EUR 17.56 17.91 17.38 15.50 Number of shares outstanding at end of period, in thousands 1) 180 127 180 222 180 228 180 233 Capital expenditure, continuing operations 41 56 317 129 Depreciation, continuing operations 50 50 52 54 Average personnel for the period, continuing operations 8 140 8 583 8 862 8 617 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 Ã— 100 Total equity (average for the period) Return on capital = Operating profit Ã— 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 Ã— 100 Total assets - advances received Debt-to-equity ratio = Net interest-bearing debt Ã— 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 This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.

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