Rautaruukki Corporation Interim report 23 April 2009 at 12.00
RAUTARUUKKI CORPORATION'S INTERIM REPORT FOR JANUARY-MARCH 2009
DIFFICULT MARKET CONDITIONS CONSIDERABLY WEAKENED RESULT, FINANCIAL POSITION
REMAINED STRONG
Summary of results for first quarter of 2009 (reference figure for Q1/2008)
- Consolidated net sales decreased to EUR 506 million (939).
- Consolidated negative operating profit of -EUR 113 million (143).
- Gearing ratio remained low at 7.4 per cent (-3.7).
- Return on capital employed (rolling 12 months) was 14.5 per cent (28.9).
- Per share earnings were -EUR 0.65 (0.77).
- The result before taxes for the second quarter is expected to remain clearly
negative, although to show some improvement on the result for the first quarter.
- The company considers that it has the potential to achieve a positive result
before taxes during the second half of the year.
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| KEY FIGURES | Q1/2009 | Q1/2008 | 2008 |
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| Net sales, EUR m | 506 | 939 | 3 851 |
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| Operating profit, EUR m | -113 | 143 | 568 |
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| Operating profit as % of net sales | -22.2 | 15.2 | 14.7 |
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| Result before taxes, EUR m | -122 | 140 | 548 |
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| Earnings per share, EUR | -0.65 | 0.77 | 2.93 |
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| Return on capital employed, % | 14.5 | 28.9 | 25.6 |
| (rolling 12 mths) | | | |
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| Gearing ratio, % | 7.4 | -3.7 | 7.9 |
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| Personnel, average | 13 460 | 14 644 | 14 953 |
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First quarter of 2009 in brief:
- Demand for steel products fell sharply in all customer industries and markets.
- Growing uncertainty impacted on customers' investment decisions and the poor
functioning of the financial markets was reflected in the difficulty of
customers in arranging funding, which in turn weakened sales, especially of
construction solutions.
- Demand weakened in the engineering industry, especially in the lifting,
handling and transportation equipment industry. High stock levels throughout the
supply chain weakened demand.
- Good demand continued from equipment manufacturers in the energy industry both
in wind and diesel power plants.
- The weakening of a number of sales currencies against the euro reduced
consolidated net sales.
- The company's cash flow was good and its financial position remained strong.
- The impact on costs of operational efficiency actions and adjustment measures
under way are expected to be seen during the second half of the year.
President & CEO Sakari Tamminen:
“Market conditions remained extremely difficult throughout the first quarter in
all our customer industries.
Poor earnings performance during the first quarter was due not only to weak
demand, but also to the low capacity utilisation rate in steel production. Low
production capacity utilisation had an impact of around EUR 90 million on
costs. Also the unwinding of stock levels produced at high raw material prices
weakened our profitability. Also the impact of weakened currencies in countries
in which the company operates was also reflected in net sales development.
We reacted to weak market conditions by initiating measures to adjust operations
and improve efficiency corporate-wide. Only one of our two blast furnaces was
operative in steel production and activities and costs in all divisions and
corporate management and business support functions were adjusted to market
conditions. We also continued with actions under our operational excellence
programme Boost, which is aimed at helping us to achieve permanent long-term
improvements in efficiency and profitability. Actions already initiated did not
yet have any material impact on the result for the first quarter, but will
lighten our cost structure from the second quarter onwards. The Boost programme
and other adjustment measures already under way are expected to deliver cost
savings of more than 80 million euros for the whole of 2009.
In April, after the report period, we announced that plans are under way to
bring the modernisation of blast furnace 1 at the Raahe Works in Finland forward
by three months so that work starts in April 2010. Even though we do not yet see
any clear signs of a market recovery in the short term, we are restarting the
idle blast furnace to prepare for disruption to production caused by downtime
during the modernisation project. Restarting blast furnace 1 is justified also
to safeguard customer deliveries. Restarting the blast furnace will also
increase the steel production capacity utilisation rate and thus clearly improve
our cost efficiency during the second half of the year,” says President & CEO
Sakari Tamminen.
The company expects net sales for the second quarter to be similar to those for
the first quarter. The result before taxes for the second quarter is expected to
remain clearly negative, although to show some improvement on the result for the
first quarter.
Based on efficiency actions and adjustment measures already under way, estimated
lower costs of raw materials used in steel production and improved cost
efficiency in steel production, the company considers that it has the potential
to achieve a positive result before taxes during the second half of the year.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Sakari Tamminen, President & CEO, tel. +358 20 592 9075
Mikko Hietanen, CFO, tel. +358 20 592 9030
Press conference on the interim report on Thursday 23 April at 1.30pm
A press conference for analysts and the media, in Finnish, will be held on
Thursday 23 April at 1.30pm at Ruukki, Suolakivenkatu 1, 00810 Helsinki.
The English webcast and conference call for investors and analysts will begin at
4pm Finnish time and can be viewed live on the company's website at
www.ruukki.com/investors. A replay of the webcast can be viewed on the same site
from about 8pm Finnish time.
To attend the conference call, please call the
number below 5-10 minutes before the conference begins:
+44 (0)20 7162 0025
Password: Rautaruukki
A recording of the conference call can be heard until 26
April 2009 at the number below:
+44 (0)20 7031 4064
Access code: 832120
Rautaruukki Corporation
Anne Pirilä
SVP, Corporate Communications and Investor Relations
Rautaruukki supplies metal-based components, systems and integrated systems to
the construction and engineering industries. The company has a wide selection of
metal products and services. Rautaruukki has operations in 26 countries and
employs 13,300 people. Net sales in 2008 totalled EUR 3.9 billion. The company's
share is quoted on NASDAQ OMX Helsinki (Rautaruukki Oyj: RTRKS). The Corporation
uses the marketing name Ruukki. www.ruukki.com
DISTRIBUTION:
NASDAQ OMX Helsinki
Main media
www.ruukki.com
RAUTARUUKKI CORPORATION'S INTERIM REPORT FOR JANUARY-MARCH 2009
Business environment
The economic downturn triggered by the financial markets and its ensuing
far-reaching impact on the real economy began to be seen during the last quarter
of 2008 and gathered momentum as the report period progressed. In Finland, as
elsewhere in the world, industrial production shrank noticeably and market
conditions remained extremely difficult throughout the first quarter of 2009.
Demand in the steel industry fell sharply in all customer sectors. High stock
levels in the industry also contributed to weakened demand as stocks were
unwound. Almost all actors in the steel industry throughout the world have
adjusted production considerably and, except for China, the capacity utilisation
rate in the steel industry was around 50-60 per cent.
Growing uncertainty as a result of the economic downturn has had a marked impact
on customers' investment decisions. The poor functioning of the financial
markets is reflected in the difficulty of customers in arranging funding. This
in turn weakened sales, especially of Rautaruukki's construction solutions.
Demand varied from one country to another. However, in Russia and Central
Eastern Europe, there is clearly still a need for new and renovation
construction. Infrastructure construction continued at a reasonably good level.
Demand also weakened in the engineering industry, especially in the lifting,
handling and transportation equipment industry. High stock levels throughout the
supply chain reduced demand. There was continued good demand from equipment
manufacturers in the energy industry both in wind and diesel power plants.
A number of currencies in Central Eastern European and the Nordic countries have
weakened appreciably against the euro. This hampered exports of products from
the eurozone, but improved the cost competitiveness of those actors with
existing manufacturing capacity in the countries in question.
Net sales for January-March
Unless otherwise stated, the comparable figures in brackets refer to the same
period a year earlier.
Consolidated net sales for January-March 2009 were EUR 506 million (EUR 939
million reported, EUR 925 million comparable).
The solutions businesses - Ruukki Construction and Ruukki Engineering -
accounted for 51 per cent (44) of consolidated net sales during the report
period. Finland accounted for 32 per cent (32) of consolidated net sales, the
other Nordic countries for 33 per cent (33) and Central Eastern Europe, Russia
and Ukraine for 15 per cent (16). The rest of Europe accounted for 15 per cent
(16) of net sales and other countries for 5 per cent (3).
Ruukki Construction's net sales for January-March 2009 were EUR 132 million
(225) and Ruukki Engineering's net sales were EUR 125 million (188). Ruukki
Metals' net sales declined to EUR 249 million (EUR 525 million reported, EUR 511
million comparable).
Ruukki Construction's net sales fell due to weak demand. Uncertainty fuelled by
the economic downturn impacted on customers' investment decisions. Customers'
difficulties in arranging funding, especially in Central Eastern Europe and
Russia, resulted in projects being postponed or in some cases even cancelled or
discontinued. In addition, lower net sales were also due to a weakening of a
number of sales currencies - such as the Swedish krona, Polish zloty, Ukrainian
hryvnia and Russian rouble - against the euro.
Ruukki Engineering's net sales fell mainly as a result of weakened demand from
end-customers and the unwinding of stocks throughout the supply chain.
Ruukki Metals continued to experience extremely weak demand in all product
groups throughout the report period. Consequently net sales were down to about
half the figure a year earlier. Demand weakened as customers unwound high stock
levels, which subsequently meant that the price development of steel products
was also much lower than expected.
Sales of special steel products weakened, especially to industries serving the
earthmoving sector and subcontractors to the automotive industry. Special steel
products accounted for 18 per cent (27) of Ruukki Metals' sales during the
report period.
Operating profit for January-March
Consolidated negative operating profit for January-March was -EUR 113 million
(EUR 143 million reported, EUR 141 million comparable), equating to -22 per cent
(15) of net sales.
Ruukki Construction posted a negative operating profit of -EUR 13 million (21).
Ruukki Engineering posted an operating profit of EUR 5 million (32) and Ruukki
Metals a negative operating profit of -EUR 102 million (EUR 97 million reported,
EUR 96 million comparable).
Ruukki Construction's operating profit fell not only as a result of weak demand,
but also particularly because of the use of own steel produced at high raw
material prices and the use of high-cost external material in stock.
Profitability was additionally negatively affected by a weakening of sales
currencies in areas where costs are either partly or fully in euros.
Ruukki Engineering's operating profit fell as a result of lower sales volumes,
weaker sales prices, especially for plate products and parts, as well as high
raw material costs.
Ruukki Metals reported weaker than expected operating profit due to the
continued extremely low demand for steel products. The low steel production
capacity utilisation rate considerably increased the fixed costs per unit of
steel produced. Low production capacity utilisation had an impact of around EUR
90 million on costs. Also the unwinding of stock levels produced at high raw
material prices weakened profitability.
Actions to improve operating efficiency and adjust operations did not yet have a
material impact on earnings during the first quarter of the year.
Financial items and earnings for January-March
Net finance expense and exchange rate differences relating to finance totalled
EUR 9 million (4).
Group taxes were -EUR 32 million (34), which includes a change of EUR 31 million
(2) in deferred tax.
The result for the period was -EUR 90 million (106).
Earnings per share were -EUR 0.65 (0.77).
Balance sheet, cash flow and financing
The balance sheet total at 31 March 2009 was EUR 20 million lower at EUR 2,941
million than at 31 March 2008 (2,961) and EUR 42 million lower than at year-end
2008. Equity at 31 March 2009 was EUR 1,658 million (2,020), equating to EUR
11.94 per share (14.48). The decrease in equity since year-end 2008 was
attributable to the loss for the report period and translation differences. In
addition, equity fell in line with the resolution by the Annual General Meeting
on 24 March 2009 to transfer a dividend payout of EUR 187 million from equity to
current liabilities. The dividend was paid to shareholders after the report
period on 8 April 2009. The equity ratio at the end of the report period was
56.7 per cent (68.9).
Return on equity during the past 12 months was 11.3 per cent (23.6) and return
on capital employed was 14.5 per cent (28.9).
Despite negative earnings, cash flow from operating activities was EUR 76
million (151) and cash flow before financing activities was EUR 30 million
(101). During the report period, EUR 114 million was freed from working capital.
Net interest-bearing financial liabilities at 31 March 2009 were EUR 122 million
(-75). Rautaruukki's indebtedness was more or less the same as at year-end 2008
and the gearing ratio was 7.4 per cent (-3.7).
At the end of March 2009, the Group had liquid assets of EUR 459 million and
undrawn revolving credit facilities of EUR 225 million. Dividends totalling EUR
187 million were paid out after the report period on 8 April 2009.
Actions to improve operational efficiency and measures to adjust operations
In October 2008, Rautaruukki initiated its corporate-wide Boost programme, which
aims at further operational efficiency and at permanently improving the
company's competitive edge and profitability.
During January-March, the company continued work on actions implemented under
the Boost programme. Closure of Ruukki Construction's profiling unit in Ostrava
in the Czech Republic was completed and the production lines were successfully
transferred to units in Hungary, Poland and Romania during the report period.
Likewise, production was discontinued at the small profiling units in Riga,
Latvia and Vilnius, Lithuania in March and production was centralised on the
Pärnu plant in Estonia. A profitability programme initiated at the Oborniki unit
in Poland is progressing to plan and a similar programme has also been initiated
in Obninsk, Russia.
Production at Ruukki Engineering's Hatvan site in Hungary was transferred to the
Jaszbereny components plant during January 2009.
Progress has been made to plan with closing the steel service centre in Tampere,
Finland and with centralising parts processing on Ruukki Metals' steel service
centres in Raahe and Seinäjoki, Finland. It is planned to close down operations
at the Tampere service centre by the end of June. Production of spiral-welded
gas pipes at the Oulainen site in Finland has been discontinued since it is not
part of the company's core business.
In March, Rautaruukki decided to improve operational efficiency by integrating
production at its plants in Kalajoki, Finland, where it has plants serving
construction and the engineering industry. In future, both plants will
manufacture components for the engineering industry. Work to implement the
change is expected to be completed by the end of May. The change is expected to
result in the loss of a maximum of 35 jobs. Employer-employee negotiations to
reduce the workforce have been initiated and apply to all Ruukki Construction's
employees in Kalajoki.
Cost savings realised under the Boost programme amounted to around EUR 10
million during the first quarter of the year.
A number of adjustment measures are also under way across the company because of
market conditions. By the end of March, employer-employee negotiations to reduce
the workforce had resulted in the loss of some 1,500 jobs corporate-wide. Almost
300 of the people affected by around 500 workforce reductions in Finland are
covered by pension arrangements. The figures above include reductions made both
as a result of actions taken under the operational efficiency programme and
adjustments made due to market conditions. Around half of the total reductions
are permanent and relate to operational efficiency. Most workforce reductions
will take place during the first half of 2009, with some occurring during the
third quarter.
At the end of the report period, a total of some 4,800 people, around 4,300 of
which in Finland, were affected by temporary lay-offs. The duration and time of
lay-offs varies according to site. In Finland, around 900 persons are being laid
off at any one time.
It is estimated that cost savings delivered by the Boost programme and other
adjustment measures under way will exceed EUR 80 million during the current
year.
One of the two blast furnaces at the Raahe Works, Finland was temporarily shut
down in December 2008 and remained idle throughout the report period.
Personnel
The Group employed an average of 13,460 (14,644) persons during January-March
2009. At the end of March, the headcount was 13,253 (14,706), compared to 14,286
at year-end 2008.
Changes in Group structure
The manufacture of steel products (Ruukki Production division) was merged with
Ruukki Metals division as of 1 February 2009. The merger will improve efficiency
and supply chain management in the steel business. The Group now comprises two
divisions - Ruukki Construction and Ruukki Engineering - which specialise in the
solutions businesses, and Ruukki Metals, which focuses on the steel business.
The Group's segment reporting remains unchanged.
Acquisition of the entire share capital of Skalles Eiendomsselskap AS, one of
Norway's leading steel frame suppliers for commercial and industrial premises,
was completed in February. This acquisition strengthens Rautaruukki's position
as a local actor in the Nordic steel construction market. Skalles' total
deliveries include the design, manufacture and installation of steel structures.
The company has some 50 employees and net sales for 2008 were around EUR 16
million.
During the report period, property, plant and equipment increased by EUR 3
million and goodwill by EUR 8 million to EUR 109 million through acquisitions.
Capital expenditure
Net cash flow from investing activities during the report period was -EUR 46
million (-50).
Capital expenditure on tangible and intangible assets totalled EUR 40 million
(49), of which maintenance investments were EUR 17 million (11). A total of EUR
7 million (2) was spent on acquisitions. Other shares increased by EUR 2 million
(0).
Cash inflows of EUR 3 million (2) from investing activities were mostly
generated by divestments of property, plant and equipment.
Capital expenditure on tangible and intangible assets during 2009 is estimated
to remain in the region of EUR 170 million.
Annual General Meeting 2009
Rautaruukki Corporation's Annual General Meeting was held in Helsinki on 24
March 2009.
The Annual General Meeting decided on the payment of a dividend for 2008 of EUR
1.35 per share to make a total dividend payout of EUR 187 million. The dividend
was paid on 8 April 2009.
The Annual General Meeting confirmed that the Board of Directors is to have
seven members. Reino Hanhinen, Maarit Aarni-Sirviö, Christer Granskog, Pirkko
Juntti, Kalle J. Korhonen and Liisa Leino were all re-elected to the Board.
Hannu Ryöppönen was elected as a new member to the Board. Reino Hanhinen was
appointed as chairman of the Board of Directors and Christer Granskog as deputy
chairman.
The Annual General Meeting confirmed that the Supervisory Board is to have nine
members. Marjo Matikainen-Kallström and Inkeri Kerola were re-elected as
chairperson and deputy chairperson of the Supervisory Board respectively. Heikki
Allonen, Turo Bergman, Miapetra Kumpula-Natri, Petteri Orpo, Jouko Skinnari and
Tapani Tölli were all re-elected to the Supervisory Board. Hans Sohlström was a
new appointment to the Board.
The Annual General Meeting re-appointed KHT audit firm KPMG Oy Ab as the
company's auditor. Pekka Pajamo KHT acts as Rautaruukki's principal auditor.
The Annual General Meeting resolved to amend Article 4 §3 of the company's
Articles of Association by deleting the right of the Ministry of Trade and
Industry (Ministry of Employment and the Economy since 1 January 2008) to
appoint a member to the Supervisory Board, and to amend Article 11 §1 so that
notice of the Annual General Meeting shall be sent no later than 21 days
(earlier 17 days) before the Meeting and is also to be published on the
company's website.
The Annual General Meeting granted the Board of Directors the authority to
acquire a maximum of 12,000,000 of the company's own shares. The authority is
valid for 18 months from the date of the resolution of the Annual General
Meeting and supersedes the authority granted by the Annual General Meeting held
on 2 April 2008 to acquire 12,000,000 shares.
The Annual General Meeting granted the Board of Directors the authority to
decide on a share issue, which includes the right to issue new shares or to
transfer treasury shares held by the company. The authority applies to a maximum
of 15,000,000 shares in total. The Board of Directors has the right to disapply
the pre-emption rights of existing shareholders in a private placement. The
authority also includes the right to decide on a bonus issue. The authority is
valid until the close of the 2011 Annual General Meeting.
The Annual General Meeting decided to establish a Nomination Committee to
prepare proposals for the following Annual General Meeting regarding the
composition of the Board of Directors and directors' fees.
At its organisation meeting on 24 March 2009, the Board of Directors elected
members to its committees from among its members. Hannu Ryöppönen was elected as
chairman and Liisa Leino and Kalle J. Korhonen as members of the Audit
Committee. Reino Hanhinen was elected as chairman and Maarit Aarni-Sirviö and
Christer Granskog as members of the Remuneration Committee.
Changes in executive management
The merger of Ruukki Metals and Ruukki Production resulted in changes to the
composition of the Corporate Management Board and Extended Management Board. As
of 1 February 2009, Rautaruukki's Corporate Management Board comprises Sakari
Tamminen, President & CEO and chairman of the Management Board; Mikko Hietanen,
CFO and deputy to the CEO; Saku Sipola, President, Ruukki Construction; Tommi
Matomäki, President, Ruukki Engineering; Olavi Huhtala, President, Ruukki Metals
and Marko Somerma, Chief Strategy Officer.
As of 1 March 2009, the Extended Management Board comprises, in addition to
members of the Corporate Management Board, Eija Hakakari, SVP Human Resources;
Olli Huuskonen, SVP General Counsel; Sakari Kallo, SVP Production, Ruukki
Metals; Markku Koljonen, Chief Technology Officer; Taina Kyllönen, SVP
Marketing; Petteri Laaksomo, SVP Supply Chain Management; Anne Pirilä, SVP
Corporate Communications and Investor Relations and Ismo Platan, Chief
Information Officer.
Shares and share capital
During the first quarter of 2009, Rautaruukki Oyj shares (RTRKS) were traded for
a total of EUR 945 million (1,853) on NASDAQ OMX Helsinki. The highest price
quoted was EUR 16.35 in February and the lowest was EUR 11.06 in January. The
volume weighted average price was EUR 13.71. The share closed at EUR 12.06 and
the company had a market capitalisation of EUR 1,692 million (4,286) at the end
of the report period on 31 March 2009.
The company's registered share capital at 31 March 2009 was EUR 238.5 million
and there were 140,264,945 shares issued.
A total of 9,466 Rautaruukki Oyj shares were subscribed through warrants
exercised between 17 and 31 December 2008 under the personnel 2003 bond with
warrants. The share capital was increased by EUR 16,092.20 accordingly. The
increase in share capital was entered in the Trade Register on 16 February 2009.
Employee warrants based on the 2003 bond with warrants have been publicly traded
on NASDAQ OMX Helsinki since 24 May 2006. One warrant entitles the holder to
subscribe one share at an issue price of EUR 1.70. Warrants had been exercised
to subscribe a total of 1,378,500 shares (98.5 per cent) by 31 March 2009. The
remaining warrants entitle holders to subscribe a total of 21,500 shares. The
subscription period expires on 23 May 2009.
Until the close of the 2009 Annual General Meeting, the Board of Directors was
authorised to transfer a maximum of 13,785,381 treasury shares held by the
company. Under this authority, on 20 March 2009, the company transferred, a
total of 48,052 treasury shares under the terms and conditions of the share
ownership plan 2008-2010, to the 77 employees covered by the plan's first
earning period, 2008.
The Board of Directors did not exercise its authority to issue shares or acquire
the company's own shares during the first quarter of 2009. These authorities are
explained in this release under the heading Annual General Meeting 2009.
At the end of the report period, the Board of Directors had no valid authority
to issue options or other special rights providing entitlement to shares.
At 31 March 2009, the company held 1,419,882 treasury shares, which had a market
value of EUR 17.1 million and an accountable par value of EUR 6.1 million.
Treasury shares account for a relative percentage of 1.01 per cent of the total
number of shares and votes.
Disclosure notifications
Pursuant to Chapter 2, Section 9 of the Finnish Securities Markets Act,
Rautaruukki received, on 28 January 2009, a disclosure notification from Capital
Research and Management Company (CRMC) that the aggregate holding of
Rautaruukki's shares and votes by the mutual funds CRMC manages had decreased to
below 5 per cent (1/20). The number of Rautaruukki Oyj shares notified by CRMC
is 6,949,917 shares, which equate to 4.96 per cent of Rautaruukki's share
capital and votes.
Energy and the environment
In January 2009 SAM Sustainable Asset Management AG awarded Rautaruukki a Bronze
Class in recognition of its position among the world's top steel companies
committed to sustainable development. Rautaruukki is also listed in SAM's
Sustainability Yearbook 2009.
The Mo i Rana rolling mill, which comes under the Norwegian emissions trading
scheme, received annual emissions allowances for 46,654 tonnes of emissions for
2008-2012 under the Norwegian national emissions quota system.
More information about environmental issues can be found in the Annual Report
2008 and in the environmental reports for the Raahe and Hämeenlinna works.
Events taking place after 31 March 2009
In April, after the report period, Rautaruukki announced it was to begin
employer-employee negotiations to temporarily lay off people in corporate
functions in Finland. Around 410 persons are affected. It is planned to
implement the layoffs as soon as possible, but at the latest during the current
year. The duration of lay-offs will become clear as the negotiations progress.
In April, Rautaruukki made a decision to modernise its two blast furnaces at the
Raahe Works during 2010 and 2011. In the same context, the company will also
make environmental investments to significantly reduce adverse environmental
impacts and energy consumption at the works. It is planned to bring
modernisation of blast furnace 1 at the Raahe Works forward by three months so
that work begins in April 2010. Rautaruukki plans to modernise blast furnace 2
during 2011, although bringing the overhaul of blast furnace 1 forward would
also allow the modernisation of blast furnace 2 to take place already in 2010.
Any decision to bring forward the modernisation of blast furnace 2 will be made
separately. Both blast furnaces will be shut down in turn for around two months
during the modernisation project. In connection with the project, Rautaruukki
will switch over to using only iron pellets instead of sinter as a raw material
in the iron-making process. The sinter plant currently in use will be closed
down by the end of 2011.
The investments in modernising the blast furnaces and changing the feedstock
base total around EUR 220 million, in addition to which environmental
investments of some EUR 60 million will be made. Some EUR 55 million of the
investments are scheduled for 2009, around EUR 107 million for 2010, EUR 109
million for 2011 and the remaining approximately EUR 10 million for 2012.
In the same context, the company has also decided to restart blast furnace 1,
which was shut down in December 2008, to prepare for the disruption to
production due to downtime whilst modernisation is being carried out by building
reserve stocks to safeguard uninterrupted customer deliveries. Restarting the
blast furnace is justified also from the slab stock management point of view to
ensure customer deliveries in the near future.
Work on restarting blast furnace 1 will begin immediately. The blast furnace
will reach its target production speed in about four weeks.
Risks and risk management
The company's risk management is guided by the operating principles and process
of corporate risk management set out in the risk management policy approved by
the company's Board of Directors. Risk management is an integrated part of
Rautaruukki's management system. Rautaruukki has explained business risks and
risk management in detail in the Annual Report 2008. The company does not
consider any material changes to have taken place during the report period in
the risks and factors of uncertainty presented in the Annual Report 2008.
Near-term outlook
It still remains challenging to anticipate market development and there are few
noticeable signs of an upturn in sight. Consequently, the company expects weak
market conditions to continue also during the second quarter.
Even though in the construction business, the second quarter is typically better
than the first, conditions for a significant recovery in demand are not likely
to materialise until customer confidence in the market picks up, there is
increased willingness to invest and financial market conditions improve. Bids
and tendering activity are still at a high level in some countries such as
Finland, the other Nordic countries and Poland. This points to a possible
recovery in demand. However, in the Baltic states, Hungary and Ukraine, the
entire national economy is definitely much weaker and it is likely to take much
longer before demand picks up.
Infrastructure construction is expected to pick up somewhat and it is
anticipated that recovery measures taken by the public sector will foster
demand.
In the engineering industry, demand is expected to remain weak from equipment
manufacturers in the lifting, handling and transportation industry. Demand from
equipment manufacturers in the energy industry is expected to continue at a good
level, even though uncertainty on the financial markets might also impact on new
wind farm projects. Market conditions in plate products and components in the
shipbuilding industry are dichotomous: although work is still under way on
customers' existing order books, there have been few new orders.
Demand for steel products varies according to customer and even though the
unwinding of stocks is expected to level off during the second quarter, no major
improvement in the overall picture for demand is expected over the next few
months. Costs of raw materials used in steel production are expected to fall
significantly and this will be reflected in full in the company's cost structure
with effect from the third quarter onwards. The price level of steel products is
expected to stabilise once stocks have been unwound and negotiations on the
prices of raw materials have ended.
Restarting the blast furnace that has been idle will increase the steel
production capacity utilisation rate and clearly improve cost efficiency. This
will be evidenced from towards the end of the second quarter.
The company expects cost savings achieved through operational efficiency actions
and adjustment measures to impact partly already during the second quarter, but
not to impact in full until during the second half of the year. Cost savings
from the Boost programme and other adjustment measures already under way are
expected to exceed EUR 80 million during the current year. Operational
efficiency actions and adjustment measures will continue corporate-wide. The
company's financial position is expected to continue strong.
The company expects net sales for the second quarter to be similar to those for
the first quarter. The result before taxes for the second quarter is expected to
remain clearly negative, although to show some improvement on the result for the
first quarter.
Based on efficiency actions and adjustment measures already under way, estimated
lower costs of raw materials used in steel production and improved cost
efficiency in steel production, the company considers that it has the potential
to achieve a positive result before taxes during the second half of the year.
This report is unaudited.
Helsinki, 23 April 2009
Rautaruukki Corporation
Board of Directors
DIVISIONS
Ruukki Construction
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| EUR million | Q1/08 | Q2/08 | Q3/08 | Q4/08 | 2008 | Q1/09 |
--------------------------------------------------------------------------------
| Net sales | 225 | 285 | 309 | 248 | 1 067 | 132 |
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| Operating | 21 | 38 | 56 | 17 | 132 | -13 |
| profit* | | | | | | |
--------------------------------------------------------------------------------
| as % of net | 9 | 13 | 18 | 7 | 12 | -10 |
| sales* | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items.
Net sales
Ruukki Construction's net sales for the first quarter of 2009 were EUR 132
million (225), down by 41 per cent year on year. The division accounted for 26
per cent (24) of consolidated net sales.
Ruukki Construction's net sales fell due to weak demand. Uncertainty fuelled by
the economic downturn impacted on customers' investment decisions. Customers'
difficulties in arranging funding, especially in Central Eastern Europe and
Russia, resulted in projects being postponed or in some cases even cancelled or
discontinued. In Russia and in other market areas, the company has tried to
switch from privately-funded to publicly-funded projects and to projects in the
energy industry. In addition, lower net sales were also due to a weakening of a
number of sales currencies - such as the Swedish krona, Polish zloty, Ukrainian
hryvnia and Russian rouble - against the euro.
Net sales in infrastructure construction also fell, albeit much less than in
commercial and industrial construction. Weakened demand for piles used in
building construction particularly contributed to lower net sales.
Infrastructure construction accounted for 13 per cent (11) of the division's net
sales during the report period.
The weak market for residential roofing products, coupled with normal seasonal
fluctuation, resulted in a decline in the sales volumes of roofing products.
Residential construction accounted for 11 per cent (8) of the division's net
sales during the first quarter.
Operating profit
Ruukki Construction posted a negative operating profit of -EUR 13 million (21)
for the first quarter of 2009. Profitability fell not only as a result of poor
demand, but also because of the use of own steel produced at high raw material
prices and the use of high-cost external material in stock. Profitability was
additionally affected by a weakening of sales currencies in areas where costs
are either partly or fully in euros. Fiercer competition has also resulted in
somewhat lower sales prices.
Operational efficiency actions and adjustment measures initiated in Ruukki
Construction did not yet deliver significant cost savings during the first
quarter. Consequently, the division's costs were high in relation to prevailing
demand.
Major new orders
Ruukki Construction secured several major contracts during the report period. In
Finland, Rautaruukki is to supply the steel structures for the Crusell bridge
linking the Helsinki districts of Jätkäsaari and Ruoholahti, as well as the
steel structures and fire protection for a new sports centre to be built in the
Salmisaari district of Helsinki. The company received an additional order to
supply and install steel superstructures for the Partihallsförbindelsen bridge
under construction in Gothenburg, Sweden.
In January, the company announced that the EUR 100 million contract signed in
February 2008 to deliver steel structures for the new Zenit football stadium in
St Petersburg, Russia had turned out to be uncertain. For reasons beyond
Rautaruukki's control, the project start has been postponed. The main contractor
of the project has changed and the new contractor is re-tendering the frame
delivery. A new round of tenders is under way.
Capital expenditure
Acquisition of the entire share capital of the Norwegian company Skalles
Eiendomsselskap AS from private owners was completed in February. This
acquisition strengthens Rautaruukki's position as a local actor in the Nordic
steel construction market. Integration of Skalles and the Lithuanian company UAB
Gensina, which was acquired in December 2008, into Ruukki Construction is
progressing to plan.
Ruukki Construction has been implementing an investment programme to increase
production capacity in Russia and Eastern Europe since 2007. The programme was
largely completed by year-end 2008. However, the sandwich panel line at the
Romanian plant and the transfer of profile lines at the Ukraine plant were not
completed until the first quarter of 2009. Construction of the sandwich panel
line at the Ukraine plant will be completed during the second quarter of 2009. A
new sandwich panel plant being built at Alajärvi, Finland will be completed
during the last quarter of the current year. Likewise, a new panel plant under
construction at Obninsk, Russia is scheduled to be commissioned towards the end
of the year.
Improved operational efficiency
Under the corporate-wide operational excellence programme, Boost, the profiling
unit in Ostrava, Czech Republic was closed and the production lines transferred
to Hungary, Poland and Romania during the report period. A profitability
improvement programme initiated at the Oborniki plant in Poland progressed to
plan and a similar programme was also initiated at the Obninsk plant in Russia.
Progress was made to plan with centralising production in the Baltic states on
the Pärnu plant in Estonia and the small profiling plants in Riga, Latvia and
Vilnius, Lithuania were closed in March.
Employer-employee negotiations initiated by the company at the end of January to
reduce the workforce and temporarily lay off personnel at the Alajärvi, Vimpeli
and Peräseinäjoki units in Finland ended in March. The negotiations resulted in
34 redundancies, of which around 15 are being carried out through various
pension arrangements. In addition, around 115 persons are being laid off at the
units.
In March, the company decided to improve the efficiency of operations in
Kalajoki, Finland, where it has plants serving construction and the engineering
industry. In future, both plants will manufacture components for the engineering
industry. Work to implement the change is expected to be completed by the end of
May. The change is expected to result in the loss of a maximum of 35 jobs.
Employer-employee negotiations to reduce the workforce have been started and
apply to all Ruukki Construction's employees in Kalajoki.
Ruukki Engineering
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| EUR million | Q1/08 | Q2/08 | Q3/08 | Q4/08 | 2008 | Q1/09 |
--------------------------------------------------------------------------------
| Net sales | 188 | 205 | 184 | 187 | 765 | 125 |
--------------------------------------------------------------------------------
| Operating | 32 | 35 | 34 | 27 | 128 | 5 |
| profit* | | | | | | |
--------------------------------------------------------------------------------
| as % of net | 17 | 17 | 19 | 14 | 17 | 4 |
| sales* | | | | | | |
--------------------------------------------------------------------------------
* Excluding non-recurring items.
Net sales
Ruukki Engineering's net sales for the first quarter of 2009 were down 34 per
cent year on year to EUR 125 million (188). The division accounted for 25 per
cent (20) of consolidated net sales.
Ruukki Engineering's net sales fell mainly as a result of weakened end-customer
demand. Also the unwinding of stocks throughout the supply chain decreased
demand for Ruukki Engineering's products and services.
Measured against the same period a year earlier, the biggest fall in Ruukki
Engineering's net sales was within equipment manufacturers in the lifting,
handling and transportation industry, especially in cabin assembly.
Demand for telescopic booms for cranes declined less than for other product
groups. Demand from equipment manufacturers in the energy industry remained good
and business in China showed further growth.
Equipment manufacturers in the lifting, handling and transportation industry
accounted for 37 per cent (45) and equipment manufacturers in the energy
industry accounted for 34 per cent (18) of the division's net sales during the
report period.
Operating profit
Ruukki Engineering's operating profit for the first quarter of 2009 fell to EUR
5 million (32). Operating profit fell as a result of lower sales volumes, weaker
sales prices, especially for plate products and parts, as well as high raw
material costs.
Capital expenditure and development
Work continued on installing two robot welding cells at the cabin assembly unit
in Kurikka, Finland during the first quarter of 2009. Automation of welding
operations at the Peräseinäjoki site in Finland also continued to plan and will
be completed during the course of 2009.
Likewise, work continued on improving machining operations at the Sepänkylä and
Kurikka plants in Finland. The project was completed at Kurikka and had reached
the test stage in Sepänkylä. The new equipment will come on stream proper during
the second quarter of the year. Progress was made to plan with the machining
project in Jaszbereny, Hungary.
The first quarter saw the start of process development work at the Mo i Rana
unit in Norway, which is focusing on energy-saving process automation. The work
will be completed during 2009. In Shanghai, China, operations expanded into new
premises during the first quarter of 2009. The first deliveries will roll off
the new production lines during the second quarter and include cabins, as well
as welded and machined components.
Improved operational efficiency
Under the corporate-wide operational excellence programme, Boost, production at
Ruukki Engineering's unit in Hatvan, Hungary was transferred to the component
plant in Jaszbereny during January 2009.
Employer-employee negotiations initiated in December 2008 in the Kurikka unit in
Finland ended in January. The negotiations resulted in 38 redundancies, 12 of
which were carried out through pension arrangements. The redundancies took place
during January 2009. In addition, agreement was reached on temporary lay-offs,
which apply to all the personnel, some 500 persons, at the Kurikka unit.
February saw the start of negotiations to increase the number of persons laid
off at any one time.
In March, Rautaruukki announced it was to improve operational efficiency by
integrating production at its two plants in Kalajoki, Finland. In future, both
plants will produce components for the engineering industry. Earlier, one of the
Kalajoki plants served Rautaruukki's construction customers.
Ruukki Metals
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| EUR million | Q1/08 | Q2/08 | Q3/08 | Q4/08 | 2008 | Q1/09 |
--------------------------------------------------------------------------------
| Net sales | 511 | 571 | 503 | 412 | 1 997 | 249 |
--------------------------------------------------------------------------------
| Operating | 96 | 106 | 112 | 36 | 350 | -102 |
| profit* | | | | | | |
--------------------------------------------------------------------------------
| as % of net | 19 | 19 | 22 | 9 | 18 | -41 |
| sales* | | | | | | |
--------------------------------------------------------------------------------
All figures are comparable and exclude Carl Froh GmbH, which was divested.
* Excluding non-recurring items.
Net sales
Ruukki Metals' net sales for the first quarter of 2009 were EUR 249 million (EUR
525 million reported, EUR 511 million comparable). The division accounted for 49
per cent (56) of consolidated net sales.
Difficult market conditions meant extremely weak demand for steel products
continued throughout the report period. In addition, demand weakened as
customers unwound high stock levels. The unwinding of stocks, weak demand from
end-customers and expectations of a fall in the cost of raw materials used in
steel production put pressure on the pricing of steel products and price
development was much poorer than expected. Demand and price development in
Eastern Europe and Russia were much weaker than in the company's other market
areas.
Net sales decreased in all product groups. Sales of special steel products
weakened, especially to industries serving the earthmoving sector and
subcontractors to the automotive industry. Sales of stainless steel and
aluminium were also down year on year. The share of special steel products
decreased to 18 per cent (27) of the division's net sales during the report
period. Net sales from stainless steel and aluminium totalled EUR 28 million
(65) during the report period.
Operating profit
Ruukki Metals posted a negative operating profit of -EUR 102 million (EUR 97
million reported, EUR 96 million, comparable) for the first quarter of 2009.
The weaker than expected operating profit was due to continued extremely low
demand for steel products. The low steel production capacity utilisation rate
considerably increased the fixed costs per unit of steel produced. Low
production capacity utilisation had an impact of around EUR 90 million on costs.
Also the unwinding of stock levels produced at high raw material prices weakened
profitability.
The operating profit on stainless steel and aluminium for the first quarter of
2009 was also slightly negative. Writedowns on stocks of stainless steel and
slowly moving other steel products totalled around EUR 11 million during the
report period.
Adjustment measures planned and initiated did not yet deliver major cost savings
during the first quarter, but are expected to impact mostly from the second and
third quarters onwards.
Steel production
--------------------------------------------------------------------------------
| 1000 tonnes | Q1/08 | Q2/08 | Q3/08 | Q4/08 | 2008 | Q1/09 |
--------------------------------------------------------------------------------
| Steel production | 672 | 680 | 703 | 531 | 2 585 | 269 |
--------------------------------------------------------------------------------
Due to weak demand and high stock levels, the company's steel production was
scaled back in line with market conditions. Rautaruukki produced 269 thousand
tonnes (672) of steel during the first quarter of 2009.
The entire steel production capacity utilisation rate remained low throughout
the report period. One of the two blast furnaces at the Raahe Works in Finland
was shut down in December 2008 and remained idle throughout the report period.
There was a marked improvement in the division's accident frequency rate
compared to a year earlier. The accident frequency rate was 9 (12) per million
hours worked.
Capital expenditure
In April 2008, a decision was taken to establish a new steel service centre next
to the production plant in Obninsk to the southwest of Moscow, which serves the
company's construction customers. The new centre was planned to start operations
in late 2009 but it has now been decided to push back the investment owing to
market conditions. The investment was worth an estimated EUR 13 million.
In August 2008, a decision was taken to invest an estimated EUR 12 million in
centralising operations and reorganising the division of work between the steel
service centres in Naantali and Järvenpää, Finland and Halmstad, Sweden. The
investments have been partly started, but it has since been decided to postpone
actions and any investments in equipment that have been planned but not yet
started. The new timescale for this investment will become clear during the
course of the second quarter.
A start was made in January on the construction of a second ladle treatment unit
at the Raahe Works in Finland. The unit will be commissioned during the second
quarter of the year and increase the production capacity of special steel
products. The first stage of the unit was commissioned about a year ago.
The new cold leveller piloted at the plate mill at the Raahe Works in December
2008 was commissioned during the report period. The cold leveller will broaden
Rautaruukki's range of wear-resistant and high-strength steels.
Improved operational efficiency
In January, a decision was taken to focus parts processing on the service
centres in Raahe and Seinäjoki, Finland and to close the steel service centre in
Tampere by the end of June 2009. Closure of the service centre is progressing to
plan.
In January, the company made a decision to discontinue the production of
spiral-welded gas pipes at Oulainen in Finland. Production of these pipes is not
part of the company's core business. Progress was made to plan and the
production of spiral-welded gas pipes has now been discontinued.
Rautaruukki's steel product manufacturing division, Ruukki Production, merged
with Ruukki Metals division on 1 February 2009. This move streamlines the
corporate structure and improves the efficiency of the steel business and supply
chain management.
The division has had a number of employer-employee negotiations regarding
redundancies and temporary lay-offs. During the report period, negotiations
ended within the division's business support functions, at the Raahe and
Hämeenlinna works and at the steel service centres in Finland. The negotiations
resulted in a workforce reduction of around 250 persons and lay-offs affecting a
total of around 3,500 people. The time and duration of lay-offs depends on the
site.
In March, the company initiated employer-employee negotiations to temporarily
lay off around a further 340 salaried and senior salaried employees in Finland
due to difficult market conditions. The negotiations ended in April and the
lay-offs, which last three weeks, will take place during the second and third
quarters.
Other events
The Ministry for Economic Development and Trade of the Russian Federation has
extended the investigation time into the anti-dumping of colour-coated products
to July 2009. If introduced, import duties would apply to exports of
colour-coated products to Russia from the date the decision enters into force.
Rautaruukki manufactures and exports around EUR 30 million of these products
from Finland to Russia each year.
Events taking place after 31 March 2009
In April, Rautaruukki made a decision to modernise its two blast furnaces at the
Raahe Works during 2010 and 2011. In the same context, the company will also
make environmental investments to significantly reduce adverse environmental
impacts and energy consumption at the works. It is planned to bring
modernisation of blast furnace 1 at the Raahe Works forward by three months so
that work begins in April 2010. Rautaruukki plans to modernise blast furnace 2
during 2011, although bringing the overhaul of blast furnace 1 forward would
also allow the modernisation of blast furnace 2 to take place already in 2010.
Any decision to bring forward the modernisation of blast furnace 2 will be made
separately. Both blast furnaces will be shut down in turn for around two months
during the modernisation project. In connection with the project, Rautaruukki
will switch over to using only iron pellets instead of sinter as a raw material
in the iron-making process. The sinter plant currently in use will be closed
down by the end of 2011.
The investments in modernising the blast furnaces and changing the feedstock
base total around EUR 220 million, in addition to which environmental
investments of some EUR 60 million will be made. Some EUR 55 million of the
investments are scheduled for 2009, around EUR 107 million for 2010, EUR 109
million for 2011 and the remaining approximately EUR 10 million for 2012.
In the same context, the company has also decided to restart blast furnace 1,
which was shut down in December 2008, to prepare for the disruption to
production due to downtime whilst modernisation is being carried out by building
reserve stocks to safeguard uninterrupted customer deliveries. Restarting the
blast furnace is justified also from the slab stock management point of view to
ensure customer deliveries in the near future.
Work on restarting blast furnace 1 will begin immediately. The blast furnace
will reach its target production speed in about four weeks.
TABLES
This interim report has been prepared in accordance with IAS 34 and, with the
exception of the following new and amended standards effective from 1 January
2009, is in conformity with the accounting policies published in the 2008
financial statements.
IAS 1 Presentation of Financial Statements. The revised standard aims to improve
users' ability to analyse and compare the information presented in the financial
statements by separating changes in equity of an entity arising from
transactions with owners from other changes in equity.
IFRS 8 Operating Segments. This new standard requires the company to apply the
“management approach” to reporting the financial performance of its operating
segments. This means that the information disclosed must be based on the
information management uses internally to evaluate segment performance.
IFRS-standards are applied in the Group's management reporting and assessment of
performance and decisions about resource allocation to segments is based on
their respective operating profits. Adoption of the standard has not impacted on
the Group's segment structure.
IAS 23 Borrowing Costs. The amended standard requires an entity to capitalise
borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset as part of the cost of that asset. The option
of immediately recognising such borrowing costs as an expense has been removed.
The Group applies capitalisation rate to calculate the interest to be
capitalised. The amended standard has had no material impact on the Group.
IFRS 2 Share-based payments amendments to the standard - Vesting Conditions and
Cancellations. The amendments clarify the accounting treatment of vesting
conditions and provide that cancellations by the company or other parties
receive similar accounting treatment.
Additionally, the Group has changed the presentation of the income statement
from the ”nature of expense” method to the ”function of expense” method. The
comparable figures have been restated accordingly.
Individual figures and totals appearing in the tables have been rounded to the
nearest full million of euros.
--------------------------------------------------------------------------------
| SUMMARY CONSOLIDATED INCOME STATEMENT |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR million | Q1/09 | Q1/08 | 2008 |
--------------------------------------------------------------------------------
| Net sales | 506 | 939 | 3 851 |
--------------------------------------------------------------------------------
| Cost of sales | 554 | 719 | 2 980 |
--------------------------------------------------------------------------------
| Gross profit | -47 | 220 | 872 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Sales and marketing costs | 30 | 36 | 148 |
--------------------------------------------------------------------------------
| Administrative expenses | 41 | 45 | 177 |
--------------------------------------------------------------------------------
| Other operating income | 7 | 5 | 31 |
--------------------------------------------------------------------------------
| Other operating expenses | 1 | 1 | 10 |
--------------------------------------------------------------------------------
| Operating profit | -113 | 143 | 568 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Finance income and expense | -9 | -4 | -23 |
--------------------------------------------------------------------------------
| Share of results of associates | 0 | 1 | 3 |
--------------------------------------------------------------------------------
| Result before taxes | -122 | 140 | 548 |
--------------------------------------------------------------------------------
| Taxes | 32 | -34 | -142 |
--------------------------------------------------------------------------------
| Result for the period | -90 | 106 | 406 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to: | | | |
--------------------------------------------------------------------------------
| Equity shareholders of the parent | -90 | 106 | 406 |
--------------------------------------------------------------------------------
| Minority interests | 0 | 0 | -1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Diluted earnings per share, EUR | -0.65 | 0.77 | 2.93 |
--------------------------------------------------------------------------------
| Basic earnings per share, EUR | -0.65 | 0.77 | 2.93 |
--------------------------------------------------------------------------------
| Operating profit as % of net sales | -22.2 | 15.2 | 14.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| STATEMENT OF COMPREHENSIVE INCOME | | | |
--------------------------------------------------------------------------------
| EUR million | Q1/09 | Q1/08 | 2008 |
--------------------------------------------------------------------------------
| Result for the period | -90 | 106 | 406 |
--------------------------------------------------------------------------------
| Other comprehensive income: | | | |
--------------------------------------------------------------------------------
| Cash flow hedges | 1 | -12 | -62 |
--------------------------------------------------------------------------------
| Translation differences | -22 | -3 | -54 |
--------------------------------------------------------------------------------
| Actuarial gains and losses | 0 | -47 | -62 |
--------------------------------------------------------------------------------
| Taxes on other comprehensive income | -1 | 15 | 32 |
--------------------------------------------------------------------------------
| Other comprehensive income after taxes | -21 | -47 | -145 |
--------------------------------------------------------------------------------
| Total comprehensive income | -111 | 59 | 261 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Attributable to: | | | |
--------------------------------------------------------------------------------
| Equity shareholders of the parent | -111 | 59 | 261 |
--------------------------------------------------------------------------------
| Minority interests | 0 | 0 | -1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| SUMMARY CONSOLIDATED BALANCE SHEET | | | |
--------------------------------------------------------------------------------
| EUR million | 31 Mar | 31 Mar | 31 Dec 2008 |
| | 2009 | 2008 | |
--------------------------------------------------------------------------------
| ASSETS | | | |
--------------------------------------------------------------------------------
| Non-current assets | 1 441 | 1 420 | 1 442 |
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Inventories | 625 | 615 | 750 |
--------------------------------------------------------------------------------
| Trade and other receivables | 415 | 633 | 536 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 459 | 293 | 254 |
--------------------------------------------------------------------------------
| | 2 941 | 2 961 | 2 983 |
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | | |
--------------------------------------------------------------------------------
| Equity | | | |
--------------------------------------------------------------------------------
| Attributable to shareholders of the | 1 658 | 2 020 | 1 948 |
| parent | | | |
--------------------------------------------------------------------------------
| Minority interests | 2 | 3 | 2 |
--------------------------------------------------------------------------------
| Non-current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 394 | 136 | 276 |
--------------------------------------------------------------------------------
| Non-interest-bearing liabilities | 132 | 176 | 158 |
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 188 | 83 | 133 |
--------------------------------------------------------------------------------
| Trade payables and other liabilities | 568 | 544 | 466 |
--------------------------------------------------------------------------------
| | 2 941 | 2 961 | 2 983 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| SUMMARY CASH FLOW STATEMENT | | | |
--------------------------------------------------------------------------------
| EUR million | Q1/09 | Q1/08 | 2008 |
--------------------------------------------------------------------------------
| Result for the period | -90 | 106 | 406 |
--------------------------------------------------------------------------------
| Adjustments | 50 | 78 | 250 |
--------------------------------------------------------------------------------
| Cash flow before change in working | -40 | 184 | 656 |
| capital | | | |
--------------------------------------------------------------------------------
| Change in working capital | 114 | 11 | -110 |
--------------------------------------------------------------------------------
| Financing items and taxes | 2 | -44 | -164 |
--------------------------------------------------------------------------------
| Cash flow from operating activities | 76 | 151 | 382 |
--------------------------------------------------------------------------------
| Cash inflow from investing activities | 3 | 2 | 25 |
--------------------------------------------------------------------------------
| Cash outflow from investing activities | -49 | -51 | -238 |
--------------------------------------------------------------------------------
| Total cash flow from investing | -46 | -50 | -213 |
| activities | | | |
--------------------------------------------------------------------------------
| Cash flow before financing activities | 30 | 101 | 169 |
--------------------------------------------------------------------------------
| Dividends paid | | | -277 |
--------------------------------------------------------------------------------
| Change in interest-bearing liabilities | 173 | -4 | 193 |
--------------------------------------------------------------------------------
| Other net cash flow from financing | 4 | 1 | -4 |
| activities | | | |
--------------------------------------------------------------------------------
| Translation differences | -2 | 0 | -11 |
--------------------------------------------------------------------------------
| Change in cash and cash equivalents | 205 | 98 | 70 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| KEY FIGURES | Q1/09 | Q1/08 | 2008 |
--------------------------------------------------------------------------------
| Net sales, EUR m | 506 | 939 | 3 851 |
--------------------------------------------------------------------------------
| Operating profit, EUR m | -113 | 143 | 568 |
--------------------------------------------------------------------------------
| as % of net sales | -22,2 | 15,2 | 14,7 |
--------------------------------------------------------------------------------
| Result before taxes, EUR m | -122 | 140 | 548 |
--------------------------------------------------------------------------------
| as % of net sales | -24.0 | 14.9 | 14.2 |
--------------------------------------------------------------------------------
| Result for the period, EUR m | -90 | 106 | 406 |
--------------------------------------------------------------------------------
| as % of net sales | -17.8 | 11.3 | 10.5 |
--------------------------------------------------------------------------------
| Return on capital employed, % | 14.5 | 28.9 | 25.6 |
--------------------------------------------------------------------------------
| Return on equity, % | 11.3 | 23.6 | 20.7 |
--------------------------------------------------------------------------------
| Equity ratio, % | 56.7 | 68.9 | 65.9 |
--------------------------------------------------------------------------------
| Gearing ratio, % | 7.4 | -3.7 | 7.9 |
--------------------------------------------------------------------------------
| Net interest-bearing | 122 | -75 | 155 |
| liabilities, EUR m | | | |
--------------------------------------------------------------------------------
| Equity per share, EUR | 11.94 | 14.48 | 14.04 |
--------------------------------------------------------------------------------
| Personnel, average | 13 460 | 14 644 | 14 953 |
--------------------------------------------------------------------------------
| Number of shares | 140 264 945 | 140 209 778 | 140 255 479 |
--------------------------------------------------------------------------------
| - excluding treasury shares | 138 845 063 | 138 744 435 | 138 788 542 |
--------------------------------------------------------------------------------
| - diluted, average | 138 818 458 | 138 796 771 | 138 773 118 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| STATEMENT OF CHANGES IN EQUITY Q1/2009 |
--------------------------------------------------------------------------------
| EUR | |
| millio | |
| n | |
--------------------------------------------------------------------------------
| | Shar | Shar | Cash | Tran | Other | Retai | Equity | Minori | Total |
| | e | e | flow | s-la | reser | ned | attri- | ty | equit |
| | capi | pre- | hedg | tion | ves | earn- | butabl | inter- | y |
| | tal | mium | es | diff | | ings | e to | ests | |
| | | | | . | | | share- | | |
| | | | | | | | holder | | |
| | | | | | | | s of | | |
| | | | | | | | the | | |
| | | | | | | | parent | | |
--------------------------------------------------------------------------------
| EQUITY | 238 | 220 | -37 | -36 | 0 | 1 563 | 1 948 | 2 | 1 950 |
| 1 Jan | | | | | | | | | |
| 2009 | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | 0 | | | | | | 0 | | 0 |
| issue | | | | | | | | | |
--------------------------------------------------------------------------------
| Divide | | | | | | -187 | -187 | | -187 |
| nd | | | | | | | | | |
| distri | | | | | | | | | |
| bution | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | | | | | 0 | 0 | 0 | | 0 |
| based | | | | | | | | | |
| pay-me | | | | | | | | | |
| nts | | | | | | | | | |
--------------------------------------------------------------------------------
| Transf | | | | 16 | | -7 | 8 | | 8 |
| ers | | | | | | | | | |
| betwee | | | | | | | | | |
| n | | | | | | | | | |
| retain | | | | | | | | | |
| ed | | | | | | | | | |
| earnin | | | | | | | | | |
| gs and | | | | | | | | | |
| compre | | | | | | | | | |
| hensiv | | | | | | | | | |
| e | | | | | | | | | |
| income | | | | | | | | | |
--------------------------------------------------------------------------------
| Total | | | 1 | -22 | | -90 | -111 | 0 | -111 |
| compre | | | | | | | | | |
| hensiv | | | | | | | | | |
| e | | | | | | | | | |
| income | | | | | | | | | |
--------------------------------------------------------------------------------
| EQUITY | 238 | 220 | -37 | -42 | 1 | 1 278 | 1 658 | 2 | 1 660 |
| 31 Mar | | | | | | | | | |
| 2009 | | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| STATEMENT OF CHANGES IN EQUITY Q1/2008 |
--------------------------------------------------------------------------------
| EUR | |
| millio | |
| n | |
--------------------------------------------------------------------------------
| | Shar | Shar | Cash | Tran | Other | Retai | Equity | Minori | Total |
| | e | e | flow | s-la | reser | ned | attri- | ty | equit |
| | capi | pre- | hedg | tion | ves | earn- | butabl | inter- | y |
| | tal | mium | es | diff | | ings | e to | ests | |
| | | | | . | | | share- | | |
| | | | | | | | holder | | |
| | | | | | | | s of | | |
| | | | | | | | the | | |
| | | | | | | | parent | | |
--------------------------------------------------------------------------------
| EQUITY | 238 | 220 | 9 | -6 | 0 | 1 498 | 1 960 | 3 | 1 963 |
| 1 Jan | | | | | | | | | |
| 2008 | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | 0 | | | | | | 0 | | 0 |
| issue | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | | | | | | 0 | 0 | | 0 |
| based | | | | | | | | | |
| pay-me | | | | | | | | | |
| nts | | | | | | | | | |
--------------------------------------------------------------------------------
| Total | | | -9 | -3 | 0 | 72 | 60 | | 60 |
| compre | | | | | | | | | |
| hensiv | | | | | | | | | |
| e | | | | | | | | | |
| income | | | | | | | | | |
--------------------------------------------------------------------------------
| EQUITY | 238 | 220 | 0 | -9 | 0 | 1 570 | 2 020 | 3 | 2 023 |
| 31 Mar | | | | | | | | | |
| 2008 | | | | | | | | | |
--------------------------------------------------------------------------------
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| NET SALES BY REGION |
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| As % of net sales | Q1/09 | Q1/08 | 2008 |
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| Finland | 32 | 32 | 31 |
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| Other Nordic countries | 33 | 33 | 31 |
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| Central Eastern Europe, Russia and | 15 | 16 | 20 |
| Ukraine | | | |
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| Rest of Europe | 15 | 16 | 15 |
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| Other countries | 5 | 3 | 4 |
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| CONTINGENT LIABILITIES |
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| EUR million | 31 Mar | 31 Mar | 31 Dec |
| | 2009 | 2008 | 2008 |
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| Mortgaged real estate | 73 | 24 | 24 |
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| Pledged assets | 1 | 5 | 5 |
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| Other guarantees given | 39 | 45 | 45 |
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| Collateral given on behalf of others | 4 | 6 | 2 |
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| Rental liabilities | 127 | 154 | 132 |
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| VALUES OF DERIVATIVE CONTRACTS |
--------------------------------------------------------------------------------
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| CASH FLOW HEDGES QUALIFYING FOR HEDGE ACCOUNTING |
--------------------------------------------------------------------------------
| | 31 Mar 2009 | 31 Mar | 31 Mar 2008 | 31 Mar |
| | Nominal | 2009 | Nominal | 2008 |
| | amount | Fair | amount | Fair |
| | | value | | value |
| | | EUR | | EUR |
| | | million | | million |
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| Zinc derivatives | | | | |
--------------------------------------------------------------------------------
| Forward contracts, | 36 000 | -26 | 45 000 | -6 |
| tonnes | | | | |
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| Electricity | | | | |
| derivatives | | | | |
--------------------------------------------------------------------------------
| Forward contracts, | 1 886 | -24 | 1 232 | 6 |
| GWh | | | | |
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--------------------------------------------------------------------------------
| The unrealised movements in the fair value of cash flow hedges are |
| recognised in equity to the extent the hedge is effective. Other movements |
| in fair value are recorded through profit and loss. |
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--------------------------------------------------------------------------------
| DERIVATIVES NOT QUALIFYING FOR HEDGE ACCOUNTING |
--------------------------------------------------------------------------------
| EUR million | 31 Mar 2009 | 31 Mar | 31 Mar 2008 | 31 Mar |
| | Nominal | 2009 | Nominal | 2008 |
| | amount | Fair | amount | Fair |
| | | value | | value |
--------------------------------------------------------------------------------
| Electricity | | | | |
| derivatives | | | | |
--------------------------------------------------------------------------------
| Forward contracts, | 2 | 0 | | |
| GWh | | | | |
--------------------------------------------------------------------------------
| Foreign currency | | | | |
| derivatives | | | | |
--------------------------------------------------------------------------------
| Forward contracts | 811 | 14 | 534 | -9 |
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| Options | | | | |
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| Bought | 65 | 7 | 180 | -2 |
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| Sold | 68 | 1 | 180 | -11 |
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| CHANGES IN PROPERTY, PLANT AND EQUIPMENT |
--------------------------------------------------------------------------------
| EUR million | Q1/09 | Q1/08 | 2008 |
--------------------------------------------------------------------------------
| Carrying value at start of period | 1 124 | 1 076 | 1 076 |
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| Additions | 37 | 45 | 215 |
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| Additions through acquisitions | 3 | 0 | 8 |
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| Disposals | -2 | -1 | -8 |
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| Disposals through divestments | 0 | 0 | -22 |
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| Depreciation and impairment | -32 | -30 | -119 |
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| Translation differences | -10 | -2 | -26 |
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| Carrying value at end of period | 1 119 | 1 088 | 1 124 |
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| TRANSACTIONS WITH RELATED PARTIES |
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| EUR million | Q1/09 | Q1/08 | 2008 |
--------------------------------------------------------------------------------
| Sales to associates | 6 | 6 | 30 |
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| Purchases from associates | 1 | 0 | 6 |
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| Transactions with Pension Foundation | 2 | 1 | 6 |
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--------------------------------------------------------------------------------
| | 31 Mar | 31 Mar | 31 Dec 2008 |
| | 2009 | 2008 | |
--------------------------------------------------------------------------------
| Non-current receivables | 0 | 0 | 0 |
--------------------------------------------------------------------------------
| Trade and other receivables | 3 | 5 | 5 |
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| Trade and other payables | 0 | 1 | 0 |
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| INVESTMENT COMMITMENTS* |
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| EUR million | After 31 | After 31 | After 31 |
| | Mar 2009 | Mar 2008 | Dec 2008 |
--------------------------------------------------------------------------------
| Maintenance investments | 106 | 137 | 102 |
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| Development investments and | 82 | 187 | 113 |
| investments in special products | | | |
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| Total | 188 | 324 | 215 |
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* Investment commitments include the estimated costs of projects that have been
given the go ahead.
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| INFORMATION ON BUSINESS COMBINATIONS | | |
--------------------------------------------------------------------------------
| EUR million | Fair values | Carrying values |
| | | of acquired |
| | | companies |
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| Assets and liabilities of acquired | | |
| companies | | |
--------------------------------------------------------------------------------
| Non-current assets | 3 | 2 |
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Inventories | 1 | 1 |
--------------------------------------------------------------------------------
| Trade and other receivables | 1 | 1 |
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| Cash and cash equivalents | 4 | 4 |
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| Total assets | 8 | 7 |
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| Non-current liabilities | | |
--------------------------------------------------------------------------------
| Interest-bearing | 0 | 0 |
--------------------------------------------------------------------------------
| Other | 0 | 0 |
--------------------------------------------------------------------------------
| Current liabilities | | |
--------------------------------------------------------------------------------
| Interest-bearing | 0 | 0 |
--------------------------------------------------------------------------------
| Other | 3 | 3 |
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| Total liabilities | 3 | 3 |
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--------------------------------------------------------------------------------
| Net assets | 5 | 5 |
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--------------------------------------------------------------------------------
| Acquisition cost | 12 | |
--------------------------------------------------------------------------------
| - including conditional purchase | 0 | |
| price | | |
--------------------------------------------------------------------------------
| Goodwill | 7 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition cost paid in cash | 10 | |
--------------------------------------------------------------------------------
| Cash and cash equivalents of acquired | 4 | |
| company | | |
--------------------------------------------------------------------------------
| Impact on cash flow | 7 | |
--------------------------------------------------------------------------------
| The figures above include information about the acquisition of Skalles |
| Eiendomsselskap AS. Rautaruukki acquired the entire share capital of the |
| Norwegian steel frame company Skalles Eiendomsselskap AS from its private |
| owners in February 2009. The acquisition strengthens the Group's market |
| position in the Nordic countries and particularly in Norwegian steel |
| construction. Skalles' business complements the Group's customer base and |
| product offering. Skalles' total deliveries include the design, manufacture |
| and installation of steel structures. The company has some 50 employees and |
| its net sales for 2008 were approximately EUR 16 million. Skalles is located |
| in Fredrikstad, Norway. The acquisition calculation is provisional in |
| accordance with IFRS 3. |
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| SEGMENT INFORMATION |
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| EUR million | Q1/09 | Q1/08 | 2008 |
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| External net sales | | | |
--------------------------------------------------------------------------------
| Ruukki Construction | 132 | 225 | 1 067 |
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| Ruukki Engineering | 125 | 188 | 765 |
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| Ruukki Metals | 249 | 525 | 2 019 |
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| Corporate management | 0 | 1 | 0 |
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| Consolidated net sales | 506 | 939 | 3 851 |
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| Operating profit | | | |
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| Ruukki Construction | -13 | 21 | 128 |
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| Ruukki Engineering | 5 | 32 | 126 |
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| Ruukki Metals | -102 | 97 | 338 |
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| Corporate management | -3 | -7 | -25 |
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| Consolidated operating profit | -113 | 143 | 568 |
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--------------------------------------------------------------------------------
| Finance income and expense | -9 | -4 | -23 |
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| Share of results of associates | 0 | 1 | 3 |
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| Result before taxes | -122 | 140 | 548 |
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| Taxes | 32 | -34 | -142 |
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| Result for the period | -90 | 106 | 406 |
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| SEGMENT ASSETS |
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| EUR million | 31 Mar | 31 Mar | 31 Dec |
| | 2009 | 2008 | 2008 |
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| Segment assets | | | |
--------------------------------------------------------------------------------
| Ruukki Construction | 710 | 756 | 761 |
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| Ruukki Engineering | 471 | 393 | 411 |
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| Ruukki Metals | 1 018 | 1 246 | 1 247 |
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| Corporate management | 42 | 38 | 36 |
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| Undistributed assets | 700 | 528 | 527 |
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| Total assets | 2 941 | 2 961 | 2 983 |
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| QUARTERLY SEGMENT INFORMATION, COMPARABLE, EXCLLUDING NON-RECURRING ITEMS |
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| EUR million | Q1/08 | Q2/08 | Q3/08 | Q4/08 | 2008 | Q1/09 |
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| External net sales | | | | | | |
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| Ruukki Construction | 225 | 285 | 309 | 248 | 1 067 | 132 |
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| Ruukki Engineering | 188 | 205 | 184 | 187 | 765 | 125 |
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| Ruukki Metals | 511 | 571 | 503 | 412 | 1 997 | 249 |
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| Corporate management | 1 | -1 | 0 | 0 | 0 | 0 |
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| Consolidated net | 925 | 1 060 | 996 | 847 | 3 829 | 506 |
| sales | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating profit | | | | | | |
--------------------------------------------------------------------------------
| Ruukki Construction | 21 | 38 | 56 | 17 | 132 | -13 |
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| Ruukki Engineering | 32 | 35 | 34 | 27 | 128 | 5 |
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| Ruukki Metals | 96 | 106 | 112 | 36 | 350 | -102 |
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| Corporate management | -7 | -7 | -5 | -6 | -25 | -3 |
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| Consolidated | 141 | 172 | 197 | 74 | 584 | -113 |
| operating profit | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Finance income and | -4 | 1 | -2 | -18 | -23 | -9 |
| expense | | | | | | |
--------------------------------------------------------------------------------
| Share of results of | 1 | 1 | 1 | 0 | 3 | 0 |
| associates | | | | | | |
--------------------------------------------------------------------------------
| Result before taxes | 139 | 174 | 195 | 56 | 564 | -122 |
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| Taxes | -34 | -45 | -56 | -7 | -142 | 32 |
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| Result for the | 105 | 129 | 139 | 49 | 422 | -90 |
| period | | | | | | |
--------------------------------------------------------------------------------
Formulas for the calculation of key indicators::
--------------------------------------------------------------------------------
| Return on capital | = | result before taxes + finance expense | x100 |
| employed, % | | (rolling 12 | |
| | | months) | |
| | | ------------------------------ | |
| | | ---- | |
--------------------------------------------------------------------------------
| | | total equity + interest-bearing | |
| | | financial liabilities (average at | |
| | | beginning and end of period) | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Return on equity, % | = | result before taxes - taxes (rolling | x100 |
| | | 12 | |
| | | months) | |
| | | ------------------------------ | |
| | | ------ | |
--------------------------------------------------------------------------------
| | | total equity (average at beginning and | |
| | | end of period) | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity ratio, % | = | total | x100 |
| | | equity | |
| | | ------------------------------- | |
| | | ------- | |
--------------------------------------------------------------------------------
| | | balance sheet total - advances | |
| | | received | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Gearing ratio, % | = | net interest-bearing financial | x100 |
| | | liabilities | |
| | | -------------------------- | |
| | | ------------- | |
--------------------------------------------------------------------------------
| | | total equity | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net interest-bearing | = | interest-bearing financial liabilities | |
| financial | | - interest-bearing financial assets | |
| liabilities | | and other cash and cash equivalents | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share | = | profit or loss attributable to equity | |
| (EPS) | | holders of the parent | |
| | | company | |
| | | ------------------------------ | |
| | | ---------- | |
--------------------------------------------------------------------------------
| | | weighted average number of shares | |
| | | outstanding during the period | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share | = | profit or loss attributable to equity | |
| (EPS), diluted | | holders of the | |
| | | parent | |
| | | ------------------------------- | |
| | | ------- | |
--------------------------------------------------------------------------------
| | | weighted average diluted number of | |
| | | shares outstanding during the period | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity per share | = | equity attributable to equity holders | |
| | | of the | |
| | | parent | |
| | | company | |
| | | ------------------------------ | |
| | | ---------- | |
--------------------------------------------------------------------------------
| | | basic number of shares at the balance | |
| | | sheet date | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Volume weighted | = | total EUR trading of | |
| average price | | shares | |
| | | ------------------------------- | |
| | | --------- | |
--------------------------------------------------------------------------------
| | | total number of shares traded | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Market | = | basic number of shares at the end of | |
| capitalisation | | the period x closing price at the end | |
| | | of the period | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Personnel, average | = | average number of personnel at the end | |
| | | of each month during the period | |
--------------------------------------------------------------------------------
