Interim report for January-June 2010: Order intake up, significant improvement in profitability

Rautaruukki Corporation  Interim report  16 July 2010 at 9.00 EEST

First half of 2010 in brief (reference period January-June 2009)

• Order intake during January-June worth EUR 1,103 million, up around 26 per cent year on year.
• Order intake during the second quarter was EUR 596 million, up 33 per cent year on year.
• Consolidated comparable net sales for January-June up 26 per cent at EUR 1,147 million (911).
• Comparable net sales for second quarter up 50 per cent year on year at EUR 647 million (430).
• Consolidated comparable operating profit for January-June was EUR 26 million (-215), equating to 2.2 per cent of net sales (-23.6).
• Comparable operating profit for second quarter was EUR 59 million (-106), equating to 9.2 per cent of net sales (-24.6), including EUR 25 million arising from USD hedging.
• Result before income tax for January-June was -EUR 16 million (-249), equating to -1.3 per cent of net sales (-26.4).
• Result before income tax for second quarter was EUR 28 million (-127), equating to 4.3 per cent of net sales (-29.1).
• Net sales in 2010 are estimated to grow 25-30 per cent year on year (previous estimate 15-20 per cent). Profitability is expected to improve significantly compared to the previous year and the full-year result before income tax is estimated to be positive.

President & CEO Sakari Tamminen:

"The global economy and industrial production continued growing during the second quarter. Private investment demand though was still modest in most of the countries in which Ruukki operates. However, our delivery volumes and selling prices showed favourable development and our comparable net sales were 50 per cent up year on year. Cost savings made and a more favourable business environment than earlier have resulted in a further improvement in our profitability, although this was mainly in the steel business. During the second quarter, USD hedging had a positive impact of EUR 25 million on profit and loss and, in addition, still relatively moderate product costs improved the profitability of the steel business.  

The encouraging improvement in the business environment can be seen not only in the steel business, but also in the number of new orders in construction and, to some extent, also in the engineering business. Our order intake during the second quarter was almost EUR 600 million. Although this is up by a third compared to a year earlier, we are still far short of order volumes during our best years.

Orders in the construction business were up by more than a fifth during the second quarter compared to last year. However, commercial and industrial construction, our largest segment in construction in terms of net sales, remained modest. On the other hand, in Russia and Central Eastern Europe, especially in Poland and the Czech Republic, the order intake rate in this sector began to improve during the second quarter. Strong net sales growth in infrastructure construction continued as a result of Nordic road and railway projects and active deliveries of piles for foundation construction. On top of this, there was also continued good demand for roofing products in residential construction.

The activity of many of our customer industries in the engineering business improved, but was still at a clearly lower level than a couple of years ago. During the second quarter, order flows from customers of cabins for mobile machines and from frame and boom component customers grew somewhat. Activity in the manufacture of equipment for the energy industry was low, but picked up slightly for wind power towards the end of the report period. The capacity utilisation rate in the engineering business was still low. To improve operational efficiency, we have developed the manufacturing network of our engineering business especially in Central Eastern Europe and China.

Delivery volumes and selling prices in the steel business gave momentum to the increase in consolidated operating profit. Our strong focus on special steel products competence can be clearly seen in our steel business and sales of special steel products showed good development. Demand for special steel products was good in a number of sectors - including the manufacture of equipment for the mining industry and in the heavy vehicle industry - as well as in our new markets in China, Turkey and Brazil.

Our cost competitiveness is now much healthier than in previous years. Our actions to improve efficiency have progressed much faster than planned and we estimate the actions we have already initiated to date will result in an annualised improvement of EUR 149 million in the company's operating profit. We will continue improving our cost efficiency. During the current year we will especially focus on strengthening sales and marketing.

Based on a number of indicators, economic growth is expected to continue in our main market areas. However, there are also factors that give cause for concern as regards continued growth. As a result of higher delivery volumes and selling prices, we have raised out net sales forecast for this year. We also estimate that product costs will rise higher than previously forecast. We estimate net sales in 2010 to grow 25-30 per cent year on year (previous estimate 15-20 per cent). Profitability is expected to improve significantly compared to the previous year and the full-year result before income tax is estimated to be positive"

For further information, please contact:
Sakari Tamminen, President & CEO, tel. +358 20 592 9075
Mikko Hietanen, CFO, tel. +358 20 592 9030

A press conference, in English, for analysts and the media will be held on 16 July 2010 at 10.30 Ruukki, Suolakivenkatu 1, 00810 Helsinki.
A live webcast of the conference and presentation by the company's President & CEO Sakari Tamminen may be followed online on the company's website at www.ruukki.com/investors. The event can also be attended through a conference call. To attend the conference call, please call the following number 5-10 minutes before the scheduled start time: +44 (0)20 7162 0025, password: Rautaruukki Corporation
A replay of the webcast can be viewed on the company's website from approximately 16.00. An encore replay of the conference call will be available until 23 July 2010 at +44 (0) 20 7031 4064, access code: 868002

Rautaruukki Corporation
Anne Pirilä
SVP, 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 27 countries and employs 11,700 people. Net sales in 2009 totalled EUR 2.0 billion. The company's share is quoted on NASDAQ OMX Helsinki (Rautaruukki Oyj: RTRKS). The Corporation uses the marketing name Ruukki.

DISTRIBUTION:
NASDAQ OMX Helsinki
Main media
www.ruukki.com

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