Outokumpu Oyj (HEL:OUT1V) Outokumpu's Operating Profit In The Fourth Quarter Lower Than Expected, Actions Taken To Improve Profitability, Investment Program Postponed

Outokumpu Oyj (HEL:OUT1V) STOCK EXCHANGE RELEASE December 11, 2008 at 9.00 a.m.

Stainless steel demand has weakened further and Outokumpu's fourth quarter performance will be below earlier indications. The company is taking actions to prepare for a period of possible prolonged demand weakness and will now prioritize profitability improvement and cash generation in the short-term. In order to secure cost efficiency, both fixed and variable costs are addressed. In this respect also personnel reductions are anticipated both on a permanent and on temporary basis.

Outokumpu decided to review its investment program in October. Based on the review, the investment program is postponed almost entirely to maximize cash flow and maintain balance sheet flexibility in 2009.

CEO Juha Rantanen comments:

"Outokumpu is well positioned to face the current turmoil due to our strong balance sheet and good liquidity position. However, the market situation has deteriorated much faster than we anticipated still in October due to the financial crisis as experienced by our customers. The visibility into 2009 is very poor, but we have to assume that things may not improve. Thus we are now taking these strong actions to improve cash flow and profitability. Unfortunately, we cannot avoid considering personnel reductions in this context.

At the same time, we remain committed to our strategy. We want to sell more to end-use and project customers, we want to have a stable relationship with distributors, and we want to increase the sales of special products and ferritics. Although we will postpone many of the related investments, we have currently enough available production capacity to continue in our strategic direction." Fourth quarter outlook revised

The stainless steel demand is currently very weak. All end-user segments have reduced their purchases as companies postpone their investments and the construction activity is low. Distributors seek to minimize cash use and reduce their inventories. Due to further decline in raw material prices distributors are still postponing their purchases in expectation of lower prices. As a result Outokumpu is revising its fourth quarter outlook as follows:

- Delivery volumes are expected to fall to around 250 000 tons (previously expected at the same level or slightly above the 323 000 tons in the third quarter) - Prices have continued to decline in the fourth quarter. Currently the German 2mm cold rolled 304 stainless steel sheet base price is around 1000 EUR/t. (previously prices were expected to stabilize with no further price erosion, CRU estimated base price for October at 1 080 EUR/t.) - Underlying operational result is expected to be negative in the order of EUR 50 million (previously slightly positive) - Raw material-related inventory losses are expected to be in the order of EUR 150 million at current raw material prices. These include timing losses and net-realizable value write-downs due to the further declined prices of nickel, molybdenum and recycled steel (previously EUR 50-100 million of nickel-related inventory losses). - Operating profit is expected to be negative (no change) - Substantial release of working capital will result in continuing strong cash flow from operations (no change) Actions taken to improve profitability As a result of the current outlook for world economy, the company is preparing for a scenario where the market is not improving in 2009. Thus Outokumpu is forced to take actions to adjust its operations to delivery volumes that are clearly below the company's production capacity and stainless steel prices that are lower than the long-term average levels.

Outokumpu's current action plans will reduce its annual fixed costs by at least EUR 50 million in 2009. The aim is to achieve these cost savings through personnel reductions and general cost saving programs. The main actions are the following:

A number of short-term measures to save costs and adjust to lower production volumes were agreed at the Tornio plant at the beginning of December. If the market situation continues to be difficult, Outokumpu will take additional actions in Tornio to lower the cost level.

Further, due to the low order load and the necessity to save costs Outokumpu will start negotiations with personnel representatives with the aim to reduce about 450 jobs in the company's Swedish production sites.

Outokumpu will also start negotiations with personnel representatives to reduce costs in the head office functions in respective countries. The negotiations will be held according to local legislation in each country and may lead to permanent or temporary layoffs. The number of Outokumpu's employees in head office functions globally is some 350.

Also in Outokumpu's other units, cost saving measures might lead to further reductions of personnel.

Outokumpu is committed to support its personnel in this process in a responsible way. The support will be based on common global principles and include mainly local actions in each country. Personal assistance and coaching will be available.

Investment program postponed

Outokumpu decided to review its investment program in October as a result of the global financial crisis and suddenly weakening stainless steel demand. Based on the analysis Outokumpu has decided to postpone its investment program almost entirely for at least 12 months. Continuing any of the projects would be subject to a separate decision based on an updated feasibility study. All of these investments continue to have strong strategic rational.

Outokumpu's target to balance the product mix by selling more value added special products and ferritic (non-nickel) grades can be achieved in the coming years by higher utilization of current capacity and product mix changes. Consequently, the investments in high-purity ferritic and bright-annealing in Tornio, Finland, special grades in Avesta, Sweden and quarto plate in Degerfors, Sweden are postponed. The investment to expand quarto plate production capacity in New Castle (IN), the US, will be proceeding according to plan.

Outokumpu's strategy is also to increase the share of end-user and project sales, which is supported by investments in the company's own service center network. Due to the synergy benefits from the acquisition of the Italian independent distributor, SoGePar, the investment program in service centers in Europe has been streamlined and optimized. Only the investment in the service center in Willich, Germany will proceed according to plan. All other service center investments in Poland, France and Southern Germany are reduced in scope or postponed for the time being.

The service center investment in India is postponed due to the ongoing antidumping investigation into stainless steel imports by Indian government. The plate service center in China will be proceeding according to plan.

Contrary to the initial scope of the investment project review, also the investment to double the ferrochrome production capacity in Tornio is postponed until further notice due to the weak market outlook of stainless steel, current oversupply and declined price level for ferrochrome.

As a result of the investment project review a total of some EUR 1.5 billion of capital expenditure is postponed. For 2009, Outokumpu now estimates capital expenditure of EUR 300 million instead of the originally planned EUR 850 million. Most of the spending in 2009 is related to expansion projects that are close to being finalized and some mandatory parts of the recently started projects. EUR 100 million of the capital expenditure in 2009 is maintenance related. Conference call for investors and analysts

A conference call for analysts and investors hosted by CEO Juha Rantanen and Deputy CEO Karri Kaitue will be held today at 1.00 pm EET.

To follow the presentation during the conference call, please click on the link:

http://wcc.webeventservices.com/view/wl/r.htm?e=128601&s=1&k=CD3FBA37AD507E650A739658E715363C&cb=genesys

To participate at the conference call, please dial one of the following numbers 5-10 minutes before the conference:

In Finland: +358 9 2313 9201 In the UK: +44 207 162 0077 In the US: +1 334 323 6201

The conference call presentation will also be available on www.outokumpu.com >> Investors.

For further information, please contact:

Juha Rantanen, CEO, tel. +358 9 421 3111 Karri Kaitue, Deputy CEO, tel. +358 9 421 5506

CEO Juha Rantanen will be available for interviews, please contact Anna Vuolanen, VP - Media Relations, tel. +358 40 705 5734, for the interviews.

OUTOKUMPU OYJ Corporate Management

Ingela Ulfves Vice President - Investor Relations and Financial Communications tel. + 358 9 421 2438, mobile +358 40 515 1531 ingela.ulfves@outokumpu.com www.outokumpu.com

This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.



LINK: http://hugin.info/3010/R/1276743/284390.pdf

Outokumpu Oyj

http://www.outokumpu.com

ISIN: FI0009002422

Stock Identifier: XHEL.OUT1V