Rautaruukki Corporation announced interim report for January to September 2009 period. Consolidated reported negative operating profit was minus EUR 284 million and negative operating profit excluding non recurring items was minus EUR 279 million. Result before taxes was minus EUR 313 million. Gearing ratio was 26.4%. Cash flow from operating activities was EUR 69 million. Return on capital employed was minus 10%. Earnings per share were minus EUR 1.65.
The company estimates 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. Earlier the company estimated that there will be a marked improvement in the result before taxes for the second half of the year compared to the first half, but might remain slightly negative.
| | 9 M '09 | 9 M '08 | Q3 '09 | Q3 '08 | 2008 |
| Net sales | 1429 | 3004 | 485 | 996 | 3851 |
| Operating profit | -284 | 505 | -54 | 197 | 568 |
| Operating profit | -279 | 584 | |||
| Operating profit (% net sales) | -19.9 | 16.8 | -11.2 | 19.7 | 14.7 |
| Operating profit (% net sales) | -19.5 | 15.3 | |||
| Result before taxes | -313 | 503 | -64 | 195 | 548 |
| Earnings per share | -1.65 | 2.65 | -0.32 | 1 | 2.93 |
| Return on capital employed % | -10 | 29.6 | 25.6 | ||
| Gearing ratio % | 26.4 | 7.8 | 7.9 | ||
| Personnel, average | 12914 | 15086 | 12413 | 15285 | 14953 |
In EUR million
By the end of the report period, the three year operational excellence program 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 unfavorable. 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 leveled off during the third quarter.
Mr Sakari Tamminen president & CEO of Rautaruukki said that "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."
He added that "Ruukki's poor earnings performance during the report period was mainly attributable to lower sales volumes, unfavorable sales price development and to the use of steel material produced using high cost raw materials. Also the low steel production capacity utilization rate during the first half of the year significantly impacted on our result. 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 reorganize the operations of the unit, which earlier primarily served the shipbuilding industry."
Mr Tamminen said that "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 color coated and galvanized 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 program. 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."
He concluded that "Our three year operational excellence program 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."