Financial Review 2005
February 8, 2006
February 8, 2006 www.ruukki.com • Ruuki in Brief • Strategy Moving Ahead • Business Environment • Financials 2005 • Dividend Proposal • Near-term Outlook • Summary
2 February 8, 2006 www.ruukki.com Ruukki in Brief Ruukki today
• Ruukki supplies an integrated range of metal-based products, components and systems • Special focus on construction and mechanical engineering industries • Net sales EUR 3.7 billion in 2005 • Crude steel production capacity 3.5 Mt; rolling capacity 3.7 Mt
• Approx. 12,000 employees in Production Processing 23 countries Sales and service
4 February 8, 2006 www.ruukki.com Ruukki´s products and services
Metals Construction Engineering
Customized cabins for mobile machines Sheets Frames and other load-bearing structures, roofs
Cabins, actuators and frames for forest machines Coils Facades and prefabricated Frames, masts, walls booms and cabins for material handling Piling and equipment foundations Parts
5 February 8, 2006 www.ruukki.com Strategy Moving Ahead Our vision: solutions for specific segments based on customer needs Construction
Construction Engineering
Engineering Solutions Solutions Solutions Service Metal Metal Metal Products Products Products
2003 2008-2010 Reliable steel producer The most desired solution supplier
7 February 8, 2006 www.ruukki.com Strategic intent
A leading A leading metal based solution provider Leading METAL PRODUCTS CONSTRUCTION for specific supplier solution provider ENGINEERING in Nordic & Baltic in Nordic & CEE customers in countries countries Northern Europe
8 February 8, 2006 www.ruukki.com Potential in customer industries
¾ Increasing demand for integrated CONSTRUCTION systems ¾ Strong growth in CEE, Russia and Ukraine ¾ Metal based market about EUR 7.5 bn
¾ Customers going downward in value chain and outsourcing operations ENGINEERING ¾ Major opportunities in Lifting, Handling and Transportation (LHT) ¾ LHT target market about EUR 1.4 bn CUSTOMERS ¾ Solid market position in Scandinavia ¾ Expanding service centre activities METALS ¾ More vertical value adding ¾ Share of special products (i.e. extra high strength steel) increasing
9 February 8, 2006 www.ruukki.com Actions taken Ruukki Construction – Steel-Mont 1) ~25 Me
Ruukki Construction – PPTH ~100 Me
Dec Ruukki Engineering – 2005 Weibulls ~50 Me Oct Ruukki 2005 Engineering – sale of Halikko Ruukki Construction – Sept 2005 unit about Metalplast ~65 Me -10 Me Aug Ruukki Metals – 2005 Froh Housetech -10 Me Ruukki June Engineering – 2005 Velsa ~50 Me May Ruukki Metals – 2005 restructuring of long Nov products about 1) acquisition awaiting for 2004 -600 Me approval from competition authorities
10 February 8, 2006 www.ruukki.com * Lifting, Handling and Transportation Integrated systems for construction
11 February 8, 2006 www.ruukki.com Focus on growing eastern European commercial construction Annual change (% by volume) 2006e
Western Europe Eastern Europe
New residential -0,6 4,0 New commercial 1,5 6,3 New civil engineering 2,9 13,5 Residential renovation 1,8 4,0 Commercial renovation 1,3 4,2 Civil engineering renovation 1,3 6,4
Source: Euroconstruct
12 February 8, 2006 www.ruukki.com Service centers and processing units
Processing / Components & parts DE Sundern SE Anderslöv RU StPeterburg
Prefabrication / Flat rolled products FI Järvenpää, Naantali SE Halmstad NO Fredrikstad PL Zyrardow DE Duisburg
Prefabrication / Long products FI Hyvinkää NO Oslo, Trondheim
Stocking, with lim. prefabrication EE Tallinn LV Riga LT Vilnius PL Gdansk HU Biatorbagy NO Bergen, Bryne, Fauske, Kopervik, Porsgrunn, Tromsø, Ørsta
13 February 8, 2006 www.ruukki.com Role of service centers and processing
PROCESSING UNITS Components and complete deliveries - additional services compared to service - cabinets for electronic industry centres - panels for household appliances - contract manufacturing - airbag components - parts for light engineering industry
SERVICE CENTRES Tailor made semi-finished products from own production and external suppliers Flat rolled products - cutting to length, slitting Supported by: - re-coiling, bending - mill deliveries - laser- and plasma cutting (alu, stainless) - standard materials from stock Long products - excellent customer service - sawing, laser cutting - shot blasting, priming
STOCKS Standard products - comprehensive product sortiment - sortiment matched to local market and - effective logistics specific customers - local presence supported by mill deliveries
14 February 8, 2006 www.ruukki.com Special Products
• Special products are less price-sensitive than standard products • Main line of businesses: – heavy engineering outside Nordi – Electronics and Automotive subcontractors • Long-term customer relationships
• Examples of special products: – High- and ultrahigh strength tubes and flats – Organic coatings for roofing+facades, dirt resistant applications, anti- bacterial applications – Abrasion resistant steels
15 February 8, 2006 www.ruukki.com Business Environment Overall demand in 2005 was good
• Good demand continued in construction and engineering industries – construction activity high in the main markets • commercial construction • infrastructure construction – continued strong order books in engineering • Lifting, Handling and Transportation • Offshore and Marine • Steel product markets showed signs of strengthening towards the end of the year – Market disturbances decreased apparent demand for standard steel products especially during the summer months – Steel industry adjusted output according to apparent demand 17 February 8, 2006 www.ruukki.com Commercial construction* activity has been strong in CEE and Baltics
Value ofcommercial construction Growth in commercial construction Europe 2005, Eur billlions Europe 2002-2005e, percent 14.4 14.0 EST 10.0 Baltics 3.9 LAT LTU 2002 2003 2004 2005 31 3.5 4.1 0.0 CEE POL 2 CZE SVK -3.1 19 2002 2003 2004 2005 HUN 3.3 3.6 334 Nordics -3.3 -6.2 2002 2003 2004 2005
0.1 0.0 Western -0.4 -1.4 * Includes new construction and renovation Europe 2002 2003 2004 2005
Source: Euroconstruct, VTT 18 February 8, 2006 www.ruukki.com Strong increase in LHT players’ order books
450 400 350 300 250
index 200 150 100 50 0 2000 2001 2002 2003 2004 2005 1-9 Source: Compiled order book data of some LHT players within Ruukki’s market 19 February 8, 2006 www.ruukki.com Apparent and Real Steel Consumption in EU, %-change quarter on quarter
10
8
6 Forecast 4 Apparent consumption 2 Real 0 consumption
-2
-4
-6
-8
-10 Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- 2004 2004 2004 2004 2005 2005 2005 2005 Source: Eurofer, January 2006
20 February 8, 2006 www.ruukki.com Product price development in Germany
1985 index = 100 170
Rolled products 150 Engineering products Automotive industry Metal products 130
110
90
70 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: Statistisches Bundesamt, Germany
21 February 8, 2006 www.ruukki.com Financials 2005 Full year 2005
• Comparable net sales increased by 14 % – the share of the solution businesses increased to 28 % of net sales (21 % of 2004 comparable net sales) • Profitability at a high level – active measures to improve the sales structure – positive price development • Deliveries decreased by 7 % on comparable basis – production was adjusted according to profitable demand • Balance sheet structure strengthened further – gearing 22.8 % at the year end
23 February 8, 2006 www.ruukki.com Fourth quarter versus third quarter: Highlights • Group net sales and deliveries increased from third quarter + seasonally strong quarter in engineering and Syneco consolidated in Ruukki Engineering + improving market activity in steel products – low season in construction • EBIT increased from third quarter + profitability at a good level + active measures to improve sales structure were continued – steel product prices decreased somewhat • Share of Ovako profit was affected by one-off costs – total Ovako one-off costs amounted to EUR 25 million in Q4
24 February 8, 2006 www.ruukki.com Net sales, Group total
m€ 4000 3564 3654 3500 3192 3402 2953 2906 2884 3019 3000 2708
2500
2000
1500
1000 Excluding Ovako 500 Comparable with 2005 0 2000 2001 2002 2003 2004 2005 Years 2000 – 2003 according to FAS and from 2004 according to IFRS.
25 February 8, 2006 www.ruukki.com Group net sales by division 2005 (2004)
Ruukki Construction 550 m€ (377 m€) 15 % (11 %)
Ruukki Engineering 476 m€ (329 m€) 13 % (9 %)
Ruukki Metals 2625 m€ (2850 m€) 72 % (80 %)
26 February 8, 2006 www.ruukki.com Group net sales by area 2005 (2004)
Other countries 3 % (3 %)
Finland 29 % (26%)
Other Western Europe 26 % (32 %)
CEE-countries 12 % (11 %) Other Nordic 30 % (28 %)
27 February 8, 2006 www.ruukki.com Quarterly net sales, Group total
m€ 1100 10051014 1000 939 911 889 900 854 878 846 822 768 794 812 800 759 704 722 770 736 700 667
600
500
400 300
200
100
0 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Comparable figures Years 2000 – 2003 according to FAS and from 2004 according to IFRS. with Q4/05
28 February 8, 2006 www.ruukki.com EBIT and profit before taxes 2000 – 2005
m€ 650 618 612
550 493 443 450
350
250
150
50
-50 2000 2001 2002 2003 2004 2005
EBIT Profit before taxes Years 2000 – 2003 according to FAS and from 2004 according to IFRS.
29 February 8, 2006 www.ruukki.com Quarterly EBIT and profit before taxes, Group total
19.8% m € 220 20.0% % of sales 19.2% 201 200 16.5% 194 18.0% 180 182 180 14.9% 169 14.1% 16.0% 13.5% 166 163 13.8% 160 152 144 14.0% 140 128 123 123 121 12.0% 118 114 116 120 108 115 107 10.0% 9.5% 100 76 8.0% 80 71 66 6.0% 60
40 4.0%
20 2.0%
0 0.0% Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
Operating profit Pre-tax profit Operating profit-% Comparable figures Operating profit margin target (right-hand scale) with Q4/05
30 February 8, 2006 www.ruukki.com Earnings per share
€ 4.00
3.50 3.31
3.00 2.40 2.50
2.00
1.50
1.00 0.51 0.39 0.50 0.22 0.00
-0.50 -0.26 2000 2001 2002 2003 2004 2005
Years 2000 – 2003 according to FAS and from 2004 according to IFRS.
31 February 8, 2006 www.ruukki.com Quarterly earnings per share
€ 1.10 1.06 1.00 0.97 0.90 0.80 0.76 0.69 0.68 0.70 0.60 0.61 0.60 0.50 0.40 0.35 0.30 0.20 0.10 0.00 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05
32 February 8, 2006 www.ruukki.com Return on equity ROCE
% % 36 35 32 28 30 24 20 25 16 20 12 Strategic target 8 15 % 15 4 0 10 -4 -8 5
0 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005
Year 2000 – 2003 according to FAS and from 2004 according to IFRS.
33 February 8, 2006 www.ruukki.com Net debt, equity, gearing m€ 1600 138 140 129 1497 % 1400 118 112 120 1200 1126 100 1087 1092 1000 1017 922 80 856 856 838 761 Target < 80 % 800 799 68 60 600 40 400 341 22.8 200 20
0 0 2000 2001 2002 2003 2004 2005 Net debt, m€ Equity, m€ Gearing % Years 2000 – 2003 according to FAS and from 2004 according to IFRS. 34 February 8, 2006 www.ruukki.com Cash flow
m€750 652 650
550 519
450 386 350 265 268 250 176 148 141 152 150
32 50 23
-50 -9 2000 2001 2002 2003 2004 2005
Cash flow from operations Cash flow before financing
Year 2000 – 2003 according to FAS and from 2004 according to IFRS. 35 February 8, 2006 www.ruukki.com Capex vs. depreciation
200 m€ 180 *) 160 140 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005
Gross capex Net capex Depreciation Years 2000 – 2003 according to FAS and from 2004 according to IFRS.
*) Excl. value reductions 33 m€ 36 February 8, 2006 www.ruukki.com Acquisitions
90 m€ 80 70
60 50
40
30 20
10 0 2000 2001 2002 2003 2004 2005 Fixed assets Working capital Goodwill Column 4
Years 2000 – 2003 according to FAS and from 2004 according to IFRS.
37 February 8, 2006 www.ruukki.com Acquisitions
90 m€ 80
70 Agreements 60 on PPTH and 50 SteelMont 40
30 20
10 0 2000 2001 2002 2003 2004 2005
Fixed assets Working capital Goodwill
Years 2000 – 2003 according to FAS and from 2004 according to IFRS.
38 February 8, 2006 www.ruukki.com Ovako Ovako’s first period of operation successful, 1 May – 31 Dec, 2005 • Net sales: EUR 869 million • Operating profit (EBIT): EUR 58 million – Q4 operating profit includes one-off costs of EUR 25 • Pre-tax profit: EUR 39 million • Strong cash flow • Gearing ratio: 23 % • The demand for long steel products was very good during the first half of 2005. Prices decreased somewhat during the latter half of the year due to weaker demand and lower prices of scrap. Demand is expected to improve somewhat during 2006.
40 February 8, 2006 www.ruukki.com Dividend Proposal Dividend proposal
• The Board proposal for 2005 dividend: – EUR 1.40 per share (2004: EUR 0.80) • Total dividend payment: EUR 191 million • Dividend yield: 5.4 % (at 7 Feb share price EUR 26.11) • Record date: 28 March 2006 • Dividend payment issued: 4 April 2006
42 February 8, 2006 www.ruukki.com Earnings and dividend per share 1999 - 2005 EUR 3.50
3.00
2.50
2.00
1.50 * 1.00
0.50
0.00
-0.50 1999 2000 2001 2002 2003 2004 2005 DPS EPS * Board proposal
43 February 8, 2006 www.ruukki.com Near-term Outlook Apparent and Real Steel Consumption
in EU,10 %-change quarter on quarter
8
6
4 Forecast App. 2 consumption
0 Real consumption -2
-4
-6
-8
-10 Q1- Q2- Q3- Q4- Q1- Q2- Q3- Q4- Q1- Q2- 2004 2004 2004 2004 2005 2005 2005 2005 2006 2006
Source: Eurofer, January 2006
45 February 8, 2006 www.ruukki.com Industrial activity in EU
y-y change, %
Construction Mechanical Engineering 6 8
4 4
2 0 0 -4 -2
-4 -8 2001 2002 2003 2004 2005 2006 2001 2002 2003 2004 2005 2006
Source: Eurofer
46 February 8, 2006 www.ruukki.com Near-term outlook
• Strong demand expected to continue in the main customer industries in the core markets • Demand for steel products expected to grow more than in previous year and prices are expected to strengthen • Full year 2006 net sales estimated to exceed 2005 comparable net sales • First half 2006 EBIT estimated to be at the same good level as second half 2005 EBIT • The biggest uncertainty lies in the market development of steel products in Asia and general development in the world economy
47 February 8, 2006 www.ruukki.com Summary Summary
• Strategic platform in place to strengthen the solution businesses through organic growth • Balance sheet structure enables the strategy implementation • Strong demand expected to continue in the main customer industries • First half 2006 EBIT estimated to be at the same good level as second half 2005 EBIT
49 February 8, 2006 www.ruukki.com
Components and Systems for engineering
Fact box (Velsa): • leading Nordic manufacturer of mobile cabins • system deliveries with a network of subcontractors to leading mechanical engineering companies • in-depth expertise also in other sub-units for mobile machines such as frames • draws Ruukki closer to the customer in the value chain • creating a strong platform for developing and expanding LHT business 51 February 8, 2006 www.ruukki.com Systems for construction
Fact box (Metalplast): • sandwich panels for walls, roofs, cold storage and noise barriers • no. 1 supplier in Poland, main export markets Russia and the Baltic States • complements and strengthens Ruukki’s position in construction panels supply
Kia Motors Car Factory
52 February 8, 2006 www.ruukki.com Engineering components
Fact box (Weibulls): • frames, masts, steel cabins and rollover protective structures for mobile machine OEMs (commercial vehicle, material handling, construction equipment) • strengthens Ruukki’s relationship with core LHT customers and enables Ruukki to expand offering into e.g. assembly
53 February 8, 2006 www.ruukki.com Integration of systems for construction
foundations – frames - envelopes
Fact box • the leading Nordic constructor with steel (PPTH): • creates a solid knowledge-based platform for Ruukki’s growth in construction solution business in Nordic, CEE, Russia and Ukraine
54 February 8, 2006 www.ruukki.com Steel structure manufacturing for construction
Fact box (Steel-Mont*): • a leading Slovakian steel construction company focusing on construction of commercial property • steel constructions are mainly offered together with services of general construction on a project management basis
* acquisition awaiting for approval from competition authorities
55 February 8, 2006 www.ruukki.com