Outokumpu Annual Accounts Bulletin 2007 - Good Results In A Turbulent Year II/II

Espoo, Finland, Jan 31, 2008 - (ABN Newswire) - Stock Exchange Release (second part of the release) January 31, 2008 at 1.00 pm



NOTES TO THE INCOME STATEMENT AND BALANCE SHEET

This annual accounts bulletin is prepared in accordance with IAS 34 (Interim Financial Reporting). The same accounting policies and methods have been followed in the interim financial statements as in the annual financial statements for 2006. The following amended and new International Financial Reporting Standards and new interpretations have been adopted as of January 1, 2007: IFRS 7 Financial Instruments: Disclosures IAS 1 Presentation of Financial Statements - Capital management

The adoption of amended and new standards had impact only on the format and extent of disclosure information and comparative information for 2006 has been amended accordingly.

IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of IFRS 2 IFRIC 9 Reassessment of Embedded Derivatives IFRIC 10 Interim Financial Reporting and Impairment

The adoption of new interpretations had no material impact on the Group's consolidated accounts. Use of estimates The preparation of the financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Accounting estimates are employed in the financial statements to determine reported amounts, including the realizability of certain assets, the useful lives of tangible and intangible assets, income taxes, provisions, pension obligations, impairment of goodwill and other items. Although these estimates are based on management's best knowledge of current events and actions, actual results may differ from the estimates. Shares and share capital The total number of Outokumpu Oyj shares was 181 321 796 and the share capital amounted to EUR 308.2 million on December 31, 2007. Outokumpu Oyj held 1 218 603 treasury shares on December 31, 2007. This corresponded to 0.7% of the share capital and the total voting rights of the Company on December 31, 2007. The Annual General Meeting held in 2003 passed a resolution on a stock option program for management (2003 option program). The stock options have been allocated as part of the Group's incentive programs to key personnel of Outokumpu. Trading with Outokumpu Oyj's stock options 2003A has commenced on the Main List of the Helsinki Stock Exchange as of September 1, 2006. On December 31, 2007 a total of 56 862 Outokumpu Oyj shares had been subscribed for on the basis of 2003A stock option program. An aggregate maximum of 602 440 Outokumpu Oyj shares can be subscribed for with the remaining 2003A stock options. In accordance with the terms and conditions of the option program, the dividend adjusted share price for a stock option was EUR 8.45 on December 31, 2007. The share subscription period for the 2003A stock options is September 1, 2006 - March 1, 2009. Trading with Outokumpu Oyj's stock options 2003B has commenced on the Main List of the Helsinki Stock Exchange as of September 3, 2007. On December 31, 2007 a total of 14 379 Outokumpu Oyj shares had been subscribed for on the basis of 2003B stock option program. An aggregate maximum of 1 014 441 Outokumpu Oyj shares can be subscribed for with the remaining 2003B stock options. In accordance with the terms and conditions of the option program, the dividend adjusted share price for a stock option was EUR 11.51 on December 31, 2007. The share subscription period for the 2003B stock options is September 3, 2007 - March 1, 2010. The current amounts that Outokumpu Oyj shares could be subscribed for with the 2003C stock options are 102 500 shares. The subscription period for shares with stock option 2003C is from September 1, 2008 to March 1, 2011. As a result of the share subscriptions with the 2003 stock options, Outokumpu Oyj's share capital may be increased by a maximum of EUR 2 922 948 and the number of shares by a maximum of 1 719 381 shares. This corresponds to 1.0% of the Company's shares and voting rights. Outokumpu's Board of Directors confirmed on February 2, 2006 a share-based incentive program for years 2006-2010 as part of the key employee incentive and commitment system of the Company. If persons to be covered by the first earning period 2006-2008 and the second earning period 2007-2009 of the program were to receive the number of shares in accordance with the maximum reward, currently a total of 598 865 shares, their shareholding obtained via the program would amount to 0.3% of the Company's shares and voting rights. The detailed information of the 2003 option program and of the share-based incentive program for 2006-2010 can be found in the annual report of Outokumpu. Non-current assets held for sale and discontinued operations Outokumpu Copper Tube and Brass

The assets and liabilities of Outokumpu Copper Tube and Brass are presented as held for sale. Outokumpu Copper Tube and Brass business comprises European sanitary and industrial tubes, including air-conditioning and refrigeration tubes in Europe, as well as brass rod. Outokumpu is implementing a vigorous improvement project in this business and it is Outokumpu's intention to divest the tube and brass business.

Outotec

Outokumpu Oyj sold 88% of Outotec (former Outokumpu Technology) by a sale of shares through an Initial Public Offering (IPO) in September 2006. In April, Outokumpu sold its remaining 12% shareholding in Outotec Oyj to institutional investors. The net proceeds from the sale totaled EUR 158 million and a tax-free non-recurring gain of EUR 142 million was recognized in financial income.

In the following tables Outokumpu Tube and Brass is referred as TB and Outotec as OT.



Specification of non-current assets held for sale and discontinued operations Income statement Jan-Dec Jan-Dec 2007 2006 EUR million TB Total OT TB Sales 599 1 178 501 678 Expenses -607 -1 124 -470 -654 Operating profit -8 54 31 23 Net financial items -6 -2 5 -7 Profit before taxes -15 53 36 17 Taxes -1 -17 -14 -3 Profit after taxes -15 35 22 14

Gain on the sale of Outotec - 328 328 - Impairment loss recognized on the fair valuation of the Tube and Brass division's assets and liabilities -3 -6 - -6 Taxes - - - - After-tax result from the disposal and impairment loss -18 322 328 -6

Minority interest - 0 0 - Net profit for the period from discontinued operations -18 357 349 8

Balance sheet Dec 31 Dec 31 EUR million 2007 2006 Assets Intangible and tangible assets 6 6 Other non-current assets 4 4 Inventories 91 122 Other current non interest-bearing assets 83 104 184 235 Liabilities Provisions 4 3 Other non-current non interest-bearing liabilities 5 6 Trade payables 32 46 Other current non interest-bearing liabilities 11 18 52 73

Cash flows Jan-Dec Jan-Dec EUR million 2007 2006 Operating cash flows 18 -13 Investing cash flows -3 -145 Financing cash flows -19 80 Total cash flows -4 -77



Acquisitions and disposals

Acquisitions In May, Outokumpu acquired from Swedish Sandvik its 11.6% minority shareholding in OSTP for EUR 22 million. Goodwill of EUR 1 million was recognized from the acquisition. Full ownership in OSTP enables Outokumpu to develop the business further in line with its strategy to increase the share of the more value-added special products. Outokumpu divested the Talvivaara exploration project in 2004 and held an option to subscribe shares with a 20% discount in a possible Initial Public Offering (IPO), representing up to 5% ownership in the company. The IPO of Talvivaara Mining Company Ltd. was carried out and the listing of the shares started on the London Stock Exchange on May 30, 2007. Outokumpu participated in the IPO by subscribing 10.9 million shares, resulting in a 4.9% ownership in the company on a fully diluted basis, with a total consideration of EUR 32 million. Outokumpu also exercised its option, part of the divestment agreement, to acquire a 20% stake in the Talvivaara nickel mining project company (Talvivaara Project Ltd.) owned by Talvivaara Mining Company Ltd., for a total consideration of one euro. Talvivaara Project Ltd. is consolidated in the Group's income statement as an associated company reflecting Outokumpu's 20% holding. The fair valuation of Outokumpu's 20% stake resulted in a tax-free non-recurring gain of EUR 110 million, which has been recognized in financial income. The shareholding in the listed Talvivaara Mining Company Ltd. has been classified as an available-for-sale financial asset with changes in fair value recognized directly in equity. In the purchase price allocation the majority of the excess value was allocated to the nickel ore reserves according to the fair value and it will be amortized using the units-of-production method based on the depletion of ore reserves in Talvivaara. A goodwill amounting to EUR 9 million was recognized. Goodwill is not amortized, but tested annually for impairment. The Talvivaara mine is estimated to start production of nickel and other metals at the end of 2008. Its target is to gradually ramp up its nickel output to some 33 000 tons annually. Disposals In March, OSTP (Outokumpu Stainless Tubular Products) sold its flange business in order to focus on pipes, tubes, butt-welded and threaded fittings. The purchaser is a subsidiary of Shree Ganesh Forgings Ltd, an Indian company. The sale had no significant impact on Group's results. In February, Outokumpu agreed to sell the Hitura nickel mine in Finland to Belvedere Resources Ltd. of Canada. The Hitura mine was the last remaining asset in Outokumpu's Exit Mining program. Hitura produces some 2 200 tons of nickel in concentrate annually and employs 90 people. The transaction was completed in June and the total consideration of EUR 25 million, is in Belvedere shares and warrants entitling to subscribe for additional Belvedere shares, resulting in a maximum 19.2% ownership in Belvedere, on a fully-diluted basis. Outokumpu recognized a non-recurring gain of EUR 25 million on the transaction, which has been included in the operating profit. The shareholding in Belvedere is classified as an available-for-sale financial asset with changes in fair value recognized directly in equity and the warrants as derivative instruments with changes in fair value recognized in financial income and expenses. Net assets of these disposed businesses were EUR 6 million. Net gain on the disposals was EUR 23 million and net cash flow was EUR 1 million.



Major non-recurring items in operating profit Jan-Dec Jan-Dec EUR million 2007 2006 Gain on the sale of Hitura mine in Finland 25 - Thin Strip restructuring in the UK -11 - Gain on the sale of real estate in the UK - 9 OSTP Fagersta closure - -8 14 1



Major non-recurring items in financial income Jan-Dec Jan-Dec EUR million 2007 2006 Gain on the sale of Outotec shares 142 - Gain on the Talvivaara transaction 110 - 252 -

Income taxes Jan-Dec Jan-Dec EUR million 2007 2006 Current taxes -107 -156 Deferred taxes -31 -22 -138 -178





Property, plant and equipment Jan 1, Jan 1, 2007 - 2006 - Dec 31, Dec 31, EUR million 2007 2006 Historical cost at the beginning of the period 4 009 4 188 Translation differences -76 37 Additions 137 179 Disposal of subsidiaries -20 -0 Disposals -67 -299 Reclassifications 0 -8 Discontinued operations - -88 Historical cost at the end of the period 3 984 4 009

Accumulated depreciation at the beginning of the period -1 939 -2 063 Translation differences 47 -21 Disposal of subsidiaries 19 0 Disposals 56 296 Reclassifications -0 8 Depreciation -190 -204 Impairments 3 -3 Discontinued operations - 48 Accumulated depreciation at the end of the period -2 004 -1 939

Carrying value at the end of the period 1 980 2 069 Carrying value at the beginning of the period 2 069 2 125

Commitments Dec 31 Dec 31 EUR million 2007 2006 Mortgages and pledges Mortgages on land 122 126 Other pledges 0 0

Guarantees On behalf of subsidiaries For commercial commitments 41 97 On behalf of associated companies For financing 5 5

Other commitments 64 59

Minimum future lease payments on operating leases 56 93



Group's major off-balance sheet investment commitments totaled EUR 37 million on Dec 31, 2007 (Dec 31, 2006: EUR 15 million).





Fair values and nominal amounts of derivative instruments Dec 31 Dec 31 Dec 31 Dec 31 Dec Dec 2007 2007 2007 2006 2007 2006 Positive Negative Net Net fair fair fair fair Nominal Nominal EUR million value value value value amounts amounts Currency and interest rate derivatives Currency forwards 19 12 8 -9 1 992 2 139 Interest rate swaps 10 - 10 10 282 283

Number Number of of shares, shares, million million Stock options Belvedere Resources Ltd. 3 - 3 - 3.7 -

Tons Tons Metal derivatives Forward and futures copper contracts 0 3 -2 -1 11 775 6 000 Forward and futures nickel contracts 4 4 0 9 3 114 3 636 Forward and futures zinc contracts 0 0 -0 0 1 100 2 150 Forward and futures molybdenum contracts - 0 -0 - 5 - Nickel options 0 - 0 - 24 -

Emission allowance derivatives 0 - 0 - 80 000 -

TWh TWh Electricity derivatives 26 10 16 8 2.3 4.1 63 28 35 16





Segment information

General Stainless

EUR million I/06 II/06 III/06 IV/06 2006 Sales 1 013 1 066 1 130 1 561 4 770 of which Tornio Works 652 740 781 1 142 3 316

Operating profit 43 91 166 236 536 of which Tornio Works 37 70 120 213 440

Operating capital at the end of period 2 397 2 404 2 602 2 847 2 847

Average personnel for the period 3 926 3 940 3 857 3 529 3 735

Deliveries of main products (1 000 tons) Cold rolled 246 206 172 180 805 White hot strip 74 85 62 84 305 Semi-finished products 128 144 126 154 551 Total deliveries of the division 448 434 360 419 1 661

EUR million I/07 II/07 III/07 IV/07 2007 Sales 1 700 1 670 879 1 073 5 321 of which Tornio Works 1 206 1 038 516 708 3 468

Operating profit 245 188 -224 11 220 of which Tornio Works 227 143 -195 3 178

Operating capital at the end of period 3 047 3 007 2 789 2 607 2 607

Average personnel for the period 3 506 3 794 3 807 3 549 3 682

Deliveries of main products (1 000 tons) Cold rolled 187 151 94 155 587 White hot strip 81 82 41 66 270 Semi-finished products 117 118 64 85 383 Total deliveries of the division 386 350 198 305 1 240

Specialty Stainless

EUR million I/06 II/06 III/06 IV/06 2006 Sales 650 638 614 821 2 723

Operating profit 22 65 81 171 338

Operating capital at the end of period 1 173 1 240 1 350 1 594 1 594

Average personnel for the period 4 317 4 377 4 329 4 201 4 289

Deliveries of main products (1 000 tons) Cold rolled 56 54 39 47 196 White hot strip 49 41 33 42 166 Quarto plate 44 44 36 39 162 Tubular products 20 20 16 18 74 Long products 14 15 14 16 59 Total deliveries of the division 182 173 139 162 656

EUR million I/07 II/07 III/07 IV/07 2007 Sales 1 003 1 028 687 738 3 456

Operating profit 182 196 -51 9 337

Operating capital at the end of period 1 668 1 871 1 657 1 513 1 513

Average personnel for the period 4 146 4 188 4 185 4 107 4 135

Deliveries of main products (1 000 tons) Cold rolled 51 52 33 38 174 White hot strip 43 38 23 31 135 Quarto plate 41 43 30 38 151 Tubular products 20 17 12 15 63 Long products 16 15 11 11 52 Total deliveries of the division 170 164 109 133 574

Other operations

EUR million I/06 II/06 III/06 IV/06 2006 Sales 87 93 97 85 361

Operating profit 2 -8 -13 -16 -35

Operating capital at the end of period 133 239 188 138 138

Average personnel for the period 504 505 479 457 481

EUR million I/07 II/07 III/07 IV/07 2007 Sales 64 63 53 57 237

Operating profit 1 19 8 -6 21

Operating capital at the end of period -125 101 184 236 236

Average personnel for the period 477 459 424 431 453



Income statement by quarter

EUR million I/06 II/06 III/06 IV/06 2006 Continuing operations: Sales General Stainless 1 013 1 066 1 130 1 561 4 770 of which intersegment sales 205 277 273 389 1 144 Specialty Stainless 650 638 614 821 2 723 of which intersegment sales 94 92 82 129 397 Other operations 87 93 97 85 361 of which intersegment sales 44 36 38 41 159 Intra-group sales -342 -405 -394 -560 -1 700 Total sales 1 408 1 392 1 447 1 907 6 154

Operating profit General Stainless 43 91 166 236 536 Specialty Stainless 22 65 81 171 338 Other operations 2 -8 -13 -16 -35 Intra-group items -0 1 -3 -13 -15 Total operating profit 67 149 231 378 824

Share of results in associated companies 0 2 1 4 8 Financial income and expenses -7 -10 -18 -13 -48 Profit before taxes 60 141 214 369 784 Income taxes -18 -29 -48 -83 -178 Net profit for the period from continuing operations 41 112 166 286 606

Net profit for the period from discontinued operations 15 20 6 317 357 Net profit for the period 56 133 172 603 963

Attributable to: Equity holders of the Company 56 132 171 603 962 Minority interest -0 0 1 1 2

EUR million I/07 II/07 III/07 IV/07 2007 Continuing operations: Sales General Stainless 1 700 1 670 879 1 073 5 321 of which intersegment sales 421 430 230 234 1 315 Specialty Stainless 1 003 1 028 687 738 3 456 of which intersegment sales 169 193 119 124 605 Other operations 64 63 53 57 237 of which intersegment sales 48 45 43 45 181 Intra-group sales -638 -669 -391 -403 -2 101 Total sales 2 129 2 092 1 227 1 465 6 913

Operating profit General Stainless 245 188 -224 11 220 Specialty Stainless 182 196 -51 9 337 Other operations 1 19 8 -6 21 Intra-group items -4 2 11 2 11 Total operating profit 424 406 -256 15 589

Share of results in associated companies 2 4 -2 -1 4 Financial income and expenses -10 242 -19 -7 206 Profit before taxes 416 652 -277 7 798 Income taxes -105 -100 67 -0 -138 Net profit for the period from continuing operations 311 553 -210 7 660

Net profit for the period from discontinued operations -4 12 -4 -23 -18 Net profit for the period 307 565 -214 -16 641

Attributable to: Equity holders of the Company 305 563 -214 -16 638 Minority interest 2 2 -0 -0 4

Major non-recurring items in operating profit

EUR million I/06 II/06 III/06 IV/06 2006 General Stainless Gain on sale of real estate in the UK - - - 9 9 Specialty Stainless Thin Strip restructuring in the UK - - - - - OSTP Fagersta closure - - - -8 -8 Other operations Gain on sale of Hitura mine in Finland - - - - - - - - 1 1

EUR million I/07 II/07 III/07 IV/07 2007 General Stainless Gain on sale of real estate in the UK - - - - - Specialty Stainless Thin Strip restructuring in the UK - - -11 - -11 OSTP Fagersta closure - - - - - Other operations Gain on sale of Hitura mine in Finland - 25 - - 25 - 25 -11 - 14

Major non-recurring items in financial income

EUR million I/06 II/06 III/06 IV/06 2006 Gain on the sale of Outotec shares - - - - - Gain on the Talvivaara transaction - - - - - - - - - -

EUR million I/07 II/07 III/07 IV/07 2007 Gain on the sale of Outotec shares - 142 - - 142 Gain on the Talvivaara transaction - 110 - - 110 - 252 - - 252



Key figures by quarter

EUR million I/06 II/06 III/06 IV/06 Operating profit margin, % 4.7 10.7 16.0 19.8 Return on capital employed, % 7.5 16.5 24.3 36.5 Return on equity, % 11.0 25.2 30.4 89.0 Return on equity, continuing operations, % 8.1 21.4 29.4 42.3

Capital employed at end of period 3 513 3 679 3 910 4 371 Net interest-bearing debt at end of period 1 483 1 509 1 560 1 300 Equity-to-assets ratio at end of period, % 37.4 38.4 37.7 47.9 Debt-to-equity ratio at end of period, % 73.0 69.5 66.4 42.3

Earnings per share, EUR 0.31 0.73 0.94 3.33 Earnings per share from continuing operations, EUR 0.23 0.62 0.91 1.58 Earnings per share from discontinued operations, EUR 0.08 0.11 0.03 1.75 Average number of shares outstanding, in thousands 1) 181 032 181 032 181 032 181 037 Equity per share at end of period, EUR 11.14 11.91 12.89 16.87 Number of shares outstanding at end of period, in thousands 1) 181 032 181 032 181 032 181 032

Capital expenditure, continuing operations 33 34 45 74 Depreciation, continuing operations 50 50 68 52 Average personnel for the period, continuing operations 8 746 8 822 8 665 8 187

EUR million I/07 II/07 III/07 IV/07 Operating profit margin, % 19.9 19.4 -20.9 1.0 Return on capital employed, % 38.8 35.5 -22.3 1.4 Return on equity, % 39.3 66.2 -24.3 -2.0 Return on equity, continuing operations, % 39.8 64.8 -23.9 0.8

Capital employed at end of period 4 377 4 753 4 421 4 125 Net interest-bearing debt at end of period 1 189 1 119 1 016 788 Equity-to-assets ratio at end of period, % 47.2 50.9 54.6 56.5 Debt-to-equity ratio at end of period, % 37.3 30.8 29.8 23.6

Earnings per share, EUR 1.69 3.11 -1.19 -0.09 Earnings per share from continuing operations, EUR 1.71 3.04 -1.17 0.04 Earnings per share from discontinued operations, EUR -0.02 0.07 -0.02 -0.13 Average number of shares outstanding, in thousands 1) 181 067 181 082 181 084 180 680 Equity per share at end of period, EUR 17.51 20.07 18.81 18.53 Number of shares outstanding at end of period, in thousands 1) 181 082 181 082 181 084 180 103

Capital expenditure, continuing operations 25 75 47 43 Depreciation, continuing operations 51 50 51 52 Average personnel for the period, continuing operations 8 129 8 441 8 416 8 086

1) The number of own shares repurchased is excluded.



Definitions of financial key figures

Total equity + net Capital employed = interest-bearing debt

Capital employed + net tax Operating capital = liability

Return on equity = Net profit for the financial year × 100 Total equity (average for the period)

Return on capital = Operating profit × 100 Capital employed (average for the employed (ROCE) period)

Net interest- Total interest-bearing debt bearing debt = - total interest-bearing assets

Equity-to-assets ratio = Total equity × 100 Total assets - advances received

Debt-to-equity ratio = Net interest-bearing debt × 100 Total equity

Net profit for the financial year Earnings per share = attributable to the equity holders Adjusted average number of shares during the period

Equity attributable to Equity per share = the equity holders Adjusted number of shares at the end of the period



This is the end of the second part II/II.



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Outokumpu Oyj

http://www.outokumpu.com

ISIN: FI0009002422

Stock Identifier: XHEL.OUT1V