26 oktober, 2005
08:00 CET
Rautaruukki Corporation Interim Report January-September 2005
Rautaruukki Corporation Stock Exchange Release 26 October 2005 at 9.00
PROFIT BEFORE TAXES EUR 491 MILLION - MARKET OUTLOOK CONTINUES TO BE FAVOURABLE
- Net sales: EUR 2,764 million (2,559 million in January-September 2004)
- Operating profit: EUR 495 million (327)
- Share of associated companies' profit: EUR 20 million (1)
- Profit before taxes: EUR 491 million (292)
- Earnings per share (diluted): EUR 2.64 (1.64)
- Gearing ratio: 34.1 per cent (77.2)
Key figures 2005* 2004 2005* 2004 2004
7-9 7-9 1-9 1-9 1-12
Net sales, EUR million 812 854 2,764 2,559 3,564
Operating profit, EUR million 114 128 495 327 493
Operating profit margin, % 14.1 14.9 17.9 12.8 13.8
Profit before taxes, EUR million 116 118 491 292 443
Earnings/share, diluted, EUR 0.61 0.60 2.64 1.64 2.40**
*Ovako has been included as an associated company in Rautaruukki's consolidated
financial statements as from 1 May 2005, Metalplast has been included in
Rautaruukki's consolidated financial statements as from 1 June.
**The reduction in the deferred tax liability resulting from the change in
Finnish tax legislation increased EPS by EUR 0.13.
Third-quarter highlights
- Delivery volumes of standard steel products fell due to destocking among
wholesalers.
- Selling prices declined somewhat compared with the previous quarter.
- Measures on profitability based sales and production control were carried on.
- The profitability of Ruukki Construction and Ruukki Engineering improved from
the second quarter.
- Consolidated operating profit EUR 114 million was at a level comparable with
last year (115).
- An agreement on the acquisition of Syneco Industri AB (Weibulls) was signed.
- An agreement was made on raising the Group's holding in PPTH to 100 per cent.
President and CEO Sakari Tamminen:
"Demand in our main customer industries - construction and engineering
industries - has remained good throughout the current year. The destocking that
got under way within standard steel products in the first half of the year
translated into pressure on spot selling prices. We continued to gear the sales
structure based on profitability and we adjusted output in line with profitable
demand. In the third quarter, destocking and the holiday season caused a slight
drop in selling prices. The effect of higher raw material prices was also felt
to the full extent during the past quarter. The profitability was very good
despite the market disturbances and Ruukki Construction and Ruukki Engineering
improved their profitability from the second quarter. The stock situation has
now normalised according to expectations and the outlook for the trend in
selling prices of standard steel products in the latter part of the year is
more positive.
We have put a strong emphasis on implementing the new strategy. In the third
quarter we announced two acquisitions: Weibulls, which manufactures frames and
other large steel components for the lifting, handling and transport
industries, and PPTH, the leading steel constructor in the Nordic countries,
will play their part in swiftly putting our strategy into action. The financial
targets in the Ruukki United programme aiming at harmonising and enhancing
Ruukki's ways of working have been outlined. By the end of 2008, the cost level
is expected to be permanently about EUR 125 million lower than the initial
level in 2004. The efficiency-boosting measures are also estimated to free up
about 150 million euros of capital by the end of 2008. The non-recurring costs
have been considered when setting the above-mentioned cost-saving targets. The
capital expenditure needed is about EUR 30 million. The impacts on the number
of personnel will be specified project by project and it is estimated that the
reductions will be mainly implemented by retirement and relocations.
Full-year consolidated net sales in 2005 are estimated to exceed EUR 3.6
billion. Profitability is estimated to hold up well during the latter part of
the year and fourth-quarter operating profit is expected to come in on a par
with the third quarter or to exceed it. The comparable operating profit for the
whole year will thus be clearly better than last year and the strengthening
market situation creates a good basis for entering the year 2006. The primary
factors of uncertainty relate to the trend in demand in the Asian market and
its impact on the market prices of basic steel products."
FOR ADDITIONAL INFORMATION, CONTACT
President and CEO Sakari Tamminen, tel. +358 20 592 9075
CFO Mikko Hietanen, tel. +358 20 592 9030
Press conference
Rautaruukki will arrange a press conference on 26 October 2005 at 10.30 a.m. at
the company's head office at the address Suolakivenkatu 1, 00810 Helsinki.
Webcast and conference call
The webcast and conference call for investors and analysts can be viewed live
on the company's website at the address www.ruukki.com/investors today 26
October 2005, at 2.00 p.m. Those desiring to participate in the conference call
can phone the number +44 20 7162 0080, password: Rautaruukki, about 5-10
minutes before the conference starts.
The Interim Report for January-September 2005 can be viewed on the company's
website at the address www.ruukki.com/investors.
Rautaruukki Corporation
Taina Kyllönen
Vice President, Corporate Communications
RAUTARUUKKI CORPORATION INTERIM REPORT JANUARY-SEPTEMBER 2005
Transition to International Financial Reporting Standards (IFRS)
Rautaruukki adopted International Financial Reporting Standards (IFRS) from the
beginning of 2005. Additional information and a more detailed discussion of the
effects of the transition on the balance sheet and profit and loss account were
given in the company's stock exchange release of 26 April 2005 and they can be
read on Rautaruukki's website at www.ruukki.com/investors. This Interim Report
has been prepared in accordance with the recognition and measurement rules
under International Financial Reporting Standards (IFRS).
Net sales and result for January-September 2005 (comparative figures for 2004)
Oy Ovako Ab, the new company jointly owned by Rautaruukki Corporation, AB SKF
and Wärtsilä Oyj Abp, began operations on 10 May 2005. Rautaruukki has a 47 per
cent stake in Ovako. Ovako has been included as an associated company in
Rautaruukki's consolidated financial statements as from 1 May 2005. The units
that transferred to Ovako are included in the reported figures up to 30 April
2005.
Metalplast-Oborniki Holding Sp. z o.o has been included in Rautaruukki's
consolidated financial statements as from 1 June 2005.
Consolidated net sales in January-September 2005 were EUR 2,764 million, up 8
per cent on the net sales in January-September 2004 (2,559). Measured against
comparable net sales of EUR 2,346 million in 2004, growth was 17.8 per cent.
Net sales were boosted by a markedly higher price level. Delivery volumes
declined by about 18 per cent compared with the same period a year earlier. The
fall in delivery volumes was attributable to the non-inclusion of the units
that transferred to Ovako in financial reporting as from 1 May 2005 as well as
to the company's internal measures to improve the sales structure and the
winding down of wholesalers' inventories that began towards the end of the
first quarter. Of net sales, 29 per cent came from Finland (26) and 30 per cent
from the other Nordic countries (28). Central Eastern Europe accounted for 11
per cent of net sales (11), the rest of Europe for 27 per cent (32) and other
countries for 3 per cent (3).
Operating profit was EUR 495 million (327), or 17.9 (12.8) per cent of net
sales. Comparable operating profit in 2004 was EUR 302 million, or 12.9 per
cent of net sales. Operating profit was lifted by the rise in product prices
coupled with an improvement in the sales structure and cost-effectiveness.
Price agreements on raw materials used in steel manufacture were made in the
first part of the year at a substantially higher level than a year ago, with a
corresponding impact on earnings beginning in the second quarter. The lower
exchange rate of the US dollar against euro added EUR 20 million to operating
profit compared with the same period a year earlier.
Net financial expenses amounted to EUR 24 million (36). Net interest expenses
totalled EUR 24 million (34) and the net effect of foreign exchange gains and
losses was EUR 0 million (0).
The share of associated companies' profit was EUR 20 million (1).
The profit before taxes was EUR 491 million (292).
Taxes amounted to EUR -130 million (-66), including an increase of EUR +11
million in deferred taxes (+11).
The profit for the report period was EUR 362 million (225).
Diluted earnings per share were EUR 2.64 (1.64).
The return on capital employed over the past twelve months was 35.7 per cent
(17.7) and the return on equity was 38.4 per cent (24.6).
Balance sheet
Total assets increased by EUR 63 million from the end of September of last
year. From the end of 2004, total assets decreased by EUR 18 million to EUR
2,694 million.
Cash flow and financing
Cash flow from operations was EUR 461 million (270) and cash flow before
financing was EUR 380 million (207).
Interest-bearing net debt at the end of September totalled EUR 477 million
(791). At the end of 2004, interest-bearing net debt stood at EUR 761 million.
Working capital grew by EUR 57 million in January-September (109) owing to the
increase in trade debtors and stocks, but it decreased by EUR 85 million during
the third quarter.
The equity ratio was 52.3 per cent (39.1) and the gearing ratio 34.1 per cent
(77.2). At the end of September liquid funds amounted to EUR 83 million and it
had a total of EUR 300 million of committed unused revolving credit facilities
with banks. Shareholders' equity stood at EUR 1,399 million at the end of
September (1,023), or EUR 10.27 per share (7.53).
Personnel
The average number of personnel employed by the Group in the January-September
period was 11,800 people (12,330). At the end of September the entire payroll
was 11,086 employees (12,026). The change in the number of employees was a
decrease of 940 people. The acquisition of Velsa Oy increased the Group's
payroll by 396 employees and the acquisition of Metalplast by 726 employees.
During the report period, 1,900 employees of the Group transferred to the
employ of Ovako.
Completed changes in corporate structure
Oy Ovako Ab, the new company jointly owned by Rautaruukki Corporation, AB SKF
and Wärtsilä Oyj Abp, began operations in May. The units that were transferred
from Rautaruukki to Ovako were the long steel products companies Fundia Special
Bar, Fundia Wire and Fundia Bar & Wire Processing with their subsidiaries.
Rautaruukki has a 47 per cent stake in Ovako. Ovako has been included as an
associated company in Rautaruukki's consolidated financial statements as from 1
May 2005. The capital invested by Rautaruukki in Ovako at 1 May 2005 amounted
to about EUR 278 million. Of this amount, an EUR 80 million shareholder loan
was repaid to Rautaruukki in its entirety during the report period. Additional
information on the effects of the arrangement (pro forma) on Rautaruukki's
balance sheet and profit and loss account were given in the company's stock
exchange release of 6 June 2005, which can be accessed on Rautaruukki's website
at www.ruukki.com/investors.
Rautaruukki Corporation's stake in the Polish company Metalplast-Oborniki
Holding Sp. z o.o was raised in June from 16.6 per cent to 99.8 per cent. The
shares were bought for a price of EUR 19 million, in addition to which
Rautaruukki assumed interest-bearing liabilities of EUR 7 million. The
remaining 0.2 per cent of the shares are held by individual shareholders.
Metalplast has been included in Rautaruukki's consolidated financial statements
as from 1 June 2005.
Agreements on acquisitions
In August, Rautaruukki Corporation announced it would buy the entire shares
outstanding in Syneco Industri AB of Sweden. The shares were bought for a price
of about EUR 15 million, in addition to which Rautaruukki took on about EUR 1
million of interest-bearing liabilities. The competition authorities gave their
approval for the arrangement on 30 September 2005, and the acquisition was
completed on 5 October 2005. Syneco Industri is included in Rautaruukki's
consolidated accounts as from 1 October 2005. Syneco Industri's operating
subsidiaries are Verkstäderna Weibulls AB in Sweden, Weibulls Poland sp. z o.o
in Poland and Syneco Weibulls Metal Components (Shanghai) Co. Ltd in China. The
companies manufacture frames and other large steel components for the lifting,
handling and transport industries. In 2005 the company's net sales are
estimated to be about EUR 50 million, with operating profit of EUR 2 million
and an average payroll of 495 employees.
In September Rautaruukki Corporation signed an agreement whereby the company
will purchase an 80 per cent stake in PPTH Steelmanagement Oy from the
company's management and funds managed by CapMan, a private equity investor.
Via the deal, Rautaruukki's holding in the company will rise from 20 per cent
to 100 per cent. The shares were bought for a price of about EUR 7 million. As
part of the transaction, Rautaruukki will assume the company's interest-bearing
liabilities, which amount to EUR 24 million. Completion of the acquisition is
contingent upon approval by the competition authorities. It is expected that
the transaction will close in November 2005. PPTH is the leading steel
constructor in the Nordic countries, and it had net sales in 2004 of EUR 101
million. In Finland, PPTH has seven production units that manufacture frame and
facade structures as well as products for the engineering industry. The company
had a payroll of 500 employees at the end of 2004.
In September Rautaruukki Corporation sold its vacuum cleaner tube business to
FON Telescopic Systems GmbH. Rautaruukki's subsidiary Froh House Tech GmbH & Co
KG has manufactured vacuum cleaner tubes in Germany. The company has net sales
of about EUR 12 million and a payroll of 71 employees. Under the terms of the
deal, the equipment for manufacturing vacuum cleaner tubes along with 54
employees will be transferred to FON Telescopic Systems. Froh House Tech will
retain a steel tube manufacturing line and 17 employees.
Capital expenditure
Capital expenditure on tangible and intangible assets in January-September
totalled EUR 69 million (82). Disposals of fixed assets during the report
period totalled EUR 10 million (17). Full-year net capital expenditures in 2005
are expected to come to less than EUR 100 million.
Funds spent on acquisitions during the report period totalled EUR 26 million,
with property, plant and equipment increasing by EUR 10 million, working
capital by EUR 7 million and goodwill by EUR 9 million.
On the second quarter, the company took a decision on modernising the direct
quench equipment at the Raahe Works. The investment is expected to be completed
in 2007 at an estimated cost of about EUR 24 million. The investment will raise
the proportion of high-strength steels within Rautaruukki's steel products
palette and support Ruukki Engineering's business in the fast-growing lifting,
handling and transport equipment sector.
Shares and share capital
The trading volume of the Rautaruukki Corporation share on the Helsinki Stock
Exchange in January-September was EUR 1,510 million (397). The share registered
a high of EUR 18.69 in September and a low of EUR 8.02 in January. The average
share price was EUR 12.04. The price of the share at the end of the report
period on September 30, 2005 was EUR 18.69 and the company had a market
capitalisation of EUR 2,596 million.
The company's registered share capital at 30 September 2005 stood at EUR 236.1
million. The number of Series K shares issued was 138,886,445.
Rautaruukki Corporation's Annual General Meeting held on 23 March 2005
authorised the Board of Directors to decide on buying back a maximum of
3,800,000 of the company's own Series K shares (2.74 per cent of the shares
outstanding). The Annual General Meeting furthermore authorised the Board of
Directors to decide on transferring a maximum of 6,872,960 Series K treasury
shares. Under the Board of Directors' existing authorisation, on 29 August 2005
the company transferred 480,263 of its own Series K shares (treasury shares)
without consideration to persons covered by the Group's share bonus scheme.
Following the transfer, the company had 2,592,697 treasury shares. The treasury
shares had a market value at 30 September 2005 of EUR 48 million.
In addition to the above, the Board of Directors does not have a valid
authorisation to issue convertible bonds or bonds with warrants or to increase
the company's share capital.
Environmental issues
The EU's internal emissions trading started on 1 January 2005. Of Rautaruukki's
plants, Raahe and Hämeenlinna in Finland fall within the scope of the EU's
emissions trading. Smedjebacken in Sweden, Alblasserdam in the Netherlands and
Koverhar in Finland became a part of Oy Ovako Ab, which began operations on 10
May 2005. A similar system has been developed in Norway, and it will be linked
to the EU's emissions trading. The Norwegian system will apply to the Mo i Rana
Works.
In the initial allocation of emissions allowances, Rautaruukki received a total
of about 18.6 million tonnes of carbon dioxide allowances, of which about 6.2
million tonnes were for 2005. Of these, the portion for the units that
transferred to Ovako amounted to a total of 3.2 million tonnes, and the portion
of emissions allowances allocated for 2005 is about 1.08 million tonnes.
Changes in the Management Group
Marko Somerma (Lic.Tech.) was appointed a member of Rautaruukki Corporation's
Management Group as from 1 October 2005. He is responsible for Rautaruukki's
corporate planning and logistics. Mr Somerma has been employed at Rautaruukki
and a member of the Extended Management Group since 2004.
Terhi Heikkinen, M.Sc. (Econ.), will take up her duties as Rautaruukki
Corporation's Senior Vice President, Human Resources, and become a member of
the Extended Management Group on 1 November 2005.
Improving cost-competitiveness
In autumn 2004 the company launched the Ruukki United programme aiming at
harmonising and enhancing the ways of working. The objective of the project is
to improve the cost structure so that cost competitiveness and profitability
are also strengthened. The cost savings programme will be carried out stage by
stage, targeting savings of about EUR 70 million at the end of 2006 and about
EUR 95 million at the end of 2007. By the end of 2008, the cost level is
expected to be permanently about EUR 125 million lower than the initial level
in 2004. About 55 million euros of the savings are estimated to come from basic
steel production. Raising the efficiency of the order-to-cash chain,
eliminating overlapping functions and centralising purchasing activities are
estimated to deliver further savings of about EUR 70 million. In addition to
the programmes that are now under way, the Group has identified new areas where
the effect of rationalisation measures is estimated to lower costs by about EUR
25 million. The aim is to implement them within the framework of the same
programme. It is also estimated that the efficiency-boosting programme will
free up about 150 million euros of capital by the end of 2008, especially by
optimising stocks and stepping up the working capital turnover ratio. As a
consequence of the projects job assignments will be reduced and the new ways of
working create new job assignments. The impacts on personnel will be specified
project by project and it is estimated that the reductions will be mainly
implemented by retirement and relocations. The non-recurring costs connected
with the projects have been considered when setting the above-mentioned cost-
saving targets. The capital expenditure needed is about EUR 30 million.
Events after the close of the report period
Rautaruukki Corporation completed the acquisition of Syneco Industri AB from AB
Pehrson & Lindgren of Sweden on 5 October 2005. Syneco Industri will be
included in Rautaruukki's consolidated financial statements as from 1 October
2005.
In October Rautaruukki Corporation announced it was selling the business
operations of Ruukki Engineering's Halikko Works to Halikko Works Oy in an MBO
transaction. The Halikko Works had net sales in 2004 of EUR 13 million and a
payroll of just over 100 employees.
Near-term outlook
The market situation is expected to remain good in the company's most important
customer industries. Strong economic growth, particularly in the Baltic
countries and central eastern Europe, is especially reflected within
construction. Customers of the engineering industry have strong order books.
Wholesalers' stocks have normalised and the prices of steel products are
expected to head upwards again in the fourth quarter.
Full-year consolidated net sales in 2005 are estimated to exceed EUR 3.6
billion. Profitability is estimated to hold up well during the latter part of
the year and fourth-quarter operating profit is expected to come in on a par
with the third quarter or to exceed it. The comparable operating profit for the
whole year will thus be clearly better than last year and the strengthening
market situation creates a good basis for entering the year 2006. The primary
factors of uncertainty relate to the trend in demand in the Asian market and
its impact on the market prices of basic steel products.
This Interim Report has not been audited.
Helsinki, 26 October 2005
Rautaruukki Corporation
Board of Directors
DIVISIONS
The Ruukki Fabrication functions were made a part of the other divisions as
from 1 January 2005. The 2004 figures for the individual divisions have been
adjusted accordingly in line with the new organisational structure.
The Pipelines business was transferred in August 2005 from Ruukki Construction
to Ruukki Metals. The reference figures have been changed consequently.
Ruukki Construction
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05 III/05
Net sales 61 99 114 103 377 88 137 170
Operating profit 0 16 24 16 57 9 22 39
- % of net sales 0.6 16.6 21.1 15.5 15.0 10.0 16.2 22.7
Net sales in January-September totalled EUR 395 million, up 44 per cent on the
same period a year earlier (274). The division's share of consolidated net
sales was 14 per cent. Net sales were boosted by the good market situation and
the active efforts to expand business on selected business areas. Operating
profit was EUR 70 million (41). Net sales were lifted by the good price level
coupled with stepped-up production efficiency and an improved sales structure.
Metalplast-Oborniki Holding Sp. z o.o. has been consolidated as part of the
Ruukki Construction division as from 1 June 2005.
The operations model of Ruukki Construction's sales was renewed during the
report period to improve customer orientation and operation efficiency. Within
building construction, the sales are based on market areas, which are northern
Europe, central eastern Europe and eastern Europe. Infrastructure construction
will continue as a separate business area.
There has been continued good growth in demand in Ruukki Construction's core
market areas, and especially within industrial and commercial construction. In
northern Europe, complete deliveries of external wall systems have been growing
strongly, and external wall systems in which cladding and windows are pre-
installed in the wall-elements at the plant have been well received by
customers. Development in the countries of central eastern Europe has been
strong, particularly in the area of total deliveries of frames and envelopes
for industrial and retail construction. Ruukki Construction's position on this
market has strengthened considerably. In Ukraine too, total deliveries of
frames and envelopes enjoyed robust growth during the report period. In Russia,
the division has progressed in envelope deliveries within the main customer
segments. In the area of infrastructure construction, the demand situation for
foundation structures was good in the Nordic countries, and a number of route
and harbour projects are under way. Ruukki Construction got a considerable
order for noise barriers during the report period and is delivering noise
barriers for the railway line project Oikorata in Finland on a turnkey basis.
In September, Rautaruukki Corporation signed an agreement whereby the company
will purchase an 80 per cent stake in PPTH Steelmanagement Oy from funds
managed by CapMan, a private equity investor, and the company's management. Via
the deal, Rautaruukki's holding in the company will rise from 20 per cent to
100 per cent. PPTH is the leading supplier of structural steel frames in the
Nordic countries, and the acquisition will also increase Ruukki Construction's
know-how in construction design and project management significantly. The
transaction will also support growth of the business in central eastern Europe.
Completion of the acquisition is contingent upon approval by the competition
authorities.
Ruukki Engineering
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05 III/05
Net sales 63 78 74 113 329 124 114 101
Operating profit 9 15 10 19 53 22 23 23
- % of net sales 14.6 19.3 13.7 16.6 16.2 18.1 20.5 23.1
Net sales in January-September totalled EUR 339 million, up 58 per cent on the
same period a year earlier (215). The increase in net sales compared with last
year stemmed from the good market situation and from the integration of Velsa
Oy into Ruukki Engineering from the beginning of November 2004. The units that
transferred to Ovako have been removed from the division figures as from 1 May
2005. The division's share of consolidated net sales was 12 per cent. Operating
profit was EUR 69 million (35). Operating profit was lifted by higher prices
coupled with efficiency-boosting and an improved sales structure.
The market situation in the engineering industry has held up well. Cabin
deliveries to the lifting, handling and transport industry continued to grow.
Customers' order books have also strengthened further. The high price of oil
has increased the number of starts of offshore projects, and the demand among
customers of the marine and offshore sector is good. In the pulp and paper and
energy sectors there was solid demand during the report period.
In August, Rautaruukki Corporation announced it would buy the entire shares
outstanding in Syneco Industri AB (Weibulls) of Sweden. The competition
authorities gave their approval for the arrangement on 30 September 2005, and
the acquisition was completed on 5 October 2005, after the end of the report
period. Syneco Industri is consolidated as part of Ruukki Engineering as from 1
October 2005. The acquisition will speed up the implementation of Ruukki
Engineering's strategy and extend the internationalisation of its operations.
Via the deal, Rautaruukki will be in a better position to serve international
customers in their new market areas. Weibulls' highly developed concept for
frame and boom solutions will also create new potential for organic growth.
Ruukki Metals
EUR million I/04 II/04 III/04 IV/04 2004 I/05 II/05 III/05
Net sales 668 733 663 787 2850 802 686 541
Operating profit 73 108 105 138 425 180 147 69
- % of nat sales 11.0 14.8 15.8 17.6 14.9 22.4 21.4 12.8
Net sales in January-September totalled EUR 2,029 million, down 2 per cent on
the same period a year earlier (2,063). The decrease in net sales was affected
by the units that transferred to Ovako, which have been removed from the
division figures as from 1 May 2005, as well as the lower volume due to
production adjustments. On comparable net sales in 2004, EUR 1,874 million, the
period's net sales increased by 8 per cent. The division's share of
consolidated net sales was 73 per cent. Operating profit was EUR 396 million
(287). Comparable operating profit in 2004 was EUR 235 million. Operating
profit was lifted by higher prices coupled with efficiency-boosting and an
improved sales structure.
In the third quarter there was a seasonal slowdown over the summer holidays,
particularly within standard steel products. In addition, wholesalers continued
to wind down the stocks that had built up in the first part of the year. The
stock situation is now normalised. Prices of steel products fell somewhat
during the third quarter. At the end of the report period, average prices were
nevertheless still at a clearly higher level than at the same time a year ago.
A factor that contributed to raising the average price level was the entry into
effect of new annual agreements at the beginning of the year.
Development of the sales structure was continued by focusing operations on the
core market areas in the Nordic countries, the Baltic Rim and central eastern
Europe. In addition, the product range will be streamlined to optimise
profitability. In areas outside the core markets, operations are based on a
special product strategy.
Ruukki Production
1000 tonnes I/04 II/04 III/04 IV/04 2004 I/05 II/05 III/05
Steel production 1,184 1,198 985 1,184 4,549 1,176 982 765
Steel output in January-September totalled 2,923,000 (3,367,000). The units
that were transferred to Ovako have been removed from the production figures as
from 1 May 2005. Production ran smoothly during the report period.
Price agreements on raw materials used in steel manufacture were made in the
first part of the year at a substantially higher level than a year ago. The
effect of higher raw material prices will feed through into earnings to the
full extent beginning in the third quarter. The use of purchased slabs this
year is estimated to be about a fourth of last year's figure, and this will
lower manufacturing costs.
The modernised automation system at the Raahe hot rolling mill went into
production in February and a new slab heating furnace became operational at the
beginning of April. The investment projects will bring a significant
improvement in the production line's ability to turn out high-quality products.
The decision taken in the second quarter to modernise the direct quenching
equipment will raise the proportion of high-strength steels within
Rautaruukki's steel products palette and support Ruukki Engineering's business
in the fast-growing lifting, handling and transport equipment sector. The
investment is expected to reach completion in 2007.
TABLES
Individual figures and grand totals presented in the tables have been rounded
off to full millions of euros from exact figures, which mean that when added
together or subtracted they will not always tally.
CONSOLIDATED PROFIT AND LOSS ACCOUNT (CONDENSED)
EUR million 7-9/05 7-9/04 1-9/05 1-9/04 2004
Net sales 812 854 2764 2559 3564
Other operating income 5 2 16 10 19
Operating expenses -665 -689 -2168 -2114 -2915
Depreciation -37 -40 -118 -129 -175
Operating profit 114 128 495 327 493
Financing income and expenses -5 -9 -24 -36 -51
Share of results
in associated companies 6 0 20 1 2
Profit before taxes 116 118 491 292 443
Taxes -31 -35 -130 -66 -114
Profit for the period 84 83 362 226 330
Attributable to:
Equity holders of the company 84 83 362 225 329
Minority interest 0 0 0 1 1
EPS, diluted, e 0.61 0.60 2.64 1.64 2.40
EPS, basic, e 0.62 0.61 2.66 1.66 2.42
Operating profit, % of net sales 14.1 14.9 17.9 12.8 13.8
CONSOLIDATED BALANCE SHEET (CONDENSED)
30 Sept 30 Sept 31 Dec
EUR million 2005 2004 2004
ASSETS
Non-current assets 1501 1370 1417
Current assets
Inventories 582 596 651
Trade and other receivables 528 580 584
Cash and cash equivalents 83 84 60
2694 2631 2712
EQUITY AND LIABILITIES
Equity
Capital attributable to
Company's equity holders 1399 1023 1126
Minority interest 0 1 1
Non-current liabilities
Interest bearing 412 616 625
Other 236 215 224
Current liabilities
Interest bearing 149 259 195
Other 498 517 541
2694 2631 2712
CASH FLOW STATEMENT (CONDENSED)
EUR million 1-9/05 1-9/04 2004
Profit for the period 362 226 330
Adjustments 265 217 306
Cash flow before working
capital changes 627 443 636
Change in working capital -57 -109 -128
Financing items and taxes -109 -64 -122
Cash flow from operations 461 270 386
Cash flow from investing activities -81 -63 -118
Cash flow before financing 380 207 268
Dividends paid -109 -27 -27
Other net cash flow from financing -247 -157 -231
Change in cash and cash equivalents 24 23 10
KEY FIGURES 7-9/05 7-9/04
Net sales, Me 812 854
Operating profit, Me 114 128
as % of net sales 14.1 14.9
Profit before taxes, Me 116 118
as % of net sales 14.2 13.8
KEY FIGURES 1-9/05 1-9/04 2004
Net sales, Me 2,764 2,559 3,564
Operating profit, Me 495 327 493
as % of net sales 17.9 12.8 13.8
Profit before taxes, Me 491 292 443
as % of net sales 17.8 11.4 12,4
Return on capital employed*, % 35.7 17.7 26.0
Return on equity*, % 38.4 24.6 33.8
Equity ratio, % 52.3 39.1 41.7
Gearing ratio, % 34.1 77.2 68.0
Interest bearing net debt, Me 477 791 761
Equity per share, e 10.27 7.53 8.29
Personnel on average 11,800 12,330 12,273
Number of shares 138,886,445 138,886,445 138,886,445
- not counting own shares 136,293,748 135,813,485 135,813,485
- diluted 135,870,405 135,638,985 137,213,485
* based on previous 12 months
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 1-9/2004
EUR million
Attributable to equity holders of the Company
ShareFair value Trans- Re-
Share premium and lation tained Minority
capital account other Differ- earn- Totalinterest
reserves ences ings
EQUITY 1.1. 236 220 1 -5 369 820 1
Change in translation difference 4 4
Share based compensation 0 0
Direct bookings
in retained earnings
Dividend distribution -27 -27
Profit for the period 225 225
EQUITY 30.9. 236 220 1 -1 567 1,023 1
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 1-9/2005
EUR million
Attributable to equity holders of the Company
ShareFair value Trans- Re-
Share premium and lation tained Minority
capital account other Differ- earn- Totalinterest
reserves ences ings
EQUITY 1.1. 236 220 2 -2 671 1,126 1
Changes from IAS 39 and 32:
Cash flow hedging 2 -2 0
ADJUSTED EQUITY 1.1. 236 220 4 -2 670 1,126 1
Cash flow hedging
Increase (hedging reserve) 24 24
Deferred taxes' share of
period movements -6 -6
Change in translation difference -2 -2
Share based compensation 3 3
Change in minority interest -1
Dividend distribution -109 -109
Profit for the period 362 362
EQUITY 30.9. 236 220 25 -4 923 1,399 0
The Pipelines business was transferred in August 2005 from Ruukki Construction
to Ruukki Metals. The reference figures have been changed consequently.
NET SALES BY DIVISION Change
EUR million 1-9/05 1-9/04 % 2004
Ruukki Construction 395 274 44 377
Ruukki Engineering 339 215 58 329
Ruukki Metals 2,029 2,063 -2 2,850
Other units 2 6 8
Consolidated net sales 2,764 2,559 8 3,564
OPERATING PROFIT BY DIVISION
EUR million 1-9/05 1-9/04 2004
Ruukki Construction 70 41 57
Ruukki Engineering 69 35 53
Ruukki Metals 396 287 425
Group management and other units -39 -35 -42
Consolidated operating profit 495 327 493
NET SALES BY QUARTER
EUR million I/04 II/04 III/04 IV/04 I/05 II/05 III/05
Ruukki Construction 61 99 114 103 88 137 170
Ruukki Engineering 63 78 74 113 124 114 101
Ruukki Metals 668 733 663 787 802 686 541
Other units 1 1 3 2 0 2 0
Consolidated net sales 794 911 854 1,005 1,014 939 812
OPERATING PROFIT BY QUARTER
EUR million I/04 II/04 III/04 IV/04 I/05 II/05 III/05
Ruukki Construction 0 16 24 16 9 22 39
Ruukki Engineering 9 15 10 19 22 23 23
Ruukki Metals 73 108 105 138 180 147 69
Group management and other units -7 -17 -12 -7 -10 -12 -17
Consolidated operating profit 76 123 128 166 201 180 114
NET SALES BY QUARTER (PRO FORMA) EXCLUDING UNITS TRANSFERRED TO OVAKO
Me I/04 II/04 III/04 IV/04 I/05 II/05 III/05
Ruukki Construction *) 61 99 114 103 88 137 170
Ruukki Engineering 48 62 61 95 103 107 101
Ruukki Metals *) 556 608 558 647 632 633 541
Other units 1 1 3 2 0 2 0
Consolidated net sales 667 770 736 846 822 878 812
*) Pipelines business transferred from Ruukki Construction to Ruukki Metals in
August 2005.
OPERATING PROFIT BY QUARTER (PRO FORMA) EXCLUDING UNITS TRANSFERRED
TO OVAKO
Me I/04 II/04 III/04 IV/04 I/05 II/05 III/05
Ruukki Construction *) 0 16 24 16 9 22 39
Ruukki Engineering 8 13 8 16 21 24 23
Ruukki Metals *) 71 94 95 119 143 135 69
Group management and other units -7 -17 -12 -7 -10 -12 -17
Consolidated operating profit 71 107 115 144 163 169 114
*) Pipelines business transferred from Ruukki Construction to Ruukki Metals in
August 2005.
NET SALES BY AREA
% of net sales 1-9/05 1-9/04 2004
Finland 29 26 26
Other Nordic countries 30 28 28
Central eastern Europe 11 11 11
Other western Europe 27 32 32
Other countries 3 3 3
CONTINGENT LIABILITIES Group Rautaruukki Oyj
EUR million 9/05 12/04 9/05 12/04
Mortgaged real estates 27 30 27 27
Collateral given on behalf of
Group companies 88 124
associated companies 16 2 16 2
others 6 2 0 0
Leasing and rental liabilities 146 166 127 149
Other financial liabilities 1 2 0 1
VALUES OF DERIVATIVE CONTRACTS
30 September 2005, EUR million
CASH FLOW HEDGES INCLUDED
IN HEDGE ACCOUNTING Nominal value Fair value
Interest rate derivatives
Interest rate swaps 95 -1.0
Zinc derivatives
Forward contracts 36,600* 9.0
Electricity derivatives
Forward contracts 2,336** 17.8
DERIVATIVES NOT INCLUDED
IN HEDGE ACCOUNTING Nominal value Fair value
Interest rate derivatives
Interest rate swaps 374 -3.5
Foreign currency derivatives
Forward contracts 654 4.8
Options
Bought 70 1.8
Sold 70 1.2
140 3.0
*tonnes
**GWh
The unrealised profit/loss of the cash flow hedges are booked to equity, if the
hedge is effective. Other fair value changes are booked to profit and loss.
Rautaruukki Corporation
Taina Kyllönen
VP, Corporate Communications
Ruukki supplies metal-based components, systems and turnkey deliveries to the
construction and mechanical engineering industries. The company has a wide
selection of metal products and services. Ruukki has operations in 23 countries
and employs 12,000 people. Net sales in 2004 totalled EUR 3.6 billion. The
company's share is quoted on the Helsinki Exchanges (Rautaruukki Corporation:
RTRKS).
DISTRIBUTION
Helsinki Exchanges
Principal Media
www.ruukki.com