December 03, 2008

Rautaruukki Q1 profit lower and missing expectation

Steel group Rautaruukki Oyj announced first quarter profits that were lower year on year and that also came in below market expectations. Pretax profit came in at EUR 143 million down from last year's EUR 178 million.

First quarter 2008 highlights
1. Good demand continued for non-residential construction in Northern Europe, Russia, Ukraine and Poland during the first quarter. Demand for infrastructure construction also continued good for road and railway construction and foundation construction.
2. Significant contracts to deliver steel structures and solutions in Russia and the Nordic countries.
3. The order books of engineering customers have remained strong. The demand was brisk especially in the energy industry.
4. Ruukki Engineering launched a profitability improvement program aimed at improving the division’s operating profit by around EUR 20 million in 2008.
5. Good demand for steel products. Driven by strong demand, special products continued to form an increasing share of Ruukki Metals’ net sales to account for 28%.

Mr Sakari Tamminen president & CEO of Rautaruukki said that “The favorable market situation in the company’s core market areas and main customer industries continued during the first three months of the year. Demand for non-residential construction was good, albeit a colder winter than a year earlier in Central Eastern Europe decreased sales volumes in this market area year on year. Residential construction slowed in the Nordic countries and Baltics. The order books of engineering customers are strong and this was also reflected in the demand within Ruukki Engineering. There was good demand for steel products, especially for plate and special steel products.

He said that “Ruukki Construction and Ruukki Engineering increased their share of the company’s net sales year on year as a result of investments and acquisitions. Strong demand for special products clearly increased the percentage of net sales of these products within Ruukki Metals. We will continue to invest to enhance the delivery capacity of special products. Rautaruukki has launched extensive investments to increase production capacity in the rapidly growing Russian and Central Eastern European markets. This will strengthen our position in non-residential construction. The building of new production lines and growing headcount added to costs during the first quarter. The company’s operating profit decreased compared to strong performance year on year, but improved compared to the last quarter of 2007.”

Mr Tamminen said that “Higher than expected increases in the price of raw materials on the world market will add considerably to our own steel production costs during the current year. To offset growing costs, price increases will be implemented and cost-efficiency improved. Brisk demand in the company’s main customer industries and a strong balance sheet provide us with a good platform to grow our business in our core market area both through investments and acquisitions. We expect comparable net sales growth in 2008 to meet the target and to exceed 10%. Operating profit in 2008 is expected to be higher than in 2007.”