Financial Statements Review January-December 2009
(Thomson Reuters ONE) - OUTOTEC OYJ STOCK EXCHANGE RELEASE FEBRUARY 9, 2010 AT 8.30 AMFinancial Statements Review January-December 2009Gross margin and balance sheet remained strong in a weak marketBoard of Directors' dividend proposal: EUR 0.70 per shareFinancial year January 1 - December 31, 2009 in brief (corresponding 2008figures): * Sales: EUR 877.7 million (EUR 1,217.9 million) * Operating profit: EUR 58.6 million (EUR 120.2 million) * Profit before taxes: EUR 60.9 million (EUR 136.3 million) * Earnings per share: EUR 1.01 (EUR 2.25) * Order intake: EUR 557.1 million (EUR 1,153.8 million) * Order backlog: EUR 867.4 million (EUR 1,176.7 million) * Net cash flow from operating activities: EUR -28.8 million (EUR 106.6 million)Q4/2009 in brief (Q4/2008): * Sales: EUR 219.8 million (EUR 398.8 million) * Operating profit: EUR 13.3 million (EUR 47.5 million) * Profit before taxes: EUR 13.3 million (EUR 52.4 million) * Order intake: EUR 110.5 million (EUR 119.9 million) * Net cash flow from operating activities: EUR -43.9 million (EUR -36.7 million)Larox figures for 2009 have been consolidated in Outotec's order backlog,balance sheet and personnel figures.President and CEO Pertti Korhonen:"The markets picked up slightly towards the year-end but were still challenging.Because of unused capacity in the metallurgical industry, many investments fornew capacity were on hold. However, we succeeded in expanding our offering toadjacent industries. The new oil shale processing plant under implementationwith Eesti Energia was a breakthrough in applying our expertise in the energysector. In addition, the acquisition of Larox's filtration solutions andAusmelt's smelter technologies will further strengthen our core business. Withthe increasing importance of energy efficiency and environmental protection,there are many business opportunities for our sustainable technologies. Thisyear, our focus will be on integrating acquired businesses, improvingcost-efficiency and accelerating the growth of service business. A newoperational model, which we are going to launch this spring, will support thesegoals." Summary of key figures Q4 Q4 Q1-Q4 Q1-Q4 2009 2008 2009 2008-------------------------------------------------------------------------------- Sales, EUR million 219.8 398.8 877.7 1,217.9 Gross margin, % 24.1 22.8 21.7 21.5 Operating profit, EUR million 13.3 47.5 58.6 120.2 Operating profit margin, % 6.1 11.9 6.7 9.9 Profit before taxes, EUR million 13.3 52.4 60.9 136.3 Net cash from operating activities, EUR million -43.9 -36.7 -28.8 106.6 Net interest-bearing debt at the end of period, -191.0 -314.6 -191.0 -314.6 EUR million Gearing at the end of period, % -55.8 -139.0 -55.8 -139.0 Working capital at the end of period, EUR -62.8 -171.2 -62.8 -171.2 million Return on investment, % 18.0 92.7 20.9 61.6 Return on equity, % 12.4 64.1 14.9 42.6 Order backlog at the end of period, EUR million 867.4 1,176.7 867.4 1,176.7 Order intake, EUR million 110.5 119.9 557.1 1,153.8 Personnel, average for the period 2,744 2,628 2,612 2,483 Earnings per share, EUR 0.21 0.84 1.01 2.25 Dividend per share, EUR - - 0.70*) 1.00--------------------------------------------------------------------------------*) Board of Directors' proposal for dividend per share.BRIEFING FOR ANALYSTS AND MEDIAA briefing, in which President and CEO Pertti Korhonen and CFO Vesa-Pekka Takalawill present Outotec's financial statements review 2009 and new operatingstructure, will be held in Helsinki, Finland.BRIEFINGDate: Tuesday, February 9Time: 2.00-3.00 pm (EET)Venue: Hotel Scandic Simonkentt?Meeting room Bulsa-Freda, Simonkatu 9,HelsinkiJOINING VIA WEBCASTYou may follow the briefing via a live webcast at www.outotec.com. Please, clickin and register approximately 5 to 10 minutes before the briefing. The webcastwill also be recorded and published on Outotec's website for on demand viewing.JOINING VIA TELECONFERENCEYou may also join the briefing by telephone. To register as a participant forthe teleconference and Q&A session, please dial in 5 to 10 minutes before thebeginning of the event:FI/UK: +44 20 7162 0025US/CANADA: +1 334 323 6201Password: OutotecIn addition, an instant replay service of the conference call will be availablefor 3 days from February 9 until February 12, 2010 midnight on the followingnumbers:UK: +44 20 7031 4064US: +1 954 334 0342Access code: 856157The contact information is gathered for registration purposes only and it is notused for commercial purposes.FINANCIAL STATEMENTS REVIEW JANUARY-DECEMBER 2009OPERATING ENVIRONMENTThe market conditions were challenging in the mining and metals industrythroughout the year, although activity picked up towards the end of the year.Mining and metals companies began to upgrade their investment plans in thesecond half of 2009, due to positive market forecasts and continued metalsdemand in emerging economies such as China and India. This was indicated by therecovered activity in negotiations with customers. However, updating largeinvestment plans, including financing, scoping and pricing and turning them toorders takes some time. In addition, many production plants still have unusedcapacity.The competitive situation was tight because of fewer new projects. Despiteincreased competition and pricing pressures, Outotec was able to defend itsmargins because of lower raw material and subcontracting prices. In 2009,Outotec strengthened its presence in China and India. The company had about 140employees at the year-end in these markets, and sales to these countriesaccounted for EUR 126 million (2008: EUR 142 million).In addition to mining and metals industry, Outotec designs and deliverssolutions to the energy sector, water treatment and chemical industry. Althoughthere were new business opportunities for Outotec's environmentally soundtechnologies in these areas, the economic recession slowed down investments alsoin these industries in 2009.ORDER INTAKEOrder intake in the reporting period amounted to EUR 557.1 million (Q1-Q4/2008:EUR 1,153.8 million) including plant deliveries, equipment deliveries andservices to existing customers. The orders received in the fourth quarter cameto EUR 110.5 million (Q4/2008: EUR 119.9 million) and included mainly equipmentdeliveries, spare parts and services.Major new orders in the fourth quarter included: * thickening technology for the Toromocho project, Peru (EUR 11 million); * flotation technology to Minera Escondida, Chile; and * alumina refinery technology to Anrak Aluminium, India.Major new orders in the third quarter included: * oil shale technology to Eesti Energia, Estonia (EUR 110 million); * copper recovery plant to Pueblo Viejo's gold mine in the Dominican Republic (EUR 16 million); * engineering and smelter technology to Iran (EUR 10 million); and * flash smelting technology to Zijin Copper Co. Ltd. China (EUR 7 million).There were no major orders in the second quarter.Major new orders in the first quarter included: * sulfuric acid plant for Noracid S.A. in Mejillones, Chile (EUR 51 million); * several service contracts for industrial and maintenance services in Chile and Canada (EUR 15 million); and * flotation cells and thickeners for Polymetal's Albazino gold mine project in Russia.ORDER BACKLOGThe order backlog at the end of the reporting period totaled EUR 867.4 million(December 31, 2008: EUR 1.176,7 million). Outotec's order backlog excludingLarox was EUR 834.6 million at the end of the reporting period representing a29% decline from the comparison period. In 2009, order backlog was reduced byapproximately EUR 50 million mainly due to changes in project scopes whichreduced auxiliary equipment deliveries.At the end of the reporting period, Outotec's order backlog included 21 projectswith an order backlog value in excess of EUR 10 million, accounting for 68% ofthe total backlog. According to a management estimate, roughly 68% of thecurrent backlog will be delivered in 2010 and the rest in 2011 and beyond. Atthe end of the reporting period, Outotec's order backlog included roughly EUR70 million (September 30, 2009: EUR 100 million) in suspended projects. Themajority of the change in the value of suspended projects came fromreactivations. Roughly 2% of the projects in Outotec's current backlog are formining companies that are developing their first processing plants.SALES AND FINANCIAL RESULTOutotec's sales in the reporting period totaled EUR 877.7 million (Q1-Q4/2008:EUR 1,217.9 million), which was 28% lower than in the comparison period. Salesfor the fourth quarter were EUR 219.8 million (Q4/2008: EUR 398.8 million). Thedecline in sales resulted from the smaller order backlog, low order intakeduring the first half of the year and the rescheduling of some major projectsunder execution. Sales to 'top 10' customers were less than 50% of the totalsales and none of the customers accounted for more than 10% of the total salesin 2009.The Services business, which is included in the divisions' and other businesses'sales figures, totaled EUR 148.6 million in the reporting period (Q1-Q4/2008:EUR 141.2 million), up 5% from the comparison period. The Services businessoverall was affected by customers' lower capacity utilization and plantclosures. Spare part deliveries reduced because of reduced metals production,but sales of maintenance and technical services increased compared to thecomparison period. Majority of the increase in maintenance services came fromOutotec Auburn, which was acquired in October 2008. The sales volume of theServices business in the fourth quarter totaled EUR 45.2 million (Q4/2008: EUR54.2 million). Sales of maintenance services in the fourth quarter of 2009 werelower than in corresponding period in 2008 mainly due to a plant closure of amajor service customer. In addition, there were fewer spare part deliveries.Supported by the acquisition of Larox, Outotec remains on track in achievingits service business sales target of EUR 250-300 million by the end of 2010.The operating profit for the reporting period was EUR 58.6 million (Q1-Q4/2008:EUR 120.2 million), representing 6.7% of sales (Q1- Q4/2008: 9.9%). The decreasewas the result of lower sales volume, a decline in license fee income and higherfixed costs. The operating profit includes the EUR 2.4 million one-time positiveeffect from the amicable settlement of all disputes related to the Pattison Sandproject as well as the EUR 2.5 million impairment loss related to fair valuationof Outotec's shares in Pacific Ore Ltd. The unrealized and realized exchangelosses related to currency forward contracts, which are not included in thehedge accounting, decreased profitability by EUR 0.1 million (Q1-Q4/2008:unrealized and realized loss of EUR 9.5 million). The operating profit in thefourth quarter was EUR 13.3 million (Q4/2008: EUR 47.5 million). The primaryreasons for the lower operating profit were the significantly lower salesvolume, decreased license fee income and fewer project completions.In the reporting period, Outotec's fixed costs were EUR 131.6 (2008: EUR 123.3million). The increase was mainly caused by the fixed costs of Outotec Auburn,increased sales work, developing business operations in India and China,one-time costs related to adjustments of the office network, increase of baddebt provisions related to accounts receivable and development of the Servicesbusiness worldwide.Outotec's profit before taxes for the reporting period was EUR 60.9 million(Q1-Q4/2008: EUR 136.3 million). Profit before taxes was favorably impacted bythe net financial income of EUR 2.2 million (Q1-Q4/2008: EUR 16.1 million) fromthe high net cash position. The decline in net financial income was primarilydue to lower interest rates. Net profit for the period was EUR 42.3 million(Q1-Q4/2008: EUR 93.9 million). Taxes totaled EUR 18.6 million (Q1-Q4/2008: EUR42.4 million). This represents an effective tax rate of 30.5%. Earnings pershare were EUR 1.01 (Q1-Q4/2008: EUR 2.25).Outotec's return on equity for the reporting period was 14.9% (Q1-Q4/2008:42.6%), and return on investment was 20.9% (Q1-Q4/2008: 61.6%). Sales and operating profit by segment Q4 Q4 Q1-Q4 Q1-Q4 EUR million 2009 2008 2009 2008--------------------------------------------------------------------- Sales Minerals Processing 83.2 144.8 338.2 419.6 Base Metals 34.0 86.4 136.4 295.3 Metals Processing 100.8 163.9 378.8 494.7 Other Businesses 10.7 18.8 60.4 56.0 Unallocated items*) and intra-group sales -8.9 -15.1 -36.2 -47.7--------------------------------------------------------------------- Total 219.8 398.8 877.7 1,217.9 Operating profit Minerals Processing 6.1 12.1 29.2 22.5 Base Metals 2.8 17.2 8.4 48.7 Metals Processing 11.5 22.1 36.0 61.1 Other Businesses -0.5 0.7 -1.5 3.9 Unallocated**) and intra-group items -6.5 -4.6 -13.5 -16.0--------------------------------------------------------------------- Total 13.3 47.5 58.6 120.2*) Unallocated items primarily include invoicing of internal management andadministrative services.**) Unallocated items primarily include internal management and administrativeservices.Minerals ProcessingThe Minerals Processing division's sales in the reporting period decreased by19% from the comparison period and totaled EUR 338.2 million (Q1-Q4/2008: EUR419.6 million). Operating profit increased to EUR 29.2 million (Q1-Q4/2008: EUR22.5 million). A high starting order backlog, good project execution and reducedbottlenecks in the delivery pipeline were factors affecting sales, however, dueto lower order intake, sales in the reporting period were less than in thecomparison period. Operating profit for the reporting period includes a EUR 2.4million one-time positive effect (2008: EUR 8.5 million one-time negativeeffect) from the amicable settlement of all disputes related to the PattisonSand project. Operating profit for the reporting period also included unrealizedand realized exchange loss related to currency forward contracts of EUR 0.2million (Q1-Q4/2008: unrealized and realized loss of EUR 8.9 million).Base MetalsThe Base Metals division's sales in the reporting period decreased by 54% fromthe comparison period and totaled EUR 136.4 million (Q1-Q4/2008: EUR 295.3million). The decrease in sales was primarily due to low order intake in 2009,lower starting order backlog, and the rescheduling of some projects. Theoperating profit was EUR 8.4 million (Q1- Q4/2008: EUR 48.7 million). Thesignificantly lower sales relative to the division's fixed costs and decreasedlicense fee income were the primary reasons for the division's low operatingprofit.Metals ProcessingThe Metals Processing division's sales in the reporting period decreased 23%from the comparison period to EUR 378.8 million (Q1-Q4/2008: EUR 494.7 million).The decrease in sales was mainly due to the rescheduling of some projects andlower order intake. Operating profit came to EUR 36.0 million (Q1-Q4/2008: EUR61.1 million). Operating profit declined due to lower sales volume, higher fixedcosts and decreased license fee income. Operating profit for the reportingperiod also included unrealized and realized exchange gains related to currencyforward contracts of EUR 2.9 million (Q1-Q4/2008: unrealized and realized lossof EUR 0.9 million). Sales by destination, % 2009 2008------------------------------------------- Europe (including CIS) 22 23 Africa 9 12 Asia (including Middle East) 31 29 Australia and Pacific countries 6 8 North America 5 5 South America 27 23------------------------------------------- Total 100 100 Sales by metals, % 2009 2008------------------------------ Copper 20 22 Iron 17 12 Aluminium 10 12 Ferroalloys 3 6 Precious metals 15 10 Zinc 5 9 Nickel 6 7 Sulfuric acid 16 13 Other 8 9------------------------------ Total 100 100BALANCE SHEET, FINANCING, AND CASH FLOWOutotec's balance sheet structure remained strong also after acquisitions. Laroxhas been consolidated into Outotec's balance sheet as a subsidiary at the end ofthe year and the minority has been separated from the shareholders' equity. Themajor impacts of the Larox acquistion on the Outotec's balance sheet were: anincrease of intangible assets by EUR 41.0 million; goodwill by EUR 45.2 millionand interest-bearing liabilities by EUR 34.6 million. The acquisition wasfinanced by issuing Outotec's new shares, and thus, Outotec's shareholdersequity increased by EUR 63.4 million. The acquisition had no significant impacton Outotec's cash flow, and cash and cash equivalents.The net cash flow from operating activities in the reporting period was at EUR-28.8 million (Q1-Q4/2008: EUR 106.6 million). The net cash flow in 2009 wasnegative because order intake contained only few large projects, and thus therewas a lack of substantial advance payments, which create strong positive cashflow in the beginning of the project.Outotec's working capital amounted to EUR -62.8 million on December 31, 2009(December 31, 2008: EUR -171.2 million). The change in working capital resultedfrom low order intake and subsequently lower advance payments received fromcustomers in the reporting period. Consolidation of Larox also negativelyaffected Outotec's working capital.At the end of the reporting period, Outotec's cash and cash equivalents totaledEUR 258.5 million (December 31, 2008: EUR 317.8 million). The net change in cashand cash equivalents was affected by the dividend payment of EUR 42.0 million inMarch2009 (April 2008: EUR 39.9 million). The company invests its excess cash inshort-term money market instruments such as bank deposits and corporatecommercial papers. Investments are made within pre-approvedcounterparty-specific limits and tenors, which Outotec regularly reviews. OnDecember 31, 2009, no money market investment had remaining maturity exceedingthree months.Outotec's financing structure remained strong. Net interest-bearing debt onDecember 31, 2009 came to EUR -191.0 million (December 31, 2008: EUR -314.6million). The advances received at the end of the reporting period totaled EUR150.9 million (December 31, 2008: EUR 214.0 million), representing a decrease of29% from the comparison period. Outotec's gearing at the end of the reportingperiod was -55.8% (December 31, 2008: -139.0%), and the equity-to-assets ratiowas 45.1% (December 31, 2008: 35.0%).The company's capital expenditure in the reporting period was EUR 98.0 million(Q1-Q4/2008: EUR 23.9 million), of which EUR 75.9 million was related toacquisitions of Larox Corporation and Ausmelt Ltd. Other capital expenditureincluded the establishment of a joint venture company, GreenExergy forbio-energy technology business, investments in information technology,intellectual property rights, as well as building and machinery for the OutotecTurula workshop.Guarantees for commercial commitments, including advance payment guaranteesissued by the parent and other Group companies decreased from the comparisonperiod due to lower order intake and were EUR 321.3 million (December 31, 2008:EUR 353.8 million) at the end of the reporting period.Outotec has an agreement with a third-party service provider concerningadministration and hedging of the share-based incentive program for keypersonnel. As part of this agreement, for hedging the underlying cash flow risk,the service provider has purchased a total of 550,000 Outotec shares (in2008: 265,000), which have been funded by Outotec and accounted as treasuryshares in Outotec's consolidated balance sheet. At the end of the reportingperiod, the amount of these treasury shares was 332,534.EXPANSION OF BUSINESS NETWORKAt the year-end, Outotec had acquired 70.5% of the shares (94.4% of all thevotes) of Larox Corporation through share transfer and made a mandatory publictender offer for all the remaining Larox shares (January 22, 2010: as a resultof the public tender offer, Outotec's ownership was 98.5% of the shares).Combining the businesses of Outotec and Larox will further strengthen Outotec'sposition as a leading global provider of technology solutions and services tothe mining and metals industry and will allow Larox to develop its business inan international, financially solid technology group operating in the sameindustry. The acquisition price of Larox's shares is approximately EUR 91million.At the year-end, Outotec had increased its holding in the Australian publiccompany Ausmelt Ltd to 37.6%. As a result of the share purchases, Ausmelt becamean associated company of Outotec Oyj (February 8, 2010: Outotec's ownership was96.4%). Ausmelt's principal activities are the development, design, engineeringand supply of Top Submerged Lance (TSL) smelting technology for the productionof metals and processing of industrial wastes. Ausmelt's TSL technologycomplements Outotec's smelting technology portfolio. Outotec currently has flashsmelting technology for copper and nickel primary smelting in large scaleplants, whereas Ausmelt's TSL technology is suitable for small to mid-sizeplants and also for a variety of other feed materials, such as ferrous metals,zinc, lead and tin concentrates, zinc bearing residues, and various secondaryand waste materials. The additional benefit of the technology is that it enablesthe recovery of valuable metals from by-products.In July, Outotec and Eesti Energia entered into a joint venture for thecommercialization of sustainable oil shale processing technology and for holdingof the intellectual property rights related to new Enefit technology. EestiEnergia has a 60% stake in the company with Outotec owning 40%.In February, Outotec and a Swedish company Skellefte?raft AB agreed toestablish a joint company, GreenExergy AB. The company focuses on thedevelopment, marketing and delivery of bio-energy technologies to power plantsfor the production of bio-energy from forestry and sawmill residues. Outotec'sstake is 45%, Skellefte?raft's 33%, and three additional Swedish companieseach have a minor stake in the joint venture.In May, Outotec announced an agreement with a Finnish company, Real Time SystemsOy, to cooperate in the development of a new-generation measuring and regulatingsystem for electric arc furnaces. Outotec is funding the development work and isa minor shareholder of Real Time Systems Oy and has a call option on thecompany.RESEARCH AND TECHNOLOGY DEVELOPMENTIn 2009, Outotec's research and technology development expenses totaled EUR20.5 million (2008: EUR 20.2 million), representing 2.3% of sales (2008: 1.7%).Outotec ?led 56 new priority patent applications (2008: 45), and 286 newnational patents were granted (2008: 277).In the reporting period, oil shale combustion test work was conducted atOutotec's Frankfurt Research Center. The test work related to basic engineeringfor the oil-shale-based oil production plant to be built in Narva, Estonia. InJuly, Outotec announced EUR 110 million project to build the oil-shale-based oilproduction plant.In January, Outotec launched a new OKTOP® reactor family. While all reactorswere previously individually designed, the new OKTOP® reactors are built frommodules which are tailored to give optimum results. The contract signed withPueblo Viejo for a copper recovery plant is a breakthrough in combiningOutotec's hydrometallurgical expertise, including new OKTOP® reactors, andPaques THIOTEQ® biotechnology in copper production.Outotec and Codelco finished testing the TankCell® 300 flotation cells atChuquicamata, Chile. The results showed a better recovery and lower energyconsumption than the previous solution.Outotec commissioned a new automated Courier® 6i SL slurry analyzer and samplingsystem at Australia's largest underground mine. It is one of the world's mostadvanced systems in the field of minerals processing.In August, Outotec launched new proprietary cooling towers for efficient liquidcooling at process plants. Outotec cooling towers enable lower emissions andlarger cooling capacity than conventional ones.Outotec's technology portfolio expanded when the Swedish joint ventureGreenExergy AB was established to offer bio-energy technologies for powerplants.The cooperation with Real Time Systems Oy in the development of a new-generationmeasuring and regulating system will bring significant savings for the furnaceoperators, who use electric arc furnaces in the production of steel from scrap.In May, Outotec committed to the Baltic Sea Action Summit project, which issupported by the Finnish government. As part of its commitment to a healthierBaltic Sea, Outotec will focus on minimizing metal-containing dusts and sulfurdioxide emissions within the metals industry as well as on reducingmetal-containing effluents.PERSONNELAt the end of the reporting period, Outotec had a total of 3,128 employees(December 31, 2008: 2,674) of which 562 employees worked for Larox. Outotec'spersonnel excluding Larox decreased by 108 employees or 4% during the reportingperiod. The reductions were primarily related to the temporary employeecontracts in the Americas, Finland and Australia. In contrast, Outotec hascontinued to increase its personnel in Asia. For the reporting period, Outotechad on average 2,612 employees (Q1-Q4/2008: 2,483). The average number ofpersonnel increased by 129 individuals from the comparison period throughacquisition, business growth, and active recruitment in 2008. Temporarypersonnel accounted for about 8% of the total number of employees. Distribution of personnel by country Dec 31, Dec 31, 2009 2008 change %--------------------------------------------------------------- Finland 1,145 925 23,8 Germany 472 380 24,2 Rest of Europe 283 249 13,7 Americas 740 758 -2,4 Australia 239 225 6,2 Rest of the world 249 137 81,8--------------------------------------------------------------- Total 3,128 2,674 17,0At the end of December 2009, the company had, in addition to own personnel onOutotec's payroll, approximately 250 (September 30, 2009: 240) full-timeequivalent, contracted people working in project execution. The number ofcontracted workers at any given time changes with the active project mix andproject commissioning, local legislation and regulations, and seasonalfluctuations.In the reporting period, salaries and other employee benefits totaled EUR 159.5million (Q1-Q4/2008: EUR 157.7 million).CHANGES IN TOP MANAGEMENTIn June, Outotec's Board of Directors appointed Mr. Pertti Korhonen, 48, M. Sc.(Eng.), as the new President and Chief Executive Officer of Outotec Oyj. Mr.Korhonen joined Outotec on September 1, 2009, and began serving as ChiefOperating Officer on October 1, 2009. He assumed the CEO duties on January1, 2010. Former CEO, Mr Tapani J?inen retired at the end of 2009.SHARE-BASED INCENTIVE PROGRAMSOutotec has two share-based incentive programs for the company's key personnel:the first, Incentive Program 2007-2008, was announced on March 23, 2007, and thesecond, Incentive Program 2008-2010, was announced on March 3, 2008.Share-based incentive program 2007-2008The program began on January 1, 2007, and ended December 31, 2008. The rewardcompensated to the key personnel was determined by based on whether the targetsset for the development of the company's net profit and order backlog had beenreached. The total reward for the two earning periods was EUR 6.5 million, whichwas paid to 22 individuals in the second quarter of 2009, with 202,779 sharesallocated and EUR 3.4 million paid in cash to cover taxes.Share-based incentive program 2008-2010The incentive program for 2008-2010 comprises three earning periods: calendaryears 2008, 2009, and 2010. The Board of Directors determines the amount of themaximum reward for each individual, the earning criteria and the targetsestablished for them separately on an annual basis. Reaching the targetsestablished for the earning criteria will determine how great a portion of themaximum reward will be paid. For the 2009 and 2010 earning periods, theincentive program involves approximately 60 individuals. The reward is paid inshares and as a cash payment. The reward will not be paid if the individual'semployment ends before the close of the earning period. The individual must alsohold the earned shares and remain employed with the company for at least twoyears after the close of the earning period.For the earning period 2008, 14,687 shares were allocated to 33 individuals andEUR 0.2 million paid in cash to cover taxes. Individuals who were included inthe initial share-based incentive program 2007-2008 were not included in the2008 earning period.RESOLUTIONS OF THE 2009 ANNUAL GENERAL MEETINGOutotec Oyj's Annual General Meeting (AGM) was held on March 18, 2009, inHelsinki, Finland. The Annual General Meeting approved the parent company andthe consolidated financial statements, and discharged the members of the Boardof Directors and the CEO from liability for the 2008 financial year.DividendThe Annual General Meeting decided that a dividend of EUR 1.00 per share be paidfor the financial year that ended on December 31, 2008. The dividends, totalingEUR 42.0 million, were paid on March 30, 2009.The Board of DirectorsThe Annual General Meeting decided on the number of the Board members, includingchairman and vice chairman, to be five (5). Mr. Carl-Gustaf Bergstr?Mr. KarriKaitue, Mr. Hannu Linnoinen, Mr. Anssi Soila and Mr. Risto Virrankoski werere-elected as members of the Board of Directors for the term expiring at the endof the next Annual General Meeting.The Annual General Meeting re-elected Mr. Risto Virrankoski as the chairman ofthe Board of Directors. In its assembly meeting, the Board re-elected Mr. KarriKaitue as the vice chairman of the Board of Directors. In addition, the Boardre-elected Mr. Carl-Gustaf Bergstr?nd Mr. Hannu Linnoinen as members of theAudit Committee, Mr. Linnoinen acting as the chairman of the Audit Committee.The Annual General Meeting also confirmed the remunerations to the Board membersas follows: chairman EUR 5,000 per month and other Board members EUR 3,000 permonth each, vice chairman and chairman of the Audit Committee an additional EUR1,000 per month each. Each Board member also EUR 500 for attendance at eachBoard and Committee meeting as well as reimbursement for direct costs related toBoard work.Board's authorizationsThe Annual General Meeting authorized the Board of Directors to resolve therepurchasing of the company's shares as follows: * The company may repurchase a maximum number of 4,200,000 shares using free equity and deviating from the shareholders' pre-emptive rights to the shares, provided that the number of shares held by the company will not exceed ten (10) percent of all shares in the company. * The shares are to be repurchased in public trading on the NASDAQ OMX Helsinki at the price established in the trading at the time of acquisition.The authorization has not been exercised as of February 9, 2010. Theauthorization shall be valid until the next Annual General Meeting.The Annual General Meeting authorized the Board of Directors to resolve theissuance of shares as follows: * The authorization includes the right to issue new shares, distribute shares held by the company, and the right to issue special rights referred to in Chapter 10, Section 1 of the Companies Act. This authorization to the Board of Directors does not, however, entitle the Board of Directors to issue share option rights as an incentive to personnel. * The total number of new shares to be issued and shares held by the company to be distributed under the authorization may not exceed 4,200,000 shares. * The Board of Directors is entitled to decide on the terms of the share issue, such as the grounds for determining the subscription price of the shares and the final subscription price as well as the approval of the subscriptions, the allocation of the issued new shares and the final amount of issued shares.This authorization was executed in conjunction with the Larox acquisition. Totalnumber of shares issued was 3,780,373 (2,763,419 shares in December 2009 and1,016,954 shares in February 2010). This authorization shall be valid until thenext Annual General Meeting.AuditorsKPMG Oy Ab, authorized public accountants, has been re-elected as the company'sauditor, with Mauri Palvi as auditor in charge. The fees for the auditor arepaid according to invoice.The Annual General Meeting decided to amend Section 9 of the Articles ofAssociation so that notice to convene the General Meeting shall be issued nolater than 21 days prior to the General Meeting.SHARES AND SHARE CAPITALOutotec's shares are listed on the NASDAQ OMX Helsinki (OTE1V). On December31, 2009, Outotec's share capital was EUR 16.8 million, consisting of44,763,419 shares. Each share entitles its holder to one vote at the company'sgeneral shareholder meetings.TRADING, MARKET CAPITALIZATION AND SHAREHOLDERSIn the reporting period, the volume-weighted average price for a share in thecompany was EUR 17.39, the highest quotation for a share was EUR 24.87 and thelowest EUR 9.30. The trading of Outotec shares in the reporting period exceeded107 million shares, with a total value of over EUR 1,850 million. On December31, 2009, Outotec's market capitalization was EUR 1,107 million and the lastquotation for the share was EUR 24.74. On December 31, 2009, the company did nothold any treasury shares for trading purposes.Outotec has an agreement with a third-party service provider concerning theadministration and hedging of a share-based incentive program for key personnel.As part of this agreement, for hedging the underlying cash flow risk, theservice provider has purchased a total of 550,000 Outotec shares (in2008: 265,000) which have been funded by Outotec and accounted as treasuryshares in Outotec's consolidated balance sheet. At the end of the reportingperiod, the amount of these treasury shares was 332,534.On May 6, 2009, Barclays Global Investors UK Holdings Ltd's holding in shares ofOutotec Oyj fell below 5% and was 2,068,377 shares, which represented 4.92% ofthe share capital and votes in the company. On April 7, 2009, Barclays GlobalInvestors UK Holdings Ltd's holding in shares of Outotec Oyj exceeded 5% and was2,111,054 shares, which represented 5.02% of the share capital and votes in thecompany.On December 31, 2009, Outotec had 15,478 shareholders and shares held in 11nominee registers accounted for 56.6% of all Outotec shares.EVENTS AFTER THE REPORTING PERIODOutotec increased its shareholding in Australian public company Ausmelt Ltdthrough takeover offer acceptances and market purchases. On February 8, 2010,Outotec's holding in Ausmelt was 96.4%, which, in accordance with the Australiancorporations law, entitles Outotec to proceed with the compulsory acquisition ofall of the outstanding Ausmelt shares. The compulsory acquisition is expected totake approximately 4 to 6 weeks. The acquisition price for Ausmelt shares isapproximately AUD 47 million (approximately EUR 30 million).Outotec made a directed share issue to all shareholders of Larox Corporation whoaccepted Outotec's mandatory public tender offer, which expired January22, 2010, for Larox against share consideration. Outotec's new shares andincrease of share capital was entered in the Trade Register on February2, 2010. Following the entering of the shares and the increase of the sharecapital in the Trade Register, the total number of Outotec shares amounts to45,780,373 shares and the share capital to EUR 17,186,442.52.In January, as part of its plans to launch a new operating structure in spring2010, Outotec appointed Pekka Erkkil?o its Executive Committee as of May1, 2010.Outotec signed a contract on the delivery of sintering technology for JSW SteelLimited's (JSW) new iron ore sinter plant to be built in Toranagallu. Thecommissioning for the plant is scheduled for 2011.Outotec has signed a contract with Baiyin Non Ferrous Group for the design anddelivery of a new precious metals plant in Gansu Province, China. The contractvalue is approximately EUR 6 million. The plant is expected to be operationalduring the first half of 2011.The board of the Helsinki University of Technology has established a fund namedafter Outotec's now retired CEO Tapani J?inen. The fund aims at promoting theresearch of environmental technology and will fund distinguished individuals'research and development work. Outotec donated the basic capital for the fund.SHORT-TERM RISKS AND UNCERTAINTIESRisks related to global operating environmentOutotec's global business operations are subject to various political, economicand social conditions. Operations in emerging markets may present risks that arenot encountered in countries with well-established economic and politicalsystems, including economic instability and a potential difficulty to anticipatefuture business conditions in these markets. These market conditions, which canrapidly change, may cause delays in the placement of orders for projects thathave already been awarded, thereby subjecting Outotec to volatile markets.The demand for export credits remained high in the reporting period. Possiblelimitations on the availability of export credits and financing as well aschanges to project scopes and prices in the offer stages may further lengthensales negotiations and postpone order effectiveness.Risks related to Outotec's businessOutotec has systematic risk management procedures - Project Risk Identificationand Management (PRIMA) - in place to monitor projects. In conjunction withOutotec's risk assessment for the fourth quarter in 2009, all unfinished workand projects, which use the percentage of completion and completed contractmethod, were monitored and evaluated and contingencies were updated. Also,projects where the stage of completion was close to 100%, were evaluated andprovisions for performance guarantees and warranty period guarantees, along withpossible provisions for project losses were updated. There were no materialchanges in the total project risk provisions.Because of the international nature of Outotec's business and projects invarious countries, different interpretations of international and local taxrules and regulations may cause additional direct or indirect taxes for Outotec,which would reduce Outotec's net result.At the end of the reporting period, Outotec's order backlog included roughly EUR70 million in suspended projects. Some of the suspended projects may becancelled or renegotiated. In any market situation, there is a risk ofpostponement in project business.Acquisitions are an integral part of Outotec's growth strategy. There is a riskthat the estimated synergy benefits will not materialize as planned.In December, Outotec, Nordea and Bagfas reached a final settlement in the Swissarbitration and related processes before public courts in Turkey and Finland.According to the settlement provisions, all claims pending have beenreciprocally withdrawn and Nordea paid EUR 0.9 million to Bagfas, in addition tothe previously paid bank guarantee capital of EUR 3.4 million. In accordancewith the provisions of its credit facility agreements, Outotec was responsiblefor all payments made by Nordea to Bagfas. The outcome of the settlement did nothave an effect on Outotec's result.Outotec is further involved in a few other arbitral and court proceedings.Outotec management expects that those cases and their outcome will have nomaterial effect on Outotec's financial result.The economic uncertainty may further reduce the demand for Outotec's productsand services. Outotec's gross margin is impacted by license fee income relatedto certain technologies. A lack of these types of orders may reduce grossmargin.Financial risksIn 2009, there were no material credit losses related to payments by Outotec'scounter-parties. The counterparties may be faced with having to renegotiatepayment terms. In addition, there is a risk that customers and suppliersexperience financial difficulties and a lack of financing may result inbankruptcies, which can also result in some losses for Outotec.More than half of Outotec's total cash flow is denominated in euros. The rest isdivided among various currencies, including the US dollar, Australian dollar,Brazilian real, Canadian dollar, and South African rand. The weight of any givencurrency in new projects can fluctuate substantially, but most cash-flow-relatedrisks are hedged in the short and long term. In the short-term, currencyfluctuations may create volatility in the operating profit. The forecasted andprobable cash flows are selectively hedged and are always on the basis ofseparate decisions and risk analysis. The cost of hedging is taken into accountin project pricing.Outotec's business model is based primarily on customer advance payments andon-demand guarantees issued by Outotec's relationship banks. Changes in advancepayments received have an impact on the liquidity of Outotec. Exposure toon-demand guarantees has remained high. Cash held by Outotec is invested mainlyin short-term bank deposits and, to a lesser extent, in Finnish corporateshort-term commercial papers. The lower interest rate levels reduce the interestincome generated from these investments.MARKET OUTLOOKAccording to market research, the investments in the mining and metals industryare expected to increase from the previous year; however, there is still unusedcapacity. Most of the growth in metals consumption will come from developingeconomies. China is expected to represent nearly 50% of the growth in 2010.India continues to develop its infrastructure utilizing its large naturalresource base.There is increased activity in the beginning of the value chain from mine tometal. Many of the sales prospects are expected to turn into new orders in 2010or later, which is in line with normal industry lead times.There is continuous demand for modernization and debottlenecking at mine sitesand metals processing plants as well as for energy-efficient and environmentallyfriendly technologies, equipment and services. As ore grades decline, moreprocessing capacity will be needed. Also, complex ore bodies require new ormodernized solutions, which enable economically viable production and bettermetals recovery. All these factors create good opportunities for Outotec'sfurther growth.Outotec's new markets include utilization of alternative energy resources, suchas oil shale and oil sands and industrial water treatment. The world'srecoverable oil shale resources are many times greater than those ofconventional oil reserves, with large oil shale deposits found in the US,Brazil, China, Jordan, Russia and Estonia. Through two joint venturesestablished in 2009, Outotec offers solutions for oil shale processing andbio-energy production for power plants.Outotec's technologies can also be applied to materials recycling and chemicalindustry.FINANCIAL GUIDANCE FOR 2010Due to post-cyclical nature of Outotec's business and low order intake in 2009,the year 2010 will be challenging. However, the management believes that orderintake will pick up this year.The management expects that in 2010:- sales will grow to approximately EUR 1 billion due to the Larox and Ausmeltacquisitions, and- operating profit will remain on the same level as in 2009, excluding one-timecost provisions which relate to restructuring, and integration of acquiredbusinesses, and which are estimated to be recorded in the financial results ofthe first half of 2010.Operating profit is dependent on exchange rates, product mix, timing of neworders, and project completions.ANNUAL GENERAL MEETING 2010Annual General Meeting 2010 is scheduled to be held on March 18, 2010. Outotec'sAnnual Report 2009 will be published in week 8 and will be available in PDF andHTML format at www.outotec.com.Espoo, on February 9, 2010Outotec OyjBoard of DirectorsFor further information, please contact:Outotec OyjPertti Korhonen, President and CEOtel. +358 20 529 211Vesa-Pekka Takala, CFOtel. +358 20 529 211, mobile +358 40 570 0074Eila Paatela, Vice President - Corporate Communicationstel. +358 20 529 2004, mobile +358 400 817198Rita Uotila, Vice President - Investor Relationstel. +358 20 529 2003, mobile +358 400 954141Format for e-mail addresses: firstname.lastname(at)outotec.com
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