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Espoo, Finland, Oct 23, 2007 - (Hugin via Asia Business News) - Stock Exchange Release October 23, 2007 at 1.00 p.m. Third quarter highlights - Nickel-related inventory losses in the order of EUR 280 million turned operating profit EUR 256 million negative, underlying operational result EUR 35 million positive. - End-user demand for stainless steel continued strong, distributors kept on de-stocking. - Weak demand for stainless steel standard products and seasonality dropped deliveries to a very low level of 238 000 tons. - The main reference transaction price fell by 17% from the previous quarter. - Demand started to pick-up in late September. - EUR 299 million released from working capital, cash flow from operations EUR 161 million. - The second phase in Outokumpu's strategic development started. New investments totaling EUR 880 million approved in September and October.
Group key figures III/07 II/07 III/06 2006 Sales EUR million 1 227 2 092 1 447 6 154 Operating profit EUR million -256 406 231 824 Non-recurring items in operating profit EUR million -11 25 - 1 Profit before taxes EUR million -277 652 214 784 Non-recurring items in financial income EUR million - 252 - - Net profit for the period from continuing operations EUR million -210 553 166 606 Net profit for the period EUR million -214 565 172 963 Earnings per share from continuing operations EUR -1.17 3.04 0.91 3.34 Earnings per share EUR -1.19 3.11 0.94 5.31 Return on capital employed % -22.3 35.5 24.3 20.7 Net cash generated from operating activities EUR million 161 132 -24 -35 Capital expenditure, continuing operations EUR million 47 75 45 187 Net interest-bearing debt at end of period EUR million 1 016 1 119 1 560 1 300 Debt-to-equity ratio at end of period % 29.8 30.8 66.4 42.3 Stainless steel deliveries 1 000 tons 238 399 393 1 815 Stainless steel base price 1) EUR/ton na. 1 518 1 572 1 470 Personnel at the end of period, continuing operations 8 049 8 783 8 215 8 159
1) Stainless steel: CRU - German base price (2 mm cold rolled 304 sheet). As of July 2007, CRU has not reported base prices separately.
SHORT-TERM OUTLOOK Underlying demand for stainless steel is holding firm. End-user demand and demand for special grades and project deliveries continues healthy. Distributor inventories are on a declining trend. Outokumpu's order intake for standard products began to pick-up in late September and the order book has been gradually improving. The price of nickel was more stable in July-September, and the alloy surcharge will clearly decline in October and November before the expected increase in December.
The pick-up in demand for standard products will increase Outokumpu's delivery volumes and improve profits in the fourth quarter. Prices for stainless steel standard products are stabilizing and even some price increases have been achieved. On the other hand, nickel-related inventory losses continue to impair results in the fourth quarter due to lower alloy surcharge. At the current nickel price level the losses due to the timing differences between the alloy surcharge and inventory turnover, are expected to be in the order of EUR 100 million. However, Outokumpu's underlying operational result in the fourth quarter, excluding nickel-related inventory losses and non-recurring items, is expected to be better than in the third quarter. The decline in nickel prices will continue to release working capital and generate strong cash flow during the fourth quarter resulting in clearly better full-year cash flow from operations in 2007 than in 2006.
Strike by the Union of Salaried Employees in Finland started on October 22, 2007. Some 400 salaried employees in Tornio are involved. This industrial action will lead to cessation of production of stainless steel at Outokumpu's Tornio Works in a few days. The duration of the strike is today not known, but if continued, will have a negative impact on the fourth quarter result.
The Group's underlying operational result for 2007 is estimated to be better than the about EUR 650 million reached in 2006. However, due to significant nickel-related inventory losses during the latter part of 2007, Outokumpu's operating profit for the whole year 2007 is expected to be lower than in 2006.
CEO Juha Rantanen:
- The steep decline in the price of nickel during the summer causes a major hit on Outokumpu's profitability in the second half of 2007. Distributors freezed their orders of stainless steel ahead of declining transaction prices which resulted in very low delivery volumes. The nickel-related inventory losses that we were forced to book in the third quarter were as dramatic as we had feared in our worst expectations.
- Outokumpu announced recently an adjustment in our pricing mechanism, which means that transaction prices of stainless steel will reflect changes in nickel price with shorter delay than today. In our view, this will result in less volatile market behavior.
- Right now the distributor market is coming back as we were anticipating earlier and the end-user demand continues to be strong. This strengthens our confidence to continue to invest in the business. The recently announced investments to move more into special grades and closer to end-users will contribute to achieving a more stable and profitable business model in the future, a target that we now see more important than ever in the light of the third-quarter results.
The attachments present Management analysis of the third quarter operating result and the Interim review by the Board of Directors for January-September 2007, the accounts and notes to the interim accounts. This interim report is unaudited.
For further information, please contact:
Päivi Lindqvist, SVP - IR and Communications tel. +358 9 421 2432, mobile +358 40 708 5351 paivi.lindqvist@outokumpu.com
Eero Mustala, SVP - Corporate Communications tel. +358 9 421 2435, mobile +358 40 504 5146 eero.mustala@outokumpu.com
Esa Lager, CFO tel +358 9 421 2516, mobile +358 40 506 5929 esa.lager@outokumpu.com
News conference and live webcast today at 2.30 pm
A combined news conference, conference call and live webcast concerning the third-quarter 2007 results will be held on October 23, 2007 at 2.30 p.m. Finnish time (7.30 a.m. US EST, 12.30 p.m. UK time, 1.30 p.m. CET) at Hotel Kämp, conference room Akseli Gallen-Kallela, Pohjoisesplanadi 29, 00100 Helsinki, Finland.
To participate via a conference call, please dial in 5-10 minutes before the beginning of the event: UK +44 20 7162 0025 US & Canada +1 334 323 6201 Password Outokumpu
The news conference can be viewed live via Internet at www.outokumpu.com.
Stock exchange release and presentation material will be available before the news conference at www.outokumpu.com -> Investors -> Downloads.
An on-demand webcast of the news conference will be available at www.outokumpu.com as of October 23, 2007 at around 6.00 p.m.
An instant replay service of the conference call will be available until Friday, October 26, 2007 on the following numbers:
UK replay number +44 20 7031 4064, access code: 769371 US & Canada replay number +1 954 334 0342, access code: 769371
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. As of July 2007, CRU has not reported base prices separately. Nickel: London Metal Exchange (LME) cash quotation Ferrochrome: Metal Bulletin - Ferrochrome lumpy chrome charge, basis 52% chrome Molybdenum: Metal Bulletin - Molybdenum oxide - Europe Recycled steel: Metal Bulletin - Steel scrap HMS 1&2 fob Rotterdam
Collapse in nickel price led to weak demand for stainless steel standard products Global apparent consumption of stainless steel flat products was 4% lower than in the previous quarter, and in Europe the decrease was 17%, partly as a result of seasonal effects. In Europe, mills suffered from low demand for standard grades as distributors continued to reduce inventories in expectation of lower transaction prices following the marked decline in nickel prices that began in late June. Both end-user demand and demand for special grades and project deliveries remained firm, suffering only from seasonality due to the holiday period and maintenance breaks. The high and volatile nickel prices have resulted in consumers attempting, where technically feasible, to move away from grades with high nickel content. To meet this demand, Outokumpu is gradually increasing production of both ferritic and low-nickel grades.
The alloy surcharge continued to increase and peaked at 3 365 EUR/ton in July before turning into decline in August. According to CRU, the average alloy surcharge for 304 cold rolled stainless steel sheet in Germany was 2 967 EUR/ton in the third quarter, 2% higher than in the previous quarter. Stainless steel base prices were therefore under intense pressure and declined month-on-month during the period. Due to very thin stainless market activity and temporary use of a total price instead of base price plus alloy surcharge for stainless steel standard products, CRU has not been reporting base prices from July onwards. The average transaction price in the quarter was 3 677 EUR/ton, down by 17% from the previous quarter. The difference in price between Chinese and European stainless steel continued to narrow in the period, and Chinese imports to the European market continued the decline that was evident in II/2007.
Among the alloying elements, the price of nickel peaked at 54 200 USD/ton in mid-May but fell sharply in the period and was at its lowest in mid-August at around 25 000 USD/ton. The average price in the third quarter was 30 205 USD/ton, down by 37% on II/2007 but still 4% higher than in III/2006. In October, the price has been around 31 000 USD/ton. Demand for ferrochrome was down by 15% compared to the previous quarter and markets were oversupplied. The average price, however, rose by 22% to 1.00 USD/lb. The supply of molybdenum was slightly constrained in the period and the average price increased by 3% to 31.97 USD/lb. The price of recycled steel fell by 6% to 271 USD/ton. Nickel-related inventory losses and low delivery volumes adversely affected results Group sales in the third quarter totaled EUR 1 227 million, 41% down on II/2007. Deliveries were down by 40% to 238 000 tons (II/2007: 399 000 tons). Weak demand for stainless steel standard products due to the de-stocking resulted in further production cuts, and these together with the holiday season and maintenance breaks, were the main reasons behind the significant drop in delivery volumes.
The operating loss for the period totaled EUR 256 million. This figure includes some EUR 280 million nickel-related inventory losses resulting from the steep and rapid fall in nickel prices, and EUR 11 million net non-recurring costs related to the restructuring at Thin Strip in the UK. Even though there was a significant reduction in delivery volumes, Outokumpu's underlying operational result for the third quarter was some EUR 35 million positive.
The majority of nickel-related inventory losses comprised write-downs of inventories in addition to losses due to timing differences between the alloy surcharge and inventory turnover. Part of standard products were temporarily sold at base price plus a lower forward alloy surcharge, and this also contributed to nickel-related losses.
The steep decline of the nickel price that started in June resulted in a dramatic drop in the orders for stainless steel standard products by distributors and thus exceptionally low delivery volumes in the third quarter. Consequently raw material and process inventory turnover slowed down substantially. The nickel tied up in the inventories was and will be sold as part of deliveries at a significantly lower value. To the extent the selling prices of these deliveries are not expected to cover corresponding total production costs, a write-down to net realizable value was made at the end of the third quarter. Additionally, as the alloy surcharge in the fourth quarter reflects a lower nickel price than the original purchase price of the nickel, losses due to timing differences will still adversely affect fourth quarter results.
Net cash generated from operating activities totaled EUR 161 million. EUR 299 million was released from working capital primarily due to the decline in nickel prices.
General Stainless' sales fell by 47% to EUR 879 million and deliveries were 43% lower than in II/2007. In addition to weak demand, extensive production cuts, as well as the holiday season and maintenance breaks decreased delivery volumes. Operating loss totaled EUR 224 million (II/2007: profit EUR 188 million), of which Tornio Works posted EUR 195 million (II/2007: profit EUR 143 million). Nickel-related inventory losses totaled some EUR 200 million. Declining base prices and low delivery volumes turned the underlying operational result negative.
Specialty Stainless' sales totaled EUR 687 million, down by 33% compared to the previous quarter. Deliveries fell by 34%. Specialty Stainless' operating loss totaled EUR 51 million (II/2007: profit EUR 196 million), including some EUR 80 million nickel-related inventory losses and EUR 11 million net non-recurring costs related to the Thin Strip restructuring. The underlying operational result achieved by Specialty Stainless was clearly positive.
In September, plans were announced to streamline and concentrate the UK Thin Strip operations to the Meadowhall site in Sheffield, and to cease production of martensitic stainless steel strip for razor, scalpel and cutlery applications at Stocksbridge. These changes will take place at the end of March 2008 and will result in the closure of operations at Stocksbridge with the loss of approximately 50 jobs. Consultation with local trade union representatives has commenced.
Second phase in Outokumpu's strategic development began with major investment decisions Outokumpu is entering the next development phase in its strategy to become the undisputed number one in stainless with success based on operational excellence, aiming at delivering a more stable and profitable business model whilst also addressing the most attractive growth opportunities. This entails an increase in the proportion of direct end-user and project sales from the current figure of 35% to at least 50% over the next five years. It will also include expansion of capacity in value-added special products, while maintaining cost leadership in standard grade volume production.
In September, as the first step in increasing the Group's capacity in value-added special products, Outokumpu decided on an investment of EUR 550 million, over the next three years, in expanding stainless steel special grades capacity at Avesta Works in Sweden. This investment will raise finished products capacity at Avesta from the current level of 250 000 tons to some 650 000 tons in mainly duplex grades, with the additional capacity operational in 2010.
In October, the Board of Directors approved plans to expand the Group's capacity to produce quarto plate in Degerfors, Sweden and in New Castle (IN) in the US by 80 000 tons and 20 000 tons respectively. Following the EUR 220 million investments the total quarto plate capacity will increase from 160 000 tons to 260 000 tons in 2010.
The transformation towards increased end-user and project sales also requires investment in the Group's service capabilities. To this end, Outokumpu has decided to establish a new business, Outokumpu Solutions, dedicated to provide value-added stainless steel solutions to the architecture, building and construction (AB&C) sector. Initially, Outokumpu Solutions will focus on architectural and facade applications in connection with which Outokumpu will provide a full service offering including the design, fabrication, installation, maintenance and renewal of the facades.
To increase sales and enhance customer service further, the Group's service center network is being amended and expanded. In September, a decision was made to invest some EUR 70 million in restructuring the Group's service center in Italy, increasing its capacity from the current 40 000 tons to some 110 000 tons with effect from 2010. A new service center is also to be built near Shanghai in China. This facility, which represents an investment of some EUR 20 million, will have the capacity to stock and process some 30 000 tons of mainly special grades from 2010 onwards.
A decision was made in October to upgrade the Group's service center in Willich, Germany. With an investment of EUR 18 million, its capacity will increase from some 60 000 tons to 110 000 tons in 2009.
The total estimated EUR 880 million cash outflow of these new investments decided in September and October, is preliminarily estimated to materialize as follows: EUR 10 million in 2007, EUR 275 million in 2008, EUR 325 million in 2009, EUR 170 million in 2010, EUR 80 million in 2011 and EUR 20 million in 2012.
Operational Excellence programs to be expanded Both the Production Excellence and Commercial Excellence programs are proceeding at full speed delivering this year at least the planned EUR 40 million benefits. The estimated benefits to be achieved in 2008 are EUR 80 million. The excellence initiatives are being expanded into supply chain management. The first phase of the Supply Chain Excellence program will concentrate on procurement. Addition of this new initiative into the Operational Excellence programs will increase the existing target of EUR 160 million in benefits for the year 2009 to EUR 200 million, and the target from 2010 onwards will be increased to some EUR 300 million.
INTERIM REVIEW BY THE BOARD OF DIRECTORS - JANUARY-SEPTEMBER 2007 (Unaudited) High stainless steel transaction prices The strong increase in demand that characterized stainless steel markets during 2006 slowed during 2007, however, global apparent consumption of stainless steel flat products was during the first nine months in 2007 still 6% higher than in I-III/2006. According to CRU, the German transaction price for 304 2mm sheet rose strongly during the first half of 2007, but declined steeply from July onwards. The average transaction price in the third quarter was 3 677 EUR/ton, 17% down on the previous quarter. The average transaction price for January-September was 4 105 EUR/ton, 68% higher than in the corresponding period in 2006.
Good profitability, significant non-recurring gains in financial income Group sales for January-September 2007 totaled EUR 5 448 million (I-III/2006: EUR 4 247 million), up by 28% on the previous year. The increase in sales was a result of significantly higher transaction prices. Stainless steel deliveries declined by 22% to 1 067 000 tons (I-III/2006: 1 371 000 tons). Falling but still high nickel prices weakened demand for stainless steel standard products from June onwards. Distributor sectors' de-stocking continued over the summer period resulting in low demand. Production cuts at mills producing standard products, reduced the Group's delivery volumes.
Operating profit totaled EUR 574 million (I-III/2006: EUR 446 million). This good figure resulted from high base prices during the first half of 2007 and internal improvement measures. Operating profit also included EUR 14 million net of positive non-recurring items, an EUR 25 million gain from the sale of the Hitura mine and EUR 11 million net non-recurring costs related to the restructuring of the Thin Strip operations in the UK.
Financial income included a EUR 142 million non-recurring gain from the sale of Outotec Oyj shares and a EUR 110 million gain recognized in the Talvivaara transaction. Net financial expenses, excluding non-recurring gains, totaled EUR 39 million (I-III/2006: EUR 35 million). Net profit for the period from continuing operations totaled EUR 653 million (I-III/2006: EUR 320 million) and net profit from discontinued operations was EUR 5 million (I-III/2006: EUR 40 million). Earnings per share from continuing operations totaled EUR 3.59 and from discontinued operations EUR 0.03. Return on capital employed rose to 17.4% (I-III/2006: 15.8%).
Net cash generated from operating activities totaled EUR 377 million (I-III/2006: EUR 47 million). EUR 266 million was tied up in working capital during January-September primarily as a consequence of high nickel prices. Net interest-bearing debt fell by EUR 284 million to EUR 1 016 million (Dec. 31, 2006: EUR 1 300 million). Gearing improved to 29.8% (Dec. 31, 2006: 42.3%).
Decisions on major investments support Group strategy Capital expenditure totaled EUR 147 million (I-III/2006: EUR 113 million). Capital expenditure for the whole year 2007 is estimated to be about EUR 240 million.
Outokumpu has now launched the second phase in the Group's strategy development towards being the undisputed number one in stainless. In this phase, the focus is on developing and securing a more stable and profitable business model to balance the effects of volatility in the market for stainless steel standard products, and growth prospects related to both the size and geographical coverage of the Group will also be addressed. This entails increasing the proportion of direct end-user and project sales from the current figure of 35% to at least 50% in the next five years. It also includes expansion of capacity in value-added special products, while maintaining cost leadership in standard grade volume production.
Increasing the Group's capacity in value-added special products will include a broadening of the range of grades manufactured and an increase in the production of low-nickel duplex grades. Growth targets also include a scaling up of production capacity in ferritic grades to help reduce the earnings cyclicality driven by volatile nickel prices.
Production at the EUR 55 million expansion in Kloster, Sweden, was ramped up in the beginning of 2007. The investment increased the mill's annual capacity in special products from 25 000 tons to 45 000 tons and enabled the production of thinner (0.12 mm) and wider (1 050 mm) products.
In Tornio, a EUR 13 million investment in batch annealing furnaces enabling annual production of 60 000 tons of ferritic stainless steel, has been completed. The first deliveries took place during II/2007.
Replacement of one of the five annealing and pickling lines at Tornio Works will provide additional production capacity for 75 000 tons of cold rolled products. It will also improve the Group's ability to produce brighter ferritic steel grades and enhances Outokumpu's flexibility in meeting customer needs. The new line will increase Tornio Works' nominal annual cold rolling capacity to more than 1 250 000 tons by the end of 2009. The total investment at Tornio is EUR 90 million, spread over three years.
At Thin Strip Nyby in Sweden, EUR 27 million will be invested in equipment for surface grinding and automatic storage and retrieval. This investment will increase the proportion of special grade sales at the expense of standard grade products and will result in annual special grades capacity in cold rolled stainless steel products being scaled up from 34 000 to 64 000 tons by the end of 2008.
In September, as a major step in increasing the Group's capacity in value-added special products, Outokumpu decided on an investment of EUR 550 million, over the next three years, in expanding stainless steel special grades capacity at Avesta Works in Sweden. This investment will increase finished products capacity at Avesta from the current 250 000 tons to some 650 000 tons with mainly duplex grades, with the additional capacity operational in 2010.
The transformation towards increased end-user and project sales requires investment into the Group's service capabilities. To this end, Outokumpu's service center network is being upgraded and expanded.
In March, a new service center for plate and tubular products was opened on the Group's site at Sheffield in the UK. The plate service centers in Jyväskylä in Finland and in Eskilstuna in Sweden will be revamped and expanded during 2007.
The Group's service center in Italy is to be restructured and expanded. This EUR 70 million investment will increase this service center's capacity from the current level of 40 000 tons to some 110 000 tons from 2010 onwards.
To serve the growing markets in Eastern Europe better, a new stainless steel service center is being established near Katowice in the south of Poland. This EUR 20 million investment in a combined coil and plate facility is scheduled to be operational by the end of 2008.
To establish presence in growing Asian markets, a new service center with an annual capacity to stock and process some 50 000 tons of stainless steel coil, will be built in the western part of India. The investment totals EUR 30 million and the service center is scheduled to be operational in the first half of 2009. A new service center will also be built near Shanghai in China. This facility, an investment of EUR 20 million, will have the capacity to stock and process some 30 000 tons of mainly special grades from 2010 onwards.
To widen the Group's geographical coverage, in addition to the above mentioned service centers, Outokumpu is currently conducting a feasibility study on the building of a 250 000 ton stainless steel cold rolling mill in India. Finalization of the study is expected in I/2008. The possibility of utilizing some equipment from the Group's cold rolling mill in Sheffield, which was closed in 2006 is being evaluated.
Acquisitions and divestments In March, OSTP (Outokumpu Stainless Tubular Products) sold its flange business in order to focus on pipes, tubes, butt-welded and threaded fittings. The purchaser is a subsidiary of Shree Ganesh Forgings Ltd, an Indian company. This divestment had no significant impact on Group results.
In April, Outokumpu sold its remaining 12% shareholding in Outotec Oyj to institutional investors. The net proceeds from the sale totaled EUR 158 million and a tax-free non-recurring gain of EUR 142 million was recognized in the Group's financial income.
In May, Outokumpu acquired Swedish Sandvik's 11.6% minority shareholding in OSTP for EUR 22 million. Full ownership in OSTP enables Outokumpu to further develop the business in line with its strategy of increasing the proportion of special products with higher added value.
Outokumpu divested the Talvivaara exploration project in 2004 as part of its Exit Mining program, and held an option to subscribe for shares with a 20% discount in a possible initial public offering (IPO), representing up to 5% ownership in the company. The IPO of Talvivaara Mining Company Ltd. was carried out and the company's shares were listed on the London Stock Exchange on May 30, 2007. Outokumpu subscribed for 10.9 million shares for a total consideration of EUR 32 million, representing a 4.9% holding in the company. Outokumpu also exercised its option, part of the divestment agreement, to acquire a 20% stake in the Talvivaara nickel mining project company (Talvivaara Project Ltd.) owned by Talvivaara Mining Company Ltd., for a total consideration of one euro. The fair valuation of Outokumpu's 20% stake resulted in a tax-free non-recurring gain of EUR 110 million, which has been recognized in financial income.
In June, Outokumpu sold the Hitura nickel mine in Finland to Belvedere Resources Ltd. of Canada. Hitura produces some 2 200 tons of nickel in concentrate annually and employs 90 people. Outokumpu recognized a non-recurring gain of EUR 25 million on this transaction. The Hitura mine was the last remaining asset in Outokumpu's Exit Mining program.
In June, Outokumpu announced its participation in a new Finnish power company Fennovoima Oy, a consortium consisting of Outokumpu, Boliden, Rauman Energia, Katternö and E.ON. Fennovoima's aim is to construct a new 1 000 - 1 800MW nuclear power plant to meet Finland's increasing need for electricity. Operation of the plant is planned to start between 2016 and 2018. By participating in Fennovoima, Outokumpu's aim is to secure a significant portion of its electricity needs in years to come.
Environment, health and safety In September, the Sustainable Asset Management Group (SAM) announced the results of the annual review carried out for the Dow Jones Sustainability Indexes (DJSI). Outokumpu retained its position in the Pan-European Dow Jones STOXX Sustainability Index (DJSI STOXX) and was also accepted for the first time into the Dow Jones Sustainability World Index (DJSI World).
The Carbon Disclosure Project (CDP) published the results of the fifth CDP request in September. The first Nordic Report was also released this year. Outokumpu was one of the 125 listed Nordic companies which answered the questionnaire and was for the first time included in the Climate Disclosure Leadership Index (CDLI). Among all carbon intensive companies, Outokumpu was ranked number eight and was the best of the Nordic Metals and Mining companies.
In the European Union, preparations for emissions trading in the Kyoto- period 2008-2013 are ongoing, and the Group's operations in Sheffield are now also in the European Union's emissions trading system. The national allocation of allowances in the UK has already been settled and it appears that the allowances for the Sheffield operation are adequate. The European Commission cut Swedish allowances by 9.5% and Finnish allowances by 5.2%. The national reallocations have not yet been finalized. In November, applications for emission permits are to be sent to authorities in Sweden. The units in Finland and the UK have already filed their applications.
At Outokumpu sites, emissions to air and discharges to water in the review period mostly remained within permitted limits and the breaches that occurred were temporary, were identified quickly and caused only minimal environmental impact.
During January-September 2007, the lost-time injury rate (i.e. lost-time accidents per million working hours) was 11 (I-III/2006: 16). The annual target is less than 12 in 2007. No major accidents were reported during the review period.
Personnel
During January-September 2007, the Group's continuing operations employed an average of 8 310 people (I-IIII/2006: 8 620) and there were 8 049 employees at the end of September (Dec. 31, 2006: 8 159). The average number of employees was boosted by some 800 summer trainees employed in the Group's units during June-August.
Customs investigation of exports to Russia by Outokumpu Tornio Works In March, the Finnish Customs authorities initiated a criminal investigation into the Group's Tornio Works' export practices to Russia. The preliminary investigation is connected with another preliminary investigation concerning a forwarding agency based in south-eastern Finland. It is suspected that defective and/or forged invoices have been prepared at the forwarding agency as regards export of stainless steel to Russia. The preliminary investigation is focusing on possible complicity by Outokumpu Stainless Oy in the preparation of defective and/or forged invoices by the forwarding agency in question. The investigation is expected to last until the end of 2007.
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, after carrying out its investigation, the leading Finnish law firm Roschier Attorneys Ltd., concluded that it had not found evidence that any employees of Tornio Works or the company had committed any of the crimes alleged by the Finnish Customs.
Class actions related to the divested fabricated copper products business The fabricated copper products business sold in 2005, comprised among others Outokumpu Copper (USA), Inc. This company has been served with several complaints in cases filed in federal district courts and state courts in the US by various plaintiffs. The complaints allege claims and damages under US antitrust laws and purport to be class actions on behalf of all direct and indirect purchasers of copper plumbing tubes and ACR tubes in the US. Outokumpu believes that the allegations in these cases are groundless and will defend itself in any such proceeding. In connection with the transaction to sell the fabricated copper products business to Nordic Capital, Outokumpu has agreed to indemnify and hold harmless Nordic Capital with respect to these class actions.
Appointments in Corporate Management Bo Annvik has been appointed Executive Vice President - Specialty Businesses and a member of Outokumpu's Group Executive Committee as of June 1, 2007. Mr. Annvik's portfolio includes supervision of Avesta Works, Hot Rolled Plate, Thin Strip and OSTP business units.
Päivi Lindqvist has been appointed Outokumpu's new SVP - IR and Communications as of October 1, 2007. Ms. Lindqvist reports to CEO Juha Rantanen.
Decisions by the Annual General Meeting The Annual General Meeting (AGM), held on March 28, 2007, approved a dividend of EUR 1.10 per share for 2006 and dividends totaling EUR 199 million were paid on April 11, 2007.
The AGM authorized the Board of Directors to repurchase a maximum of 18 000 000 of the Company's own shares. The AGM authorized the Board of Directors to decide to issue shares and grant share entitlements for a maximum of 18 000 000 shares and, in addition, the maximum number of treasury shares to be transferred is 18 000 000. By October 23, 2007, these authorizations had not been exercised.
Evert Henkes, Jukka Härmälä, Ole Johansson, Anna Nilsson-Ehle, Leena Saarinen and Taisto Turunen were re-elected as members of the Board of Directors, and Victoire de Margerie and Leo Oksanen were elected as new members. Mr. Härmälä was re-elected as Chairman of the Board of Directors and Mr. Johansson was re-elected as Vice Chairman.
KPMG Oy Ab, Authorized Public Accountants, was elected as the company's auditor.
Events after the review period The Board of Directors has today approved plans to expand the Group's capacity to produce quarto plate in Degerfors, Sweden and in New Castle (IN) in the US by 80 000 tons and 20 000 tons respectively. Following the EUR 220 million investments the total quarto plate capacity will increase from 160 000 tons to 260 000 tons in 2010.
The Group's service center in Willich, Germany, will be upgraded. With an investment of EUR 18 million, its capacity will increase from some 60 000 tons to 110 000 tons in 2009.
Strike by the Union of Salaried Employees in Finland started on October 22, 2007. Some 400 salaried employees in Tornio are involved, mainly at the stainless steel mill. This industrial action will lead to cessation of production of stainless steel at Outokumpu's Tornio Works in a few days. The duration of the strike is today not known.
Outokumpu announced on October 22, 2007 a change to the calculation method for the alloy surcharge in stainless steel pricing. Starting with stainless steel deliveries for January 2008, Outokumpu's alloy surcharge will be based on the 30-day average price of raw materials calculated back from the previous month's 20th day. The new method is expected to bring more stability to the stainless steel demand, however, the overall risk associated with the prices of alloying materials is estimated to increase. Outokumpu aims to reduce this risk by adjusting its business processes and by financial hedging, e.g. use of derivatives.
Outokumpu's Board of Directors has decided to start a repurchase of own shares based on the authorization of the Annual General Meeting of March 28, 2007. The maximum amount to be repurchased is 1 000 000 shares, representing some 0.55% of the company's share capital and voting rights. Outokumpu currently holds 218 603 treasury shares. The own shares are repurchased to be used in the company's share based incentive schemes. The shares will be acquired through public securities trading on the Helsinki stock exchange, at market price. The repurchase of own shares will commence on November 1, 2007, at the earliest.
Short-term outlook
Underlying demand for stainless steel is holding firm. End-user demand and demand for special grades and project deliveries continues healthy. Distributor inventories are on a declining trend. Outokumpu's order intake for standard products began to pick-up in late September and the order book has been gradually improving. The price of nickel was more stable in July-September, and the alloy surcharge will clearly decline in October and November before the expected increase in December.
The pick-up in demand for standard products will increase Outokumpu's delivery volumes and improve profits in the fourth quarter. Prices for stainless steel standard products are stabilizing and even some price increases have been achieved. On the other hand, nickel-related inventory losses continue to impair results in the fourth quarter due to lower alloy surcharge. At the current nickel price level the losses due to the timing differences between the alloy surcharge and inventory turnover, are expected to be in the order of EUR 100 million. However, Outokumpu's underlying operational result in the fourth quarter, excluding nickel-related inventory losses and non-recurring items, is expected to be better than in the third quarter. The decline in nickel prices will continue to release working capital and generate strong cash flow during the fourth quarter resulting in clearly better full-year cash flow from operations in 2007 than in 2006.
Strike by the Union of Salaried Employees in Finland started on October 22, 2007. Some 400 salaried employees in Tornio are involved. This industrial action will lead to cessation of production of stainless steel at Outokumpu's Tornio Works in a few days. The duration of the strike is today not known, but if continued, will have a negative impact on the fourth quarter result.
The Group's underlying operational result for 2007 is estimated to be better than the about EUR 650 million reached in 2006. However, due to significant nickel-related inventory losses during the latter part of 2007, Outokumpu's operating profit for the whole year 2007 is expected to be lower than in 2006.
Share of results in associated companies 5 3 -2 1 8 Financial income and expenses Interest income 18 16 6 5 26 Interest expenses -63 -67 -20 -23 -88 Market price gains and losses -2 13 -4 0 12 Other financial income 263 8 0 1 8 Other financial expenses -4 -5 -1 -2 -5 Profit before taxes 791 415 -277 214 784
Income taxes -138 -95 67 -48 -178 Net profit for the period from continuing operations 653 320 -210 166 606
Discontinued operations: Net profit for the period from discontinued operations 5 40 -4 5 357
Net profit for the period 658 360 -214 172 963
Attributable to: Equity holders of the Company 654 359 -214 171 962 Minority interest 4 1 -0 1 2
Earnings per share for profit attributable to the equity holders of the Company: Earnings per share, EUR 3.61 1.98 -1.19 0.94 5.31 Diluted earnings per share, EUR 3.59 1.98 -1.19 0.94 5.29
Earnings per share from continuing operations attributable to the equity holders of the Company: Earnings per share, EUR 3.59 1.76 -1.17 0.91 3.34
Earnings per share from discontinued operations attributable to the equity holders of the Company: Earnings per share, EUR 0.03 0.22 -0.02 0.03 1.97
EQUITY AND LIABILITIES Equity Equity attributable to the equity holders of the Company 3 405 2 334 3 054 Minority interest 0 16 17 3 405 2 350 3 071 Non-current liabilities Interest-bearing 1 140 1 365 1 293 Non interest-bearing 333 329 337 1 472 1 694 1 630 Current liabilities Interest-bearing 617 890 685 Non interest-bearing 680 880 955 1 297 1 770 1 640
Liabilities related to assets held for sale 65 420 73
Total equity and liabilities 6 240 6 233 6 414
Consolidated statement of changes in equity
Attributable to the equity holders of the Company
Fair Share Unregistered Share Other value capital Share premium reserves reserves EUR million capital fund Equity on December 31, 2005 308 - 701 11 23 Cash flow hedges - - - - 5 Fair value changes on available-for-sale financial assets - - - - 9 Net investment hedges - - - - - Change in translation differences - - - - - Items recognised directly in equity - - - - 14 Net profit for the period - - - - - Total recognised income and expenses - - - - 14 Dividend distribution - - - - - Management stock option program: value of received services - - - - - Equity on September 30, 2006 308 - 701 11 37
Equity on December 31, 2006 308 0 701 11 144 Cash flow hedges - - - - 2 Fair value changes on available-for-sale financial assets - - - - 9 Available-for-sale financial assets recognized through P&L - - - - -99 Net investment hedges - - - - - Change in translation differences - - - - - Items recognised directly in equity - - - - -88 Net profit for the period - - - - - Total recognised income and expenses - - - - -88 Transfers from unregistered share capital 0 -0 - - - Transfers from retained earnings - - - 4 - Dividend distribution - - - - - Shares subscribed with options 0 - 0 - - Management stock option program: value of received services - - - - - Purchase of minority in OSTP - - - - - Equity on September 30, 2007 308 - 701 15 56
Attributable to the equity holders of the Company
Cumulative Treasury translation Retained Minority Total EUR million shares differences earnings interest equity Equity on December 31, 2005 -2 -38 1 044 15 2 062 Cash flow hedges - - - - 5 Fair value changes on available-for-sale financial assets - - - - 9 Net investment hedges - -1 - - -1 Change in translation differences - -5 - 0 -5 Items recognised directly in equity - -6 - 0 8 Net profit for the period - - 359 1 360 Total recognised income and expenses - -6 359 1 368 Dividend distribution - - -81 - -81 Management stock option program: value of received services - - 1 - 1 Equity on September 30, 2006 -2 -44 1 323 16 2 350
Equity on December 31, 2006 -2 -35 1 927 17 3 071 Cash flow hedges - - - - 2 Fair value changes on available-for-sale financial assets - - - - 9 Available-for-sale financial assets recognized through P&L - - - - -99 Net investment hedges - 2 - - 2 Change in translation differences - -20 - 0 -20 Items recognised directly in equity - -18 - 0 -106 Net profit for the period - - 654 4 658 Total recognised income and expenses - -18 654 4 552 Transfers from unregistered share capital - - - - - Transfers from retained earnings - - -4 - - Dividend distribution - - -199 - -199 Shares subscribed with options - - - - 0 Management stock option program: value of received services - - 2 - 2 Purchase of minority in OSTP - - - -21 -21 Equity on September 30, 2007 -2 -53 2 380 0 3 405
Condensed statement of cash flows Jan-Sept Jan-Sept Jan-Dec EUR million 2007 2006 2006 Net profit for the period 658 360 963 Adjustments Depreciation and amortization 152 176 229 Impairments 3 6 12 Gain on the sale of Outotec shares -142 - -328 Gain on the Talvivaara transaction -110 - - Other adjustments 318 141 215 Increase in working capital -266 -525 -975 Dividends received 13 7 7 Interests received 7 12 17 Interests paid -67 -69 -89 Income taxes paid -189 -63 -87 Net cash from operating activities 377 47 -35 Purchases of assets -106 -127 -183 Purchase of Talvivaara shares -32 - - Purchase of the minority in OSTP -22 - - Proceeds from the sale of subsidiaries 1 20 338 Proceeds from the sale of shares in associated companies - 9 9 Proceeds from the sale of other assets 9 9 20 Net cash from other investing activities 3 1 14 Net cash from investing activities -146 -88 198 Cash flow before financing activities 231 -41 163 Borrowings of long-term debt 151 181 174 Repayment of long-term debt -301 -277 -380 Change in current debt -54 191 3 Dividends paid -199 -81 -81 The sale of the shares of Outotec 158 - - Other financing cash flow -0 -2 -2 Net cash from financing activities -246 11 -286 Adjustments 0 0 0 Net change in cash and cash equivalents -15 -30 -123
Cash and cash equivalents at the beginning of the period 85 212 212 Foreign exchange rate effect -1 -6 -5 Net change in cash and cash equivalents -15 -30 -123 Cash and cash equivalents at the end of the period 69 176 85
Key figures Jan-Sept Jan-Sept Jan-Dec EUR million 2007 2006 2006 Operating profit margin, % 10.5 10.5 13.4 Return on capital employed, % 17.4 15.8 20.7 Return on equity, % 27.1 21.8 37.5 Return on equity from continuing operations, % 26.9 19.3 23.6
Capital employed at end of period 4 421 3 910 4 371 Net interest-bearing debt at end of period 1 016 1 560 1 300 Equity-to-assets ratio at end of period, % 54.6 37.7 47.9 Debt-to-equity ratio at end of period, % 29.8 66.4 42.3
Earnings per share, EUR 3.61 1.98 5.31 Earnings per share from continuing operations, EUR 3.59 1.76 3.34 Earnings per share from discontinued operations, EUR 0.03 0.22 1.97 Average number of shares outstanding, in thousands 1) 181 078 181 032 181 033 Fully diluted earnings per share, EUR 3.59 1.98 5.29 Fully diluted average number of shares, in thousands 1) 182 100 181 754 181 758 Equity per share at end of period, EUR 18.81 12.89 16.87 Number of shares outstanding at end of period, in thousands 1) 181 084 181 032 181 032
Capital expenditure, continuing operations 147 113 187 Depreciation, continuing operations 152 169 221 Average personnel for the period, continuing operations 8 310 8 620 8 505
1)The number of own shares repurchased is excluded.
NOTES TO THE INCOME STATEMENT AND BALANCE SHEET
This interim financial report is prepared in accordance with IAS 34 (Interim Financial Reporting). The same accounting policies and methods of computation have been followed in the interim financial statements as in the annual financial statements for 2006.
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 181 300 967 and the share capital amounted to EUR 308.2 million on September 30, 2007. Outokumpu Oyj held 218 603 treasury shares on September 30, 2007. This corresponded to 0.1% of the share capital and the total voting rights of the Company on September 30, 2007. The Annual General Meeting held in 2003 passed a resolution on a stock option program for management (2003 option program).
The stock options have been allocated as part of the Group's incentive programs to key personnel of Outokumpu. Trading with Outokumpu Oyj's stock options 2003A has commenced on the main list of OMX Nordic Exchange Helsinki as of September 1, 2006. On September 30, 2007 a total of 51 812 Outokumpu Oyj shares had been subscribed for on the basis of 2003A stock option program. An aggregate maximum of 607 490 Outokumpu Oyj shares can be subscribed for with the remaining 2003A stock options. In accordance with the terms and conditions of the option program, the dividend adjusted share price for a stock option was EUR 8.45 on September 30, 2007. The share subscription period for the 2003A stock options is September 1, 2006 - March 1, 2009.
Trading with Outokumpu Oyj's stock options 2003B has commenced on the main list of OMX Nordic Exchange Helsinki as of September 3, 2007. An aggregate maximum of 1 028 820 Outokumpu Oyj shares can be subscribed for with the remaining 2003B stock options. In accordance with the terms and conditions of the option program, the dividend adjusted share price for a stock option was EUR 11.51 on September 30, 2007. The share subscription period for the 2003B stock options is September 3, 2007 - March 1, 2010. The current amounts that Outokumpu Oyj shares could be subscribed for with the 2003C stock options are 100 500 shares. The subscription period for shares with stock option 2003C is from September 1, 2008 to March 1, 2011. As a result of the share subscriptions with the 2003 stock options, Outokumpu Oyj's share capital may be increased by a maximum of EUR 2 952 577 and the number of shares by a maximum of 1 736 840 shares. This corresponds to 1.0% of the Company's shares and voting rights.
Outokumpu's Board of Directors confirmed on February 2, 2006 a share-based incentive program for years 2006-2010 as part of the key employee incentive and commitment system of the Company. If persons to be covered by the first earning period 2006-2008 and the second earning period 2007-2009 of the program were to receive the number of shares in accordance with the maximum reward, currently a total of 601 000 shares, their shareholding obtained via the program would amount to 0.3% 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 2006.
Non-current assets held for sale and discontinued operations Outokumpu Copper Tube and Brass
The assets and liabilities of Outokumpu Copper Tube and Brass are presented as held for sale. Outokumpu Copper Tube and Brass business comprises European sanitary and industrial tubes, including air-conditioning and refrigeration tubes in Europe, as well as brass rod. Outokumpu is implementing a vigorous improvement project in this business and it is Outokumpu's intention to divest the tube and brass business.
Outotec
In September 2006, Outokumpu Oyj sold 88% of Outotec (former Outokumpu Technology) by a sale of shares through an Initial Public Offering (IPO). In April 2007, Outokumpu sold its remaining 12% shareholding in Outotec Oyj to institutional investors. The net proceeds from the sale totaled EUR 158 million and a tax-free non-recurring gain of EUR 142 million was recognized in financial income.
In the following tables Outokumpu Tube and Brass is referred as TB and Outotec as OT.
Specification of non-current assets held for sale and discontinued operations
Income statement Jan-Sept Jan-Sept Jan-Dec 2007 2006 2006 EUR million TB Total OT TB Total OT TB Sales 461 1 014 501 513 1 178 501 678 Expenses -449 -946 -470 -476 -1 124 -470 -654 Operating profit 13 68 31 37 54 31 23 Net financial items -5 0 5 -5 -2 5 -7 Profit before taxes 7 68 36 32 53 36 17 Taxes -1 -18 -14 -4 -17 -14 -3 Profit after taxes 6 50 22 28 35 22 14
Gain on the sale of Outotec - - - - 328 328 - Impairment loss recognized on the fair valuation of the Tube and Brass division's assets and liabilities -1 -4 - -4 -6 - -6 Costs related to initial public offering of Outotec - -6 -6 - - - - Taxes - - - - - - - After-tax result from the disposal and impairment loss 5 -9 -6 -4 322 328 -6
Minority interest - 0 0 - 0 0 - Net profit for the period from discontinued operations 5 40 16 25 357 349 8
Balance sheet Sept 30 Sept 30 Dec 31 EUR million 2007 2006 2006 Assets Intangible and tangible assets 6 106 6 Other non-current assets 3 23 4 Inventories 112 190 122 Current interest-bearing assets - 79 - Other current non interest-bearing assets 103 280 104 224 678 235 Liabilities Provisions 2 6 3 Non-current interest- bearing liabilities - 4 - Other non-current non interest-bearing liabilities 4 41 6 Current interest-bearing liabilities - 0 - Trade payables 44 100 46 Other current non interest-bearing liabilities 15 269 18 65 420 73
In May, Outokumpu acquired from Swedish Sandvik its 11.6% minority shareholding in OSTP for EUR 22 million. Goodwill of EUR 1 million was recognized from the acquisition. Full ownership in OSTP enables Outokumpu to develop the business further in line with its strategy to increase the share of the more value-added special products.
Outokumpu divested the Talvivaara exploration project in 2004 and held an option to subscribe shares with a 20% discount in a possible Initial Public Offering (IPO), representing up to 5% ownership in the company. The IPO of Talvivaara Mining Company Ltd. was carried out and the listing of the shares started on the London Stock Exchange on May 30, 2007. Outokumpu participated in the IPO by subscribing 10.9 million shares, resulting in a 4.9% ownership in the company on a fully diluted basis, with a total consideration of EUR 32 million. Outokumpu also exercised its option, part of the divestment agreement, to acquire a 20% stake in the Talvivaara nickel mining project company (Talvivaara Project Ltd.) owned by Talvivaara Mining Company Ltd., for a total consideration of one euro.
Talvivaara Project Ltd. will be consolidated in the Group's income statement as an associated company reflecting Outokumpu's 20% holding. The fair valuation of Outokumpu's 20% stake resulted in a tax-free non-recurring gain of EUR 110 million, which has been recognized in financial income. The shareholding in the listed Talvivaara Mining Company Ltd. has been classified as an available-for-sale financial asset with changes in fair value recognized directly in equity.
The purchase price allocation is preliminary and subject to finalization of the fair valuation of the ore reserves. The preliminary assumption is that the majority of the excess value will be allocated to the nickel ore reserves according to the fair value and amortized using the units-of-production method based on the depletion of ore reserves in Talvivaara. The Talvivaara mine is estimated to start production of nickel and other metals at the end of 2008. Its target is to gradually ramp up its nickel output to some 33 000 tons annually.
Disposals
In March, OSTP (Outokumpu Stainless Tubular Products) sold its flange business in order to focus on pipes, tubes, butt-welded and threaded fittings. The purchaser is a subsidiary of Shree Ganesh Forgings Ltd, an Indian company. The sale had no significant impact on the Group's results.
In June, Outokumpu sold the Hitura nickel mine in Finland to Belvedere Resources Ltd. of Canada. The Hitura mine was the last remaining asset in Outokumpu's Exit Mining program. Hitura produces some 2 200 tons of nickel in concentrate annually and employs 90 people. The total consideration from the sale, EUR 25 million, is in Belvedere shares and warrants entitling to subscribe for additional Belvedere shares, resulting in a maximum 19.2% ownership in Belvedere, on a fully-diluted basis. Outokumpu recognized a non-recurring gain of EUR 25 million on the transaction, which has been included in the operating profit. The shareholding in Belvedere is classified as an available-for-sale financial asset with changes in fair value recognized directly in equity and the warrants as derivative instruments with changes in fair value recognized in financial income and expenses.
Net assets of these disposed businesses totaled EUR 6 million. Net gain on the disposals totaled EUR 23 million and net cash flow EUR 1 million.
Major non-recurring items in operating profit Jan-Sept Jan-Sept Jan-Dec EUR million 2007 2006 2006 Gain on the sale of Hitura mine in Finland 25 - - Thin Strip restructuring in the UK -11 - - Gain on the sale of real estate in the UK - - 9 OSTP Fagersta closure - - -8 14 - 1
Major non-cash items in operating profit comprise EUR 155 million write-down of inventories to net realizable value (NRV) during the third quarter, and EUR 11 million provision for the Thin Strip restructuring.
Major non-recurring items in financial income Jan-Sept Jan-Sept Jan-Dec EUR million 2007 2006 2006 Gain on the sale of Outotec shares 142 - - Gain on the Talvivaara transaction 110 - - 252 - -
Income taxes Jan-Sept Jan-Sept Jan-Dec EUR million 2007 2006 2006 Current taxes -124 -61 -156 Deferred taxes -14 -34 -22 -138 -95 -178
Property, plant and equipment Jan 1, 2007 - Jan 1, 2006 - Jan 1, 2006 - EUR million Sept 30, 2007 Sept 30, 2006 Dec 31, 2006 Historical cost at the beginning of the period 4 009 4 188 4 188 Translation differences -35 11 37 Additions 93 105 179 Disposal of subsidiaries -20 0 -0 Disposals -3 -14 -299 Reclassifications 0 -8 -8 Discontinued operations - -88 -88 Historical cost at the end of the period 4 044 4 194 4 009
Accumulated depreciation at the beginning of the period -1 939 -2 063 -2 063 Translation differences 21 -6 -21 Disposal of subsidiaries 19 0 0 Disposals 3 12 296 Reclassifications 0 8 8 Depreciation -141 -155 -204 Impairments - -1 -3 Discontinued operations - 48 48 Accumulated depreciation at the end of the period -2 037 -2 157 -1 939
Carrying value at the end of the period 2 006 2 037 2 069 Carrying value at the beginning of the period 2 069 2 125 2 125
Commitments Sept 30 Sept 30 Dec 31 EUR million 2007 2006 2006 Mortgages and pledges Mortgages on land 132 129 126 Other pledges 0 4 0
Guarantees On behalf of subsidiaries For commercial commitments 84 137 97 On behalf of associated companies For financing 5 4 5
Other commitments 55 61 59
Minimum future lease payments on operating leases 59 119 93
Group's major off-balance sheet investment commitments totaled EUR 38 million on September 30, 2007 (Dec 31, 2006: EUR 15 million).
Fair values and nominal amounts of derivative instruments Sept 30 Sept 30 Sept 30 Dec 31 Sept Dec 2007 2007 2007 2006 2007 2006 Net Net Positive Negative fair fair Nominal Nominal EUR million fair value fair value value value amounts amounts Currency and interest rate derivatives Currency forwards 16 11 5 -9 1 940 2 139 Interest rate swaps 10 - 10 10 283 283
Number Number of of shares, shares, million million Stock options Belvedere Resources Ltd. 1 - 1 - 3.7 -
Share of results in associated companies 0 2 1 4 8 2 4 -2 Financial income and expenses -7 -10 -18 -13 -48 -10 242 -19 Profit before taxes 60 141 214 369 784 416 652 -277 Income taxes -18 -29 -48 -83 -178 -105 -100 67 Net profit for the period from continuing operations 41 112 166 286 606 311 553 -210
Net profit for the period from discontinued operations 15 20 6 317 357 -4 12 -4 Net profit for the period 56 133 172 603 963 307 565 -214
Attributable to: Equity holders of the Company 56 132 171 603 962 305 563 -214 Minority interest -0 0 1 1 2 2 2 -0
Major non-recurring items in operating profit
EUR million I/06 II/06 III/06 IV/06 2006 I/07 II/07 III/07 General Stainless Gain on sale of real estate in the UK - - - 9 9 - - - Specialty Stainless Thin Strip restructuring in the UK - - - - - - - -11 OSTP Fagersta closure - - - -8 -8 - - - Other operations Gain on sale of Hitura mine in Finland - - - - - - 25 - - - - 1 1 - 25 -11
Major non-recurring items in financial income
EUR million I/06 II/06 III/06 IV/06 2006 I/07 II/07 III/07 Gain on the sale of Outotec shares - - - - - - 142 - Gain on the Talvivaara transaction - - - - - - 110 - - - - - - - 252 -
Capital employed at end of period 3 513 3 679 3 910 4 371 4 377 4 753 4 421 Net interest-bearing debt at end of period 1 483 1 509 1 560 1 300 1 189 1 119 1 016 Equity-to-assets ratio at end of period, % 37.4 38.4 37.7 47.9 47.2 50.9 54.6 Debt-to-equity ratio at end of period, % 73.0 69.5 66.4 42.3 37.3 30.8 29.8
Earnings per share, EUR 0.31 0.73 0.94 3.33 1.69 3.11 -1.19 Earnings per share from continuing operations, EUR 0.23 0.62 0.91 1.58 1.71 3.04 -1.17 Earnings per share from discontinued operations, EUR 0.08 0.11 0.03 1.75 -0.02 0.07 -0.02 Average number of shares outstanding, in 181 181 181 181 181 thousands 1) 032 032 181 032 037 067 082 181 084 Equity per share at end of period, EUR 11.14 11.91 12.89 16.87 17.51 20.07 18.81 Number of shares outstanding at end of period, in thousands 181 181 181 181 181 1) 032 032 181 032 032 082 082 181 084
