Rautaruukki Corporation's interim report for January-September 2009: Continued difficult market conditions, efficiency measures to be continued

  

 

 

First nine months of 2009 in brief:

 

- By the end of the report period, the three-year operational excellence programme Boost had delivered permanent cost savings of around EUR 46 million and savings for the whole year are estimated to exceed EUR 60 million. Actions already initiated equate to cost savings of around EUR 80 million at an annual level. In addition to these actions, adjustment measures taken as a result of difficult market conditions are estimated to deliver of around EUR 30 million in 2009.

 

- Continued caution in construction investment decisions across the market area. Positive signs were visible in the third quarter in sales of roofing products, as well as in road and rail construction projects in the Nordic countries.

 

- Market conditions in the engineering business were very challenging, delivery volumes fell sharply and price development in new contracts was unfavourable. However, deliveries to equipment manufacturers in the energy industry continued at a good level.

 

- Delivery volumes of steel products remained exceptionally low and no recovery was evident in end-customer demand. Lower customer stocks increased orders somewhat and the fall in prices of steel products levelled off during the third quarter.

 

- Cash flow from operating activities was positive and a healthy balance sheet was maintained.

 

 

President & CEO Sakari Tamminen:

 

"The rate of decline in the global economy eased during the third quarter of the year. A reduction in stocks has resulted in a brief pick-up in demand in customer industries, but this has not yet formed a platform for any permanent improvement in end-customer demand. It still remains difficult to predict market development. It is clear that the fallout from the global economic crisis will stretch far into the future, industrial structures are changing and actors in the engineering industry among others are pursuing cost efficiency in countries with lower cost levels.

 

Ruukki's poor earnings performance during the report period was mainly attributable to lower sales volumes, unfavourable sales price development and to the use of steel material produced using high-cost raw materials. Also the low steel production capacity utilisation rate during the first half of the year significantly impacted on our result.

 

Despite difficult market conditions, seasonal demand picked up somewhat in Ruukki's construction businesses during the third quarter. Nevertheless, we remained well below the level witnessed in previous years and commercial and industrial construction in particular was quiet. Especially in Russia, publicly funded projects accounted for a notably increased share of our net sales in construction. In addition, activity in road and rail projects in the Nordic countries and in residential construction was even brisker than anticipated.

 

Delivery volumes in the engineering industry were significantly smaller than a year earlier. The profitability of our engineering business was particularly weakened by the poor performance of the Norwegian unit and we have accordingly started to reorganise the operations of the unit, which earlier primarily served the shipbuilding industry.

 

There was major fluctuation in demand for different products in our steel business. Whilst sales volumes of plate products in particular were low, sales of further processed colour-coated and galvanised products and strip products were much better. There was even a shortage of some products at times and the stock cycle improved towards the end of the report period. However, de-stocking was slower than anticipated.

 

We have built the company to be able to face challenging times from a strong platform. This year, we have lowered our cost structure through corporate-wide efficiency and saving measures, as well as progressed with our three-year operational excellence programme. We will continue to improve efficiency to further strengthen our cost competitiveness and market position. Our manufacturing network and local presence in Poland, Hungary and China, for example, provide Ruukki with a competitive edge in the engineering business in the future. There is a strong need for new and renovation construction in our important market area in Eastern Europe. However, in the short-term, we need to see a restoration of customer willingness to invest before commercial and industrial construction picks up.

 

Our three-year operational excellence programme has progressed faster than expected and by the end of September had delivered permanent cost savings of around EUR 46 million. Expected savings for the whole year have been revised upwards from EUR 50 million to over EUR 60 million. Efficiency measures we have initiated equate to savings of around EUR 80 million at an annual level. Adjustment measures under way, lower costs of raw materials and a decrease in the cost per unit of steel produced will also improve our cost efficiency. We estimate that there will be a marked improvement in the result before taxes for the fourth quarter, compared to the third quarter, but that the result might remain slightly negative".

 

 

 

For further information, please contact:

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

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

 

 

Press conference

A press conference, in Finnish, for analysts and the media will be held on Thursday 22 October at 2.30pm 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 following number 5-10 minutes before the conference begins: +44 (0)20 7162 0025, password: Rautaruukki

 

A recording of the conference call can be heard until 27 October 2009 at the following number:

+44 (0)20 7031 4064, access code: 846983

 

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 12,200 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.

 

 

DISTRIBUTION:

NASDAQ OMX Helsinki

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