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Rautaruukki Corporation Interim Report Q1/2014: Comparable operating profit at previous year's level, net sales of special steels up 16%

Rautaruukki Corporation Interim Report 24 April 2014 at 9am EEST

Rautaruukki Corporation Interim Report Q1/2014:Comparable operating profit at
previous year's level, net sales of special
steels up 16%

January-March 2014 (Q1/2013)

- Order intake was EUR 560 million (590).

- Comparable net sales were EUR 581 million (589).
- Reported EBITDA was EUR 28 million (37).
- Comparable operating profit was EUR 5 million (4).
- Comparable result before taxes was -EUR 11 million (-4).
- Net cash from operating activities was -EUR 21 million (22).

Guidance for 2014:

Comparable net sales in 2014 are estimated to grow compared to 2013.
Comparable operating profit in 2014 is estimated to improve compared to 2013.

| Q1/14 Q1/13 2013 |
|Comparable figures |
|Comparable net sales, EUR m 581 589 2,404 |
|Comparable operating profit, 5 4 39 |
| |
|EUR m |
|Comparable operating profit 0.8 0.8 1.6 |
| |
|as % of net sales |
|Comparable result before -11 -4 -1 |
| |
|income tax, EUR m |
| |
|Reported figures |
|Reported net sales, EUR m 581 590 2,405 |
|Reported EBITDA, EUR m 28 37 168 |
|Reported EBITDA as of % of net sales 4.8 6.4 7.0 |
|Reported operating profit, -4 4 34 |
| |
|EUR m |
|Reported result before -20 -4 -6 |
| |
|income tax, EUR m |
| |
|Net cash from operating activities, EUR m -21 22 184 |
|Net cash before financing activities, EUR m -36 7 101 |
|Earnings per share, EUR -0.14 -0.03 -0.10 |
|Return on capital employed (rolling 12 months), % 1.4 -4.1 1.8 |
|Return on capital employed -0.9 0.8 1.8 |
| |
|(annualised), % |
|Gearing ratio, % 74.1 72.4 68.5 |
|Equity ratio, % 44.4 44.3 45.0 |
|Personnel on average 8,572 8,876 8,955 |

"Despite a strengthening of the eurozone Purchasing Managers' Index and GDP
development returning to positive at the end of last year, European economic
development continued to be uncertain during the first quarter. However,
indicators forecasting economic growth were rising in all eurozone countries
and predicting a turn for the better. Steel use has, however, decreased
significantly during recent years as a result of structural change in the
Finnish manufacturing industry. The situation in our home market is worrying.

The Ukraine crisis and its multiplier effects on economic growth in Russia
have not yet been significantly reflected in Ruukki's everyday business in
either Ukraine or Russia. Nevertheless, the impacts of the crisis on exchange
rates resulted in a non-cash calculated exchange rate loss of around EUR 8
million in Ruukki's finance costs during the report period. The unstable
situation in Ukraine increased uncertainty in growth potential not just in
Russia, but also in Finland and across the whole of Europe, and it is still
impossible to assess the ultimate effects of the situation.

As regards Ruukki's most important markets, the pace of economic growth in
Sweden and Norway continued to outperform growth in the eurozone also during
the first part of the year. Construction activity in our main market areas
continued at a low level also taking into account normal seasonality.
Apparent demand for steel across the EU grew by an estimated 3% year on year
during the first quarter and capacity utilisation rates in the European steel
industry showed a slight rise. Due to the uncertain economic situation and
lower market prices of raw materials, inventory replenishment was more
moderate than expected and this in turn had a negative impact on the price
development of steel products.

Ruukki Metals' order intake and net sales were at the same level as a year
earlier. Higher order and delivery volumes of special steel products in
particular offset the negative impact of lower average selling prices
compared to a year earlier. An especially positive note in the first quarter
was that net sales of special steels were up 16% year on year and 5% quarter
on quarter. A weakening of certain currencies in emerging markets outside
Europe impacted negatively on the order intake value of special steels.

In the construction businesses, development continued to be twofold also
during the first quarter of the year. Given market conditions, overall demand
for building products was at a very good level. Order intake and net sales
for roofing products in particular showed clear growth compared to a year
earlier. Demand in commercial and industrial construction continued to be
weak, especially in Finland, and this was reflected in a significant decrease
in Ruukki Building Systems' order intake and net sales. Also in Sweden and
Norway, customers' investment decisions in commercial and industrial
construction were pushed back.

Comparable operating profit was EUR 5 million. Despite a good capacity
utilisation rate and the positive development seen in relative share of
special steels, clearly lower average selling prices drove operating profit
below the level of a year earlier. However, even in these difficult market
conditions, Ruukki Metals posted comparable operating profit of EUR 12
million, which is in line with the original targets of cost saving programmes
completed. Ruukki Building Products broke even during a seasonally difficult
first quarter, which in these market conditions can be considered a good
performance. Ruukki Building Systems' operating result, however, was still
negative due to lower than expected project volume. Consolidated cash flow
was EUR 21 million negative because of EUR 44 million tied up in net working
capital. Net debt rose slightly since the end of 2013 and was EUR 731
million. The gearing ratio was 74.1%.

During the report period, growth of special steels was pursued by signing up
new customers, launching new products and applications, and by further
expanding into new market areas. Compared to the previous year, the results
are beginning to be seen in the form of growing order and delivery volumes in
many market areas. Compared to the previous quarter, sales of special steel
products rose to account for 35% (30) of Ruukki Metals' net sales. The target
is to achieve annual sales of special steel products of EUR 850 million in
2015 (2013: EUR 558 million).

In our construction businesses, we will continue our chosen strategy of energy
efficient construction. Ruukki Building Products has a good market position
in our main markets and we are aiming for profitable growth, especially
through energy-efficient building components and residential roofing
products. Development of components and solutions to optimise a building's
lifecycle energy efficiency is a key aspect. Sales of the new solar thermal
products for single-family homes we launched earlier in the year have got off
to a good start. Also in weak market conditions, renovation construction
creates growth opportunities for building products. In Ruukki Building
Systems, our main aim is still improved profitability through better project
management and more cost-efficient manufacturing.

We expect demand for steel to pick up slightly in 2014. Nevertheless, demand
growth will continue to be limited by overcapacity in the steel markets and
slowing economic growth in emerging countries. We expect demand for special
steels to outpace demand for standard products, especially in market areas
outside Europe. We forecast a modest recovery of construction growth in most
of Ruukki's main market areas in 2014, albeit at a very low level.

Comparable net sales in 2014 are estimated to grow compared to 2013.
Comparable operating profit in 2014 is estimated to improve compared to 2013.

On 22 January 2014, SSAB and Rautaruukki announced a plan to combine the two
companies through SSAB making a public share exchange offer to Rautaruukki's
shareholders which Rautaruukki's Board of Directors recommends to the
company's owners. The Board of Directors of Rautaruukki in its statement
announced on 26 March 2014 recommended to Rautaruukki shareholders that they
accept the share exchange offer. The largest shareholder of Rautaruukki,
Solidium Oy, which holds 39.7% of all Rautaruukki shares, has undertaken to
accept the share exchange offer. The offer period began on 14 April 2014 and
will expire on 12 May 2014, unless the offer period is extended. I believe
that the combination of Ruukki and SSAB gives an excellent opportunity to
continue the rationalisation of the cost base of the companies and build a
new Nordic steel producer that is able to transit the steel business towards
a global special steel company. There is also a good synergy potential in the
construction business which offers profitable growth potential on top of the
synergy benefits. "

Rautaruukki Corporation's full interim report for Q1/2014 is attached to this

For further information, please contact

Sakari Tamminen, President&CEO, tel. +358 20 592 9075

Mikko Hietanen, CFO, tel. +358 20 592 9030

News conference for analysts and the media
A joint news conference in English both for analysts and the media will be
hosted on Thursday 24 April at 10.30am at Ruukki' s head office,
Suolakivenkatu 1, 00810 Helsinki.

A live webcast of the event and the presentation by the company's
President&CEO Sakari Tamminen may be followed online on the company website

Författare Hugin

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