Outokumpu Oyj Annual Report 2013

FY2013 Annual Report · Outokumpu Oyj

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Annual Report
2013

CONTENTS

CEO’s review ....................................................... 1
Key figures .......................................................... 3
Highlights ............................................................. 4
Market environment .......................................... 8
Members of the Leadership Team ...............12
Members of the Board of Directors ............14
Review by the Board of Directors 2013 .....16
Auditor’s report ................................................30
Consolidated financial statements, IFRS ..32
Consolidated statement of income .............32
Consolidated statement
of financial position .......................................34
Consolidated statement of cash flows .......36
Consolidated statement
of changes in equity ......................................38
Notes to the consolidated
financial statements .....................................39
Key financial figures of the Group ........... 103
Share-related key figures ........................... 105
Definitions of key financial figures ........... 106

Parent company
financial statements, FAS ......................107

Income statement of
the parent company ................................... 107
Balance sheet of
the parent company ................................... 108
Cash flow statement
of the parent company .............................. 110
Statement of changes in equity
of the parent company .............................. 111
Corporate Governance in 2013 ................. 112
Risk management ......................................... 120
Shares and shareholders ............................ 126

“We are making
fundamental changes
to reshape our future
to ensure we can seize
the opportunities that
the stainless steel
industry holds.”

Mika Seitovirta, CEO

This Annual Report
includes Financial
Statements and Corporate
Governance Statement.
For our environmental and
social reporting, please
check our Sustainability
Report 2013.

Outokumpu Annual Report 2013 Our year 2013

CEO foreword

Y ear 2013 marked a new beginning for Outokumpu

as a global leader in stainless steel. Through the
acquisition of Inoxum we gained a truly global reach
with a more diverse and balanced customer base
and the broadest range of products in the industry.
Our presence grew especially in Germany, the largest stainless
steel market in Europe, where we now hold a 50% market share
and world-class cold-rolling centers that serve the most de-
manding and attractive end-customer segments. We continue
to invest in this important market, while at the same time en-
suring we cut excess capacity to increase efficiency and reduce
our cost levels. Furthermore, we got a strong foothold in Ameri-
cas with a new stainless steel mill in United States and a cold-
rolling center in Mexico, and a 20% market share in the growing
NAFTA market.

Throughout our first year we shared news about how our
products and expertise are used all over the world in a vari-
ety of applications from small Mexican coins to large chemi-
cal tankers, to thermal power plants in India, to the tallest sky-
scraper in China.

Outokumpu Annual Report 2013 Our year 2013

“Stainless steel is a key enabler
of sustainable, modern society. It
is designed to last for centuries
with high strength, high corrosion
resistance and durability.”

Mika Seitovirta, CEO

measures that included the divestment
of Terni and VDM businesses to Thyssen-
Krupp, new financing arrangement with
longer maturities and debt reduction as
well as the rights issue of approximately
665 million euro. These measures signif-
icantly strengthen Outokumpu’s financial
position and balance sheet so that we
can continue the decisive implementa-
tion of our strategy to turn the company
to sustainable profitability.

In 2013 our environmental leadership

was once again recognized by several
rankings and ratings. For example, Outo-
kumpu was included in the Dow Jones
Sustainability Index for the seventh con-
secutive year. We further improved our
scores, and were ranked as the best
stainless steel company and one of the
top three in the steel sector globally.

Stainless steel itself is a key enabler
of sustainable, modern society. It is de-
signed to last for centuries with high
strength, high corrosion resistance and
durability. And when a product comes
to the end of its long life, 100% of the
stainless steel can be used to make new
stainless steel.

Because of these qualities that per-
fectly meet the needs of societies and
business around the world, stainless
steel has limitless opportunities as an
advance material that can build a world

that lasts forever. And so, even in the
current global economy, the global de-
mand stainless steel is growing: Steel &
Metals Market Research (SMR), an inde-
pendent market research company fore-
casts continued 5% growth in the stain-
less steel demand in 2014–2015.

We are making fundamental changes
to reshape our future to ensure we can
seize the opportunities that the stain-
less steel industry holds. We have a
clear strategy that we are executing de-
cisively to restructure our operations to
ensure competitive cost level and lever-
age the investments we have made in
our ferrochrome operations and the Cal-
vert mill in the United States. In fact, we
expect our Americas business area to
reach break-even EBITDA already for the
full year 2014.

I am confident that we have all the el-
ements in place to make a turnaround. I
believe the synergy benefits, strong posi-
tion in all the key markets and unparal-
leled expertise that builds on a legacy of
100 years in stainless steel lay a solid
foundation for Outokumpu to once again
become a company that creates true
shareholder value.

Mika Seitovirta
CEO

However, our journey started in strong

headwinds. The demand for stainless
steel remained even weaker than expect-
ed, particularly in Europe. Nickel price
declined 18% from beginning of 2013 till
year end, which negatively affected our
financial performance as it contributed
to the market sentiment and caused in-
ventory losses. Furthermore, we were
burdened by the remedy requirement of
the European Commission that dictated
the divestiture of the stainless steel op-
erations in Terni, Italy and additional Eu-
ropean service centers. The Terni remedy
requirement did not only tie our time and
resources, but also significantly ham-
pered the ramp-up of the Calvert stain-
less steel mill in Alabama, USA as we
were forced us to continue the deliveries
from Terni to our mills in United States
and Mexico that could have already been
supplied by Calvert melt shop alone.

Despite these obstacles we made sig-
nificant progress in many areas. The syn-
ergy savings that were at the core of the
Inoxum acquisition started to material-
ize immediately from the first quarter of
2013, and exceeded the full year 2013
targets already during the third quarter.
As planned, the synergy savings accu-
mulated mainly through the streamlining
of operations in all areas and increased
purchasing power in raw material and
general procurement.

To accelerate efficiencies and cost
savings we launched a new P150 pro-
gram with the target to reduce our costs
by 150 million euros annually. A new
P300 program was initiated to reduce
our working capital by 300 million euros
by end of 2014. All in all, the synergy
and cost savings reached 199 million eu-
ros in 2013, giving us further confidence
in the targeted annual cost savings of
450 million euro that we expect to reach
in 2017. The P300 program exceeded its
targets already in 2013, and all in all we
achieved a working capital reduction of
351 million euros through active invento-
ry management and other measures.

While we executed our strategy deci-
sively, the weak market with sluggish de-
mand and low prices and the challenges
with the Calvert ramp-up our results off-
set the good progress: for the full year
2013 we reported an underlying operat-
ing result of -377 million euros.

We are in the middle of a large trans-
formation. In the weak market we have
had to carry it out at the expense of our
balance sheet. Thus, we made focused
efforts to address this: in November
2013 we announced comprehensive

Outokumpu Annual Report 2013 Our year 2013

Key figures

Group key figures, comparable

Sales (€ million)

EBITDA (€ million)

Underlying EBITDA (€ million)

EBIT (€ million)

Underlying EBIT (€ million)

Net result (€ million)

Net cash generated from operating activities (€ million)

Capital expenditure (€ million)

Stainless steel deliveries (1 000 tonnes)

Personnel at the end of the period

2013

6 745

-165

-32

-510

-377

2012

7 961

-267

-66

-754

-412

Sales, 6 745 € million
n/a

-1 003

183

2 585

12 561

n/a

763

2 723

14 073

Please note that these figures have been restated to only include continuing operations. All
comperable figures from 2012 are presented as if the Outokumpu would have completed the Inoxum
transaction at the beginning of 2012 and are unaudited management estimates.

Sales, 6 745 € million

Stainless EMEA 55%

Stainless Americas 13%

Stainless APAC 6%

Specialty Stainless 23%

Other operations 3%

Stainless EMEA 55%

Stainless Americas 13%
Stainless EMEA 55%
Stainless APAC 6%
Stainless Americas 13%
Specialty Stainless 23%
Stainless APAC 6%
Other operations 3%
Specialty Stainless 23%

Other operations 3%

Capital structure

Combined savings, € million*

Long-term debt (€ million)

Current debt (€ million)

Cash and cash equivalents (€ million)

Net interest-bearing debt at the end of the year (€ million)

Debt-to-equity ratio at the end of the year (%)

2013

3 270

893

-607

3 556

188.0

2012

2 935

718

-222

3 431

116.2

The figures for 2012 have been restated after Outokumpu adopted a new definition of net interest-
bearing debt and gearing in January 2014.

450

380

199

2013

2015

2017

* 2015 and 2017 include savings from

planned efficiency measures in the new
industrial plan for Europe.

Sales

6 745

€ million

Outokumpu Annual Report 2013 Our year 2013

Highlights

Outokumpu’s year 2013 was characterized by the integration
between Outokumpu and Inoxum, the related industrial restructuring
and heavy cost saving measures, the ferrochrome expansion and
the ramp-up of the Calvert stainless steel mill. Good progress
was made in these areas despite strong headwinds. However,
in a weak market the results remained unsatisfactory.

T he year 2013 marked the

first year for Outokumpu as
the new global leader fol-
lowing the acquisition of In-
oxum, which was a perfect fit
for Outokumpu: Outokumpu’s presence
grew, especially in the Americas and
Asia, the product portfolio was comple-
mented by, for example, ferritic grades
and Outokumpu’s customer base ex-
panded from industrial segments to
cover consumer goods and appliances.
What is more, it created annual synergy
saving potential of 200 million euro that
is expected to materialize in full by the
end of 2017. In short, the acquisition hit
all of Outokumpu’s strategic objectives
with a single stroke.

For the new Outokumpu, the strategy

is twofold: restructure the company to
achieve synergy and cost savings, and
leverage the investments in Ferrochrome
and Calvert to create profitable growth.
The clear objective is to reach sustain-
able profitability. Thus, for 2013 the pri-
orities were clear: customers, synergy
savings, the Calvert ramp-up, cash flow
and strengthening the company’s bal-
ance sheet.

Start of the new company
In January, the new Outokumpu started operations, and
the integration of two stainless steel giants began. In
the stainless steel business, thousands of employees,
several plants in China, Germany, Mexico and USA, new
customers in consumer goods segments and countless
grades and surface finishes joined the company.

JANUARY

FEBRUARY

Long service life in extreme
temperatures
Outokumpu supplied stainless steel for
Vantrunk for cable ladders and cable
trays to support cable in the massive
Gorgon liquefied natural gas project
in Australia, the largest construction
project ever undertaken in Austra-
lia. The chosen material ensures a
20-year service life in a temperature
range from -50 to +450 degrees Cel-
sius. “We have developed a strong
and reliable supply chain. Outokumpu
plays a key role in helping us to deliver
our customer promise,” commented
Vantrunk.

Outokumpu Annual Report 2013 Our year 2013

Strong efforts
to cut costs and
inventory levels
Both companies had been heavily
loss-making for years. In April, the
company started new projects to re-
duce working capital by 300 million
euros by the end of 2014 and to cut
costs by 150 million euros. The results
were excellent: P150 beat its targets,
reaping savings of 104 million euros
already in 2013, with the rest mate-
rializing in 2014, and P300 dropped
inventory days to 88, reaching its tar-
gets for year-end.

Outokumpu launched new
stainless steel grades, surface
finishes, vision, mission and brand
at Outokumpu Experience.

Experience Outokumpu
A global event, Outokumpu Experience brought together more than 700 professionals,
investors and analysts of stainless steel under one roof in London, UK. Outokumpu
launched at the event its new vision – a world that lasts forever, new formable duplex
grades FDX 25™ and FDX 27™ that conquer the one weakness in duplex grades, their
formability, and new surface finishes, 2R2, Gritline and Laser. Later in the year, Outo-
kumpu also launched new high-chromium austenitic and ferritic grades.

MARCH–APRIL

MAY

JUNE

Pioneering solar plant in Nevada
Outokumpu won another contract for
the pioneering Crescent Dunes solar
plant project in Tonopah, Nevada, USA
and now supplies lean duplex on top of
the quarto plate deliveries announced
earlier. Duplex is used in the zenithal
anchor bolts or mounting bolts of the
solar panels, which allow the panels to
turn in two planes and thus to follow
the sun and capture its energy more
efficiently. “Technical explanations and
credibility of the technician contact at
Outokumpu convinced us,” said Cobra
Thermosolar Plants.

Lighter tanks, less maintenance
Outokumpu’s stainless steel helps Ja-
protek, a Finnish company that produc-
es pressure vessels and large tanks,
to construct lighter storage tanks and
to decrease maintenance costs tak-
ing into account the total cost of in-
vestment throughout the product’s life
cycle. “The main reasons for switch-
ing to stainless steel were the longer
life-cycle time and lower maintenance
costs as well as the good properties
of LDX 2101® that make it ideal for big
tanks,” commented Japrotek.

12 250 tonnes,
five chemical tankers
Outokumpu won a contract to supply
12 250 tonnes of tailor-made stain-
less steel for the construction of five
chemical tankers in a Chinese ship-
yard, ordered by Stolt Tankers. The
use of duplex grade enables reduced
weight, high strength and excellent
corrosion resistance. The contract
formed a unique scope of supply within
the stainless steel industry, including
duplex 2205® grade in tailor-made di-
mensions as well as services such as
welding and forming.

Outokumpu Annual Report 2013 Our year 2013

Ferrochrome
ramps up
The ramp-up of the ferrochrome ex-
pansion was a clear success and pro-
ceeded as expected. Outokumpu inau-
gurated the new ferrochrome smelter
in Tornio, Finland in June. At year-end,
production reached 434 000 tonnes
as targeted.

Calvert progressing
In Alabama, the Calvert ramp-up progressed throughout the year and despite
difficulties related to the remedy obligations with Terni delivering materials to
Calvert that impacted the second-quarter results. The mill improved its per-
formance steadily, reaching the targets set by year-end.

JUNE

JULY

AUGUST

Strategic partnership in China
Outokumpu signed a one-year strate-
gic partnership agreement with Sino-
pec, China’s largest energy and chemi-
cal company, on material develop-
ment and deliveries of stainless steel.
Outokumpu supplies rolled billets of
duplex stainless steel for seamless
pipe for the oil refinery and liquefied
natural gas plants. “Outokumpu, as
the biggest stainless steel supplier in
the world, demonstrated their leader-
ship through technical capabilities and
good local customer service,” com-
mented Sinopec.

Coins with exceptional surface quality
Outokumpu’s stainless steel is used
in Mexico for the production of coins
by Casa de Moneda de Mexico (the
Mexican Mint) for the Latin American
marketplace. Outokumpu is a regu-
lar supplier to Casa de Moneda for its
Mexican currency and now supports
Casa de Moneda’s export business for
stainless steel coin blanks. The ap-
plication required exceptional surface
quality, and mastery of such applica-
tions awarded Outokumpu even this
contract. “As we continue to expand
our business, we rely on the techni-
cal expertise, quality and expansive
portfolio that Outokumpu offers,” com-
mented Casa de Moneda.

China’s highest skyscraper
Outokumpu is providing stainless steel
for Ping An Finance Center in Shen-
zhen, China. The façade will be the
largest stainless steel façade in the
world, as the center is set to become
the highest skyscraper in China and
the second highest in the world, with a
height of 660 meters. The architectur-
al firm Kohn Pedersen Fox said: “The
performance of the material is one of
the best. The timely technical support
and tailored advice will greatly help
us along the construction process as
well.”

Outokumpu Annual Report 2013 Our year 2013

New industrial
plan for Europe

In October, Outokumpu announced a
new industrial plan for its European
operations. The plan included cuts
in cold rolling capacity in Finland and
Germany and accelerating the closure
of the Bochum melt shop in Germany.
With these measures, Outokumpu can
accelerate cost savings and increase
capacity utilization rates.

Divesting Terni
The European Commission approved
the Inoxum transaction on the condi-
tion that Outokumpu divests its stain-
less steel mill in Terni, Italy and some
of its service centers. The forced sale
situation combined with the difficult
market environment prolonged the
divestment process, as Outokumpu
fought to ensure a satisfactory out-
come. In November, Outokumpu an-
nounced that it will sell Terni and the
related businesses back to Thyssen-
Krupp. Furthermore, Outokumpu an-
nounced the divestment of the VDM
business to ThyssenKrupp. The value
of these divestments was the cancel-
lation of the loan note from Thyssen-
Krupp to Outokumpu at its full value.
The deal addressed the remedy is-
sue and significantly improved Outo-
kumpu’s financial position.

Closing Krefeld
melt shop

After close to 100 years of operations,
the Krefeld melt shop was closed on
December 6, 2013. The ramp-down
and closure was done as profession-
ally as all operations in the melt shop
throughout its history, a true testi-
mony to the skills and competence of
the Krefeld team. Good solutions were
found for each employee of the melt
shop: half of them returned to Thys-
senKrupp, as agreed in the acquisi-
tion, some 100 found new positions
within Outokumpu and some retired.

SEPTEMBER–OCTOBER

NOVEMBER

DECEMBER

Largest delivery of heat
resistant 253 MA® in India
Outokumpu’s high-performance pro-
prietary austenitic grade 253 MA®
is used by Thermax in the construc-
tion of thermal power plants in India.
This extremely heat-resistant grade
withstands high temperatures, and in
the part of the boiler where the grade
is used temperatures can rise above
850 degrees Celsius. “We have a long-
standing relationship with Outokumpu
and we trust their technical capabili-
ties and reliable customer service,”
commented Thermax.

4565 helps to remove
SO2 emissions
Outokumpu’s austenitic 4565 stain-
less steel grade and quarto plates
were used in a power plant built by
Babcock Noell in Saxony, Germany.
Outokumpu advised Babcock Noell on
the material selection, and the cus-
tomer chose high-alloyed austenitic
grade 4565 that withstands all the el-
ements in the severe environment of
the wet-scrubbing system to remove
the sulfur dioxide emissions of the
power plant. “The property profile of
Outokumpu 4565 enables us to offer
competitive and efficient solutions to
our client,” commented Babcock Noell.

New start for New Street station
Outokumpu’s stainless steel be-
came part of the project to trans-
form Birmingham New Street station
in Birmingham, UK. More than 8 000
brightly polished, laser-cut panels of
stainless steel will cover the façade
of station, which is one of the busi-
est stations in the UK. Martifer, who
managed the steelwork project, said:
“Outokumpu is technically and in Mar-
tifer’s opinion the leading expert in
stainless steel solutions.”

Outokumpu Annual Report 2013 Our year 2013

Market
environment

EMEA
The overall stainless steel demand consumption increased only
slightly, with a decline in Western Europe and growth in Eastern
Europe, Africa and Middle East. Outokumpu reaps up significant
savings of nearly 200 million euros from the merger, including
the closure of the melt shop in Krefeld, Germany. Outokumpu
continues restructuring in both melting and cold rolling in 2014 to
improve capacity utilization of its mills.

35%

share of stainless steel
deliveries in Europe

share globally

AMERICAS
In the NAFTA region, stain-
less steel consumption
increased by 3% in 2013,
with most of the growth in
the US and Mexico. Outo-
kumpu focused on the
ramp-up of its new inte-
grated stainless steel mill
in Calvert, Alabama, USA.
The ramp up is progress-
ing and the business area
Stainless Americas targets
a break-even EBITDA in
2014.

Outokumpu Annual Report 2013 Our year 2013

Economic and
population growth,
increasing mobility,
urbanization and
modernization
are driving the
future demand of
stainless steel”.

APAC
In the Asia and Pacific,
stainless steel consumption
continued to grow rapidly,
especially in China, India,
Japan and South Korea.
Through the Inoxum
transaction, Outokumpu
increased its presence
in Asia with a cold rolling
mill in Shanghai, China
that adds to the service
centers in China and
Australia. In the APAC
region, Outokumpu focuses
on special grades and
won significant deals in
2013, including deliveries
to Sinopec and Ping An
Finance Center in China.

Production locations
Service center locations

Number of locations

Our market position

In 2013, total global steel production
was 1.6 billion tonnes, of which approxi-
mately 92% was carbon steel and ap-
proximately 2.4% was stainless steel.
Stainless steel is a versatile and widely
used material that plays a key role in
many important areas, including urban-
ization, transportation and the produc-
tion and consumption of food, water
and other beverages as well as ener-
gy. Stainless steel’s attractive proper-
ties, which include corrosion resistance,
high strength-to-weight ratio, heat toler-
ance, aesthetic qualities and the ability
to be recycled, have contributed to the
increased use of stainless steel in new
and existing applications. As a result,
stainless steel consumption has been
growing more rapidly than that of any
other metal in recent decades.
Source: World Steel Association, SMR February
2014

Outokumpu is one of the world’s leading
stainless steel producers and is widely
recognized for its product quality, ex-
cellence in both standard and special
grades, such as duplex stainless steel
grades, and as a global leader in re-
search, development and technical sup-
port. Outokumpu operates around the
world. Its main production facilities are
located in Finland, Germany, Sweden,
the UK, the US, Mexico and China. The
Group’s site in Tornio, Finland is one
of the world’s most cost-effective and
highly-integrated single-site stainless
steel production facilities which focus-
es on high-volume standard grades of
stainless steel. The Group’s production
sites in Germany focus on more custom-
ized deliveries of ferritic and austenitic
grades, including bright annealed sur-
faces, and the production sites in Swe-
den focus on special grades. The Group
is ramping up a new and fully integrat-
ed production site in Calvert, Alabama,
USA, which will complement the product
portfolio of the Mexican plant and supply
it with feedstock material.

The global stainless steel slab produc-

tion capacity in 2013 totaled approxi-
mately 43.9 million tonnes. The larg-
est producers based on this measure
are Tisco, Outokumpu, Posco, Baosteel,
Yusco, Acerinox, and Aperam. Global
stainless steel production was 30.4 mil-
lion tonnes in 2013, an increase of 7%
compared to 2012. In Europe, stainless
steel production was 5.5 million tonnes
in 2013, a decrease of 4% compared to
2012; Europe has not yet recovered from
the impact of the financial crisis and is
far away from returning to the 2006 level
of 7.3 million tonnes. In China, stainless
steel production has increased signifi-
cantly during the past ten years, from
1.2 million tonnes in 2003 to 15.9 mil-
lion tonnes in 2013. Outokumpu had an
approximately 35% share of stainless
steel deliveries in Europe and an approx-
imately 8% share globally in 2013.
Source: Eurofer and SMR February 2014

Major stainless steel producers
Estimated slab melting capacity

million tonnes

2013

2015

Tisco

Outokumpu

Posco

Baosteel

Yusco

Acerinox

Aperam

4.2

3.7

3.5

3.0

2.7

1.9

4.2

2.8*

3.9

4.5

2.8

2.9

1.9

Source: SMR, excluding Terni operations of

Outokumpu.

* Closure of Krefeld melt shop (-0.6 million
tonnes); assuming closure of Bochum meltshop
subject to union negotiation (-0.8 million
tonnes); assuming ramp-up of Calvert melt shop
(+0.6 million tonnes)

Outokumpu Annual Report 2013 Our year 2013

Market review

Global consumption of stainless steel products increased by
6%, from 31.2 million tonnes in 2012 to 32.9 million tonnes in
2013. Global consumption levels were negatively influenced by
the continuing decline in the nickel price, increasing concerns
over the outcome of the euro crisis and the reduced growth per-
spectives of the Chinese economy. Growth dynamics differed
significantly from region to region. Some global markets have
also sensed growth opportunities in 2013, especially from the
Consumer Goods & Medical and ABC & Infrastructure indus-
tries.

In EMEA, stainless steel consumption only slightly increased,
by 0.7% to 6.8 million tonnes in 2013. The main driver was the
drop in consumption levels in major Western European con-
suming countries such as Italy, Germany, France and Spain. In
Europe, consumption totaled 5.5 million tonnes in 2013, a de-
crease of 2% compared to 2012, and remained far below the
2008 level of 5.9 million tonnes. Other regions in EMEA per-
formed substantially better than Western Europe (Eastern Eu-
rope +2%, Middle East +10% and CIS +8% compared to 2012).
The reduced European demand in 2013 was attributable to low-
er demand in all end-use segments.

In the Americas, stainless steel consumption increased to
3.4 million tonnes in 2013, with mainly the NAFTA region ex-
periencing growth (+3% to 2.8 million tonnes). After a compar-
atively weak start in 2013, dynamics in the US market have
significantly accelerated from the second quarter of 2013 on.
The US growth was topped by a strong Mexican market. South
America was dominated by the robust Brazilian market, while
other markets such as Argentina, Colombia and Chile were even
or declining. In NAFTA, growth in 2013 was mainly attributable
to increased demand from the Automotive & Heavy Transport,
ABC & Infrastructure and Consumer Goods & Medical seg-
ments.

In APAC, stainless steel consumption has grown rapidly in re-

cent years (22.7 million tonnes in 2013), which has been the
main factor supporting global growth. China’s share of APAC
demand reached 62% in 2013 (+10% to 14.1 million tonnes in
2013 compared to 2012), followed by India with a share of 12%
(+7% to 2.8 million tonnes), Japan with a share of 9% (+6% to
1.9 million tonnes) and South Korea with a share of 8% ( +6%
to 1.7 million tonnes). Growth in the consumption of the Con-
sumer Goods & Medical, ABC & Infrastructure and Industrial &
Heavy Industry segments mainly contributed to increased con-
sumption in China.
Source: SMR February 2014

Average transaction prices in 2013 for 2 mm cold rolled 304
stainless steel sheet in the three regions; Europe, the USA and
China remained significantly below previous year’s levels. While
in the first quarter of 2013 price levels in all three regions in-
creased quarter-on-quarter, the transaction prices dropped
sharply in the second and third quarter. In the fourth quarter of
2013, small base price increases have been acknowledged in
Europe as well as in the USA. Asian price advantages remained
present in 2013 and kept up the attractiveness of imported
material in the European market. The price advantages result
from high investments of Asian mills in new state-of-the-art
facilities with high production capacities, economies of scale
and partially significant cost advantages, for example from us-
ing alternative raw materials such as nickel pig iron. Outokum-

End-uses of stainless steel
End-uses of stainless steel
End-uses of stainless steel

Consumer Goods & Medical
Consumer Goods & Medical
45.2%
45.2%
Consumer Goods & Medical
Chemical / Petrochemical
Chemical / Petrochemical
45.2%
& Energy 17.3%
& Energy 17.3%
Chemical / Petrochemical
Automotive &
Automotive &
& Energy 17.3%
Heavy Transport 11.0%
Heavy Transport 11.0%
Automotive &
ABC & Infrastructure 15.2%
ABC & Infrastructure 15.2%
Heavy Transport 11.0%
Industrial & Heavy Industry 8.5%
Industrial & Heavy Industry 8.5%
ABC & Infrastructure 15.2%
Others 2.9%
Others 2.9%
Industrial & Heavy Industry 8.5%

Others 2.9%

Source: SMR, stainless steel finished products*, February 2014.
Source: SMR, stainless steel finished products*, February 2014.
*Rolled and forged products excl. 13Cr tubes.
*Rolled and forged products excl. 13Cr tubes.
Source: SMR, stainless steel finished products*, February 2014.

*Rolled and forged products excl. 13Cr tubes.
Market price comparison with competing materials

2006=100
300

250

200

150

100

Stainless steel*
Zinc
Carbon steel galvanized sheet

12
11
Aluminium
Carbon steel cold rolled coil
Copper

Source: CRU, LME and Metal Bulletin. Including December 2013.

* Stainless steel prices are for grade 1.4301.

World stainless steel end-use demand outlook

million tonnes
40

2013

2015

Consumer Goods
& Medical (4.9%*)
Chemical / Petrochemical
& Energy (4.5%*)
Automotive & Heavy
Transport (6.0%*)

ABC &
Infrastructure (5.9%*)
Industrial & Heavy
Industry (5.3%*)
Others (4.3%*)

Source: SMR, stainless steel finished products**, February 2014.

* CAGR 2013–2015.

**Rolled and forged products excl. 13Cr tubes.

Outokumpu Annual Report 2013 Our year 2013

pu intends to improve its competitiveness and attractiveness
against imported material coming from Asia by optimizing its
production network, further developing its raw material strate-
gy, delivering faster, more reliably, more flexibly and introducing
a new daily alloy surcharge pricing system.
Source: CRU February 2014

Outlook

The long-term prospects for stainless steel consumption remain
robust. Key global megatrends in urbanization, modernization
and increased mobility, combined with growing global demand
for energy, food and water, will ensure the continuing growth of
stainless steel consumption in the future. SMR estimates that
global stainless steel demand will reach 34.6 million tonnes
and 36.4 million tonnes in 2014 and 2015, respectively. Be-
tween 2013 and 2015, global consumption is expected to in-
crease at an annual growth rate of 5% CAGR, while growth is es-
timated to be mainly driven by increased consumption in APAC
(+6% CAGR). In EMEA and Americas, total stainless steel de-
mand is estimated to increase by 4% and 4% CAGR, respective-
ly, from 2013 to 2015. Growth will be mainly supported from
increased demand in the Automotive & Heavy Transport (+6%)
and the ABC & Infrastructure (+6%) segments. Between 2013
and 2015, the Consumer Goods & Medical and the Chemical/
Petrochemical & Energy segments are expected to grow at aver-
age annual growth rates of 5%, respectively.
Source: SMR February 2014

Nickel price

USD/t
50 000

45 000

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

Source: LME settlement, monthly average prices,

including December 2013.

Molybdenum price

USD/lb
40

Source: Metal Bulletin – Molybdenum Drummed molybdic oxide.
Free market $ per lb Mo in warehouse.

German stainless steel price*

Ferrochrome price

EUR/t
5 000

4 000

3 000

2 000

1 000

USD/lb
2.5

2.0

1.5

1.0

0.5

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Base price

Alloy surcharge

Transaction price

Source: Quarterly contract prices agreed between South African

ferrochrome producers and European buyers, including Q4/2013.

Source: CRU. Including February 2014.

* Stainless steel price for cold rolled 304 2mm sheet.

Leadership Team on Dec 31, 2013

Outokumpu Annual Report 2013 MeMbers Of the leadership teaM

Mika Seitovirta

Reinhard Florey

Pekka Erkkilä

Austin Lu

Pekka Erkkilä
b. 1958, Finnish citizen
M.Sc. (Eng.)
Executive Vice President, Chief Technology Officer 2013–
Member of the Leadership Team 2013–
Responsibility: Global production and technology strategy, capital investment
optimization, R&D, raw material and general procurement and energy.
Employed by the Outokumpu Group since 2013 (and in 1983–2000 and 2004–
2010)

Work experience
President, Ferrous Solutions business area: Outotec Oyj 2010–2013
Executive Vice President, General Stainless and Production Operations:
Outokumpu Oyj 2004–2010
Executive Vice President, later President: AvestaPolarit Oyj 2001–2004
President: Outokumpu Chrome Oy 1996–2000
Various management positions: Outokumpu Tornio Works 1983–1995

Positions of trust
Chairman of the Board: Manga LNG Oy 2013–
Board member: University of Oulu 2009–
Board member: Grängesberg Iron AB 2009–

Austin Lu
b. 1971, Chinese citizen (People’s Republic)
MBA, B.Sc. (Econ.)
President – Stainless APAC 2012–
Member of the Leadership team 2012–
Responsibility: Stainless APAC business area.
Employed by the Outokumpu Group since 2012

Work experience
Senior Vice President – APAC Focus Area: Outokumpu Oyj 2012
Vice President, Regional General Manager, China: General Electric 2009–2011
Business Leader, Life Science Ingredient: Lonza Group 2008–2009
Marketing Director: General Electric Plastics, China 2005–2008
Various positions in General Electric Plastics in China 1996–2005
Various positions in China MinMetals Co. 1993–1996

Mika Seitovirta
b. 1962, Finnish citizen
M.Sc. (Econ.)
CEO 2011–
Chairman of the Leadership Team 2011–
Responsibility: Group management, strategy and business excellence, legal and
internal audit.
Employed by the Outokumpu Group since 2011

Work experience
President and CEO: Glaston Corporation (formerly Kyro Corporation) 2007–2009
Managing Director: Hartwall Oy 2003–2006
Managing Director: Volvo Auto 1998–2003
Finance Director, Deputy to Sales Company President: Volvo Deutschland
1994–1998
Several positions at Volvo Auto 1986–1994
Business Development Manager at Aro Yhtymä 1989–1990

Positions of trust
Deputy Chairman of the Board of Directors: Shanghai Krupp Stainless Co. Ltd.
2013–
Board member: Federation of Finnish Technology Industries 2013–
Board member: East Office of Finnish Industries 2013–
Board member: World Steel Association 2013–
Board member: International Stainless Steel Forum 2011–
Board member: Association of Finnish Steel and Metal Producers 2011–
Member of the Supervisory Board: Varma Mutual Pension Insurance Company
2011–
Board member: Are 2009–2011
Senior Advisor, Advisory Group: Ratos 2008–2011
Board member: Aro-Yhtymä 2006–2011
Board member: Handelsbanken Finland 2004–2011

Reinhard Florey
b. 1965, Austrian citizen
M. Sc. (Eng.), M.A.
CFO 2013–
Member of the Leadership team 2012–
Responsibility: Finance and control, treasury and risk management, taxation,
integration and M&A, corporate affairs and compliance, and investor relations.
Employed by the Outokumpu Group since 2012

Work experience
Executive Vice President – Integration and Strategy: Outokumpu Oyj 2012–2013
CFO: Inoxum GmbH 2011–2012
Member of Executive Board: ThyssenKrupp Steel Americas, LLC 2010–2011
CFO – Steel Americas business area: ThyssenKrupp AG 2009–2011
SVP – Corporate Center Mergers and Acquisitions: ThyssenKrupp AG 2005–
2009
SVP – Corporate Development/M&A: ThyssenKrupp Steel AG 2002–2005
Various positions at McKinsey & Company 1995–2002

Positions of trust
Member of the Board of Directors: Shanghai Krupp Stainless Co. Ltd. 2011–
Executive Member of the Board: Acciai Speciali Terni S.p.A. 2011–2014

Leadership Team on Dec 31, 2013

Outokumpu Annual Report 2013 MeMbers Of the leadership teaM

Kari Parvento

Johann Steiner

Jarmo Tonteri

Kari Tuutti

Kari Parvento
b. 1957, Finnish citizen
M.Sc. (Eng.)
President – Stainless Americas 2012–
Member of the Leadership Team 2010–
Responsibility: Stainless Americas business area.
Employed by the Outokumpu Group since 2010

Work experience
Executive Vice President – Ferrochrome, Group R&D and Environment and
Quality: Outokumpu 2012
Executive Vice President – Group Sales and Marketing: Outokumpu Oyj 2010–
2011
President, Underground Mining: Sandvik Group 2009–2010
President, Underground Hard Rock Mining: Sandvik Group 2007–2009
Managing Director, Sandvik Mining and Construction Oy (“SMC Oy”) : Sandvik
Group 2007–2010
Managing Director, SMC Australia and Sandvik Materials Handling Pty Ltd.
Australia: Sandvik Group 2005–2007
Business Development Manager, Sandvik Tamrock Finland: Sandvik Group
2004–2005
Managing Director: Kuusakoski Sverige AB 2003–2004 and Country Manager,
Scandinavia: Kuusakoski Group 2000–2004 as well as the Managing Director of
Kuusakoski AB between 2000 and 2003

Positions of trust
Chairman of the Board: SMC Austria GmbH 2009–2010
Board member: SMC Corporation Finland 2007–2010

Johann Steiner
b. 1966, German citizen
M.Sc. (Econ.)
Executive Vice President - Human Resources, Health, Safety and IT 2013–
Member of the Leadership team 2013–
Responsibility: Human resources, health and safety and IT.
Employed by the Outokumpu Group since 2013

Work experience
Executive Vice President - Human Resources and Health, Safety and
Sustainability 2013
Group HR Director: SAG Group GmbH 2012
Operating Partner: Humatica AG 2010–2012
Group HR Director: Clariant International AG 2002–2008
VP Executive Policies: EADS (former DaimlerChrysler Aerospace AG) 1999–2002
Senior Consultant: Towers Perrin 1993–1998

Jarmo Tonteri
b. 1952, Finnish citizen
M.Sc. (Econ.), M.Sc. (Tech.)
President – Stainless EMEA 2013–
President – Specialty Stainless 2012–
Member of the Leadership Team 2011–
Responsibility: Stainless EMEA and Specialty Stainless business areas.
Employed by the Outokumpu Group since 2011

Work experience
Executive Vice President – Specialty Stainless: Outokumpu Oyj 2011–2012
Managing Director: Ovako Group 2005–2011
Managing Director and member of Rautaruukki management Board: Fundia
(Rautaruukki Group) 2000–2005
Managing Director: Gasell (Rautaruukki Group) 1992–2000
Managing Director: Lokomo Steel (Repola Group) 1990–1992
Director of the metallurgical division: Kuusakoski 1985–1990
Sales engineer on metallurgical process technology: Outokumpu Oy 1978–1985

Positions of trust
Board member: Dannemora Mineral AB 2012–2013
Board member: FN Steel Group 2010–2014

Kari Tuutti
b. 1970, Finnish citizen
M.Sc. (Econ.)
Executive Vice President – Marketing, Communications and Sustainability.
2013–
Member of the Leadership team 2012–
Responsibility: Marketing, communications and sustainability.
Employed by the Outokumpu Group since 2011

Work experience
Executive Vice President – Marketing, Communications and IR: Outokumpu Oyj
2012–2013
Senior Vice President – Marketing, Communications and IR: Outokumpu Oyj
2011–2012
Director, Marketing Creation: Nokia Oyj 2009–2011
Vice President, Communications: Nokia Oyj 2008
Director, Communications, Multimedia Business Group: Nokia Oyj 2002–2007
Senior Manager, Investor Relations: Nokia Oyj 1999–2002
Manager, Treasury: Nokia Oyj 1995–1999
Analyst, Treasury: Merita Bank 1994–1995

Board of Directors on Dec 31, 2013

Outokumpu Annual Report 2013 MeMbers Of the bOard Of directOrs

Jorma Ollila

Olli Vaartimo

Markus Akermann

Harri Kerminen

Jorma Ollila
Chairman of the Board of Directors
b. 1950, Finnish citizen
M.Sc. (Pol.) (University of Helsinki 1976)
M.Sc. (Econ.) (London School of Economics 1978)
M.Sc. (Eng.) (Helsinki University of Technology 1981)
Outokumpu Board member 2013–
Chairman of the Board 2013–
Chairman of the Remuneration Committee
Chairman of the Board Finance Working Group

Work experience
Chairman of the Board: Nokia Corporation 2006–2012
Chairman and Chief Executive Officer: Nokia Corporation 1999–2006
President and Chief Executive Officer: Nokia Corporation 1992–1999
President: Nokia Mobile Phones 1990–1992
Senior Vice President, Finance: Nokia 1986–1989
Various managerial positions within corporate banking: Citibank 1978–1985

Markus Akermann
b. 1947, Swiss citizen
M.Econ. (University of St.Gallen, Switzerland)
Outokumpu Board member 2013–
Member of the Audit Committee
Member of the Board Finance Working Group

Work experience
Chairman of the Board: Holcim Group Support Ltd 2002-2012
Member of the Board: Holcim Ltd 2002–2013
Chief Executive Officer: Holcim Group 2002–2012
Member of the Group Executive Committee with responsibility for Latin America,
international trading activities and Corporate Human Resources and Training:
Holcim Group 1993–2001
Member of the Board and Managing Director: Holcim Apasco SA de CV, Mexico
1993–2012
Area Manager Central America, Andean Countries and international trading
activities: Holcim Group 1986–1993

Positions of trust
Chairman of the Board: Royal Dutch Shell Plc, 2006–
Vice Chairman of the Board: Otava Books and Magazines Group 1996–
Board member: Tetra Laval Group 2013–
Board member: University of Helsinki 2009–
Chairman of the Boards of Directors and the Supervisory Boards: The Research
Institute of the Finnish Economy ETLA and Finnish Business and Policy Forum
EVA 2005–

Positions of trust
Member of the Board: Votorantim Cimentos S.A. 2013–
Member of the Board: ACC Mumbai, India 2005–2012
Member of the Board: Ambuja Cements Ltd Mumbai, India 2006–2012
Member of the Executive Board: World Business Council for Sustainable
Development (WBCSD) 2008–2011

Independent of the company and its significant shareholders.

Olli Vaartimo
Vice Chairman of the Board of Directors
b. 1950, Finnish citizen
M.Sc. (Econ.)
Outokumpu Board member 2010–
Vice Chairman of the Board 2011–
Chairman of the Audit Committee
Member of the Board Finance Working Group

Work experience
CFO: Metso Oyj 2003–2011
Executive Vice President, Deputy to the President and CEO: Metso Oyj 2003–2010
Member of the Executive Team 1999–2011 and Vice Chairman of the Executive
Team 2004–2010: Metso Oyj
President and CEO (acting): Metso Oyj 2003–2004
President and CEO: Metso Minerals Oy 1999–2003
President and CEO: Nordberg Group, Rauma Oyj 1993–1999
Executive Vice President: Rauma Oyj 1991–1998

Positions of trust
Chairman of the Board: Valmet Automotive Oy 2003–
Board member: Northland Resources SA 2013–
Board member: Kuusakoski Oy 2008–
Board member: Kuusakoski Group Oy 2008–
Board member: Alteams Oy 2008–

Independent of the company and its significant shareholders.

Harri Kerminen
b. 1951, Finnish citizen
M.Sc. (Eng.), MBA
Outokumpu Board member 2012–
Member of the Remuneration Committee

Work experience
President and CEO: Kemira Oyj, 2008–2012
President of the Kemira Pulp & Paper business area: Kemira Oyj 2006–2007
President of the Kemira Specialty business area: Kemira Oyj 2000–2006
Managing Director: Kemira Pigments Oy 2002–2003
Vice President, Human Resources: Kemira Chemicals Oy 1996–2000
Manager of Oulu plant: Kemira Oyj 1994–1996
Production Manager: Kemira Kemi AB 1990
Project Manager: Kemira Oy/Kemira Oyj, plant construction projects in Finland,
Sweden, Belgium and the US 1989–1994

Positions of trust
Chairman of the Board: HST Partners Oy: 2012-
Chairman of the Board: MetGen Oy 2012–
Chairman of the Board: Finpro ry 2011–
Chairman of the Board: Finnish Industry Investment 2012
Chairman of the Board: Chemical Industry Federation of Finland 2011–2012
Vice Chairman of the Board: Finnair Oyj 2012-
Vice Chairman of the Board: Chemical Industry Federation of Finland 2009–2011
Board member: Tikkurila Oyj 2012–
Board member: Achemos Grupe 2012–
Board member: Normet Oy 2012–
Board member: Finnair Oyj 2011–2012

Board of Directors on Dec 31, 2013

Outokumpu Annual Report 2013 MeMbers Of the bOard Of directOrs

Heikki Malinen

Elisabeth Nilsson

Siv Schalin

Board member: Confederation of Finnish Industries and Employers TT-
Foundation 2011–2013
Board member: Confederation of Finnish Industries EK 2011–2012
Board member: Formia Emissions Control 2012
Board member: CEFIC 2008–2012
Board member: Finpro ry 2010–2011

Independent of the company and its significant shareholders.

Heikki Malinen
b. 1962, Finnish citizen
M.Sc. (Econ.), MBA (Harvard)
Outokumpu Board member 2012–
Member of the Audit Committee

Work experience
President and CEO: Itella Corporation 2012–
President and CEO: Pöyry PLC 2008–2012
Executive Vice President, Strategy, member of the UPM Executive Team: UPM-
Kymmene Corporation, Helsinki, Finland 2006–2008
President: UPM North America, Chicago, USA 2004–2005
President of Sales: UPM North America, Chicago, USA 2002–2003
Managing Partner: Jaakko Pöyry Consulting, New York, USA 2000–2001
Engagement Manager: McKinsey & Co, Atlanta, USA 1997–1999
Director, Business Development UPM Paper Divisions, Helsinki, Finland 1994–
1996

Positions of trust
Chairman: American Chamber of Commerce (AmCham Finland) 2009–
Board member: Service Sector Employers PALTA 2013–
Board member: East Office of Finnish Industries 2012–
Board member: Federation of Finnish Technology Industries 2011–2012
Board member: Botnia Oy 2006–2008
Supervisory Board member: Ilmarinen Mutual Pension Insurance Company 2013

Chairman: Svenska Bergsmannaföreningen 2007–2009
Member: Royal Swedish Academy of Engineering Science IVA 2007–
Board member: Northland Resources SA 2013–
Board member: Sveaskog AB 2010–2012
Board member: 4:e AP-fonden 2010–2011
Board member: Swerea AB 2008–2011
Board member: Euromaint AB 2004–2007
Board member: Swedish Maritime Administration 1996–2006

Independent of the company and its significant shareholders.

Siv Schalin
b. 1962, Finnish citizen
M.Sc. (Econ.), MBA
Outokumpu Board member 2011–
Member of the Audit Committee

Work experience
President: Docrates Oy 2012–
President and General Manager, Patient Care Solutions: GE Healthcare Finland
Oy 2008–2012
Vice President, Service: GE Healthcare EMEA 2005–2008
General Manager: GE Healthcare Sweden 2004–2005
Director, Critical Care: Instrumentarium Oyj 2003–2004
Area Manager, Nordic Countries: Instrumentarium Oyj 2002
Vice President, Components Division: Össur hf. 2000–2001
President: Össur USA Inc. 1997–2000

Positions of trust
Board member: Association of Private Health Care Providers in Finland 2013–
Supervisory Board member, Arcada University of Applied Sciences 2009–
Chairman, Managing Director and member of the Board of several GE
Healthcare group companies 2008–2012
Vice Chairman: FIHTA (Finnish Healthcare Technology Association) 2008–2012

Independent of the company and its significant shareholders.

Elisabeth Nilsson
b. 1953, Swedish citizen
M.Sc. (Tech.)
Outokumpu Board member 2011–
Member of the Remuneration Committee

Work experience
Governor: Östergötlands län 2010–
President: Jernkontoret (Swedish Steel Producers’ Association) 2005–2010
General Manager, Metallurgy Division: SSAB Oxelösund 2003–2005
Managing Director: SSAB Merox 2001–2003
Manager, Department for Environment, Health and Safety: SSAB 1996–2001
Manager, Continuous Casting Department: SSAB Oxelösund 1991–1996

Positions of trust
Chairman of the Board: Göta Kanalbolaget 2011–
Chairman of the Board: Risbergska donationsfonden 2010–
Chairman of the Board: Tåkernfonden 2010–
Chairman of the Board: Övralidsstiftelsen 2010–
Chairman: Foundation Mefos 2005–2010

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Review by the Board
of Directors 2013

Outokumpu’s year 2013 was characterized by the integration between Outokumpu and Inoxum, the
related industrial restructuring and heavy cost saving measures, the ferrochrome expansion in Finland
and the ramp-up of the Calvert stainless steel mill in USA. Good progress was made in these areas
despite strong headwinds. However, financial results remained unsatisfactory and were at heavy loss.

Update on strategic initiatives

Divestment of Terni and VDM to
ThyssenKrupp and comprehensive
measures to strengthen balance sheet

Financial package and rights issue

As a result of the transaction to sell Terni and VDM, Outokumpu’s net
debt is expected to decrease by approximately EUR 1.3 billion and
gearing to decrease by approximately 68 percentage points (Dec 31,
2013: gearing of 188.0%). Balance sheet and liquidity will be further
strengthened by a planned rights issue, new liquidity facility of EUR
500 million and extensions of existing loans and credit facilities.
Please see “Events after the end of the reporting period” for more
information.

An Extraordinary General Meeting will be held on February 14, 2014
to decide on the proposed authorization to the Board of Directors to
undertake the share issue. The rights issue is planned to be carried
out immediately after the closing of the sale of Terni and VDM to
ThyssenKrupp, which is expected to take place during the first quarter
of 2014.

In relation to the planned approximately EUR 650 million rights issue,
Outokumpu has received irrevocable commitments to subscribe
for their respective allocation of the rights issue from shareholders
representing 52.8% of all its shares, with the remaining 47.2% of the
rights issue being underwritten by Outokumpu’s core banks, subject to
customary terms and conditions.

Outokumpu management is confident that the conditions for the
closing of the transaction will be met and closing will take place during
the first quarter of 2014.

New industrial plan in Europe

On October 1, 2013, Outokumpu announced plans for further
structural changes in its European operations aimed at improving
its financial performance and efficiency, and ultimately returning the
company to profitability. Specifically, the planned changes include:

· Acceleration of the Bochum melt shop closure in Germany to achieve
more efficient production structure and higher capacity utilization
rates.

· Reduction of annealing and pickling capacity by 200 000 tonnes in
Finland and cold rolling capacity by 300 000–350 000 tonnes in
Germany to increase capacity utilization and lower costs.

· Optimization of the company’s service center network by closing

service center in Langenhagen, Germany.

· Further cost savings through leaner overheads and organization at

all sites, functions and activities across European operations.

The planned structural changes are expected to result in up-to 1 000
additional job reductions in Europe, bringing the total planned global
reduction up-to 3 500 jobs compared to 2012. The industrial plan is
expected to result in additional savings of more than EUR 100 million
and the overall savings programs are expected to result in annual
savings of EUR 380 million in 2015 and EUR 450 million in 2017,
compared to the 2012 level.

Outokumpu and the respective unions in Germany have continued
discussions regarding the new industrial plan in Europe, including the
planned acceleration of the Bochum melt shop closure. Outokumpu
expects to find a solution with the unions that will enable the
implementation of the new industrial concept.

Synergy savings clearly exceeded target for 2013

The ongoing integration work and the related synergies are proceeding
successfully. The year 2013 ended with savings of EUR 95 million and
therefore clearly exceeded the forecast of EUR 75 million for 2013.
The main reason was good performance in raw material procurement
savings, especially stainless scrap. The Krefeld melt shop ramp-
down and the headcount reductions contributed as well to the overall
achievement. Outokumpu expects cumulative synergy savings in 2014
of more than EUR 170 million, with a larger relative share coming from
production optimization. The target of EUR 200 million of synergy
savings by the end of 2017 remains unchanged.

Krefeld melt shop ramp-down completed

According to the agreed timeline, the Krefeld melt shop in Germany
has been ramped-down completely; the last day of operations was
December 6, 2013. The closure was announced in January 2012 in
connection with the Outokumpu and Inoxum merger as part of the
original synergy saving plan and leads to a cut in Outokumpu’s melt
capacity by 600 000 tonnes. From 2014 onwards, this will contribute

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

EUR 50 million annually of savings to the overall planned efficiency
measures. In 2013, cost savings related to the Krefeld melt shop
closure amounted to EUR 15 million.

Ongoing value-enhancing and cost-saving projects

Ferrochrome production ramp-up

The ramp-up of new capacity at the Ferrochrome operations in Finland
has progressed as planned in 2013, with ferrochrome production
of 434 000 tonnes (2012: 230 000 tonnes). The full technical
production capacity of 530 000 tonnes is expected to be reached in
2015.

Calvert ramp-up

The integrated stainless steel mill in Calvert, USA, continues to trend
positively with improvements over the third quarter, although overall
the ramp-up is running behind original targets. The ramp-up of the
cold rolling mill is proceeding with an expanded product portfolio
to match customer needs. The production covers both standard
austenitic and ferritic grades as well as widths ranging from 36 to 72
inches wide. Product quality is improving as the ramp up progresses,
and delivery reliability remains a key. Additionally, the melt shop
ramp-up continues with a record melt achieved in October, 2013.
Melt shop operations are aligned with the higher production levels of
2014. The Calvert melt shop supplies steel to both the Calvert cold
rolling mill and Outokumpu’s cold rolling mill in San Luis Potosi, Mexico
(Mexinox). Previously, Mexinox received the majority of its hot rolled
coil from Europe. With the increase in Calvert’s supply to Mexinox,
fourth quarter shipments from Europe have decreased significantly
and are expected to end within the first quarter of 2014, recognizing
Outokumpu’s “melted in America” advantage.

P150 beats its target for 2013

Outokumpu introduced its P150 cost reduction program in the
beginning of 2013. The aim of this program is to reduce Outokumpu’s
annual costs by EUR 150 million by the end of 2014 on top of the
synergy measures. The main drivers of the program are savings
in procurement, IT, operational costs as well as in general and
administration costs, including headcount reductions. During
2013, EUR 104 million of cost savings were reached, exceeding the
latest expectation of more than EUR 75 million. The fourth quarter
contributed EUR 38 million. The main reasons were good performance
in raw material procurement savings, especially stainless scrap, as
well as savings on operational costs, for example by improved metal
recovery and optimized material usage. The original target of EUR 150
million of savings by the end of 2014 remains unchanged. However,
Outokumpu is working on identifying and implementing further cost
saving potential.

P300 exceeds 2013 expectations

In February 2013, Outokumpu announced a two-year working capital
reduction program, P300. The program target is a net working capital
reduction of EUR 300 million to be achieved through active inventory,
accounts receivable and accounts payable management. After a
difficult second quarter due to the ramp-up of Calvert which led to
an increase in working capital, good progress has been made in all
business areas.

The total reduction of net working capital during 2013 was EUR 351
million or 27%. The main driver has been the reduction of inventories
leading to a significant improvement in all key metrics, such as in
inventory tonnes, days and value.

In 2014, Outokumpu will continue to tightly manage net working
capital and inventories in line with the anticipated market demand.
The target for working capital efficiency measured in inventory days for
the continuing operations is 91 (2013: actual 88). Special focus will
be on accounts receivable and accounts payable.

Divestment of non-core assets

Luvata loan receivable

As part of the measures to strengthen its financial position and
liquidity, Outokumpu continued to divest its non-core assets during
2013. In December, Outokumpu sold its loan receivable from Luvata
Fabrication Ltd for a cash consideration of USD 157 million to
Proventus Capital Management AB. The loan receivable related to the
divestiture of fabricated copper products business to Nordic Capital in
2005, in which the long-term subordinated vendor note of some USD
123 million was part of the overall consideration. The divestment had
a direct cash flow effect of EUR 114 million and Outokumpu booked
EUR 49 million as a non-recurring financial expense in the fourth
quarter.

Electricity distribution network at Tornio

In December, Outokumpu sold the electricity distribution network
at the Tornio site in Finland to InfraVia European Fund II. With
the transaction, five Outokumpu employees transferred to a new
industrial electricity distribution company established by InfraVia II
that will continue to operate the network at the Tornio site. The cash
consideration of the transaction was EUR 63 million. In the financial
reporting the transaction is recognized as a sale and leaseback
resulting in a finance lease.

Market development

Price development of alloying metals

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Stainless steel demand down in all
markets, most notably in Europe

Global real demand for stainless steel products increased by 5.6%
from 31.2 million tonnes in 2012 to 32.9 million tonnes in 2013. In
the Americas and APAC regions, consumption rose by 4.0% and 7.9%,
respectively year-on-year. Consumption in EMEA remained weak during
2013, with a decrease of 0.7%.

Global demand for stainless steel products in 2013 was split among
the segments: Consumer Goods & Medical (45.2%), Chemical/
Petrochemical & Energy (17.3%), Automotive & Heavy Transport
(11.0%), Architecture/Building/Construction & Infrastructure (15.2%),
Industrial & Heavy Industry (8.5%) and Others (2.9%). The main
drivers for the demand increase in 2013 were the Consumer Goods &
Medical (+7.7%), Architecture/Building/Construction & Infrastructure
(+6.3%) and Industrial & Heavy Industries (+4.3%). In the Chemical/
Petrochemical & Energy, Automotive & Heavy Transport and Others
segments demand increased in 2013 by 2.9%, 1.9% and 5.2%,
respectively.

Imports into the EU are expected to reach 23.6% of total consumption
in 2013, which is higher than the average level of 18.6% in 2012. This
mainly reflects a further increase in Asian imports during 2013. The
largest countries in terms of imports to the EU included China, Taiwan,
South Korea, the USA, South Africa, India and Japan.

Average imports into the NAFTA region reached 13.4% of the total
consumption in 2013, below the average level of 18.6% in 2012.
Import levels have been constantly declining since the fourth quarter
of 2012, mainly due to anti-dumping cases against other countries
and the ramp-up of Outokumpu’s integrated stainless steel mill in
Calvert.

Stainless steel transaction prices

According to CRU, average transaction prices in 2013 for 2mm
cold rolled 304 stainless steel sheet in Europe, the USA and China
remained significantly below the previous year’s levels. In Europe, the
total decline of 8.8% in the transaction price was the result of a drop
in the base price by 2.8% and a decrease in the alloy surcharge by
13.7%. In the US, the fall in the alloy surcharge by 15.6% was the main
price driver year-on-year for the 8.8% decline in the transaction price.
The Chinese transaction price dropped by 10.3% in 2013 compared
to 2012.

The average nickel price1) came down strongly in 2013, by 14.3%,
and was 15 012 USD/tonne (2012: 17 511 USD/tonne). The London
Metal Exchange (LME) cash price for nickel declined by 18.2% since
the beginning of the year. A growing surplus on the markets put
pressure on prices, especially during the first half of the year. The
price hit the year low of 13 160 USD/tonne in early July. Some signs
of improvement were seen in December due to improved demand from
the stainless steel industry and an anticipated Indonesian nickel ore
export ban. Since the beginning of 2014 nickel price has been in the
region of 13 365–14 645 USD/tonne.

The European average benchmark price2) for ferrochrome in 2013
was 1.16 USD/lb., down 3.8% from 1.21 USD/lb. in 2012. The price
rose in the first half of the year, driven by expectations of improved
demand for stainless steel and reduced South African ferrochrome
supply due to a power buy-back program from the national electricity
supplier. For the second half of the year, the price decreased due to
increased ferrochrome supply from South Africa and weak stainless
steel demand, to a level of 1.125 USD/lb. for both the third and fourth
quarters. For the first quarter of 2014, the benchmark price rose to a
level of 1.18 USD/lb.

The molybdenum average price3) in 2013 was 10.35 USD/lb., down
19.0% from 12.78 USD/lb. in 2012. The price declined during the first
half of the year and was mainly stagnant during the second half.

1) Nickel Cash LME Daily Official Settlement, USD per tonne
2) Ferro-chrome Contract: Ferro-chrome Lumpy CR charge basis 52% Cr

quarterly major European destinations USD per lb. Cr

3) MetalBulletin – Molybdenum Drummed molybdic oxide Free market USD

per lb. Mo in warehouse

Business areas

Following the planned divestment of the Terni remedy assets, VDM
business and certain service centers to ThyssenKrupp, Outokumpu
has changed the names of its business areas to be:

· Stainless EMEA
· Stainless Americas
· Stainless APAC
· Specialty Stainless

Note: This report contains comparisons to both Outokumpu stand
alone as well as comparable figures for the combined entity based on
management estimates for 2012. Tables that are marked with ‘comparable’
show the combined entity comparisons for 2012. In the text itself, only
comparable numbers will be stated and analyzed. No verbal analysis is
done based on the official financial statements 2012 since it presents
Outokumpu stand alone and such analysis would not be meaningful.

Market development of total stainless steel real demand in 2013

Million tonnes

EMEA

Americas

APAC

Total

Source: SMR February 2014
e = estimate

2013e

6.8

3.4

22.7

32.9

2012

6.9

3.3

21.0

31.2

2011

6.8

3.1

20.0

29.9

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Sales, 6 745 € million

Stainless EMEA 55%

Stainless Americas 13%

Stainless APAC 6%

Specialty Stainless 23%

Other operations 3%

Terni remedy assets, the VDM business and certain service centers are
reported as discontinued operations. Quarterly 2013 profit and loss
figures including related key figures have been restated for this reason.
All comparable 2012 figures as well as restated quarterly 2013 figures
are unaudited. For the full year 2013, deliveries decreased by 138,000
or 5.1% tonnes to 2,585,000 tonnes (2012: 2,723,000 tonnes).

Stainless EMEA

The key focus of Stainless EMEA is to maintain and expand
Outokumpu’s strong European stainless coil position through
customer and product leadership, to improve financial performance
and to drive cost efficiency by leveraging the company’s own
chrome mine and expanded ferrochrome production. The successful
implementation of Outokumpu’s industrial plan targeting to
restructure the company’s operations in Europe, introduced in October
2013, will be key in returning the company to profitability.

Stainless EMEA’s deliveries for the full year 2013 declined by 8.7%
year-on-year, due to the continued weak market. In addition, some
volumes continued to be rerouted to Avesta in Sweden and Bochum
in Germany towards the end of the year due to the production
disturbances at the Tornio hot rolling mill in September. Ferrochrome
ramp-up continued in line with the plans and production was 434 000
tonnes in 2013 (2012: 230 000 tonnes). The Krefeld melt shop was
closed as planned in December 2013.

For the full year 2013, Stainless EMEA’s EBIT was EUR -158 million,
compared to EUR -281 million in the previous year. Non-recurring
items accumulated to EUR -55 million (2012: EUR -125 million) and
related primarily to headcount reductions announced in spring 2013.
The reduction in operational losses was mainly driven by savings
related to the closure of the Krefeld melt shop and headcount
reductions, savings from the P150 program, as well as the focus on
high-quality products with better margins. This partly compensated for
the lower deliveries.

Stainless Americas

The EBIT for 2013 was EUR -270 million (2012: EUR -182 million). The
main drivers for the unsatisfactory performance during the year were
the inventory-related losses in connection with falling nickel prices
during the first half, production issues and high production unit costs
due to low utilization rates during the Calvert ramp-up.

The high inventory levels at the beginning of the year were to a
large degree caused by the continued deliveries of stainless steel
from Terni. The shipments of the material from Europe to Stainless
Americas will end in the first quarter of 2014 and this is estimated to
have a positive impact on financial performance. Inventory levels were
brought down during the second half of 2013 and are now well aligned
with the anticipated delivery volumes of about 530 000 tonnes for
2014.

Stainless APAC

Stainless APAC’s key focus is to contribute to the growth of
Outokumpu by establishing a profitable foothold in the APAC region
and to focus on selected customer and product segments in which the
Outokumpu offering is differentiated from its competitors.

In 2013, deliveries increased from 104 000 tonnes to 184 000
tonnes, mainly driven by SKS business. Some recovery in the project
business was seen towards the end of the year.

For the full year 2013, the EBIT was EUR -7 million compared to EUR
-14 million in 2012.

Specialty Stainless

Following the planned divestment of the VDM business to
ThyssenKrupp, Outokumpu presents VDM as discontinued operations
and has restated its financial figures. The following table and
commentary reflect the key business area figures without the VDM
business.

The key focus of Specialty Stainless is to identify new customers
and sales opportunities to drive profitability. In addition, Specialty
Stainless is finalizing its ongoing investments for example, in
Degerfors, Sweden, and continuing several cost reduction and
efficiency improvement initiatives.

In 2013, deliveries in Specialty Stainless declined by 9.1% to 490 000
tonnes, compared to 539 000 tonnes in the previous year.

The EBIT loss for the full year 2013 decreased to EUR 33 million,
compared to a loss of EUR 133 million in 2012. EBIT in 2012 included
non-recurring items of EUR -93 million. Excluding non-recurring items,
EBIT improved year-on-year from EUR -40 million to EUR -33 million in
2013. Despite the lower deliveries, profitability improved thanks to a
better mix as well as a streamlined cost base.

Stainless Americas’ key focus is to build up a strong position in the
Americas market by focusing on superior product quality, technical
service, and delivery reliability. Improvement in Stainless Americas’
financial performance is a priority and this is driven by the ramp-up of
the Calvert facility. The aim is to finalize the Calvert technical ramp-up
during 2014 and implement the full commercial ramp-up into 2016. In
addition, Stainless Americas focuses on ensuring performance of the
Mexican operations.

Deliveries for 2013 increased by 16.3% totaled 465 000 tonnes,
compared to 400 000 tonnes in 2012, mainly driven by the ramp up
of the Calvert mill.

Financial performance

Outokumpu’s financial performance for 2013 as a whole was
unsatisfactory although losses were reduced. Stainless steel
deliveries were down by 5.1% to 2 585 000 tonnes (2012:
2 723 000 tonnes), underlying EBITDA was EUR -32 million (2012:
EUR -66 million), and underlying EBIT was EUR -377 million (2012: EUR
-412 million). The main drivers for reduced losses were the improved
performance of the Ferrochrome business as well as decreased overall
cost levels thanks to ongoing cost takeout initiatives. On the other
hand, the significantly lower deliveries and lower base prices had a
major negative impact on performance.

Lower deliveries in 2013

Sales by market area

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

For the full year 2013, deliveries decreased by 138 000 or 5.1%
tonnes to 2 585 000 tonnes (2012: 2,723,000 tonnes).

Average capacity utilization of the Outokumpu facilities declined
during the year: starting at 75–80% in the first quarter, 70–75% in the
second quarter and reaching a low level at 65–70% for the second half
of the year.

Europe 66% (Finland 3%)

North and South America 19%

Asia 13%

Australia and Oceania 1%

Africa 1%

2013

Deliveries, continuing operations
2012
Comparable
1 890
436
88
59

1 879
370
77
62

1 000 tonnes
Cold rolled
White hot strip
Quarto plate
Long products
Semi-finished
products
Stainless steel 1)
Ferrochrome
Tubular products
Total deliveries
Stainless steel
deliveries

399
186
212
12
2 797

274
206
68
44
2 791

2012

2011

728
315
88
59

261
193
68
44
1 495

740
309
106
60

187
129
58
48
1 449

2 585

2 723

1 428

1 391

1) Black hot rolled, slabs, billets and other stainless steel products

Sales and earnings declined in sluggish markets

In 2013, Outokumpu sales decreased by 15.3% to EUR 6 745 million
due to low overall demand for stainless steel and Outokumpu
products, lower base prices and a 14.3% decline in average nickel
price.

Sales

€ million
Stainless EMEA
Stainless Americas
Stainless APAC
Specialty Stainless
Other operations
Intra-group sales
The Group

2013

4 267
906
388
1 619
538
-974
6 745

2012
Comparable
5 738
923
294
1 921
565
-1 480
7 961

2012
Restated 1)
2 648
2
128
1 937
564
-742
4 538

2011

3 042
1
137
2 304
702
-1 178
5 009

1) Adjusted due to reallocation of R&D operations in Avesta, Sweden from

Other operations to Specialty Stainless.

In 2013, the underlying EBITDA improved from EUR -66 million to EUR
-32 million, and the underlying EBIT from EUR -412 million to EUR -377
million. For the full year the non-recurring items amounted to EUR -78
million and raw material-related inventory effect of EUR -56 million
adding up to total adjustments to EBIT of EUR -133 million during
2013. Reported EBIT in 2013 was EUR -510 million (2012: EUR -754
million).

The main drivers for the reduced losses were the improved
performance of the Ferrochrome business as well as decreased overall
cost levels thanks to ongoing cost takeout initiatives. On the other
hand, the significantly lower deliveries and lower base prices had a
major negative impact on performance.

Higher financial expenses

The financial income and expense for the full year 2013 amounted to
EUR -310 million, and of that interest expenses amounted to EUR 210
million. Market price losses decreased from EUR -64 million in 2012
to EUR -37 million in 2013. Financial expenses in the fourth quarter
include a fair value change of EUR -41 million for the remaining 16%
stake in Talvivaara Sotkamo Ltd due to the decline in the share price
of Talvivaara Mining Company Plc during the year with a remaining fair
value of EUR 13 million at the end of the year.

Negative net result for the period

For the full year, the net result was EUR -1,003 million (2012
Outokumpu stand alone: EUR -536 million) and earnings per share of
continuing operations was EUR -0.40 (2012 Outokumpu stand alone:
EUR -0.46).

Operating result

€ million
800

600

400

200

–200

–400

–600

–800

Year 2012 restated due to adoption of revised IAS 19 standard.

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Profitability

€ million
EBIT
Stainless EMEA
Stainless Americas
Stainless APAC
Specialty Stainless
Other operations
Intra-group items

Share of results in
associated companies
and joint ventures
Financial income and
expenses
Result before taxes
Income taxes
Net result for the financial
year from continuing
operations
Net result for the financial
year from discontinued
operations
Net result for the financial
year

Operating profit margin, %
Return on capital
employed, %
Earnings per share
Earnings per share,
continuing operations, EUR

Net cash generated from
operating activities

Earnings per share

€
2

–1

–2

–3

–4

2013

2012
Comparable

2012

2011

Positive operating cash flow driven
by decrease in working capital

-158
-270
-7
-33
-39
-3
-510

-2

-310
-822
-11

-832

-170

-1 003

-7.6

-10.3
-0.48

-0.40

-281
-182
-14
-133
-148
5
-754

-113
0
-8
-133
-130
-1
-385

-84
0
-3
-106
-72
14
-251

-5

-138
-524
-12

11
-244
65

-
-
-

For the full year 2013, net cash from operating activities was positive
as well at EUR 34 million, mainly driven by the release of working
capital of EUR 297 million since the beginning of the year.

Capital expenditure and depreciation

€ million
1 000

800

600

400

200

%
10

Capital expenditure

Depreciation

12*

13
Capital expenditure, % of sales

-536

-180

* Year 2012 continuing operations, comparable figures.

-9.5

-8.5

-5.0

-
-

-8.2
-0.46

-6.3
-0.62

266

338

Capital expenditure

Capital expenditure for continuing operations declined significantly
during 2013 and amounted to EUR 183 million (2012: EUR 763
million). This was mainly spent on the new production facility in
Calvert, USA, the doubling of the ferrochrome production in Tornio,
Finland, the quarto plate project in Degerfors, Sweden as well as to
maintenance-related investments.

Capital expenditure, continuing operations
2012
€ million
357
Stainless EMEA
-
Stainless Americas
0
Stainless APAC
Specialty Stainless
65
2 733
Other operations
3 155
The Group
763
The Group, comparable

2013
69
44
3
54
14
183
183

2011
181
-
1
60
13
255
-

Depreciation and amortization

332

230

235

Balance sheet shows higher gearing

On November 30, 2013, Outokumpu announced the divestment of
Terni remedy assets, the VDM business and certain service centers
to ThyssenKrupp. Outokumpu presents the businesses to be divested
as discontinued operations separately from the continuing operations
2013 result. In the statement of financial position, the additional
reclassifications to assets held for sale are shown in the December
31, 2013 figures. In comparison periods, only original Terni remedy
assets are classified to assets held for sale, and the additional
reclassifications are included in the figures on each line. The
ThyssenKrupp loan note which will be used as a consideration for the
divestment is presented in long-term debt and will be derecognized at
closing of the divestment in the first quarter of 2014.

Equity-to-assets ratio

Debt-to-equity ratio

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

%
60

%
200

175

150

125

100

Year 2012 restated due to adoption of revised IAS 19 standard
and completing the Inoxum acquisition accounting.

Years 2009–2012 have been restated due to Outokumpu’s change in net
interest-bearing debt definition.

Net interest-bearing debt

€ million
4 000

3 500

3000

2 500

2 000

1 500

1 000

500

Years 2009–2012 have been restated due to Outokumpu’s change
in net interest-bearing debt definition.

Outokumpu has finalized the accounting related to the Inoxum
transaction of 2012 based on the final valuation of the identifiable
asset and liabilities. The completion of the accounting did not
materially change the provisional valuation and did not have a material
impact on the 2013 income statement or financial position.

During 2013, total assets decreased by EUR 865 million to EUR
8 823 million (Dec 31, 2012: EUR 9 688 million), to a large degree
driven by a reduction in current assets by EUR 1 078 million to EUR
2 679 million (Dec 31, 2012: EUR 3 757 million). The main reason
for this decline was focused and successful inventory management
throughout the company: Inventories came down by EUR 1 112
million to EUR 1 216 million, (Dec 31, 2012: EUR 2 328 million).
Approximately half of the inventory reduction was attributable to
continuing operations and the other half reflects the reclassification of
assets to assets held for sale and also the actual inventory decrease
in those units.

Cash and cash equivalents increased by EUR 385 million to EUR 607
million at the end of 2013 (Dec 31, 2012: EUR 222 million) and it was
mostly related to the continuing operations.

Total non-current assets decreased by EUR 711 million from EUR 4
655 million to EUR 3 944 million during 2013. The largest changes
were recognized in property, plant and equipment, which decreased
by EUR 462 milion to EUR 3 254 million (Dec 31, 2012: EUR 3 716
million). Approximately EUR 200 million of the reduction in property,
plant and equipment was attributable to continuing operations
reflecting mainly capital expenditure, depreciation and smaller
disposals. The rest reflects the reclassification of assets to assets
held for sale, but also the actual decrease in property, plant and
equipment in those units.

The change in non-current trade and other receivables of EUR 161
million was primarily related to the sale of the Luvata receivable.

The goodwill was EUR 465 million at the end of 2013 (Dec 31, 2012:
EUR 477 million).

Assets held for sale increased by EUR 924 million to EUR 2 200
million, mostly due to the reclassification of VDM and certain service
centers, compared to EUR 1 276 million at the end of 2012, when only
the Terni remedy assets were included. Liabilities directly attributable
to these assets increased by EUR 262 million to EUR 1 048 million
(Dec 31, 2012: EUR 786 million). These figures combine to a net value
of EUR 1 152 million for the assets held for sale on the balance sheet.

Equity decreased by EUR 1 039 million, mainly reflecting the net loss
of EUR 1 003 million of Outokumpu Group in 2013.

Non-current liabilities increased by EUR 169 million mainly driven by
higher long-term debt of EUR 3 270 million, compared to EUR 2 935
million at the end of the previous’ year. The increase in long-term
debt was mostly driven by continuing operations and related to the
committed revolving credit facility of EUR 900 million signed in July.
Long-term debt also includes the total amount of the ThyssenKrupp
loan note of EUR 1 283 million (Dec 31, 2012: EUR 1 229 million).

Current liabilities went down by EUR 234 million to EUR 2 093 million
(Dec 31, 2012: EUR 2 327 million), primarily because of the decline
in trade and other payables by EUR 407 million to EUR 1 136 million
(Dec 31, 2012: EUR 1 543 million). Continuing operations contributed
some EUR 170 million to this decline and discontinued operations the
rest, reflecting the reclassification of liabilities to liabilities directly
attributable to assets held for sale as well as the actual decrease of
trade and other payables in those units.

Net interest-bearing debt at the end of December 2013 totaled EUR
3 556 million, up by EUR 125 million compared to the end of 2012
(Dec 31, 2012: 3 431 million). During the last quarter of the year, net
debt declined by EUR 305 million, mostly due to positive cash flow
driven by working capital release during the fourth quarter. Gearing
at the end of December 2013 was 188.0%, compared to 116.2% at
the end of December 2012. The planned divestiture of the Terni and
VDM businesses to ThyssenKrupp in exchange for the EUR 1.3 billion
loan note is expected to be reduce gearing by 68 percentage points
compared to the end of 2013.

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Key financial indicators on financial position

€ million
Net interest-bearing debt

Long-term debt
Current debt

Cash and cash equivalents
Net interest-bearing debt

Shareholders' equity
Return on equity, %
Debt-to-equity ratio, %
Equity-to-assets ratio, %
Net interest expenses

2013

2012
Restated 1)

3 270
893
-607
3 556

1 891
-41.4
188.0
21.5
197

2 935
718
-222
3 431

2 952
-21.4
116.2
30.5
66

2012

1 161
998
-168
1 991

2 050
-8.2
97.1
39.3
65

1) Figures for 2012 have been restated as a result of adoption of the
revised IAS 19 Employee Benefits standard.

Financing

Cash and liquidity reserves

At the end of 2013, cash was EUR 607, while the overall liquidity
reserves are in excess of EUR 1 000 million.

Refinancing

During the year Outokumpu took decisive steps to refinance its loan
portfolio. In July, Outokumpu Oyj signed a EUR 900 million committed
revolving credit facility with a maturity in June 2015. The facility
replaced the EUR 750 million facility that had been put to place in
June 2011 and the EUR 250 million facility that became effective in
December 2012. At the end of 2013, EUR 590 million of the EUR 900
million revolving credit facility had been drawn. The EUR 900 million
revolving credit facility includes two financial covenants, one based
on gearing and the other on liquidity. There have been no breaches of
financial covenants in 2013.

At the end of November, Outokumpu announced comprehensive plans
to strengthen the company’s balance sheet, including renewal and
maturity extension of the loan portfolio, new liquidity facility and a
planned rights issue of approximately EUR 650 million. See “Events
after the end of the reporting period” for more information.

People

Outokumpu’s headcount for continuing operations decreased by
1 512 and totaled 12 561 at year end (2012: 14 073). The average
number of employees was 13 150 during the year. The decrease
in the number of employees was mainly related to the sale of the
majority in OSTP tubular joint venture in January 2013 as well as to
the ongoing integration and cost reduction programs. The lost-time
injury rate (lost-time accidents per million working hours) for the
full year 2013 was 4.5 and in line with the Outokumpu target. This
rate represents an all-time low level of lost time injuries. There was
one serious accident, which was investigated and follow-up actions
implemented. Outokumpu’s overall target for safety for 2014 will be
4.0 lost-time accidents for million hours worked.

In response to the difficult market situation, Outokumpu initiated
actions to reduce costs and enable the Group to achieve sustainable
profitability. In connection with the P150 cost savings program,
headcount reduction measures as announced in April 2013 are
currently being implemented. Additional reduction of up-to 1 000 jobs
is expected in Europe by the planned structural changes as per the
new EMEA industrial plan, bringing the total planned global reduction
to 3 500 jobs. The planned reductions are related to capacity
reductions in Europe as well as streamlining all overlapping activities
in sales, production, supply chain and support functions.

Total wages and salaries in 2013 amounted to EUR 583 million (2012:
EUR 340 million and 2011 EUR 379 million). Indirect employee costs
totaled EUR 222 million (2012: EUR 133 million and 2011 EUR 150
million).

Personnel, continuing operations

Dec 31
Stainless EMEA
Stainless Americas
Stainless APAC
Specialty Stainless
Other operations
The Group

2013

6 890
2 006
630
2 650
385
12 561

2012
Comparable
7 476
1 974
662
2 741
1 220
14 073

2012

2011

7 977
1 974
662
4 764
1 272
16 649

3 582
5
121
3 063
1 482
8 253

Personnel on December 31, 2013

20 000

15 000

10 000

5 000

Year 2009 reported as full-time equivalent.

Year 2013 reported for continuing operations.

Environment

Emissions into the air and discharges into water remained within
permitted limits at the Outokumpu sites and the breaches that
occurred were temporary, were identified and had only a minimal
impact on the environment. Outokumpu is not a party in any
significant juridical or administrative proceeding concerning
environmental issues, nor is it aware of any realized environmental
risks that could have a material adverse effect on Outokumpu’s
financial position. This conclusion was made also in internal
environmental audits which were performed at each production site
during 2013.

Despite the start of the new EU CO2 Emission Trading period 2013–
2020, the authorities have not yet allocated the final amounts of CO2
emissions allowances for all Outokumpu European production units.
However, our operations under the EU Emissions Trading Scheme
(ETS) will continue to receive free emissions allocations according
to efficiency-based benchmarks and historical activity. The coming
allocation is foreseen to be sufficient for the operations this year.
During 2013, Outokumpu sold in total 600 000 emissions allowances
(EUA’s) to external markets.

Due to the increased electricity price caused by EU ETS, the UK
government is paying national compensation to electricity-intensive
industry. Outokumpu’s SMACC melt shop in Sheffield, UK will get a
compensation of about EUR 1 million annually.

In 2013, Outokumpu maintained its membership in the DJSI World
Index for the seventh consecutive year and it was also recognized by
CDP (also known as the Carbon Disclosure Project).

Outokumpu’s sustainability report will be published together with the
2013 annual report in March 2014.

Research and development

Research and development work at Outokumpu aims to ensure the
company’s future competitiveness, profitability and growth. R&D
work is focused on technical market and application development,
product development and process development. Outokumpu has three
research centers, located in Avesta, Sweden, in Krefeld and Benrath,
Germany and in Tornio, Finland, and R&D work is also carried out at
Outokumpu production sites globally. The research centers employed
total of around 230 people. In 2013, Outokumpu’s R&D expenditure
for continuing operations totaled EUR 26 million which is 0.4% of the
operating costs (2012: EUR 19 million and 0.4%, 2011: EUR 21 million
and 0.4%).

The highlights of Outokumpu’s new product launches in 2013 include
new formable duplex steels FDX 25™ and FDX 27™, the high-
strength, corrosion-resistant austenitic grade Outokumpu 4420, the
high-chromium ferritic grade Outokumpu 4622, and EDX 2304™, an
enhanced duplex grade 2304 developed for offshore industry. Other
examples of new product innovations include the GritLine surface
finish and austenitic grades H500, H800 and H1000 for lightweight
applications.

Risks and uncertainties

Outokumpu operates in accordance with the risk management
policy approved by the Board of Directors. This policy defines the
objectives, approaches and areas of responsibility in risk management
activities. In addition to supporting Outokumpu’s strategy, the aim of
risk management is identifying, evaluating and mitigating risks from
the perspective of shareholders, customers, suppliers, personnel,
creditors and other stakeholders.

Outokumpu has defined “risk” as anything that could have an adverse
impact on achieving the Group’s objectives. Risks can therefore be
threats, uncertainties or lost opportunities for the company’s current
or future operations. The risk management process is an integral part
of overall management processes and is divided into four stages: risk
identification, risk evaluation, risk prioritization and risk mitigation.

One of the main focus areas during 2013 was to monitor and
strengthen Outokumpu’s financial position, as low profitability and a
stretched balance sheet led to increased risk of financial distress for
Outokumpu. Financing measures initiated during the fourth quarter
will help to reduce refinancing risk, strengthen liquidity and improve
significantly Outokumpu’s financial position. There was one major
realized operational risk: a machinery breakdown loss at the Tornio hot
rolling mill, which also had significant business interruption impacts.
Outokumpu was able to mitigate the losses to a large extent.

Strategic and business risks

The key strategic and business risks currently include: risks related to
Outokumpu’s ability to achieve the anticipated synergy savings from
the acquisition of Inoxum, reduction of cost and release of cash from
working capital; risks related to the ramp-up of production in Calvert,
USA, and uncertainties related to the subsequent, profitable market
entry for stainless steel volumes generated from the project; risks
and uncertainties in implementing the announced new industrial plan

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

in Europe; risks related to Outokumpu’s ability to expand the Group’s
business in growth markets; risks related to structural overcapacity
and continued weak markets for stainless steel; risks related to
stainless steel market developments and competitor actions,
including the possible impact of Nickel Pig Iron (NPI) technology on the
competitive situation; the risk of litigation or adverse political action
affecting trade or changes that have an impact on environmental
legislation, and risks and uncertainties related to the Fennovoima
project.

Operational risks

Operational risks include inadequate or failed internal processes,
employee actions, systems, or events such as natural catastrophes
and misconduct or crime. Risks of these types are often connected
with production operations, logistics, financial processes, major
investment projects, other projects or information technology
and, should they materialize, can lead to personal injury, liability,
loss of property, interrupted operations or environmental impacts.
Outokumpu’s operational risks are partly covered by insurance. Key
operational risks for Outokumpu are: a major fire or accident; IT
dependency; project implementation risks and personnel related risks.
To minimize possible damage to property and business interruptions
which could result from a fire occurring at some of its major production
sites, Outokumpu has systematic fire and security audit programs in
place.

Financial risks

Key financial risks for Outokumpu include: changes in the price of
nickel, molybdenum, electricity and fuels; currency risks associated
with the euro, the US dollar and the Swedish krona; interest rate
risks connected with the euro, the US dollar and Swedish krona; risks
related to Talvivaara’s share price; risks and uncertainties related to
taxation; risks and uncertainties related to the announced divestment
of Terni remedy assets and VDM to ThyssenKrupp in exchange for
the ThyssenKrupp loan note; risks and uncertainties related to
the implementation of financing measures; Outokumpu’s ability to
maintain adequate liquidity and capital structure; increases in the
prices of metals and other raw material, which may tie excessive
amounts of cash to working capital and reduce cash flow; and
continued low stainless steel prices, which would further weaken cash
flow and the profitability of Outokumpu.

Outokumpu evaluates both liquidity and refinancing risks related to
its capital management as well as major investment decisions. The
nickel price remained quite stable during the second half of the year;
however, the price decline earlier in the year continued to have a
negative impact on Outokumpu’s profitability. Outokumpu changed
its nickel hedging policy in 2013 to cover a higher ratio of hedging of
inventory-related exposures. In addition, the amount of debt and the
margins increased by the end of the year. Continuing reductions in the
value of the Group’s stake in Talvivaara Sotkamo Ltd had a negative
impact on earnings and on the balance sheet.

Short-term risks and uncertainties

Outokumpu is exposed to the following risks and uncertainties in
the short term: risks and uncertainties in implementing the new
industrial plan in Europe, the risk related to possible failures or delays
in or inadequate profitability of ramping up the stainless steel mill in
Calvert, USA; risks related to stainless steel market developments and
competitor actions; risks and uncertainties, related to the announced
divestment of Terni remedy assets and VDM to ThyssenKrupp in
exchange for the ThyssenKrupp loan note; risks and uncertainties
related to the implementation of financing measures; risks related
to Outokumpu’s ability to maintain adequate liquidity and capital

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

structure; major failures or delays in achieving the anticipated
synergy benefits, reduction of cost and release of cash from working
capital; risks and uncertainties related to the Fennovoima project;
the risk of increases in metals and other raw material prices, which
may tie excessive amounts of cash to working capital and reduce
cash flow; and the risk of continued low stainless steel prices, which
would further weaken cash flow and the profitability of Outokumpu
in the short term. A further reduction in the nickel and other alloying
metals prices presents a risk for Outokumpu, for example by causing
inventory-related losses and other adverse business impacts. Possible
adverse changes in the global economic environment, which would
impact the stainless steel industry, are risks for Outokumpu. These
kinds of adverse developments may weaken the Group’s financial
position further and also have an impact on Outokumpu’s customers’
payment behavior and increase default rates.

In order to increase its risk tolerance, Outokumpu has initiated
significant financing measures including for example a new liquidity
facility of EUR 500 million, maturity extensions of a debt portfolio of
about EUR 1.5 billion and a planned rights issue of approximately
EUR 650 million in connection with the announced sale of the Terni
and VDM operations. All these measures will significantly de-risk
Outokumpu in 2014 by improving liquidity, strengthening the balance
sheet, reducing variations in free cash flow and decreasing exposure
to operational risks.

Closing the sale of the Terni and VDM assets as well as the
completion of the financing measures will significantly reduce
Outokumpu’s financial and operational risks. This is expected to
return risk tolerance to acceptable level and enable the execution of
Outokumpu’s restructuring measures back to sustainable profitability.

Significant legal proceedings

The following is an update on pending legal proceedings. All legal
disputes and litigations related to the Terni remedy assets, the VDM
business and certain service centers will move over to ThyssenKrupp
once the asset sale transaction with ThyssenKrupp is completed.
Due to the contractual agreements between ThyssenKrupp and
Outokumpu, there will be no further liability risk for Outokumpu
resulting from these legal disputes.

European Commission cartel investigation
in the industrial copper tube sector

In connection with the industrial copper tubes EU cartel investigation,
completed in May 2009, Outokumpu has, since 2004, been in the
process of addressing civil action related to the cartel investigations
raised by Carrier Corporation (“Carrier”) in the United States and in
the UK against Outokumpu and its former fabricated copper products
business in the United States and Europe (see the 2012 annual report
for further details of the case). In April 2013, Outokumpu and Carrier
signed a settlement agreement that covers all damage suits against
Outokumpu by Carrier in the US and UK. The total settlement amount,
including cost reimbursement, is EUR 11 million. The settlement also
covers all former Outokumpu subsidiaries included in the claims.
According to the settlement agreement, all damage suits by Carrier
against Outokumpu are now rescinded. The settlement amount has
been booked as a non-recurring item in the 2013 operating result.

production method is developed by Outokumpu and it has filed the
patent applications related to this invention. Outotec claims it has
rights to the inventions. Outokumpu finds these allegations to be
completely without merit.

Lawsuits regarding a fire in AST’s Turin facility

In December 2007, a fire on line 5 at AST’s production facility in Turin,
Italy, caused the death of seven AST employees. In May 2008, the
public prosecutor of Turin brought charges against AST and six of
its employees. In April 2011, the court announced its verdict, under
which all of the individual defendants were found guilty and given
prison sentences ranging from ten years and ten months to 16 years
and six months. Proceedings in the appellate court commenced in
November 2012, and in February 2013 the court issued the operative
part of its judgment, in which the sentences of the individuals were
reduced to a range from seven years to ten years. All defendants and
AST have filed an appeal to the Corte di Cassazione in Rome. The first
hearings are expected to take place in April 2014.

Rejection of exemption from renewable
energy charges for German plants

On July 8, 2013, Nirosta and VDM received rejections from the
competent authority Bundesamt für Wirtschaft und Ausfuhrkontrolle
(“BAFA”) with respect to their applications for an exemption from
the German Renewable Energy Charge. Nirosta and VDM both filed
complaints against the decision of BAFA. Since then, Nirosta and
VDM have been able to reach an agreement with BAFA by which the
exemption for 2013 was still granted. The renewable energy charge
reduction resulted in a EUR 25 million refund on energy costs for the
entities in Germany for 2013 (EUR 20 million related to continuing
operations). The complaint has therefore become redundant. On
December 18, 2013, the EU Commission initiated a state aid
procedure against Germany in connection with the Renewable Energy
Charge system and the exemptions for energy-intensive industries.
While Nirosta and Outokumpu will still receive such benefits in 2014,
it cannot be excluded that such benefits are endangered by that state
aid procedure for 2015.

U.S. antidumping order on stainless steel strip
and sheet from Mexico, Germany and Italy

On July 27, 1999, the U.S. Department of Commerce (the “USDOC”)
issued antidumping duty orders on imports of stainless steel strip
and sheet from Mexico, Germany and Italy, among other countries.
The antidumping duty orders on stainless steel strip and sheet from
Mexico, Germany and Italy were revoked effective July 25, 2011 due
to a negative determination by the United States International Trade
Commission (USITC). The U.S. petitioners in the antidumping case
appealed the USITC’s determination to the U.S. Court of International
Trade in New York with regard to the revocation of the antidumping
duty order on imports from Mexico. On November 15, 2012, the court
dismissed the appeal by the plaintiffs. A complaint by the plaintiffs
against that court order was rejected by the U.S. Court of Appeals on
January 9, 2014. The revocation of the duty orders on stainless steel
imports have therefore become legally binding as the plaintiffs have
no further means of challenging the decision by the USITC.

Dispute over invention rights

Share development and shareholders

In January 2013, Outokumpu and Outotec entered into a legal dispute
over invention rights. In August 2013, Outotec submitted another
application for summons at the District Court of Helsinki regarding
another patent relating to the invention. The ferrochrome-nickel

Outokumpu’s share capital did not change during 2013 and was
EUR 311 million at the end of the year. As of December 31, 2013,
the total number of Outokumpu shares was 2 078 081 348, and
Outokumpu held 975 888 of its own shares. According to its Articles

of Association, Outokumpu has only one single class of shares, and all
shares have equal voting power at General Meetings of shareholders.

Management shareholdings and
share-based incentive programs

The following table sets out the largest shareholders as per December
31, 2013 and December 31, 2012.

As of December 31, 2013, the members of the Board of Directors
and the members of the Outokumpu Leadership Team (OLT) held
altogether 943 452 shares or 0.05% of the total shares outstanding.

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Shareholders

%
Foreign investors
Finnish corporations
Finnish private households
Finnish public sector institutions
Finnish financial and insurance
institutions
Finnish non-profit organizations

Shareholders with over 5% of shares and
voting rights

ThyssenKrupp AG
Solidium Oy (owned by the Finnish
State)

Dec 31
2013
41.7
26.1
22.1
6.6

2.5
1.0

Dec 31
2012
43.2
25.2
14.4
11.3

4.7
1.2

29.9

21.8

29.9

21.8

Information regarding shares and shareholders is updated daily on
Outokumpu’s website at www.outokumpu.com/en/investors/share-info/.

In connection with the agreed sale of the Terni remedy assets,
the VDM business and certain service centers to ThyssenKrupp,
ThyssenKrupp has entered into an agreement to divest its
29.9% shareholding in Outokumpu to a group of institutional
investors, to comply with the buyer suitability requirements of the
European competition rules. In connection with the divestment by
ThyssenKrupp, Solidium has agreed to acquire a part of the shares
resulting in an increase of its ownership in Outokumpu from its current
level of 21.8% to 29.9%. Similarly, Ahlström Capital has agreed to
acquire shares representing 5.0% of all shares in Outokumpu.

Outokumpu has established share-based incentive programs for the
OLT members and for selected managers and key employees. In 2013,
40 000 reward shares have been paid out based on the restricted
shares program 2010 in relation to the end of the retention period.
The reward shares were paid with treasury shares in the company’s
possession. Due to the payment of the reward shares, the number of
treasury shares held by Outokumpu decreased to 975 888 at the end
of 2013 (Dec 31, 2012: 1 015 888).

For the earning period 2010–2012, no shares have been paid out
because the targets set for this period have not been met.

More details on the share-based incentive programs can be found on
the Outokumpu web page.

The continued losses of Outokumpu in 2013, the weak stainless steel
market development as well as uncertainty related to the divestment
of the Terni remedy assets were reflected in Outokumpu share price.
The Outokumpu share price declined by 48% and was EUR 0.41 on the
last trading day of 2013 (EUR 0.79 on December 28, 2012). During
2013, the price of the Outokumpu share peaked at EUR 0.85 and
was EUR 0.35 at its lowest (2012 high/low: EUR 2.10/EUR 0.64). At
the end of 2013, the company’s market capitalization was EUR 845
million, compared to EUR 1 650 million at the previous year’s end.

For details on relate party transactions, please see note 31. Related
party transactions.

Share information

Fully paid share capital at the end of the period

€ million

Number of shares at the end of the period
Average number of shares outstanding 1)
Average number of shares outstanding, rights-issue-adjusted 1)
Number of shares outstanding at the end of the period 1)
Number of treasury shares held at the end of the period

Share price at the end of the period 2)
Average share price 2)
Highest price during the period 2)
Lowest price during the period 2)

Market capitalization at the end of period
Share turnover 3)
Value of shares traded 3)

€
€
€
€

€ million
million shares
€ million

Jan–Dec 2013
311.1

2 078 081 348
2 077 080 035
2 077 080 035
2 077 105 460
975 888

0.41
0.53
0.85
0.35

845
1 564.5
835.1

Jan–Dec 2012
311.1

2 078 081 348
1 130 421 112
1 156 005 029
2 077 065 460
1 015 888

0.79
0.97
2.10
0.64

1 650
1 297.7
1 773.9

Source of share information: NASDAQ OMX Helsinki (only includes OMX Helsinki trading)

1) The number of own shares repurchased is excluded. There are currently no programs with diluting effect in place.
2) Comparative share prices adjusted regarding the effect of the rights issue.
3) Jan–Dec 2012 figures include the effect of share subsciption rights traded during March 15–28, 2012.

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Changes to the leadership team

As announced on July 24, 2013, Outokumpu appointed Reinhard
Florey as Executive Vice President and Chief Financial Officer as
of November 1, 2013. Reinhard Florey took on the role from Esa
Lager, whose intention to leave the position by the end of 2013 was
announced on February 14, 2013.

Pekka Erkkilä was appointed Chief Technology Officer and a member
of the Outokumpu Leadership Team as of September 1, 2013. Pekka
Erkkilä has over 30 years of experience in stainless steel and mining
industries and was employed by Outokumpu during 1983–2010. He is
responsible for Outokumpu’s global production, technology and R&D
strategy as well as capital investments optimization.

Annual General Meeting

The Annual General Meeting (AGM) was held on March 18, 2013, in
Helsinki. In accordance with a proposal by the Board of Directors,
the AGM decided that no dividend shall be paid for the financial
year 2012. The AGM authorized the Board of Directors to decide to
repurchase the Group’s own shares. The maximum number of shares
to be repurchased is 200 000 000. Outokumpu held 975 888 of its
own shares at the end of 2013.

The AGM also authorized the Board of Directors to decide on the
issuance of shares as well as other special rights entitling it to shares.
The AGM authorized the Board of Directors to resolve to issue a
maximum of 400 000 000 shares through one or several share issues
and/or by the granting special rights entitling to shares, excluding
option rights granted to the company’s management and personnel
under incentive plans. Pursuant to this authorization, the maximum
number of new shares to be issued through any share issue and/or
by granting special rights entitling to shares is 200 000 000, and, in
addition, the maximum number of treasury shares to be transferred is
200 000 000.

These authorizations are valid until the end of the next AGM, but no
longer than May 31, 2014. To date the authorizations have not been
used.

The AGM decided to increase the number of Board members, including
the Chairman and Vice Chairman, to eight. The Annual General
Meeting decided to re-elect Olli Vaartimo, Harri Kerminen, Guido
Kerkhoff, Heikki Malinen, Elisabeth Nilsson and Siv Schalin of the
current members and elect Markus Akermann and Jorma Ollila as new
members, for the following term. The Annual General Meeting elected
Jorma Ollila as the Chairman and Olli Vaartimo as the Vice Chairman
of the Board of Directors.

At its first meeting, the Outokumpu Board of Directors appointed two
permanent committees consisting of Board members. Olli Vaartimo
(Chairman), Markus Akermann, Heikki Malinen, and Siv Schalin were
elected as members of the Board Audit Committee. Jorma Ollila
(Chairman), Guido Kerkhoff, Elisabeth Nilsson, and Harri Kerminen
were elected as members of the Board Remuneration Committee.

KPMG Oy Ab, Authorized Public Accountants, was re-elected as the
company’s auditor for the period ending at the close of the next AGM.

Nomination Board

Outokumpu’s Annual General Meeting has established a Nomination
Board to annually prepare proposals on the composition of the
Board of Directors and director remuneration for the Annual General
Meeting.

According to the Charter of the Nomination Board, the Nomination
Board consists of the representatives of Outokumpu’s four largest
shareholders, registered in the Finnish book-entry system on October
1, who accept the assignment.

On October 1, 2013 the four largest shareholders of Outokumpu
were ThyssenKrupp AG, Solidium Oy, The Social Insurance Institute
of Finland and Varma Mutual Pension Insurance Company. They
have appointed the following people as their representatives on the
Nomination Board:

· Guido Kerkhoff, CFO at ThyssenKrupp AG and also member of the

Outokumpu Board of Directors,

· Kari Järvinen, Managing Director at Solidium Oy,
· Tuula Korhonen, Investment Director at The Social Insurance

Institute of Finland and

· Pekka Pajamo, CFO at Varma Mutual Pension Insurance Company.

The Nomination Board elected from among its members Kari Järvinen
as Chairman. In addition, the Chairman of the Outokumpu Board of
Directors Jorma Ollila serves as an expert member in the Nomination
Board. Nomination Board has held its first meeting on October 16,
2013.

Changes to the Board of Directors
and the Nomination Board

Guido Kerkhoff, CFO of ThyssenKrupp, stepped down from the
Outokumpu Board of Directors as of November 30, 2013 and from the
Nomination Board as of December 2, 2013. This decision was made
in connection with the planned transaction to sell the Terni remedy
assets and the VDM business to ThyssenKrupp. To comply with the
buyer suitability requirements of the European competition rules,
ThyssenKrupp has entered into an agreement to divest its 29.9%
shareholding in Outokumpu to a group of institutional investors.

Market and business outlook

Market outlook

Global real demand for total stainless steel products is estimated to
total 32.9 million tonnes in 2013 and forecasted to reach 34.6 million
tonnes and 36.4 million tonnes in 2014 and 2015, respectively.
Between 2013 and 2015, global consumption is expected to increase
at an annual growth rate of 5.1%, while growth is forecasted to be
mainly driven by increased consumption in APAC (+5.7%) and in the
Americas (+3.8%). In EMEA, total stainless steel demand is estimated
to increase by 3.8% from 2013 to 2015.

For the first quarter of 2014, the latest forecasts provided by Steel
& Metals Market Research (SMR) see some improvement in the
European market to the level of 1.8 million tonnes compared to the
very low level of 1.6 million tonnes in the fourth quarter of 2013.
Demand in APAC is estimated to remain flat at the level of 5.8 million
tonnes and the Americas market is expected to grow from 0.8 million
tonnes to 0.9 million tonnes during the first quarter of 2014.

Market development for total stainless steel
real demand between 2010 and 2015
Million
tonnes
EMEA
Americas
APAC
Sum

2013e
6.8
3.4
22.7
32.9

2014f
7.1
3.5
24.0
34.6

2012
6.9
3.3
21.0
31.2

2011
6.8
3.1
20.0
29.9

2010
6.4
2.5
18.5
27.3

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

· Ferrochrome production is targeted to be approximately 490 000
tonnes in 2014 (2013: 434 000 tonnes). Once fully ramped up in
2015 (technical capacity of 530 000 tonnes), annual ferrochrome
deliveries will range between 500 000 and 530 000 tonnes
depending on maintenance activities.

· Continued progress in the Calvert operational ramp-up is expected
in the coming months. We estimate EBITDA in Stainless Americas
to break-even for the full year 2014 and delivery volumes of about
530 000 tonnes.

2015f
7.3
3.7
25.3
36.4

Source: SMR February 2014
e = estimate, f = forecast

The long-term outlook for stainless steel demand remains positive. Key
global megatrends such as urbanization, modernization, and increased
mobility combined with growing global demand for energy, food, and
water are expected to support the future growth of stainless steel
demand. According to SMR, growth in stainless steel consumption
between 2013 and 2015 will mainly be attributable to increased
demand from the Automotive & Heavy Transport (+6.0%), Architecture/
Building/Construction & Infrastructure (+5.9%) and Industrial & Heavy
Industries (+5.3%) segments. The Consumer Goods & Medical and
Chemical/Petrochemical & Energy segments are expected to grow at
average annual growth rates of 4.9% and 4.5%, respectively.

Sources: SMR February 2014

Business and financial outlook
for the first quarter of 2014

Outokumpu expects modest improvement in the underlying market
demand for the first quarter. The company estimates sequentially
higher delivery volumes and some improvement in base prices. The
progress in the cost efficiency initiatives and synergies is estimated to
be steady.

For the first quarter of 2014, Outokumpu estimates that the underlying
EBIT will be better than in the fourth quarter, but still a loss. Operating
cash flow is expected to be negative during the first quarter of 2014,
driven by an increase in inventories related to anticipated higher
deliveries. At current metal prices, marginal raw material-related
timing gains are expected, if any. Outokumpu’s operating result in
the first quarter of 2014 could be impacted by non-recurring items
associated with the Group’s ongoing restructuring programs.

Board of Directors’ proposal
for profit distribution

In accordance with the Board of Directors’ established dividend policy,
the pay-out ratio over a business cycle should be at least one third of
the Group’s profit for the period, with the aim of having stable annual
payments to shareholders. In its annual dividend proposal, the Board
of Directors will, in addition to financial results, take into consideration
the Group’s investment and development needs.

According to the Group’s financial statements on December 31, 2013
distributable funds of the parent company totaled EUR 1 504 million,
of which retained earnings EUR 46 million.

The Board of Directors is proposing to the Annual General Meeting
scheduled for April 14, 2014 that no dividend be paid from the parent
company’s distributable funds and that net result for the financial year
2013 be allocated to retained earnings.

Events after the end of the
reporting period

EU Commission approves the
Terni and VDM transaction

On February 12, the European Commission approved the sale of the
Terni, VDM business and certain service centers to ThyssenKrupp.
Most of the other regulatory approvals have also been obtained.

This outlook reflects the current scope of continuing operations of
Outokumpu.

Update on financing plan

Key targets updated

· Capital expenditure to be below EUR 200 million in 2014 (2013: EUR

183 million).

· Net working capital management remains high on the agenda. The
original target of EUR 300 million reduction in net working capital is
expected to be exceeded by the end of 2014. The target for working
capital efficiency measured in inventory days for the continuing
operations is 91.

· Cumulative synergy savings connected with the Inoxum integration
expected to reach EUR 170 million during 2014 (2013: EUR 95
million).

· The P150 program is expected to reach cumulative savings of EUR
150 million in 2014 as originally planned (2013: EUR 104 million).
· The European industrial plan expected to result in additional savings

of more than EUR 100 million in 2017.

· Everything combined Outokumpu’s overall savings programs are
expected to result in annual savings of approximately EUR 320
million in 2014, EUR 380 million in 2015, EUR 440 million in 2016
and EUR 450 million in 2017.

On January 27, 2014 Outokumpu told that it is proceeding with the
comprehensive measures to strengthen the company’s balance sheet
as announced on November 30, 2013. The company has received
commitments to, and signed a mandate letter for, a new EUR 900
million revolving credit facility maturing in February 2017. This facility will
replace the facility for the same amount signed on July 12, 2013 and
maturing in June 2015. Outokumpu has also made progress in extending
and amending its bilateral loan portfolio of about EUR 600 million.
Outokumpu has obtained the required consent from most lenders to
extend the loan maturities until February 2017, and expects to complete
this process in February 2014. Outokumpu and ThyssenKrupp have also
agreed to amend and extend the outstanding credit facility in the amount
of EUR 250 million granted by ThyssenKrupp. This facility will be settled
at the closing of the sale of the Terni and VDM units to ThyssenKrupp to
end all financing agreements between the two companies.

Outokumpu has also decided to grant a security package to secure its
debt financing. As security, Outokumpu plans to pledge certain of its
subsidiary shares for example in Finland, Sweden and the USA as well
as certain other assets. The security package ensures financing on
competitive prices and its benefits clearly surpass its costs, which are
only marginal.

Outokumpu Annual Report 2013 review by the bOard Of directOrs 2013

Since the granting of the proposed security package required the
consent of the holders of the Outokumpu’s notes maturing in 2015
and 2016 Outokumpu launched a consent solicitation process for
the notes. In the noteholders’ meetings held on February 7, 2014
in Helsinki the holders of the 2015 and 2016 notes resolved to
approve the proposals relating to the granting of security and certain
amendments of the terms and conditions of the respective notes
and to certain authorization and waivers related to the subordination
deed. Accordingly and except for certain limited circumstances, the
consents and waivers became effective immediately after being
sanctioned and the amendments to terms and conditions of the both
notes will enter into force upon the completion of certain refinancing
measures.

EGM called for February 14, 2014

On January 23, 2013 Outokumpu convened an Extraordinary General
Meeting for February 14, 2014 in Espoo, Finland The Board of
Directors proposed that the Extraordinary General Meeting authorizes
the Board of Directors to undertake a share issue for consideration
in which shareholders have the right to subscribe for new shares in
proportion to their existing holdings of the shares of the company.
The Board of Directors has the right to decide upon the offering to
parties determined by the Board of Directors of any shares that may
remain unsubscribed for pursuant to the shareholders’ pre-emptive
subscription right. The authorization is for a maximum of 65 billion
new shares. The Board of Directors is authorized to determine the
other terms and conditions of the share issue.

Strategic review of operations in Nyby,
Kloster and Dahlerbrück concluded

In June 2013, Outokumpu announced a strategic review of its thin
and precision strip operations in Kloster and Nyby, Sweden and
in Dahlerbrück, Germany with the aim of reducing capacities and
achieving cost savings through increased efficiencies. As a result of
the review, the company plans to discontinue its operations in Kloster,
Sweden. Outokumpu will continue the operations in Nyby, Sweden and
in Dahlerbrück, Germany as before.

Proved ore reserves of the Kemi mine
significantly larger after new drillings

As announced in January 2014, Outokumpu has updated its estimates
on the proved ore reserves and mineral resources of the Kemi mine
in Finland. The proved ore reserves have significantly increased
compared to earlier estimates, and are now altogether 50.1 million
tonnes instead of the earlier estimated some 33 million tonnes.

In Espoo, February 12, 2014

Board of Directors

Jorma Ollila

Heikki Malinen

Olli Vaartimo

Elisabeth Nilsson

Markus Akermann

Siv M. Schalin

Harri Kerminen

OUTOKUMPU OYJ

Outokumpu Annual Report 2013 auditOr's repOrt

company’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating
the overall presentation of the financial statements and the report of
the Board of Directors.

We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.

Opinion on the consolidated financial statements

In our opinion, the consolidated financial statements give a true and
fair view of the financial position, financial performance, and cash
flows of the group in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU.

Opinion on the company’s financial statements
and the report of the Board of Directors

In our opinion, the financial statements and the report of the Board
of Directors give a true and fair view of both the consolidated and
the parent company’s financial performance and financial position in
accordance with the laws and regulations governing the preparation
of the financial statements and the report of the Board of Directors
in Finland. The information in the report of the Board of Directors is
consistent with the information in the financial statements.

Other opinions

We support the adoption of the financial statements. The proposal by
the Board of Directors regarding the treatment of distributable funds
is in compliance with the Limited Liability Companies Act. We support
that the Board of Directors of the parent company and the President
and CEO be discharged from liability for the financial period audited
by us.

Espoo, February 13, 2014

KPMG Oy Ab

Virpi Halonen
Authorized Public Accountant

This document is an English translation of the Finnish auditor’s report.
Only the Finnish version of the report is legally binding.

Auditor’s report

To the Annual General Meeting
of Outokumpu Oyj

We have audited the accounting records, the financial statements,
the report of the Board of Directors, and the administration of
Outokumpu Oyj for the year ended 31 December, 2013. The financial
statements comprise the consolidated statement of financial position,
income statement, statement of comprehensive income, statement
of changes in equity and statement of cash flows, and notes to the
consolidated financial statements, as well as the parent company’s
balance sheet, income statement, cash flow statement and notes to
the financial statements.

Responsibility of the Board of Directors
and the President and CEO

The Board of Directors and the President and CEO are responsible
for the preparation of consolidated financial statements that give a
true and fair view in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU, as well as for the preparation
of financial statements and the report of the Board of Directors that
give a true and fair view in accordance with the laws and regulations
governing the preparation of the financial statements and the report of
the Board of Directors in Finland. The Board of Directors is responsible
for the appropriate arrangement of the control of the company’s
accounts and finances, and the President and CEO shall see to it that
the accounts of the company are in compliance with the law and that
its financial affairs have been arranged in a reliable manner.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial statements,
on the consolidated financial statements and on the report of the
Board of Directors based on our audit. The Auditing Act requires that
we comply with the requirements of professional ethics. We conducted
our audit in accordance with good auditing practice in Finland. Good
auditing practice requires that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the
report of the Board of Directors are free from material misstatement,
and whether the members of the Board of Directors of the parent
company or the President and CEO are guilty of an act or negligence
which may result in liability in damages towards the company or
have violated the Limited Liability Companies Act or the articles of
association of the company.

An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements and
the report of the Board of Directors. The procedures selected depend
on the auditor’s judgment, including the assessment of the risks of
material misstatement, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control relevant to
the entity’s preparation of financial statements and report of the
Board of Directors that give a true and fair view in order to design
audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the

Outokumpu Annual Report 2013 auditOr's repOrt

Outokumpu Annual Report 2013 cOnsOlidated financial stateMents, ifrs

Consolidated financial
statements, IFRS

Consolidated statement of income

Note

2013

2012
Restated 1)

€ million

Continuing operations

Sales

Cost of sales

Gross margin

Other operating income
Selling and marketing expenses
Administrative expenses
Research and development expenses
Other operating expenses

Operating result

Share of results in associated companies and joint ventures

Financial income and expenses

Interest income
Interest expenses
Market price gains and losses
Other financial income
Other financial expenses

Total financial income and expenses

Result before taxes

Income taxes

Net result for the financial year from continuing operations

Net result for the financial year from discontinued operations

Net result for the financial year

Attributable to
Equity holders of the Company
Non-controlling interests

6 745

-6 847

4 538

-4 503

-102

24
-144
-230
-26
-31

-510

-2

13
-210
-37
0
-76
-310

-822

-11

-832

-170

-1 003

-997
-6

-0.40
-0.08
-0.48

23
-115
-181
-19
-128

-385

-0

13
-80
-64
2
-10
-138

-524

-12

-536

-534
-2

-0.46
-
-0.46

Earnings per share for result attributable to the equity holders of the Company (basic and
diluted), € 2)

Earnings per share, continuing operations
Earnings per share, discontinued operations
Earnings per share

1) Figures for 2012 have been restated due to adoption of revised IAS 19 Employee Benefits standard. Restatement had an effect on the following notes: 7.

Employee benefit expenses, 8. Financial income and expenses, 9. Income taxes, 10. Earnings per share, and 25. Employee benefit obligations.

2) Figures for 2012 calculated based on the rights-issue-adjusted weighted average number of shares.

Outokumpu Annual Report 2013 cOnsOlidated financial stateMents, ifrs

Consolidated statement of comprehensive income

€ million

Net result for the financial year

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operations

Available-for-sale financial assets

Fair value changes during the financial year
Reclassification adjustments from other comprehensive income to profit or loss
Income tax relating to available-for-sale financial assets

Cash flow hedges

Fair value changes during the financial year
Reclassification adjustments from other comprehensive income to profit or loss
Income tax relating to cash flow hedges

Net investment hedges

Income tax relating to net investment hedges

Items that will not be reclassified to profit or loss:

Remeasurements of defined benefit plans

Changes during the financial year
Income tax relating to remeasurements

Other comprehensive income for the financial year, net of tax

Note

2013

2012
Restated 1)

-1 003

-536

-40

-2
-0
0

-11
-4
4

15
-8

-44

-6

-5
-1
1

-3
-3

-44
11

-36

Total comprehensive income for the financial year

-1 047

-571

Attributable to
Equity holders of the Company
Non-controlling interests

-1 040
-7

-569
-2

1) Figures for 2012 have been restated due to adoption of revised IAS 19 Employee Benefits standard. Restatement had an effect on the following notes: 7.

Employee benefit expenses, 8. Financial income and expenses, 9. Income taxes, 10. Earnings per share, and 25. Employee benefit obligations.

Outokumpu Annual Report 2013 cOnsOlidated financial stateMents, ifrs

Consolidated statement of financial position

€ million

ASSETS

Non-current assets
Intangible assets
Property, plant and equipment
Investments in associated companies and joint ventures
Available-for-sale financial assets
Investments at fair value through profit or loss
Derivative financial instruments
Deferred tax assets
Trade and other receivables

Current assets
Inventories
Available-for-sale financial assets
Investments at fair value through profit or loss
Derivative financial instruments
Trade and other receivables
Cash and cash equivalents

Assets held for sale

TOTAL ASSETS

Note

2013

2012
Restated 1) 2)

11
12
13
16
17
20
9
22

21
16
17
20
22
23

570
3 254
66
15
2
2
24
11
3 944

1 216
4
17
21
813
607
2 679

2 200

8 823

607
3 716
51
16
2
2
89
172
4 655

2 328
5
59
54
1 089
222
3 757

1 276

9 688

1) Figures for 2012 have been restated due to completing the Inoxum acquisition accounting (see Note 4. Acquisitions and disposals).
2) Figures for 2012 have been restated due to adoption of revised IAS 19 Employee Benefits standard. Restatement had an effect on the following notes: 7.

Employee benefit expenses, 8. Financial income and expenses, 9. Income taxes, 10. Earnings per share, and 25. Employee benefit obligations.

Outokumpu Annual Report 2013 cOnsOlidated financial stateMents, ifrs

€ million

EQUITY AND LIABILITIES

Equity attributable to the equity holders of the Company
Share capital
Premium fund
Invested unrestricted equity reserve
Other reserves
Retained earnings

Non-controlling interests

Total equity

Non-current liabilities
Long-term debt 3)
Derivative financial instruments
Deferred tax liabilities
Defined benefit and other long-term employee benefit obligations
Provisions
Trade and other payables

Current liabilities
Current debt
Derivative financial instruments
Provisions
Current tax liabilities
Trade and other payables

Liabilities directly attributable to assets held for sale

TOTAL EQUITY AND LIABILITIES

Note

2013

2012
Restated 1) 2)

311
714
1 462
17
-617
1 887

311
714
1 462
30
410
2 926

1 891

2 952

3 270
15
26
317
115
48
3 791

893
35
25
4
1 136
2 093

1 048

8 823

2 935
39
92
434
119
5
3 622

718
24
37
4
1 543
2 327

786

9 688

27
20
9
25
26
28

27
20
26
9
28

Employee benefit expenses, 8. Financial income and expenses, 9. Income taxes, 10. Earnings per share, and 25. Employee benefit obligations.

3) Includes Outokumpu’s loan note to ThyssenKrupp.

Consolidated statement of cash flows

€ million

Cash flow from operating activities

Net result for the financial year 1)

Adjustments for

Taxes
Depreciation and amortization
Impairments
Share of results in associated companies and joint ventures
Gain/loss on sale of intangible and tangible assets
Gain/loss on sale of financial assets
Gain/loss on divestments
Interest income
Dividend income
Interest expense
Exchange rate differences
Other non-cash adjustments 1)

Change in working capital

Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in provisions

Dividends received
Interest received
Interest paid
Income taxes paid

Net cash from operating activities

Outokumpu Annual Report 2013 cOnsOlidated financial stateMents, ifrs

Note

2013

2012

-1 003

-536

9
11, 12
11, 12
13
6
8
4
8
8
8
8

11
332
14
2
-5
50
-4
-13
-1
210
31
218
844

43
480
-172
-55
297

2
3
-106
-3

12
230
106
0
-1
-1
19
-12
-0
67
65
-7
478

683
277
-535
-31
394

0
3
-72
-1

266

Outokumpu Annual Report 2013 cOnsOlidated financial stateMents, ifrs

€ million

Cash flow from investing activities
Acquisition of subsidiaries, net of cash
Purchases of available-for-sale financial assets
Purchases of property, plant and equipment
Purchases of intangible assets
Disposal of businesses, net of cash
Proceeds from sale of property, plant and equipment
Proceeds from sale of intangible assets
Proceeds from sale of loan receivable
Change in other long-term receivables

Net cash from investing activities

Cash flow before financing activities

Cash flow from financing activities
Rights issue
Borrowings of long-term debt
Repayments of long-term debt
Change in current debt
Repayments of finance lease liabilities
Other financing cash flow

Net cash from financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year
Foreign exchange rate effect on cash and cash equivalents
Discontinued operations net change in cash effect
Net change in cash and cash equivalents

Cash and cash equivalents at the end of the financial year

1) Figures for 2012 have been restated due to adoption of revised IAS 19 Employee Benefits standard.
Cash flows are presented for continuing operations.

Note

4
16
12
11
4
12
11

2013

-
-2
-281
-4
-1
70
3
114
-7

-108

-74

-
1 114
-696
52
-12
1

459

385

222
-11
12
385
607

2012

-915
-5
-295
-2
19
1
0
-
1

-1 196

-929

972
611
-384
-188
-12
-3

994

168
-11
-
65
222

Outokumpu Annual Report 2013 cOnsOlidated financial stateMents, ifrs

Consolidated statement of changes in equity

Attributable to the equity holders of the Company

Invested
unrestricted
equity
reserve

Other
reserves

Fair
value
reserves

Cumula-
tive trans-
lation dif-
ferences

Remea-
surements
of defined
benefit
plans

Treasury
shares

Other
retained
earnings

Non-
controlling
interests

€ million
Equity on Jan 1, 2012 1)
Result for the period
Other comprehensive income
Total comprehensive income for
the financial year
Transactions with owners of the
Company
Contributions and distributions

Share issues 2)
Share-based payments

Changes in ownership interests

OSTP reorganization
Non-controlling interest in
Inoxum

Equity on Dec 31, 2012 1)
Result for the period
Other comprehensive income
Total comprehensive income for
the financial year
Transactions with owners of the
Company
Contributions and distributions

Share-based payments

Changes in ownership interests

Disposal of subsidiary

Share
capital

Premium
fund

311
-
-

714
-
-

-
-

-
-
-

1 462
-

311
-
-

714
-
-

1 462
-
-

7
-
-

-
-

7
-
-

19
-
3

-
-

22
-
-13

-13

-76
-
-5

-5

-
-

-81
-
-38

-38

-42
-
-34

-34

-
-

-75
-
8

-25
-
-

1 127
-534
-

-534

-
0

-25
-
-

-
1

-4

591
-997
-

14
-2
0

-2

-
-

26
-6
-1

Total
equity

2 050
-536
-36

-571

1 462
1

2 952
-1 003
-44

-997

-7

-1 047

-1

-3

-15

1 891

Equity on Dec 31, 2013

311

714

1 462

-119

-65

-24

-410

1) Figures for 2012 have been restated due to adoption of revised IAS 19 Employee Benefits standard. Restatement of equity Jan 1, 2012 was immaterial.
2) Shares issued in the Outokumpu rights issue in March–April 2012 and in the directed share issue to ThyssenKrupp AG in connection with the Inoxum

acquisition in December 2012.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Notes to the consolidated
financial statements

1. Corporate information

Outokumpu Oyj is a Finnish public limited liability company organized
under the laws of Finland and domiciled in Espoo, Finland. The parent
company, Outokumpu Oyj, has been listed on the NASDAQ OMX
Helsinki since 1988. A copy of the consolidated financial statements
is available at the Group’s website www.outokumpu.com, from
Outokumpu Oyj/Corporate Communications, P.O. Box 140, 02201
Espoo, Finland or via e-mail at corporate.comms@outokumpu.com.

Outokumpu is the global leader in stainless steel. We create advanced
materials that are efficient, long lasting and recyclable – helping to
build a world that lasts forever. Stainless steel is an ideal material
to create lasting solutions in demanding applications from cutlery
to bridges, energy to medical equipment. Stainless steel is 100%
recyclable, corrosion-resistant, maintenance-free, durable and
hygienic. Outokumpu employs more than 12 000 professionals in
more than 40 countries.

In its meeting on February 12, 2014 the Board of Directors of
Outokumpu Oyj approved the publishing of these consolidated
financial statements. According to the Finnish Limited Liability
Companies Act, shareholders have the right to approve or reject
the financial statements in the Annual General Meeting held after
the publication of the financial statements. The Annual General
Meeting also has the right to make a decision to amend the financial
statements.

2. Accounting principles for
the consolidated financial
statements

Basis of preparation

The consolidated financial statements of Outokumpu have been
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The
consolidated financial statements have been prepared in compliance
with the IAS and IFRS standards as well as the SIC and IFRIC
interpretations in force on December 31, 2013. The consolidated
financial statements also comply with the regulations of Finnish
accounting and company legislation complementing the IFRSs.

The consolidated financial statements are presented in millions of
euros and have been prepared under the historical cost convention,
unless otherwise stated in the accounting principles. All figures
presented have been rounded, and consequently the sum of individual
figures may deviate from the presented aggregate figure. Key figures
have been calculated using exact figures.

The consolidated financial statements of Outokumpu for 2013 have
been prepared on a going concern basis.

Outokumpu has suffered from low profitability resulting to a stretched
financial position. As a consequence, Outokumpu has taken industrial
restructuring and efficiency measures to improve profitability. Also,
Outokumpu has taken measures to strengthen its financial position,
which include the divestment of the Terni remedy assets, the VDM
business and certain service centers to ThyssenKrupp, the planned
rights issue of EUR 650 million, a new liquidity facility of EUR 500
million and extensions of existing loans and credit facilities.

Outokumpu has signed a binding agreement with ThyssenKrupp to
sell the Terni remedy assets, the VDM business and certain service
centers to ThyssenKrupp. Outokumpu’s loan note to ThyssenKrupp
will be used as a consideration for the transaction, which will result
to a strengthening of Outokumpu’s financial position. The rights issue
(subject to approval by Extraordinary General Meeting on February 14,
2014), the new liquidity facility of EUR 500 million and extensions of
existing loans and credit facilities are all subject to the divestment.
Outokumpu management is confident that the conditions for the
closing of the transaction will be met and closing will take place during
the first quarter 2014.

Strengthening of financial position will further enhance the execution
of Outokumpu’s strategy that decisively aims at sustainable
profitability through industrial restructuring and efficiency measures.
Outokumpu management is confident that the measures described
above will mitigate the risks related to company’s liquidity and capital
structure.

As from January 1, 2013 Outokumpu has applied the following
new and amended standards and interpretations. The adoption of
amended or new standards did not have a material impact on the
consolidated financial statements for 2013.

· Amendment to IAS 1 Presentation of Financial Statements: The
main change resulting from the amendment is the requirement
to group items of other comprehensive income by whether they
will subsequently be reclassified through profit or loss if certain
conditions are met. Outokumpu has modified the presentation
of other comprehensive income accordingly in the consolidated
financial statements.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Adoption of new and amended IFRS
standards and interpretations

Outokumpu has not yet applied the following new and amended
standards and interpretations already issued. The Group will adopt
them as of the effective date or, if the date is other than the first day
of the financial year, from the beginning of the subsequent financial
year (* = not yet endorsed by the European Union as at December 31,
2013).

· IFRS 10 Consolidated Financial Statements and related

amendments (effective in the EU for financial years beginning
on or after January 1, 2014): IFRS 10 builds on existing principles
by identifying the concept of control as the determining factor
when deciding whether an entity should be incorporated within
the consolidated financial statements. The standard also provides
additional guidance to assist in the determination of control where
this is difficult to assess. Based on Outokumpu’s evaluation, the new
standard does not affect significantly Outokumpu’s future financial
statements.

· IFRS 11 Joint Arrangements and related amendments (effective
in the EU for annual periods beginning on or after January 1,
2014): In the accounting of joint arrangements IFRS 11 focuses on
the rights and obligations of the arrangement rather than its legal
form. There are two types of joint arrangements: joint operations
and joint ventures. In future jointly controlled entities are to be
accounted for using only one method, equity method, and the other
alternative, proportional consolidation is no longer allowed. Based
on Outokumpu’s evaluation, the new standard does not have a
material impact on Outokumpu’s future financial statements.
· IFRS 12 Disclosures of Interests in Other Entities and related
amendments (effective in the EU for financial years beginning
on or after January 1, 2014): IFRS 12 includes the disclosure
requirements for all forms of interests in other entities, including
associates, joint arrangements, structured entities and other off-
balance sheet vehicles. The new standard will have an impact on the
disclosures of Outokumpu’s future financial statements.

· IAS 28 (revised 2011) Investments in Associates and Joint

Ventures (effective in the EU for financial years beginning on
or after January 1, 2014): Following the issue of IFRS 11, the
revised IAS 28 includes the requirements for joint ventures, as well
as associates, to be equity accounted. The revised standard is
not expected to have a significant impact on Outokumpu’s future
financial statements.

· Amendments to IAS 32 Financial Instruments: Presentation

(effective for annual periods beginning on or after January 1,
2014): The amendments provide clarifications on the application of
requirements for offsetting financial assets and financial liabilities
on the statement of financial position. The amended standard is
to be applied retrospectively. The amendments are not expected
to have a significant impact on Outokumpu’s future financial
statements.

· Amendments to IAS 36 Impairment of Assets (effective for
financial years beginning on or after January 1, 2014): The
objective of the amendments is to clarify that the scope of the
disclosures of information about the recoverable amount of assets,
where that amount is based on fair value less costs of disposal, is
limited to impaired assets. The amended standard is not assessed
to have a significant impact on Outokumpu’s consolidated financial
statements.

· Amendment to IAS 19 Employee Benefits: Remeasurements of
the net defined benefit liability, including all actuarial gains and
losses, are immediately recognized in other comprehensive income,
thus eliminating the so-called corridor approach. Finance costs are
calculated on a net funding basis. In addition, all past service costs
are immediately recognized in profit or loss. Outokumpu waived
the corridor approach already in the 2012 consolidated financial
statements. Therefore the impact regarding the defined benefit
pension plans is limited to the restatement of the expected return on
assets assumption and recognition of the previously unrecognized
past service cost. The amendment also resulted in additional
disclosures.

· IFRS 13 Fair Value Measurement: IFRS 13 establishes a single

source of all fair value measurements and disclosure requirements
for use across IFRSs. The new standard also provides a precise
definition of fair value. IFRS 13 does not extend the use of fair
value accounting, but it provides guidance on how to measure fair
value under IFRSs when fair value is required or permitted. The new
standard resulted in additional disclosures.

· Amendments to IFRS 7 Financial Instruments: Disclosures: The
amended standard requires the presentation of information that
will allow evaluation of the effects of netting arrangements on the
entity’s financial position. The amendment resulted in additional
disclosures.

· Annual Improvements to IFRSs 2009-2011 (May 2012):

Through the Annual Improvements process, minor and non-urgent
amendments are grouped together and carried out once a year. The
improvements affected a total of five standards. Their impact has
not been significant.

Other new or amended standards and interpretations had no impact
on Outokumpu’s consolidated financial statements.

Restatements of financial statements

In 2013, Outokumpu adopted amended IAS 19 Employee Benefits
standard. As Outokumpu had already adopted the amended standard
requirement regarding waiving of the so-called corridor method in
2012, changes on Outokumpu’s accounting policies were limited to
the following: to immediately recognizing all past service costs, and
to replace interest cost and expected return on plan assets with a net
interest amount that is calculated by applying the discount rate to the
net defined benefit liability. The resulting restatement had a minor
impact on employee benefit expenses, interest income and interest
expenses, and defined benefit and other long-term employee benefit
obligations in the consolidated financial statements for 2012.

Outokumpu has finalized the accounting related to the Inoxum
transaction in 2012 based on the final valuation of the identifiable
asset and liabilities. Outokumpu had 12 months from the closing
of the transaction to retrospectively adjust the provisional amounts
that were presented in detail in the note 4 of Outokumpu’s financial
statements 2012. Final identifiable assets acquired and liabilities
assumed, as well as goodwill arising from the acquisition are
presented in the note 4 for these financial statements.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

· Amendments to IAS 39 Financial Instruments: Recognition

and Measurement (effective for financial years beginning on
or after January 1, 2014): The amendments made to IAS 39
provide an exception to the requirement to discontinue hedge
accounting in certain circumstances where a derivative, which has
been designated as a hedging instrument, is novated from one
counterparty to a central counterparty as a consequence of laws or
regulations. The amendments are not assessed to have an impact
on Outokumpu’s consolidated financial statements.

· IFRIC 21 Levies* (effective for financial years beginning on or

after January1, 2014): The interpretation clarifies the accounting
treatment of levies. A liability for a levy is recognised when
the activity that triggers payment, as identified by the relevant
legislation, occurs. The interpretation is applicable to all levies other
than income taxes, fines, penalties and outflows that are in scope
of other standards. The interpretation is not assessed to have a
significant impact on Group’s consolidated financial statements.
· Amendments to IAS 19 Employee Benefits – Defined Benefit
Plans: Employee Contributions* (effective for financial years
beginning on or after July 1, 2014): The amendments clarify the
accounting treatment under IAS 19 in respect of defined benefit
plans that involve contributions from employees or third parties
towards the cost of benefits. The amendments are not assessed to
have an impact on Outokumpu’s consolidated financial statements.

· Annual Improvements to IFRSs (2011–2013 cycle* and 2011–
2012 cycle*, December 2013) (effective for financial years
beginning on or after July 1, 2014): The annual improvements
process provides a mechanism for minor and non-urgent
amendments to IFRSs to be grouped together and issued in one
package annually. The amendments cover in total four (2011–2013
cycle) and seven (2010–2012 cycle) standards. Their impacts vary
standard by standard but are not significant.

· IFRS 9 Financial Instruments* and subsequent amendments

(scheduling postponed): IFRS 9 is the first step of the IASB’s three-
phase project to replace the current IAS 39 Financial Instruments:
Recognition and Measurement. The amendments resulting from the
first phase address the classification, measurement and recognition
of financial assets and financial liabilities. Different ways of
measurement for financial assets have been retained, but simplified.
Based on measurement, financial assets are classified into two main
groups: financial assets at amortized cost and financial assets at
fair value. Classification depends on a company’s business model
and the characteristics of contractual cash flows. For financial
liabilities, the standard retains most of the IAS 39 requirements.
IFRS 9 is estimated to have a significant impact on the Group’s
accounting for financial instruments.

Other new or amended standards and interpretations are not expected
to have an impact on Outokumpu’s consolidated financial statements
when adopted.

Management judgements
and use of estimates

The preparation of the financial statements in accordance with IFRSs
requires management to make judgements and make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and contingent liabilities at
the reporting date, as well as the reported amounts of income and
expenses during the reporting period. The management estimates

and judgements are continuously monitored and they are based
on prior experience and other factors, such as future expectations
assumed to be reasonable considering the circumstances. Although
these estimates are based on management’s best knowledge of the
circumstances at the end of the reporting period, actual results may
differ from the estimates and assumptions. Management believes
that the following accounting principles represent those matters
requiring the exercise of judgement where a different opinion could
result in significant changes to reported results.

Business combinations

In significant business combinations, the Group has used external
advisor to assist in evaluating the fair values of assets acquired and
liabilities assumed. The procedures included for example analysis of
market conditions, market data covering e.g. economic and regulatory
trends; analysis and inspection of acquired companies and their
operating and financial projections; and development of discounted
cash flow models and discount rates used in the models. Regarding
analysis of property, plant and equipment, the scope included a
study of the major assets at various facilities and research in the
marketplace in order to identify replacement costs, useful lives and
other pertinent information used in the valuation process.

Management believes that the estimates and assumptions used are
reasonable for determining fair values, although different estimates
and assumptions could significantly affect the amounts reported in
Note 4. Acquisitions and disposals.

Classification of assets and
liabilities as held for sale

Outokumpu announced on November 30, 2013 the disposal of the
Terni, certain service centers and the VDM business. Considering
circumstances and information available, management has concluded
the sale highly probable and presents the related assets and liabilities
classified as held for sale in the consolidated financial statements. No
impairment loss has been recognized on these assets or liabilities as
management expects that their fair value less costs to sell does not
materially differ from their carrying amounts.

Inventories

Inventories are stated at the lower of cost and net realizable value
(NRV). Net realizable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and the
estimated costs necessary to make the sale. The most important
commodity price risk for Outokumpu is caused by fluctuation in nickel
and other alloy prices. The majority of stainless steel sales contracts
include an alloy surcharge clause, with the aim of reducing the risk
arising from the time difference between raw material purchase and
product delivery. However, the risk is significant because the delivery
cycle in production is longer than the alloy surcharge mechanism
provides for. Thus, only the price for the products to be sold in near
future is known. That is why a significant part of the future price for
each product to be sold is estimated according to management’s best
knowledge in NRV calculations. Due to fluctuations in nickel and other
alloy prices, the realized prices can deviate significantly from what has
been used in NRV calculations on the closing date.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Property, plant and equipment and
intangible assets and impairments

Management estimates relate to carrying amounts and useful lives of
assets as well as other underlying assumptions. Different assumptions
and assigned lives could have a significant impact on the reported
amounts. Management estimates in relation to goodwill relate to the
estimation of the value in use of the cash-generating units to which
goodwill has been allocated. The value in use calculation requires
management to estimate the future cash flows expected to arise from
the cash-generating units and a suitable discount rate in order to
calculate present value. The future projections of cash flows include,
among other estimates, projections of future prices and delivery
volumes, production costs and maintenance capital expenditures.

Carrying amounts of assets are regularly reviewed to determine
whether there is any evidence of impairment as described in these
accounting principles. Preparation of the estimated future cash flows
and discount rates for the impairment testing requires management
to make assumptions relating to future expectations (e.g. future
product pricing, production levels, production costs, market supply
and demand, projected maintenance capital expenditure and weighted
average cost of capital). A pre-tax discount rate used for the net
present value calculation of projected cash flows reflects the weighted
average cost of capital. The key assumptions used in the impairment
testing, including sensitivity analysis, are explained further in Note 11.
Intangible assets and Note 12. Property, plant and equipment.

Income taxes

Group operates and earns income in numerous countries and is
subject to changing tax laws in multiple jurisdictions within the
countries. Significant judgments are necessary in determining the
worldwide income tax liabilities of the Group. Although management
believes they have made reasonable estimates about the resolution of
tax uncertainties, the final outcome of these uncertainties could have
an effect on the income tax liabilities and deferred tax liabilities in the
period.

At the end of reporting period, the Group assesses whether the
realization of future tax benefits is sufficiently probable to recognize
deferred tax assets. This assessment requires judgment with respect
to, among other things, benefits that could be realized from future
taxable income, available tax strategies, as well as other positive and
negative factors. The recorded amount of deferred tax assets could be
reduced if estimates of taxable income and benefits from available tax
strategies are lowered, or if current tax regulations are enacted that
impose restrictions on the Group’s ability to utilize future tax benefits.

Fair values of derivatives and
other financial instruments

The fair value of financial instruments which cannot be determined
based on quoted market prices and rates are based on different
valuation techniques. The Group uses its judgment to select a variety
of methods and make assumptions that are mainly based on market
conditions existing at the end of each reporting period. Factors
regarding valuation techniques and their assumptions could affect the
reported fair values.

The Group has used discounted cash flow analysis for various
derivative contracts and in case of options Black-Scholes-Merton
model has been applied.

Employee benefits

The present value of pension obligations is subject to actuarial
assumptions which actuaries use in calculating these obligations.
Actuarial assumptions include, among others, discount rate, the
annual rate of increase in future compensation levels and inflation
rate. The assumptions used are presented in Note 25. Employee
benefit obligations.

Provisions

The most significant provisions in the statement of financial position
relate to restructuring programs and primarily include termination
benefits to employees. The applied judgment mainly relates to the
estimated amounts of termination benefits.

The Group has also made provisions for known environmental
liabilities based on management’s best estimate of the remediation
costs. The precise amount and timing of these costs could differ
significantly from the estimate.

Principles of consolidation

Subsidiaries

The consolidated financial statements include the parent company
Outokumpu Oyj and all those subsidiaries where over 50% of the
subsidiary’s voting rights are controlled directly or indirectly by the
parent company, or the parent company is otherwise in control of
the company at the end of the reporting period. Control is the power
to govern the financial and operational policies of an entity so as to
obtain benefits from its activities. The existence of potential control is
also taken into account if the instruments entitling to potential voting
rights are currently exercisable. Acquired subsidiaries are consolidated
from the date that control was obtained by the Group, and disposed
subsidiaries until control ceases.

Acquired or established subsidiaries are accounted for by using the
acquisition method. The consideration transferred and the identifiable
assets acquired and liabilities assumed in the acquired company
are measured at fair value at the acquisition date. The consideration
transferred includes any assets transferred by the acquirer, liabilities
incurred by the acquirer to former owners of the acquiree and the
equity interests issued by the acquirer. Any contingent consideration
related to the business combination is measured at fair value at
the acquisition date and it is classified as either liability or equity.
Contingent consideration classified as liability is remeasured at its fair
value at the end of each reporting period and the subsequent changes
to fair value are recognized in profit or loss. Contingent consideration
classified as equity is not subsequently remeasured. The consideration
transferred does not include any transactions accounted for separately
from the acquisition. All acquisition-related costs, with the exception
of costs to issue debt or equity securities, are recognized as expenses
in the periods in which costs are incurred and services rendered.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Goodwill arising on an acquisition is recognized as the excess of the
aggregate of the consideration transferred and the amount of any
non-controlling interests or previously held equity interests in the
acquiree, over the Group’s share of the fair value of the identifiable
assets acquired and liabilities assumed at the acquisition date.
Non-controlling interest in the acquiree is measured acquisition-
by-acquisition either at fair value or at value, which equals to the
proportional share of the non-controlling interest in the identifiable net
assets acquired. Changes in the parent company’s ownership interest
in a subsidiary are accounted for as equity transactions if the parent
company retains control of the subsidiary.

To those business combinations, which have taken place before
January 1, 2010 accounting principles effective at that time have
been applied.

All intra-group transactions, receivables, liabilities and unrealized
margins, as well as distribution of profits within the Group, are
eliminated in the preparation of consolidated financial statements.
The result for the period and items recognized in other comprehensive
income are allocated to the equity holders of the company and non-
controlling interests and presented in the statement of income and
statement of other comprehensive income. Non-controlling interests
are presented separately from the equity allocated to the equity
holders of the company. Comprehensive income is allocated to the
equity holders of the company and to non-controlling interests even
in situations where the allocation would result in the non-controlling
interests’ share being negative, unless non-controlling interests have
an exemption not to meet obligations which exceed non-controlling
interests’ investment in the company.

Associated companies and joint ventures

Non-current assets held for sale
and discontinued operations

Non-current assets (or disposal groups) and assets and liabilities
related to discontinued operations are classified as held for sale if
their carrying amounts are expected to be recovered primarily through
sale rather than through continuing use. Classification as held for
sale requires that the following criteria are met; the sale is highly
probable, the asset (or disposal group) is available for immediate sale
in its present condition subject to usual and customary terms, the
management is committed to the sale and the sale is expected to be
completed within one year from the date of classification.

Prior to classification as held for sale, the assets or assets and
liabilities related to a disposal group in question are measured
according to the respective IFRS standards. From the date of
classification, non-current assets (or a disposal group) held for sale
are measured at the lower of the carrying amount and the fair value
less costs to sell, and the recognition of depreciation and amortization
is discontinued.

Assets included in disposal groups but not in the scope of the
measurement requirements of IFRS 5, as well as liabilities, are
measured according to the related IFRS standards also after the date
of classification.

Discontinued operation is a component of an entity that either has
been disposed of, or is classified as held for sale, and represents a
separate major line of business or geographical area of operations,
is part of a single co-ordinated plan to dispose of a separate major
line of business or geographical area of operations or is a subsidiary
acquired exclusively with a view to resale.

Companies, where Outokumpu generally holds voting rights of 20–
50% and in which Outokumpu otherwise has significant influence, but
not control, over the financial and operating policies, are included
in the consolidated financial statements as associated companies.
Associated companies are consolidated by using the equity method
from the date that significant influence was obtained until it ceases.

Result from discontinued operations is shown separately in the
consolidated statement of income and the comparative figures
are restated accordingly. Assets held for sale, disposal groups and
liabilities included in disposal groups are presented in the statement
of financial position separately from other items. The comparatives for
statement of financial position items are not restated.

The Group’s share of the associated company’s result for the period
is separately disclosed below the operating result in the consolidated
statement of income. Outokumpu’s share of changes recognized in
the associated company’s other comprehensive income is recognized
in the Group’s other comprehensive income. When Outokumpu’s share
of the associated company’s losses exceeds the carrying amount
of the investment, the investment is recognized at zero value in the
statement of financial position and recognition of further losses
is discontinued, except to the extent that the Group has incurred
obligations in respect of the associated company. The interest in an
associated company comprises the carrying amount of the investment
under the equity method together with any long-term interest that,
in substance, forms a part of the net investment in the associated
company.

Joint ventures in which Outokumpu has contractually based joint
control with a third party are also accounted for by using the equity
method described above.

Segment reporting

An operating segment is a component of the Group that engages
in business activities from which it may earn revenues and incur
expenses, and for which discrete financial information is available.
Outokumpu has four reportable operating segments which represent
the strategic business areas of the Group. The business areas are
located in different geographical areas, they are managed separately
and they are separately reported in the internal management
reporting to CEO who is Outokumpu’s chief operating decision
maker. Outokumpu’s segment information is based on the internal
management reporting which is prepared according to IFRS accounting
principles.

Outokumpu’s reportable operating segments are: Stainless EMEA,
Stainless Americas, Stainless APAC and Specialty Stainless. Pricing of
intersegment transactions is based on arm’s length prices. Operating
result of the operating segments is reported to the CEO regularly in
order for him to review their performance and make decisions about
resources to be allocated to the segments. Operating result is defined

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

correspondingly in management reporting as in these accounting
principles.

Other operations mainly consist of such business development
and Corporate Management expenses that are not allocated to the
businesses.

Foreign currency transactions

Transactions of each subsidiary included in the consolidated
financial statements are measured using the currency that best
reflects the economic substance of the underlying events and
circumstances relevant to that subsidiary (“the functional currency”).
The consolidated financial statements are presented in euros which
is the functional and presentation currency of the parent company.
Group companies’ foreign currency transactions are translated into
local functional currencies using the exchange rates prevailing at
the dates of the transactions. Receivables and liabilities in foreign
currencies are translated into functional currencies at the exchange
rates prevailing at the end of the reporting period. Foreign exchange
differences arising from interest-bearing assets and liabilities and
related derivatives are recognized in finance income and expenses
in the statement of income. Foreign exchange differences arising in
respect of other financial instruments are included in operating result
under sales, purchases or other operating income and expenses. The
effective portion of exchange differences arisen from instruments
designated as hedges of the net investments in foreign operations is
recognized in other comprehensive income.

For those subsidiaries whose functional and presentation currency is
not the euro, the income and expenses for the statements of income
and comprehensive income, and the items for statement of cash
flows, are translated into euro using the average exchange rates of
the reporting period. The assets and liabilities for the statement of
financial position are translated using the exchange rates prevailing
at the reporting date. The translation differences arising from the use
of different exchange rates explained above are recognized in Group’s
other comprehensive income. Any goodwill arising on the acquisition
of foreign operations and any fair value adjustments to the carrying
amounts of assets and liabilities arising on the acquisition of those
foreign operations are treated as assets and liabilities of those foreign
operations. They are translated into euro using the exchange rates
prevailing at the reporting date. When a foreign operation is sold,
or is otherwise partially or completely disposed of, the translation
differences accumulated in equity are reclassified in profit or loss as
part of the gain or loss on the sale.

Revenue recognition

Revenue from the sale of goods is recognized after the significant risks
and rewards of ownership have been transferred to the buyer, and
the Group retains neither a continuing managerial involvement to the
degree usually associated with ownership, nor effective control of those
goods. Usually this means that revenue is recognized upon delivery of
goods to customers in accordance with agreed terms of delivery.

Outokumpu ships stainless steel products to customers under a
variety of delivery terms. The used terms are based on Incoterms
2013 collection of delivery terms, published and defined by the
International Chamber of Commerce Terms of Trade.

The most common delivery terms used by Outokumpu are “C” terms,
whereby the Group arranges and pays for the carriage and certain
other costs. The Group ceases to be responsible for the goods and
revenue is recognized once the goods have been handed over to the
carrier to be delivered to the agreed destination.

Less frequently used are “D” terms, under which the Group is obliged
to deliver the goods to the buyer at the agreed destination, in which
case revenue is recognized when the goods are delivered to the
buyer. Also “F” terms are less frequently used, under which the buyer
arranges and pays for the carriage, and revenue is recognized when
the goods are handed over to the carrier contracted by the buyer.

Income taxes

Current and deferred income taxes are determined in accordance with
IAS 12 Income taxes on entity level to the extent an entity is subject
to income taxation. The Group’s income tax in the statement of
income includes current income taxes of the Group companies based
on taxable profit for the period, together with tax adjustments for
previous periods and the change in deferred income taxes. In several
countries (France, Germany, the UK, Italy, the Netherlands, Sweden
and the USA) Outokumpu companies are included in income tax
consolidation groups / group taxation systems. The share of results in
associated companies is reported in the statement of income based
on the net result and thus including the income tax effect.

Deferred income taxes are stated using the balance sheet liability
method to reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax basis at the reporting date, as
well as for unused tax losses or credits carry forward. Deferred tax
assets are recognized for all deductible temporary differences to the
extent that it is probable that future taxable profits will be available,
against which deductible temporary differences can be utilized. A
valuation allowance is recognized against a deferred tax asset if the
realization of the related tax benefit is not probable. The ability to
recognize deferred tax assets is reviewed at the end of each reporting
period. Deferred tax liabilities are usually recognized in the statement
of financial position in full except to the extent that the deferred
taxes arise from the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of the
transaction, affects neither accounting profit nor taxable profit.

Deferred taxes are calculated at the enacted or substantially enacted
tax rates that are expected to apply when the asset or the liability
is settled. Generally, deferred tax is charged or credited to the
statement of income, except if the taxes are related to items of other
comprehensive income or to transactions or other events recognized
directly in equity, in which case the related income taxes are also
recognized either in other comprehensive income or directly in equity,
respectively.

Research and development costs

Research costs are expensed in the reporting period in which they are
incurred. Development costs are capitalized when it is probable that
the development project will generate future economic benefits for the
Group, and certain criteria related to commercial and technological
feasibility are met. These projects relate to the development of new or

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

substantially improved products or production processes. Capitalized
development costs mainly comprise materials and supplies and direct
labour costs as well as related overhead costs. Development costs
recognized as expenses are not subsequently capitalized.

Subsequent to initial recognition, capitalized development costs are
measured at cost less accumulated amortization and impairment
losses. Capitalized development costs are amortized on a straight-line
basis over their estimated useful lives which is generally five years.
Recognition of amortization is commenced as the asset is ready for
use. The accounting treatment of the government grants received
for research and development activities is described below under
Government grants.

Emission allowances

Emission allowances are intangible assets measured at cost.
Allowances received free of charge are recognized at nominal value,
i.e. at zero carrying amount. A provision to cover the obligation to
return emission allowances is recognized at fair value at the end of the
reporting period provided that the emission allowances received free
of charge will not cover the actual emissions. The purchased emission
allowance quotas recognized in intangible rights are derecognized as
they have been offset against the obligation or, when the emission
allowances are sold. The obligation to deliver allowances equal to
emissions is recognized under other operating expenses. Gains from
the sale of excess allowances are recognized as other operating
income in the statement of income.

Goodwill and other intangible assets

Goodwill arising on a business combination is recognized at the
acquisition date at an amount representing the excess of the
consideration transferred in an acquisition over the fair value of
the identifiable assets acquired, liabilities assumed and any non-
controlling interest and any previously held equity interests in the
acquiree, if any. Goodwill is not amortized, but tested for impairment.
In respect of associated companies, goodwill is included in the
carrying amount of the investment. Goodwill is measured at cost less
accumulated impairment losses.

Intangible assets other than goodwill include land-use rights, customer
relationships, capitalized development costs, patents, licenses and
software. An intangible asset is recognized only if it is probable that
the future economic benefits attributable to the asset will flow to the
Group and the cost of the asset can be measured reliably. All other
expenditure is expensed as incurred. Intangible assets are recognized
initially at cost. After initial recognition, assets are measured at
cost less amortizations and accumulated impairment losses if the
intangible asset has a finite useful life. Cost comprises the purchase
price and all costs directly attributable to bringing the asset ready for
its intended use. Intangible assets acquired in a business combination
are measured at fair value at the acquisition date.

Intangible assets are amortized on a straight-line basis over their
expected useful lives. Assets tied to a certain fixed period are
amortized over the contract term. Amortization periods used for
intangible assets are the following:

Customer relationships
Software
Capitalized development costs
Intangible rights

up to 5 years
up to 10 years
up to 10 years
up to 20 years

Recognition of amortization is discontinued when the intangible asset
is classified as held for sale. The estimated useful lives and residual
values are reviewed at least at the end of each financial year. If they
differ substantially from previous estimates, the useful lives are
adjusted accordingly.

Gains and losses on disposal of intangible assets are included in
other operating income and expenses.

Property, plant and equipment

Property, plant and equipment acquired by the Group companies
are measured at cost. The cost includes all expenditure directly
attributable to the acquisition of the asset. Government grants
received are deducted from the cost. Property, plant and equipment
acquired in business combinations are measured at fair value at
the acquisition date. Borrowing costs (mainly interest costs) directly
attributable to the acquisition or construction of a qualifying asset
are capitalized in the statement of financial position as part of the
carrying amount of the asset. Qualifying asset is an asset that
necessarily takes a substantial period of time to get ready for its
intended use or sale. Other borrowing costs are recognized as
expenses in the period in which they are incurred. Property, plant and
equipment are carried in the statement of financial position at cost
less accumulated depreciation and impairment losses.

Property, plant and equipment are depreciated on a straight-line basis
over their expected useful lives. Depreciation is based on the following
estimated useful lives:

Buildings
Heavy machinery
Light machinery and equipment

25–40 years
15–20 years
3–15 years

Land is not depreciated as the useful life of land is assumed to
be indefinite. Mine properties are depreciated using the units-of-
production method based on the depletion of ore reserves over
their estimated useful lives. Recognition of depreciation on an item
of property, plant and equipment is discontinued when the item is
classified as held for sale. Expected useful lives and residual values
are reviewed at least at the end of each financial year and, if they
differ significantly from previous estimates, the useful lives are revised
accordingly.

Ordinary repairs and maintenance costs are expensed during the
reporting period in which they are incurred. The cost of major
renovations is included in the asset’s carrying amount when it is
probable that the Group will derive future economic benefits in excess
of the originally assessed standard of performance of the existing
asset and the cost can be reliably measured. Costs arising on such
major renovations are accounted for as capital expenditure and
depreciated on a straight-line basis over their estimated useful lives.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Gains and losses on sale and disposals of property, plant and
equipment are determined by the difference between the received
net proceeds and the carrying amount of the asset. Gains and losses
on sale and disposals are presented in other operating income or
expenses, thus included in operating result.

Government grants

Government or other grants are recognized as income on a systematic
basis over the periods necessary to match them with the related costs
which they are intended to compensate. Investment grants related to
acquisitions of property, plant and equipment and intangible assets
are deducted from the cost of the asset in question in the statement
of financial position and recognized as income on a systematic basis
over the useful life of the asset in the form of reduced depreciation
expense.

Impairment of property, plant and
equipment and intangible assets

Carrying amounts of non-current assets are regularly reviewed to
determine whether there is any evidence of impairment. If any such
evidence of impairment emerges, the asset’s recoverable amount is
estimated. Goodwill is tested at least annually, irrespective of whether
there is any evidence of impairment.

The recoverable amount of an asset is the higher of fair value less
costs to sell and value in use. For goodwill testing purposes the
recoverable amount is based on value in use which is determined
by reference to discounted future net cash flows expected to be
generated by the asset. In Outokumpu, goodwill is tested on operating
segment level. The discount rate used is a pre-tax rate that reflects
the current market view on the time value of money and the asset-
specific risks. An impairment loss is the amount by which the carrying
amount of an asset exceeds its recoverable amount. An impairment
loss is recognized immediately in profit or loss. The estimated useful
life of the asset that is subject to depreciation or amortization is also
reassessed when an impairment loss is recognized.

A previously recognized impairment loss is reversed if there has been
a change in the estimates used to determine the recoverable amount.
However, the reversal must not cause that the adjusted carrying
amount is higher than the carrying amount that would have been
determined if no impairment loss had been recognized in prior years.
Impairment losses recognized for goodwill are not reversed.

Leases

Group as a lessee

Lease agreements of property plant and equipment, in which the
Group has substantially all the rewards and risks of ownership, are
classified as finance leases. An asset acquired through finance lease
is recognized as property, plant and equipment in the statement
of financial position, within a group determined by the asset’s
characteristics, at the commencement of the lease term at the lower
of fair value and the present value of minimum lease payments.

Respective lease liabilities less finance charges are included in other
interest-bearing financial liabilities. Each lease payment is allocated
between the finance charge and the reduction of the outstanding
liability. The finance charge is allocated to each period during the
lease term so as to produce a constant periodic rate of interest on
the remaining balance of the liability. Property, plant and equipment
acquired under finance lease contracts are depreciated over the
shorter of the useful life of the asset and the lease term. If a sale
and leaseback transaction results in a finance lease, any excess
of sales proceeds over the sold asset’s carrying amount will not be
immediately recognized but deferred and amortized over the lease
term.

At inception of significant other arrangements, the Group determines
whether these arrangements are, or contain a lease component.
At inception of an arrangement that contains a lease the Group
separates payments and other consideration required by the
arrangement into those for the lease and those for other elements.
Lease accounting principles are applied to lease payments.

Leases of assets where the lessor retains substantially all the
risks and benefits of ownership are classified as operating leases.
Payments made under operating lease contracts are expensed on a
straight-line basis over the lease terms.

Group as a lessor

Leases of property, plant and equipment where the Group has
substantially transferred all the rewards and risks of ownership to the
lessee are classified as finance leases. Assets leased out through
such contracts are recognized as interest-bearing receivables and
measured at the lower of the fair value of the leased asset and the
present value of minimum lease payments. Interest income from
finance lease is recognized in the statement of income so as to
achieve a constant periodic rate of return on the net investment in the
finance lease.

Rental income received from property, plant and equipment leased
out by the Group under operating leases is recognized on a straight-
line basis over the lease term.

Financial instruments

Financial assets

The Group’s financial assets are classified as financial assets at fair
value through profit or loss, loans and receivables and available-for-
sale financial assets. Outokumpu did not hold financial instruments
classified as held-to-maturity investments in the current or previous
reporting period. Classification is made upon initial recognition based
on the purpose of use of the financial asset.

If an item is not measured at fair value through profit or loss,
significant transaction costs are included in the initial carrying amount
of the financial asset. Financial assets are derecognized when the
Group loses the rights to receive the contractual cash flows on the
financial asset or it transfers substantially all the risks and rewards of
ownership outside the Group.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

At the end of the reporting period, the Group estimates whether there
is objective evidence on impairment of items other than financial
assets measured at fair value through profit or loss. A financial
asset is assumed to be impaired if there is objective evidence
on impairment and the effect on the estimated future cash flows
generated by the financial assets can be reliably measured. Objective
evidence on impairment may be e.g. a significant deterioration in the
counterparty’s results, a contract breach by the debtor and, in case
of equity instruments (available-for-sale financial assets), a significant
or long-term decrease in the value of an instrument below its carrying
amount. In such situations, the fair value development of equity
instruments is reviewed for the past three quarters of the reporting
period. The Group has determined percentual limits for the review, the
breach of which will result in the recognition of an impairment loss. An
impairment loss is recognized immediately in profit or loss.

Financial assets at fair value through profit or loss

The category of financial assets at fair value through profit or loss
includes derivatives, to which hedge accounting is not applied, as well
as other financial items at fair value through profit or loss held for
trading purposes. A financial asset is classified in this category if it
has been acquired with the main purpose of selling the asset within a
short period of time.

These financial assets are recognized at the trade date at fair
value and subsequently remeasured at fair value at the end of each
reporting period. The fair value measurement is based on quoted rates
and market prices as well as on appropriate valuation methodologies
and models. Realized and unrealized gains and losses arising from
changes in fair values are recognized in profit or loss in the reporting
period in which they are incurred.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in active markets. Loans
and receivables arise when the Group gives out a loan or delivers
goods or services directly to a debtor.

Loans and receivables are recognized at the settlement date and
measured initially at fair value. After initial recognition, loans and
receivables are measured at amortized cost by using the effective
interest rate method.

Outokumpu uses factoring for working capital management. Sold
trade receivables have been derecognized when the related risks and
rewards of ownership have been transferred in material respect.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets
which are either designated in this category or not classified in any
other category of financial assets. The purchases and sales of these
items are recognized at the trade date. Available-for-sale financial
assets are included in non-current assets, unless the Group has the
intention to dispose of the investment within 12 months from the
reporting date.

This category includes share investments, both in listed and unlisted
companies. Investments in shares are measured at fair value, or if
fair value cannot be reliably measured, at cost less any impairment
losses. The fair value measurement is based on quoted rates and
market prices at the end of the reporting period, as well as on

appropriate valuation techniques, such as recent transaction prices
and cash flow discounting. These valuation techniques maximize
the use of observable market data where it is available and rely as
little as possible on entity-specific estimates made by Outokumpu.
Fair value changes of share instruments measured at fair value are
recognized in other comprehensive income and presented in equity
within fair value reserve, net of tax, until the shares in question are
disposed of or impaired, in which case, the accumulated changes in
fair value are transferred from equity to be recognized in profit or loss
as reclassification adjustments.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits held
at call with banks and other highly liquid investments with original
maturities of three months or less. These are readily convertible
to a known amount of cash and the risk of changes in value is low.
Bank overdrafts are included in current liabilities in the statement of
financial position.

Financial liabilities

The Group’s financial liabilities are classified as either financial
liabilities at fair value through profit or loss or other financial liabilities
(financial liabilities recognized at amortized cost). A financial liability
(or part of the liability) is not derecognized until the liability has
ceased to exist, that is, when the obligation identified in a contract
has been fulfilled or cancelled or is no longer effective.

Financial liabilities at fair value through profit or loss

In Outokumpu Group, the category of financial liabilities at fair value
through profit or loss includes derivatives that do not meet the criteria
of hedge accounting. Realized and unrealized gains and losses arising
from changes in fair value of derivatives are recognized in profit or loss
in the reporting period in which they are incurred.

Other financial liabilities

Financial liabilities recognized at amortized cost include the loans
of the Group, finance lease liabilities and trade and other payables.
Loans and trade and other payables are recognized at the settlement
date and measured initially at fair value. After initial recognition they
are carried at amortized cost using the effective interest rate method.
Significant transaction costs are included in the original carrying
amount.

Significant costs related to revolving credit facilities are amortized
over the expected loan term.

Derivative instruments and hedge accounting

Derivatives

All the Group’s derivatives, including embedded derivatives, are
initially recognized at fair value on the trade date, on which the Group
becomes a contractual counterparty, and are subsequently measured
at fair value. Gains and losses arising on fair value measurement
are accounted for depending on the purpose of use of the derivative
contract. The gains and losses arising from fair value changes of
derivative contracts, to which hedge accounting is applied and which
are effective hedging instruments, are presented congruent with
the hedged item. Changes in fair value of derivative contracts not

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

qualifying for hedge accounting are recognized in operating result in
other operating income and expenses. If a derivative is designated for
financing activities, the gain or loss effects arising from the instrument
are recognized within financial income and financial expenses.

The fair value measurement of derivatives is based on quoted market
prices and rates as well as on discounted cash flows at the end of the
reporting period. The fair value of currency, interest rate and metal
options is determined by utilising commonly applied option valuation
models, such as Black-Scholes-Merton model. Fair values of certain
derivatives are based on valuations of external counterparties.

Hedge accounting

Hedge accounting refers to the method of accounting, which aims to
assign one or several hedging instruments so that their fair value or cost
flows offset completely or partly the changes in fair value or cash flows
of the hedged item. Outokumpu applies hedge accounting to certain
foreign exchange and commodity derivatives. Derivatives, to which
hedge accounting is not applied, have been acquired to reduce the profit
or loss and/or cash flow effects of operations or financing activities.

In the beginning of each hedging arrangement, the Group documents the
relationship between the hedging instrument and the hedged item, as
well as the objectives of risk management and strategy of the hedging
arrangement. Hedging instruments are subject to prospective and
retrospective effectiveness testing. Hedge effectiveness is the degree
to which changes in the fair value or cash flows of the hedged item that
are attributable to a hedged risk are offset by changes in the fair value
or cash flows of the hedging instrument. The hedging relationship is
considered to be highly effective if the changes in fair values or cash
flows of the hedging instrument offset the cash flow changes of the
hedged item by 80–125%. Hedge accounting is discontinued when the
requirements of hedge accounting are no longer met.

Cash flow hedges

In cash flow hedging, the Group is hedging against changes in
cash flows, which result from the realization of a risk associated
with a recognized asset or liability or a highly probable forecast
transaction. Fair value changes of derivatives designated to hedge
forecast cash flows are recognized in other comprehensive income
and presented within the fair value reserve in equity to the extent
that the hedge is effective. Such fair value changes accumulated
in equity are reclassified in profit or loss in the period in which the
hedged cash flows affect profit or loss. The fair value changes related
to the ineffective portion of the hedging instrument are recognized
immediately in profit or loss.

Fair value hedges

Changes in the fair value of derivatives that are designated and qualify
as fair value hedges are recorded in the statement of income, together
with any changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk.

Net investment hedges

The equities of the subsidiaries located outside the euro area are hedged
against changes in exchange rates with the aim to reduce the effects
of changes in exchange rates on the Group’s equity. Fair value changes
of qualifying financial instruments, which are designated as hedges
for translation risk related to net investments in foreign operations,
are recognized in other comprehensive income to the extent that the
hedge is effective. The ineffective portion of the fair value changes of
the hedging instrument is immediately recognized in financial income

and financial expenses. When a foreign operation is sold or otherwise
disposed of, partly or in full, the fair value changes accumulated in equity
are transferred to profit or loss as part of the gain or loss on disposal.

Measurement of fair values

A number of the Group’s accounting policies and disclosures require
the measurement of fair values, for both financial and non-financial
assets and liabilities. Fair value hierarchy is based on the source of
inputs used in determining fair values. In level one, fair values are
based on public quotations for identical instruments. In level two, fair
values are based on market rates and prices, discounted future cash
flows and, in respect of options, on valuation models. For assets and
liabilities in level three, there is no reliable market source available
and thus fair value measurement cannot be based on observable
market data. Therefore, the measurement methods are chosen so that
the information available for the measurement and the characteristics
of the measured objects can be adequately taken into account.

Inventories

Inventories are stated at the lower of cost and net realizable value.
The cost of raw material is determined by the weighted average
method. The cost of self-produced finished goods and work in progress
comprises raw materials, direct labour, other direct costs and related
production and procurement overheads, but excludes borrowing costs.
Cost of purchased products includes all purchasing costs including
direct transportation, handling and other costs. Net realizable value
is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and the estimated costs necessary
to make the sale. Spare parts are carried as inventory and their cost
is recognized in profit or loss as consumed. Major spare parts are
recognized in property, plant and equipment when they are expected
to be used over more than one financial year.

Treasury shares

When the parent company or its subsidiaries purchase the
company’s own shares, the consideration paid, including any
attributable transaction costs, net of taxes, is deducted from the
parent company’s equity as treasury shares until the shares are
cancelled. When such shares are subsequently sold or reissued, any
consideration received is recognized directly in equity.

Provisions and contingent liabilities

A provision is recognized when Outokumpu has a present legal or
constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. The Group’s provisions mainly relate to restructuring plans,
onerous contracts, environmental liabilities, litigation and tax risks. The
amount recognized as a provision corresponds to the management’s
best estimate of the costs required to fulfil an existing obligation at
the end of the reporting period. If part of the obligation may potentially
be compensated by a third party, the compensation is recognized as a
separate asset when it is virtually certain that the compensation will be
received. Non-current provisions are discounted to net present value at
the end of the reporting period using risk-free discount rates.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

The cost of an item of property, plant and equipment also comprises
the initial estimate of costs of dismantling and removing the item
and restoring the site on which it is located at the end of the useful
life of the item on a present value basis. Such a liability may exist
for decommissioning a plant, rehabilitating environmental damage,
landscaping or removing equipment. A provision presenting the asset
retirement obligation is recognized in the same amount at the same
date. Adjustments to the provision due to subsequent changes in
the estimated timing or amount of the outflow of resources, or in the
change in the discount rate are deducted from or added to the cost
of the corresponding asset in a symmetrical manner. The costs will be
depreciated over the asset’s remaining useful life.

Environmental provisions are based on the interpretation of the
effective environmental laws and regulations related to the Group
at the end of the reporting period. Such environmental expenditure,
that arises from restoring the conditions caused by prior operations
are recognized as expenses in the period in which they are incurred.
A restructuring provision is recognized when a detailed restructuring
plan has been prepared and its implementation has been started or
the main parts of the plan have been communicated to those, who
are impacted by the plan. Restructuring provision mainly comprise
employee termination benefits.

A contingent liability is a possible obligation that arises from past
events and whose existence will be confirmed only by the occurrence
of uncertain future events not wholly within the control of the entity.
Such present obligation that probably does not require settlement
of a payment obligation and the amount of which cannot be reliably
measured is also considered to be a contingent liability. Contingent
liabilities are disclosed in the notes to the financial statements.

Employee benefits

income. All remeasurements of the net defined benefit liability (asset)
are recognized directly in other comprehensive income.

For other long-term employee benefits, all service costs and
remeasurements are recognized immediately in the statement of
income. Interest expenses are recognized in financial items under
interest expenses.

Share-based payment transactions

The share-based incentive programs are accounted for partly as
equity-settled and partly as cash-settled. The equity-settled and
cash-settled parts both include market and non-market based
vesting conditions. The fair values of programs over vesting periods
are determined at the grant date and the portion paid in cash is re-
measured based on market conditions at the end of each reporting
period. Market prices and applicable statistical models are used in
determining the fair values. The impact of non-market based vesting
conditions is assessed at the end of each reporting period. The
programs include maximum limits for the pay-outs and the limits have
been taken into account in the fair value measurement of the benefits.

Operating result

In Outokumpu Group, operating result is the net sum which is formed
by adding other operating income to sales and then deducting the
cost of purchase adjusted by change in the inventory and the cost of
manufacture for own use, the cost of employee benefits, depreciation,
amortization, any impairments, and other operating expenses. All other
items of the statement of income are presented below the operating
result. Exchange gains and losses and fair value changes of derivatives
are included in operating result, if they arise from business-related
items. Otherwise they are recognized in financial items.

Post-employment and other long-term
employee benefits

Non-recurring items

Group companies in different countries have various post-employment
benefit plans in accordance with local conditions and practices. The
plans are classified as either defined contribution plans or defined
benefit plans.

Non-recurring items are defined as items which are unusual because
of their nature, size or incidence. Only material events are classified as
non-recurring.

The fixed contributions to defined contribution plans are recognized
as expenses in the period to which they relate. The Group has no
legal or constructive obligation to pay further contributions if the
receiving party is not able to pay the benefits in question. All such
arrangements that do not meet these requirements are defined
benefit plans.

Defined benefit plans are funded with payments to the pension
insurance companies. The present value of the defined benefit
obligations is determined separately for each plan by using the
projected unit credit method. The plan assets are measured at fair
value at the end of the reporting period. The fair value of the plan
assets at the end of the reporting period is deducted from the defined
benefit liability recognized at present value in the statement of
financial position. Current service costs, past service costs and gains
or losses on non-routine settlements are recognized in functional
costs above operating result. Net interest expense or income is
recognized in financial items under interest expense or interest

Dividends

The dividend proposed by the Board of Directors is not deducted from
distributable equity until approved by the Annual General Meeting of
Shareholders.

Earnings per share

Basic earnings per share is calculated by dividing the net result
attributable to the equity holders of the company by the weighted
average number of shares in issue during the period, excluding
shares purchased by Outokumpu and held as treasury shares. Diluted
earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding with the assumption that
convertible instruments are converted and options exercised. The
Group did not have such instruments at the end of the financial year.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Stainless APAC includes cold rolling facility and coil and plate
service center in China as well as a coil service center in Australia.
The production concentrates mainly on high quality stainless steel
flat products for the consumer and automotive industries in China.
The service center in China specializes in selling, processing and
distributing high quality stainless steel products, including high
performance stainless.

Specialty Stainless consists of four business lines which are Special
Coil, Special Plate, Long Products and Thin Strip. The Special Coil
and Thin Strip business lines offer wide range of high performance
stainless steel special grades and products in a variety of dimensions,
with manufacturing operations centered in Sweden. Special Plate is
comprised of the quarto plate production facilities in Sweden and in
the US. These units produce individually rolled thick and wide plates
in standard and special stainless steel grades. Long products are
used in a wide range of applications such as springs, wires, surgical
equipment, automotive parts and construction. The manufacturing is
concentrated in the integrated sites in the UK, Sweden and the US.

Other operations consist of activities outside the four reportable
segments described above as well as industrial holdings. Such
business development and Corporate Management expenses that
are not allocated to the business areas are also reported under Other
operations. Sales of Other operations consist of electricity, nickel
warrants, internal commissions and services.

Outokumpu does not have individual significant customers as defined
in IFRS 8.

3. Segment information

Outokumpu’s business is divided into four business areas which are
Stainless EMEA, Stainless Americas, Stainless APAC and Specialty
Stainless. In addition to the business area structure, Group Functions
cover the CFO’s office, HR and Health, Safety and Sustainability,
Marketing, Communications and IR as well as Strategy, Integration
Procurement, IT and Legal.

Business areas have responsibility for sales, profitability, production
and supply chain management and they are Outokumpu’s reportable
segments under IFRS. The performance of the segments is reviewed
based on segment’s operating result which is defined in the
accounting principles for the consolidated financial statements. The
review is done regularly by the CEO based on internal management
reporting which is based on IFRS.

Outokumpu is the leader in the advanced materials with the strongest
technical expertise and widest range of products across all our
customer segments. Our offering covers stainless steel and wide
range of high performance stainless steel special grades. Below is the
description of the activities of the four reportable segments:

Stainless EMEA consists of stainless operations as well as
ferrochrome production in Europe. The high-volume and tailored
standard stainless steel grades are primarily used for example in
architecture, building and construction, transportation, catering,
appliances, chemical, petrochemical and energy sectors, as well as
other process industries. The business area has production facilities
in Finland and Germany as well as a finishing plant in the Netherlands.

Stainless Americas produce standard austenitic and ferritic grades
as well as tailored products. Its largest customer segments are
automotive and transport, consumer appliances, oil and gas, chemical
and petrochemical industries, food and beverage processing as
well as building and construction industry. The business area has
production units in the US and Mexico as well as a service center in
Argentina.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Operating segments

2013

€ million
External sales
Inter-segment sales
Sales
Operating result
Share of results in associated
companies and joint ventures
Financial income
Financial expenses
Result before taxes
Income taxes
Net result for the financial year from
continuing operations
Net result for the financial year from
discontinued operations
Net result for the financial year

Non-recurring items

Redundancy provisions
Inventory write-down related to
efficiency programs
Carrier settlement
Costs related to Inoxum transaction
Depreciation
Amortization

Assets in operating capital
Investments in associated companies
and joint ventures
Other financial assets
Deferred tax assets
Assets held for sale
Total assets

Liabilities in operating capital
Other financial liabilities
Deferred tax liabilities
Liabilities directly attributable to
assets held for sale
Total liabilities

Operating capital
Net deferred tax asset
Capital employed

Stainless
EMEA

Stainless
Americas

Stainless
APAC

Specialty
Stainless

3 700
567
4 267
-158

884
23
906
-270

377
11
388
-7

1 528
90
1 619
-33

Reportable
segments
total

6 489
691
7 180
-468

-
-
-
-
-

-
-

-51

-4
-
-
-178
-2

-
-
-
-
-

-
-

-8
-
-
-68
-1

-
-
-
-
-

-
-

-0
-
-
-13
-2

-
-
-
-
-

-
-

-0

-
-
-
-56
-1

-
-
-
-
-

-
-

-51

-12
-
-
-314
-7

Reconciliation

Other
operations

Eliminations

256
283
538
-39

-
-
-
-
-

-
-

-3

-
-11
-1
-1
-9

-
-974
-974
-3

-
-
-
-
-

-
-

-
-
-
-
-

Group

6 745
-
6 745
-510

-2
13
-323
-822
-11

-832

-170
-1 003

-54

-12
-11
-1
-316
-16

3 459

1 221

251

1 062

5 993

321

-465

5 849

-
-
-
-
-

1 241
-
-

-
-

2 218
-
-

-
-
-
-
-

180
-
-

-
-

1 040
-
-

-
-
-
-
-

63
-
-

-
-

189
-
-

-
-
-
-
-

320
-
-

-
-

743
-
-

-
-
-
-
-

1 804
-
-

-
-

4 189
-
-

-
-
-
-
-

239
-
-

-
-

82
-
-

-
-
-
-
-

-460
-
-

-
-

-5
-
-

66
683
24
2 200
8 823

1 583
4 275
26

1 048
6 932

4 266
-1
4 265

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

2012

Non-recurring items

Redundancy provisions
Inventory write-down related to
efficiency programs
Costs related to Inoxum acquisition
Kloster and Nyby impairments
Losses from divestment of the
Group's Brass operations
Impairment of stock locations
divestment
Depreciation
Amortization

Assets in operating capital 4)
Investments in associated companies
and joint ventures
Other financial assets
Deferred tax assets
Assets held for sale
Total assets

Liabilities in operating capital 4)
Other financial liabilities
Deferred tax liabilities
Liabilities directly attributable to
assets held for sale
Total liabilities

Operating capital
Net deferred tax liability
Capital employed

Stainless
EMEA 1)

Stainless
Americas 1)

Stainless
APAC 1)

Specialty
Stainless 2)

2 341
307
2 648
-112

-
-
-
-
-
-

-3

-4
-
-

-10
-128
-10

-
2
2
0

-
-
-
-
-
-

-
-
-

-
-0
-

119
9
128
-8

1 764
173
1 937
-134

-
-
-
-
-
-

-6
-
-

-
-1
-0

-
-
-
-
-
-

-7
-
-86

-
-67
-7

Reportable
segments
total 1) 2)

4 223
491
4 715
-254

-
-
-
-
-
-

-3

-17
-
-86

-10
-197
-17

Reconciliation

Other
operations 2)

Eliminations

314
250
564
-130

-
-
-
-
-
-

-2
-64
-

-18

-
-4
-12

-
-742
-742
-1

-
-
-
-
-
-

-
-
-

Group 2)

4 538
-
4 538
-385

-0
16
-154
-524
-12
-536

-3

-19
-64
-86

-18

-10
-201
-29

3 830

1 483

283

1 215

6 812

297

637

7 746

-
-
-
-
-

1 443
-
-

-
-

2 387
-
-

-
-
-
-
-

311
-
-

-
-

1 172
-
-

-
-
-
-
-

67
-
-

-
-

216
-
-

-
-
-
-
-

361
-
-

-
-

854
-
-

-
-
-
-
-

2 182
-
-

-
-

4 629
-
-

-
-
-
-
-

154
-
-

-
-

144
-
-

-
-
-
-
-

-216
-
-

-
-

853
-
-

51
526
89
1 276
9 688

2 120
3 737
92

786
6 735

5 626
-3
5 623

1) Figures related to statement of financial position restated due to completing the Inoxum acquisition accounting.
2) Adjusted due to reallocation of R&D operations in Avesta, Sweden from Other operations to Specialty Stainless.
3) Restated due to adoption of revised IAS 19 Employee Benefits standard.
4) 2012 figures for EMEA Stainless and Specialty Stainless exclude companies classified to assets held for sale in Nov 30, 2013, which are presented in

Other operations column.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Geographical information

€ million

2013
Sales by destination
Sales by origin
Non-current assets

2012
Sales by destination
Sales by origin
Non-current assets

Finland

Germany

Sweden

The UK

Other
Europel

North
America

Asia and
Australia

Other
countries

Inter-area

Group

207
2 620
1 791

197
2 666
1 853

1 597
2 088
358

741
294
620

207
1 130
368

196
1 445
378

470
557
68

300
697
81

1 981
554
137

1 926
684
171

1 292
1 147
925

466
359
1 003

948
390
173

629
142
214

42
60
3

83
25
4

-
-1 802
-

-
-1 775
-

6 745
6 745
3 824

4 538
4 538
4 323

Sales by destination is presented for external sales.
Sales and non-current assets are presented by the locations of the Group companies.
Non-current assets exclude financial instruments, deferred tax assets and defined benefit plan assets.
Non-current assets for 2012 are restated due to completion of Inoxum acquistion accounting.

4. Acquisitions and disposals

Inoxum acquisition

On January 31, 2012, Outokumpu entered into a business
combination agreement with ThyssenKrupp AG for the purchase of the
entire share capital of both Inoxum GmbH and ThyssenKrupp Nirosta
GmbH (“Inoxum”), the parent companies of the Group comprising the
stainless steel business of ThyssenKrupp. The acquired companies
have sites in Germany, Italy, the US, Mexico and China. The ownership
and control transferred to Outokumpu on December 28, 2012, which
was the date of acquisition.

The combination of Outokumpu and Inoxum created a new global
leader in stainless steel with a complementary and innovative product
offering across key customer segments. The transaction creates
significant cost synergy benefits that neither company could have
realized on its own. The transaction enables a strategic optimization
of production capacities, production locations and supply routes.
Outokumpu and Inoxum are complementary in terms of product
offering. This, coupled with its extensive network of local service
centers, enables the combined entity to supply a broad product
offering with shorter delivery times and customized solutions for its
customers globally. In addition, it provides a diversification across
different grades reducing volatility from any temporary shifts in
demand between grades. Following completion of the transaction,
Outokumpu also has a global and well-balanced customer base,
covering key end-user segments.

Following the European Commission’s demand for an industrial
remedy related to the Inoxum transaction, Outokumpu committed
to the divestiture of the Inoxum’s stainless steel mill in Terni, Italy,
and selected European service centers (remedy assets) which are
classified as held for sale in the consolidated financial statements.
See note 5 Assets held for sale and discontinued operations for
additional information.

The initial accounting for Inoxum acquisition was provisional on
December 31, 2012 due to the size and complexity of the transaction
and the acquisition date being close to the preparation of Outokumpu
consolidated financial statements. Therefore, the amounts recognized
for identifiable assets acquired and liabilities assumed, goodwill and
items of consideration were determined only provisionally. Based on
the information obtained during the measurement period about facts
and circumstances that existed as of the acquisition date, Outokumpu
has retrospectively adjusted the provisional amounts on December
28, 2012 as presented in the tables below.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Identifiable assets acquired and liabilities assumed

€ million
Intangible assets
Property, plant and equipment
Deferred tax assets
Inventories
Trade receivables
Other assets
Cash and cash equivalents

Interest-bearing liabilities
Defined benefit and other long-term employee benefit obligations
Deferred tax liabilities
Trade and other liabilities

Final

86
2 185
160
1 801
549
190
84
5 055

250
376
89
1 612
2 327

Reported as
provisional

108
2 166
160
1 781
549
190
84
5 038

250
376
87
1 601
2 314

Identifiable assets acquired and liabilities assumed include the Terni remedy assets acquired as part of the Inoxum transaction on December 28, 2012.

Consideration and goodwill arising on acquisition

€ million
Cash
Shares to ThyssenKrupp
Loan note to ThyssenKrupp
Total consideration transferred
Non-controlling interests, based on their proportionate interest
in the recognized amounts of assets and liabilities of Inoxum
Fair value of identifiable net assets acquired
Goodwill arising on acquisition

The fair value of the 621 042 573 Outokumpu Oyj shares transferred
to the seller (EUR 491 million) was determined based on the share
price of EUR 0.79 at the date of acquisition.

The principal amount of the loan note was the amount by which the
balance of ThyssenKrupp’s receivables against Inoxum and Inoxum’s
receivables against ThyssenKrupp exceeded the EUR 1 billion
cash consideration at the acquisition date. The EUR 1 229 million
represented loan note’s estimated fair value at the date of acquisition.

Final goodwill of EUR 4 million was considered mainly attributable to
assembled workforce. None of the goodwill recognized is expected to
be deductible for income tax purposes.

Final

1 000
491
1 229
2 720

11
2 728
4

Net cash outflow on acquisition
€ million
Consideration paid in cash
Cash and cash equivalent balances acquired
Net cash outflow on acquisition

Reported as
provisional

1 000
491
1 229
2 720

11
2 724
7

2012

1 000
-84
915

Had Inoxum been consolidated in Outokumpu Group from January 1,
2012, management estimates that the consolidated statement of
income for 2012 would have shown net sales of approximately EUR
9 400 million and net loss of approximately EUR 900 million.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Disposals

Year 2013

On January 18, 2013 Outokumpu’s partner in the OSTP business,
Tubinoxia S.r.l. exercised its call option and acquired additional 15%
of the company’s shares from Outokumpu. Consequently, Outokumpu
lost the control over OSTP, and OSTP is consolidated as an associated
company in the Group’s financial statements. OSTP provides
stainless steel process tubes and pipes and fittings. OSTP employed
approximately 770 people in Sweden, Finland, Saudi Arabia, Estonia
and Canada.

Effect of disposal on the financial
position of the Group
€ million
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Disposal-related gain
Disposal of non-controlling interest
Recognition of remaining interest in associate
at fair value
Consideration received, satisfied in cash
Cash and cash equivalents disposed of
Net cash outflow

2013
30
79
-26
-56
27
4
-15

-17
2
-2
-1

Year 2012

Brass

In June, Outokumpu sold its brass-rod plant in Drünen in the
Netherlands, the last of the Group’s brass operations. Resulting
from this transaction, a loss of EUR 18 million was booked into other
operating expenses.

Amari

In September, Outokumpu completed a transaction to divest part of
the Group’s stock operations in Europe to Amari, a privately owned
group of companies focusing on multi-metal distribution. With the
transaction, 10 of the Group’s stock operations in nine countries
were transferred to Amari, thereby halving the number of the Group’s
own stock locations. Furthermore, approximately 100 Outokumpu
employees transferred to Amari. In connection to the transaction,
Outokumpu booked a non-recurring impairment of EUR 10 million into
other operating expenses.

Effect of disposal on the financial
position of the Group
€ million
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Disposal-related losses and impairments
Consideration received, satisfied in cash
Cash and cash equivalents disposed of
Net cash inflow

2012

23
49
-3
-19
49
-28
21
-2
19

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

5. Assets held for sale and
discontinued operations

On November 30, 2013 Outokumpu announced its plans to divest
the VDM business and the remedy assets which include Terni and
certain service centers to ThyssenKrupp. The sale of VDM is the
result of strategic review conducted of the business during 2013, and
the divestment of Terni and certain European service centers aims
to address the remedy requirements of the European Commission
related to the Inoxum acquisition in 2012. Outokumpu’s loan note
to ThyssenKrupp will be used as a consideration for the transaction.
The sale framework agreement also includes customary terms and
conditions regarding the businesses’ level of working capital and net
debt.

VDM develops high performance alloys for the use in extreme
conditions, for example in high and low temperatures, high in the
atmosphere and deep underground. Following the announcement,
VDM assets and related liabilities were classified as held for sale on
November 30, 2013 and reported as a discontinued operation. VDM
assets classified as held for sale and related liabilities are measured
at carrying values.

Terni is an integrated stainless steel production facility in Italy. Terni
entities were classified as held for sale at the closing of Inoxum
transaction in December 2012 together with a service center in
Germany, which was included in remedy assets at that time. Following
the announcement in November 2013 additional remedy assets to be
divested, i.e. Tubificio di Terni and service centers in France, Spain and
Turkey were also classified as held for sale. Remedy assets classified
as held for sale and related liabilities are measured at carrying values.
Remedy entities’ results are reported under discontinued operations
in the 2013 statement of income.

Result from discontinued operations
€ million
Sales and other operating income
Expenses
Net financial expenses
Result before tax
Income tax
Net result from discontinued operations

2013

3 302
-3 392
-22
-112
-58
-170

EUR 1 090 million of the sales and other operating income and EUR
1 072 million of the expenses are attributable to VDM. EUR 2 212
million of the sales and other operating income and EUR 2 293 million
of the expenses are attributable to Terni remedy assets. In addition,
the expenses include transaction costs relating to the sale of Terni
and VDM of EUR 27 million.

Assets held for sale and liabilities directly
attributable to assets held for sale
€ million
Intangible assets and property, plant and
equipment
Other assets
Inventories
Trade and other receivables

Interest-bearing debt
Defined benefit and other long-term employee
benefit obligations
Other liabilities
Trade and other payables

2013

885
147
844
325
2 200

129
112
792
1 048

EUR 829 million of the total assets and EUR 323 million of the total
liabilities are attributable to VDM. EUR 1 371 million of the total
assets and EUR 725 million of the total liabilities are attributable to
Terni remedy assets.

Cash flows
€ million
Operating cash flow
Investing cash flow
Financing cash flow

2013

115
-77
-26
12

In 2013, there are EUR -9 million (2012: EUR -4 million) cumulative
net income and expenses related to discontinued operations included
in other comprehensive income. They are mainly due to exchange
differences on translating foreign operations, remeasurements of
defined benefit pension plans and fair value changes of hedging
instruments.

6. Income and expenses

Depreciation and amortization by function
€ million
2013
Cost of sales
Selling and marketing expenses
Administrative expenses
Research and development expenses

-315
-2
-14
-1
-332

2012

-212
-10
-7
-1
-230

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Other operating income
€ million
Exchange gains and losses from foreign
exchange derivatives
Market price gains and losses from
commodity derivatives
Market price gains and losses from derivative
financial instruments
Gains on sale of other intangible and tangible
assets
Other income items

7
12
24

-4

1
5
23

In 2013, the market price gains and losses from derivative financial
instruments included a gain of EUR 4 million (2012: a gain of EUR 6
million) from ineffective portion of cash flow hedges.

Other operating expenses
€ million
Carrier settlement
Impairments
Losses on sale of intangible and tangible
assets
Losses from divestment of the Group's Brass
operations
Other expense items

2013

-11
-13

-2

-
-6
-31

Non-recurring items in operating result
€ million
Redundancy provisions
Inventory write-downs related to efficiency
programs
Carrier settlement
Costs related to Inoxum acquisition
Nyby and Kloster impairments
Losses from divestment of the Group's Brass
operations
Impairment of stock locations divestment

2013

-54

-12
-11
-1
-

-
-
-78

2012

-
-105

-0

-18
-5
-128

2012

-3

-19
-
-64
-86

-18
-10
-200

In April 2013, as part of its intention to significantly reduce operating
expenses and return to profitability, Outokumpu announced plans that
result in job reductions. The reductions relate to capacity reductions,
particularly to the previously announced closure of Krefeld meltshop
in Germany, as well as streamlining overlapping activities in sales,
production, supply chain and support functions. As a result, a non-
recurring redundancy cost of EUR 54 million was recognized in 2013.

Inventories were written down in 2013 and 2012 in connection with
Outokumpu’s efficiency programs. The write-downs amounted to non-
recurring costs of EUR 12 million in 2013 (2012: EUR 19 million).

In May 2013 Outokumpu Oyj and Carrier Corporation signed
a settlement agreement that covers all damage suits against
Outokumpu by Carrier in the US and UK pursuant to the European
Commission’s industrial tubes cartel decision of 2003. The total

2013

2012

settlement amount was EUR 11 million. The settlement covered also
all former Outokumpu subsidiaries included in the claims.

In 2013, Outokumpu booked EUR 1 million of non-recurring costs
related to Inoxum acquisition in addition to costs of EUR 64 million
in 2012. Out of the costs in 2012, EUR 12 million was related to real
estate transfer taxes in Germany.

In 2012 an impairment loss of EUR 70 million related to Nyby and EUR
16 million related to Kloster was recognized as a result of impairment
tests on assets of Nyby and Kloster business lines.

In 2012, Outokumpu sold the remaining units of its Brass operations.
The losses booked from divestment were approximately EUR 18
million. In 2012, Outokumpu also divested part of its European stock
operations to Amari. Related to the transaction, impairment of EUR 10
million was booked.

P100 program-related cost savings resulted to non-recurring
redundancy provisions of EUR 3 million in 2012.

Auditor fees – KPMG
€ million
Audit
Audit related services
Tax advisory
Other services

2013

-2.7
-0.1
-0.2
-0.7
-3.7

2012

-1.9
-0.3
-0.1
-3.4
-5.7

7. Employee benefit expenses

€ million
Wages and salaries
Termination benefits
Social security costs
Post-employment and other long-term
employee benefits

Defined benefit plans 1)
Defined contribution plans
Other long-term employee benefits
Expenses from share-based payments
Other personnel expenses

2013

-583
-45
-94

-11
-49
-10
-1
-12
-805

2012

-340
-10
-53

-5
-54
-1
-0
-10
-473

1) Defined benefit plans in 2012 have been restated as a result of adoption

of the revised IAS 19 Employee Benefits standard.

Profit-sharing bonuses based on the Finnish Personnel Funds Act were
not recognized in 2013 nor 2012.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

8. Financial income and expenses

€ million
Dividend income on available-for-sale financial assets
Interest income

Loans and receivables
Bank accounts and deposits
Interest income on defined benefit plan assets 1)

Gains on the sale of investments at fair value through profit or loss
Gains on the sale of available-for-sale financial assets
Other financial income
Total financial income

Interest expenses

Debt at amortized cost
Finance lease arrangements
Derivatives
Interest expense on defined benefit obligations and other long-term employee benefits 1)

Capitalized interests
Impairment of financial assets
Loss from the sale of financial assets
Fees related to committed credit facilities
Other financial expense items
Total financial expenses

Exchange gains and losses

Derivatives
Cash, loans and receivables

Other market price gains and losses

Derivatives
Subsequent fair valuation of Talvivaara Sotkamo Ltd
Other

Total market price gains and losses

1) Figures for 2012 have been restated as a result of adoption of the revised IAS 19 Employee Benefits standard.

Exchange gains and losses in the consolidated statement of income
€ million
In sales
In purchases 2)
In other income and expenses 2)
In financial income and expenses 2)

2013

2012

-181

-7

-12

-10

-2

-50

-17

-10

-286

-57

-41

-0

-37

-66

-5

-6

-4

-0

-11

-7

-90

-24

-3

-52

-0

-64

-310

-138

2013

2012

-7

-8

-9

-10

2) Includes exchange gains and losses on elimination of intra-group transactions.

Exchange gains and losses include EUR 56 million net exchange gain on derivative financial instruments (2012: EUR 0 million net exchange loss)
of which EUR 4 million gain on derivatives has been recognized in other operating income, EUR 4 million gain as adjustment to purchases and
EUR 49 million gain in financial items.

Non-recurring items in financial income and expenses
In 2013, a non-recurring loss of EUR 49 million on the sale of Luvata loan receivable is included in the financial expenses as loss from sale of
financial assets. In 2012, there were no non-recurring items in financial income and expenses.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

9. Income taxes

Income taxes in the consolidated statement of income
€ million
Current taxes
Deferred taxes

2013

-4
-7
-11

2012

-4
-8
-12

The applicable Finnish corporate tax rate for the financial year 2013 is 24.5% (2012: 24.5%). In December 2013 a reduction of the Finnish
corporate tax rate was enacted for tax years beginning from January 1, 2014 onwards. Therefore, on December 31, 2013, deferred taxes of the
Finnish companies are calculated with the reduced tax rate of 20% (2012: 24.5%). The applicable tax rates for companies outside Finland range
from 0.0% to 42.7% (2012: 0.0% to 42.7%). In financial year 2013, changes in tax rates resulted in a deferred tax income of EUR 4 million (2012:
EUR 1 million deferred tax expense).

Aggregate deferred taxes recognized in equity through other comprehensive income
€ million
Cash flow hedging
Available-for-sale financial assets
Net investment hedging
Remeasurements of the net defined benefit liability

2013
-3
0
-4
19
13

2012
-7
0
-5
27
15

As of December 31, 2013 tax loss carry forwards amount to EUR 2 322 million (2012: EUR 1 794 million), in particular EUR 684 million (2012:
EUR 538 million) in Finland, EUR 402 million (2012: EUR 430 million) in Sweden, EUR 621 million (2012: EUR 306 million) in the USA and EUR
158 million (2012: EUR 161 million) in the People’s Republic of China. Deferred tax assets are recognized only to the extent that the realization
of such tax benefits is probable. In determining the related valuation allowance, all positive and negative factors, including prospective results,
are taken into consideration in estimating whether sufficient taxable income will be generated to realize deferred tax assets. These estimates can
change depending on the future course of events. As of December 31, 2013 tax loss carry forwards of the Outokumpu Group for which no deferred
tax asset is recognized amount to EUR 1 822 million (2012: EUR 1 639 million). According to tax legislations as of December 31, 2013 an amount
of EUR 235 million (2012: EUR 515 million) of these tax loss carry forwards will expire within the next five years if not utilized. No deferred tax
liabilities were recorded on undistributed profits on foreign subsidiaries, as such profits are not to be distributed in the foreseeable future.

Deferred income taxes in the statement of financial position
€ million
Deferred tax assets
Deferred tax liabilities 1)
Net deferred tax asset

1) Figures for 2012 have been restated due to completing the Inoxum acquisition accounting.

2013

24
-26
-1

2012

89
-92
-3

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Significant components of the deferred tax assets and liabilities are as follows:

€ million
Intangible assets
Property, plant and equipment
Other financial assets
Inventories
Derivative financial assets
Trade and other receivables
Long-term and current debt
Defined benefit and other long-term
employee benefit obligations
Provisions
Derivative financial liabilities
Trade and other payables
Tax loss carry forwards

Valuation allowance
Offset

Deferred tax
asset

2013
Deferred tax
liabilities

12
118
0
20
8
3
69

56
24
13
40
629
993
-724
-245

-9
-190
0
-11
-12
-15
-0

-12
-6
-1
-15
-
-270
-
245

-26

2012

Deferred tax
asset

Deferred tax
liabilities 1)

13
26
0
28
9
9
40

74
15
6
15
540
774
-427
-258
89

-6
-229
-2
-61
-24
-3
-0

-14
-5
0
-7
0
-351
-
258
-92

Net

3
-72
0
9
-4
-12
69

44
18
13
25
629
723
-724
-

-1

Net

7
-203
-2
-33
-15
6
40

60
10
6
8
540
424
-427
0
-3

1) Figures for 2012 have been restated due to completing the Inoxum acquisition accounting.

Deferred taxes have been reported as a net balance of those group companies that file a consolidated tax return, or that may otherwise be
consolidated for current tax purposes.

Movement in deferred tax assets and liabilities during the financial year

Valuation allowance

Net deferred
taxes
Jan 1, 2013

Translation
differences

Recognized in
profit or loss

Recognized
in other
comprehensive
income

Companies
sold

Reclassifica-
tion to assets
and liabilities
held for sale

Net deferred
taxes
Dec 31, 2013

7
-203
-2
-33
-15
6
40

60
10
6
8
540
424
-427
-3

-0
-2
0
-0
-
-0
-0

-1
-
-
-1
-16
-19
18
-1

-7
112
2
10
0
-16
30

3
9
9
17
130
296
-337
-41

-
-
0
-
5
-
-

-8
-
-
-
-
-2
-
-2

-
0
-
0
-
-
-

-1
-
-
-1
-21
-22
22
0

3
21
-
32
6
-1
-1

-10
-1
-2
1
-3
45
1
46

3
-72
0
9
-4
-12
69

44
18
13
25
629

723
-724

-1

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Valuation allowance

Net deferred
taxes
Jan 1, 2012

Translation
differences

Recognized in
profit or loss

Recognized
in other
comprehensive
income

Companies
acquired 1)

Companies
sold

Net deferred
taxes
Dec 31, 2012

-5
-102
-1
-10
1
-15
7

26
11
0
1
234
147
-108
39

-
-
-
-
-
-
-

-
-
-
-
-
-
-
-

2
-20
-2
8
-4
22
32

-15
-8
1
4
117
137
-144
-7

-
-
1
-
-1
-
-

10
-
-
-
-
10
-
10

10
-82
-
-30
-11
-1
1

39
7
5
4
189
132
-175
-43

-
-
-
-1
-
-
-

-
-
-
-1
-
-2
-
-2

7
-203
-2
-33
-15
6
40

60
10
6
8
540
424
-427
-3

1) Figures for 2012 have been restated due to completing the Inoxum acquisition accounting.

In 2013, the income tax expense of EUR 11 million presented in the consolidated statement of income is EUR 222 million higher than the
expected income tax benefit of EUR 201 million, which would result if the Finnish corporate tax rate of 24.5% were applied to the Group’s result
before taxes. In 2012, the reported income tax expense of EUR 12 million is EUR 140 million higher than the expected income tax benefit of EUR
128 million calculated with the Finnish corporate tax rate of 24.5%. The following table reconciles the expected income tax benefit to the income
tax expense presented in the consolidated statement of income:

€ million
Hypothetical income taxes at Finnish tax rate on consolidated result before tax
Difference between Finnish and foreign tax rates
Tax effect of non-deductible expenses and tax exempt income
Tax effect of losses for which no deferred tax asset is recognized
Changes in the carrying amounts of deferred tax assets from prior years
Taxes for prior years
Impact of the changes in the tax rates on deferred tax balances 2)
Effects of consolidation and eliminations
Other items
Income taxes in the consolidated statement of income

2013
201
58
-75
-204
0
25
4
0
-20
-11

2012
128
2
-6
-109
-30
1
-1
6
-2
-12

2) In 2013, the majority of the impact of the changes in the tax rates was attributable to the enacted decrease in the Finish and UK tax rates, in Finland from
24.5% to 20.0% on January 1, 2014 and in the UK from 24.0% to 23.0% on April 1, 2013, from 23.0 to 21.0% on April 1, 2014 and from 21.0% to 20.0%
on April 1, 2015. In 2012, the majority of the impact of the changes in the tax rates was attributable to the enacted decrease in the Swedish and UK tax
rates, in Sweden from 26.3% to 22.0% on January 1, 2013 and in the UK from 25.0% to 24.0% on April 1, 2013.

Outokumpu Oyj is currently subject to a tax audit in Finland. Currently no information exists on the outcome of the audit. Preliminary tax audit
report is expected to be issued in February–March 2014.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

10. Earnings per share

Result attributable to the equity holders of the Company, € million 1)
Result from continuing operations attributable to the equity holders of the Company, € million
Result from discontinued operations attributable to the equity holders of the Company, € million

Weighted average number of shares, in thousands
Diluted average number of shares, in thousands

Earnings per share for result attributable to the equity holders of the Company, €

Earnings per share 1)
Earnings per share, continuing operations
Earnings per share, discontinued operations

2013

-997
-826
-170

2012

-534
-
-

2 077 080
2 077 080

1 156 005
1 156 005

-0.48
-0.40
-0.08

-0.46
-0.46
-

1) Defined benefit plans in 2012 have been restated as a result of adoption of the revised IAS 19 Employee Benefits standard.

Outokumpu did not have any diluting effect share options in 2013 nor 2012.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

11. Intangible assets

€ million
Historical cost on Jan 1, 2013 2)
Translation differences
Additions
Disposals
Disposed subsidiaries
Reclassifications 3)
Reclassifications to assets held for sale

Historical cost on Dec 31, 2013

Accumulated amortization and impairment on Jan 1, 2013
Translation differences
Disposals
Disposed subsidiaries
Amortization
Reclassifications
Reclassifications to assets held for sale

Accumulated amortization and impairment on Dec 31, 2013

Carrying value on Dec 31, 2013
Carrying value on Jan 1, 2013 2)

Historical cost on Jan 1, 2012
Translation differences
Additions
Acquired subsidiaries 2)
Disposals
Disposed subsidiaries
Reclassifications 3)
Reclassifications to assets held for sale
Historical cost on Dec 31, 2012 2)

Accumulated amortization and impairment on Jan 1, 2012
Translation differences
Disposals
Disposed subsidiaries
Amortization
Impairments
Reclassifications 3)
Reclassifications to assets held for sale

Accumulated amortization and impairment on Dec 31, 2012

Carrying value on Dec 31, 2012 2)
Carrying value on Jan 1, 2012

Customer
relationships

Other intangible
assets 1)

Goodwill

49
-0
-
-
-2
-
-

-48
0
-
1
-0
-
-

-47

-
0

49
-0
-
-
-
-
-
-

-40
0
-
-
-8
-
-
-

-48

0
9

319
-4
6
-3
-7
0
-13

298

-189
2
1
7
-18
1
1

-193

105
130

231
2
1
85
-1
-0
1
-0

319

-163
-2
0
0
-21
-3
-0
0

-189

130
67

494
-0
-
-
-10
-0
-12

472

-17
-
-
10
-
-
-

-7

465
477

490
0
-
4
-0
-
-
-

494

-12
-
0
-
-
-6
-
-

-17

477
478

1) Other intangible assets include capitalized land-use rights, development costs, patents, licenses and software.
2) Restated due to completing the Inoxum acquisition accounting (see Note 4. Acquisitions and disposals).
3) Construction work in progress related to intangible assets is presented in the corresponding item of PPE. When the asset is taken into use, it is

reclassified to the appropriate asset account.

Intangible assets mainly comprise acquired assets.

Total

861
-4
6
-3
-18
-0
-25

817

-254
2
1
18
-18
1
1

-247

570
607

769
3
1
89
-1
-0
1
-0

861

-215
-2
1
0
-29
-9
-0
0

-254

607
554

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated
for impairment testing as follows:

carrying amount to exceed the recoverable amount. Terminal growth
rate of 0% would not lead to impairment.

€ million
Stainless EMEA
Specialty Stainless 1)

416
60
477
1) 2012 restated due to completing the Inoxum acquisition accounting (see

408
56
465

2013

2012

Note 4. Acquisitions and disposals).

As a result of the performed impairment test to Group’s cash-
generating units, no impairment losses were recognized in 2013. In
2012, EUR 5 million goodwill related to Outokumpu Tubular business’
(OSTP) was impaired in the statement of income in connection with
the business’ asset valuation. OSTP was divested in 2013.

During the year 2013, impairment testing of goodwill was carried out
on a quarterly basis.

Emission allowances

Following the Inoxum transaction, Outokumpu had 7 active sites
(excluding VDM and Remedy assets) operating under EU’s Emissions
Trading Scheme (ETS) in 2013. These include the production plants in
Tornio, Finland; Avesta, Degerfors and Nyby in Sweden; Sheffield in the
UK; as well as Krefeld and Bochum in Germany.

Outokumpu has not yet received all the emission allowances for
2013 by the end of the reporting period (2012: 1.3 million tonnes
excluding former Inoxum sites) as the allocation is pending for the
authorities’ final decision. The pre-verified carbon dioxide emissions
under ETS were approximately 1 030 000 tonnes in 2013 (2012:
759 000 tonnes excluding former Inoxum sites). Outokumpu sold 0.6
million tonnes of emission allowances in 2013 (2012: no emission
allowances sold).

For the trading period 2013–2020, all relevant Outokumpu sites have
applied free emission allowances. Preliminary allocation for years
2013 and 2014 is estimated to be some 1 million tonnes annually in
total. Considering the Group’s operations and the Group’s emission
allowance surplus position, the amount of allowances is foreseen to
be sufficient for compliance. Position is frequently monitored and
optimized according to the definitions set in corporate risk policies.

See Note 19. Financial risk management, capital management and
insurances for information on the management of the emission
allowance price risk.

The recoverable amounts of Stainless EMEA and Specialty Stainless
are based on value-in-use calculations which are estimated using
discounted cash flow projections. Key assumptions used in the value-
in-use calculations are discount rate, terminal value growth rate,
average global growth in end-use consumption of stainless steel and
base price development. The values assigned to the key assumptions
are based on the strategic plans approved by the management for
2014 after which cash flows are projected for a period of 11 years,
including terminal value based on conservative assumptions. The
longer period is justified due to the integration of Inoxum and related
synergies. Shorter period would not give fair view of the business and
forecasts.

Discount rate is the weighted average pre-tax cost of capital (WACC),
as defined for Outokumpu. The components of WACC are risk-free yield
rate, Outokumpu credit margin, market risk premium, equity beta and
industry capital structure. The pre-tax WACC used for EMEA is 10.9%
and Specialty Stainless 11.0% (2012: 11.4% and 11.5% respectively).

In the terminal value, growth rate assumption of 0.5% (2012: 0.5%)
is used which management believes to be prudent based on current
economic circumstances, although historical growth rates and
forecasts of independent market analysts indicate higher long-term
growth rates.

Assumed average global growth in end-use consumption of stainless
steel of 3.5% (2014–2023) follows independent analysts’ view on
long-term market development.

Base price forecast is based on conservative assumptions, which are
in line with expectations of general inflation.

In addition, committed investments and expected synergies have
been included in the cash flow projections.

The estimated recoverable amount of Stainless EMEA exceeds its
carrying amount by approximately EUR 1,228 million. Increase of 4
percentage point in after-tax WACC would cause the carrying amount
to exceed the recoverable amount. Also, 16% decrease in annual
delivery volumes or 7% decrease in base prices would cause the
carrying amount to exceed the recoverable amount. Terminal growth
rate of 0% would not lead to impairment.

The estimated recoverable amount of Specialty Stainless exceeds
its carrying amount by approximately EUR 711 million. Increase of 4
percentage point in after-tax WACC would cause the carrying amount
to exceed the recoverable amount. Also, 7% decrease in annual
delivery volumes or 4% decrease in base prices would cause the

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

12. Property, plant and equipment

€ million
Historical cost on Jan 1, 2013 2)
Translation differences
Additions
Disposals
Disposed subsidiaries
Reclassifications
Reclassifications to assets held for sale

Historical cost on Dec 31, 2013

Accumulated depreciation and impairment on Jan 1, 2013
Translation differences
Disposals
Disposed subsidiaries
Reclassifications
Depreciation
Impairments
Reclassifications to assets held for sale

Accumulated depreciation and impairment on Dec 31, 2013

Carrying value on Dec 31, 2013
Carrying value on Jan 1, 2013 2)

Historical cost on Jan 1, 2012
Translation differences
Additions
Acquired subsidiaries 2)
Disposals
Disposed subsidiaries
Reclassifications
Reclassifications to assets held for sale
Historical cost on Dec 31, 2012 2)

Accumulated depreciation and impairment on Jan 1, 2012
Translation differences
Disposals
Disposed subsidiaries
Reclassifications
Depreciation
Impairments
Reclassifications to assets held for sale
Accumulated depreciation and impairment on Dec 31, 2012

Carrying value on Dec 31, 2012 2)
Carrying value on Jan 1, 2012

Land

173
-2
1
-
-1
2
-28

146

-6
0
-
0
-
-0
-3
-

-9

137
167

49
1
0
133
-0
-4
1
-6
173

-7
-0
0
2
0
-
-1
-
-6

167
42

Mine
properties

Buildings

Machinery
and
equipment

Other
tangible
assets

Advances
paid and
construction
work in
progress 1)

46
-
-
-
-
0
-

-7
-
-
-
-
-2
-
-

-9

37
40

36
-
2
-
-
-
8
-
46

-6
-
-
-
-
-1
-
-
-7

40
30

1 307
-14
33
-6
-29
23
-55

1 260

-507
5
3
23
0
-47
0
3

-520

740
800

965
6
78
241
-9
-1
48
-21
1 307

-462
-4
9
1
-6
-33
-20
9
-507

800
503

4 808
-79
189
-35
-120
66
-230

4 600

-2 429
37
33
100
65
-291
0
23

-2 462

2 139
2 380

3 336
43
188
1 157
-23
-13
141
-22
4 808

-2 206
-31
23
11
-6
-162
-69
11
-2 429

2 380
1 130

142
-1
0
0
-2
-8
-

132

-63
0
-0
2
0
-5
-0
-

-66

66
79

121
1
10
8
-0
-1
3
-
142

-55
-0
0
0
-
-5
-3
-
-63

79
66

295
-7
7
-0
-1
-102
-9

184

-45
1
-
0
1
-
-7
0

-49

134
250

274
3
76
133
-0
-1
-190
-
295

-41
-1
0
-
0
-
-2
-
-45

250
233

Total

6 772
-101
231
-41
-152
-19
-323

6 368

-3 056
44
36
124
66
-346
-9
26

-3 115

3 254
3 716

4 782
53
354
1 673
-33
-19
11
-49
6 772

-2 777
-36
32
14
-12
-201
-96
20
-3 056

3 716
2 005

1) Advances paid and construction work in progress includes also intangible assets. When the asset is ready to be taken into use, it is reclassified to

appropriate asset account either in property, plant and equipment or in intangible assets.

2) Restated due to completing the Inoxum acquisition accounting (see Note 4. Acquisitions and disposals).

Borrowing costs amounting to EUR 2 million were capitalized on investment projects during the financial year (2012: EUR 8 million). Total interest
capitalized on December 31, 2013 was EUR 38 million (Dec 31, 2012: EUR 41 million). Outokumpu determines separate capitalization rates for
each quarter. The average rate used during 2013 was 4.3%.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Impairments
As a result of the impairment test performed to Group’s cash-generating units, no impairment losses were recognized in 2013. However,
immaterial impairment losses related to single assets and totaling EUR 9 million were recognized in various Group companies.

In 2012, impairment test was carried out to the assets of Nyby and Kloster leading to the recognition of an impairment loss of EUR 70 million
related to Nyby and EUR 16 million related to Kloster, mainly allocated to machinery and equipment. Additionally, an impairment of EUR 10 million
was recognized related to the divested stock locations. The impairment mainly related to buildings and machinery and equipment.

Assets leased by finance lease agreements

€ million
Historical cost
Accumulated depreciation

Carrying value on Dec 31, 2013

Historical cost
Accumulated depreciation
Carrying value on Dec 31, 2012

Land

Buildings

Machinery and
equipment

29
-0

27
-
27

37
-5

34
-4
30

270
-70

200

212
-57
155

Total

335
-75

260

272
-61
211

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

13. Investments in associated companies and joint ventures

€ million
Investments in associated companies and joint ventures at cost

Historical cost on Jan 1
Translation differences
Investments in associated companies and joint ventures in acquired subsidiaries 1)
Reclassification from investments in subsidiaries 2)
Investments in associated companies and joint ventures
Impairments
Reclassification to assets held for sale
Disposals 3)
Historical cost on Dec 31

Equity adjustment to investments in associated companies and joint ventures on Jan 1

Translation differences
Dividends received
Share of results in associated companies and joint ventures
Recognition of remaining interest in associate at fair value 2)
Equity adjustments to investments in associated companies and joint ventures in acquired subsidiaries 1)
Reclassification to assets held for sale
Disposals 3)
Equity adjustment on Dec 31

Carrying value of investments in associated companies and joint ventures on Dec 31

2013

2012

30
-0
-
11
6
-3
-0
-0
43

21
-1
-2
-2
6
-
-0
0
23
66

23
0
6
-
-
-
-
-
30

16
1
-
0
-
5
-
-
21
51

1) As part of Inoxum transaction in 2012 Outokumpu acquired Fischer Mexicana S.A. de C.V. in Mexico (50% ownership),

MOL Katalysatortechnik GmbH in Germany (20.46% ownership) and Evidal Schmöle Verwaltungsgesellschaft GmbH (50% ownership).

2) Subsidiary OSTP Holding Oy became an associate as a result of Outokumpu’s loss in control in January 2013.
3) KDAB i Västerås AB was liquidated in April, 2013.

Associated companies and joint ventures

OSTP Holding Oy
Fagersta Stainless AB
Fischer Mexicana S.A. de C.V.
Rapid Power Oy
Ilserv S.r.l. 1)
Euroacciai S.r.l. Sarezzo (BS) 1)
Terni Frantumati S.p.A. 1)
MOL Katalysatortechnik GmbH 1)

1) Classified to assets held for sale.

Information on associated companies and joint ventures
€ million

Domicile

Assets

Domicile

Ownership, %

Finland
Sweden
Mexico
Finland
Italy
Italy
Italy
Germany

49
50
50
33
35
30
21
20

Liabilities

Sales

Profit

Ownership, %

2013
OSTP Holding Oy
Fagersta Stainless AB
Fischer Mexicana S.A. de C.V. 1)
Rapid Power Oy

2012
Fagersta Stainless AB
Fischer Mexicana S.A. de C.V. 2)
Rapid Power Oy

Finland
Sweden
Mexico
Finland

Sweden
Mexico
Finland

117
69
36
129

64
31
153

73
40
9
76

28
8
100

198
137
52
43

157
66
47

-3
-7
8
0

-0
9
0

1) Figures are based on the information on September 30, 2013.
2) Company was acquired as part of the Inoxum transaction on December 28, 2012. The profit was not consolidated to the statement of income in 2012.

49
50
50
33

50
50
33

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

14. Carrying values and fair values of financial assets
and liabilities by measurement category

Measured at

2013
€ million

Non-current financial assets
Available-for-sale financial assets
Investments at fair value through profit
or loss
Trade and other receivables
Hedge accounted derivatives
Derivatives held for trading

Current financial assets
Available-for-sale financial assets
Investments at fair value through profit
or loss
Trade and other receivables
Cash and cash equivalents
Hedge accounted derivatives
Derivatives held for trading

Non-current financial liabilities
Long-term debt
Hedge accounted derivatives
Derivatives held for trading

Current financial liabilities
Current debt
Trade and other payables
Hedge accounted derivatives
Derivatives held for trading

Category in
accordance
with IAS 39

Amortized
cost

c)
b)
e)
d)

c)
b)
b), c)
e)
d)

f)
e)
d)

f)
f)
e)
d)

-
11
-
-

-
754
607
-
-
1 372

3 270
-
-

893
997
-
-
5 160

Categories in accordance with IAS 39:
a) Available-for-sale financial assets
b) Loans and receivables
c) Financial assets at fair value through profit or loss
d) Derivatives held for trading
e) Hedge accounted derivatives
f) Other financial liabilities

Fair value
recognized
in other
comprehensive
income

Fair value
recognized
through
profit or loss

Carrying
amount
on Dec 31,
2013

Fair value
on Dec 31,
2013

-
-
0
-

-
-
-
1
-
4

-
4
-

-
-
3
-
7

2
-
-
2

17
-
-
-
19
41

-
-
11

-
-
-
31
42

2
11
0
2

17
754
607
1
19
1 433

3 270
4
11

893
997
3
31
5 210

2
11
0
2

17
754
607
1
19
1 433

3 189
4
11

893
997
3
31
5 129

Cost

-
-
-
-

-
-
-
-
-
17

-
-
-

-
-
-
-
-

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

2012
€ million

Non-current financial assets
Available-for-sale financial assets
Investments at fair value through profit
or loss
Trade and other receivables
Hedge accounted derivatives
Derivatives held for trading

Non-current financial liabilities
Long-term debt
Hedge accounted derivatives
Derivatives held for trading

Current financial liabilities
Current debt
Trade and other payables
Hedge accounted derivatives
Derivatives held for trading

Category in
accordance
with IAS 39

Amortized
cost

c)
b)
e)
d)

c)
b)
b), c)
e)
d)

f)
e)
d)

f)
f)
e)
d)

-
172
-
-

-
1 033
222
-
-
1 428

2 935
-
-

718
1 374
-
-
5 027

Measured at

Fair value
recognized
in other
comprehensive
income

Fair value
recognized
through
profit or loss

Carrying
amount
on Dec 31,
2012

Fair value
on Dec 31,
2012

-
-
2
-

-
-
-
16
-
25

-
0
-

-
-
3
-
3

2
-
-
0

59
-
-
-
37
98

-
-
39

-
-
-
22
61

2
172
2
0

2
174
2
0

59
1 033
222
16
37
1 566

2 935
0
39

718
1 374
3
22
5 094

59
1 033
222
16
37
1 568

2 883
0
39

718
1 374
3
22
5 042

Cost

-
-
-
-

-
-
-
-
-
14

-
-
-

-
-
-
-
-

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

15. Fair value hierarchy of financial assets and liabilities

2013
€ million

Financial assets measured at fair value
Available-for-sale financial assets
Investments at fair value through profit or loss
Hedge accounted derivatives
Derivatives held for trading

Financial assets not measured at fair value
Non-current trade and other receivables

Financial liabilities measured at fair value
Hedge accounted derivatives
Derivatives held for trading

Carrying
amount

Level 1

Level 2

Level 3

Total

Fair value

2
19
1
22
45

7
42
50

1
4
-
-
5

-
-
-

2
-
1
22
25

7
42
50

0
15
-
-
15

-
-
-

2
19
1
22
45

7
42
50

3 189

Financial liabilities not measured at fair value
Long-term debt

3 270

386

2 803

The fair value of long-term debt is determinated by using discounted cash flow method and taking into consideration the market credit spread
applied for Outokumpu. The fair value of long-term non-current trade and other receivable is determinated by discounted cash flow method and
taken into account credit risk of the counterparty. The carrying amounts of current financial assets and current financial liabilities not measured
at fair value are reasonable estimation of their fair value.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

2012
€ million

Financial assets measured at fair value
Available-for-sale financial assets
Investments at fair value through profit or loss
Hedge accounted derivatives
Derivatives held for trading

Financial assets not measured at fair value
Non-current trade and other receivables

Financial liabilities measured at fair value
Hedge accounted derivatives
Derivatives held for trading

Carrying
amount

Level 1

Level 2

Level 3

Fair value

7
61
19
37
124

172

3
60
60

3
6
-
-
9

-
-
-

-
-
19
37
56

3
60
63

Total

7
61
19
37
124

4
55
-
-
59

160

172

-
-
-

3
60
63

2 883

Financial liabilities not measured at fair value
Long-term debt

2 935

385

2 498

Reconciliation of changes on level 3
2013

€ million
Carrying value on Jan 1
Fair value changes
Transfer to level 2
Disposals

Carrying balance on Dec 31

Available-for-sale
financial assets

Investment at fair value
through profit or loss

4
-2
-2
-0

55
-41
-
-

Accounting principles contain information on how fair values are defined on different levels in the fair value hierarchy. There were no transfers
between level 1 and 2 during the year.

The fair value of the level three relates mostly investments in Talvivaara Sotkamo Ltd. Valuation of the investment to Talvivaara Sotkamo Ltd
is based on the share value of Talvivaara Mining Company Plc. Change of +/- 10% in the share price of Talvivaara Mining Company Ltd leads to
an increase of EUR 1 million or decrease of EUR 1 million in the value. The ownerships in energy producing companies are valued at fair value.
Valuation model of energy producing companies is based on discounted cash flow model, which takes into account the future prices of electricity,
discount rate and inflation rate, the estimated amount of electricity to be received and estimated production costs. The valuation model is very
sensitive to electricity price, +/- 10% change in electricity price leads to an increase of EUR 1 million or decrease of EUR 0 million in valuation.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

16. Available-for-sale financial assets

€ million
Carrying value on Jan 1
Translation differences
Additions
Available-for-sale assets from acquired subsidiaries
Fair value changes
Disposals
Impairments
Gains and losses from disposals reclassified to profit or loss
Carrying value on Dec 31

Non-current listed equity securities
Non-current unlisted equity securities
Current available-for-sale financial assets

Listed equity securities, at fair value
Unlisted equity securities and other investments, at fair value
Unlisted equity securities and other investments, at cost

Fair value reserve in equity
€ million
Fair value
Cost
Fair value reserve before tax
Deferred tax liability
Fair value reserve

2013

2012

21
0
2
-
-3
-0
-2
0
19

0
15
4
19

1
2
17
19

23
0
4
0
-4
-0
-
-1
21

1
15
5
21

3
4
14
21

2013

2012

19
20
-1
0
-1

21
20
1
0
1

Unlisted equity securities and other investments at cost consist of EUR 12 million holdings in Voimaosakeyhtiö SF providing ownership to
Fennovoima Oy. As the Fennovoima project is in early stage, the fair value cannot be reliably measured. Unlisted equity securities at fair value
consist of holdings in energy producing companies and other investments not listed in any stock exchange. The valuation method of these
investments is described in Note 15. Fair value hierarchy of financial assets and liabilities.

17. Investments at fair value through profit or loss

€ million
Carrying value on Jan 1
Translation differences
Additions
Subsequent fair value changes of Talvivaara Sotkamo Ltd
Other movement
Carrying value on Dec 31

2013

61
-0
0
-41
-2
19

2012

106
0
1
-52
6
61

Subsequent valuation of the 16% ownership in Talvivaara Sotkamo Ltd reflects the changes in the share price of Talvivaara Mining Company Plc,
which on December 31, 2013 was EUR 0.08 per share.

In December 2013, the district court of Espoo took the decision to commence the corporate reorganization process in respect of Talvivaara
Sotkamo Ltd. The corporate reorganization process of Talvivaara Mining Company Plc commenced in November 2013. Reports on the financial
status of both companies are to be compiled by March 28, 2014, and proposals for the respective reorganization programs by May 28, 2014.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

18. Share-based payment plans

During 2013 Outokumpu’s share based programs included Share-
based Incentive Program 2009–2013 (plan 2011–2013); Performance
Share Plan 2012 (plans 2012–2014 and 2013–2015); Resticted
Share Program 2010–2013; and Restricted Share Pool Program
(plans 2012–2014 and 2013–2015). Share-based programs are part
of the Group’s incentive and commitment-building system for key
employees. The objective of the programs is to retain, motivate and
reward selected employees for good performance which supports
Outokumpu’s strategy.

Regarding the Share-based Incentive program, the targets set for the
earnings period 2010–2012 were not met and therefore no reward
was paid to the participants in 2013.

The EBIT criterion previously applied in the on-going earnings period
2011–2013 of the Share-based Incentive Program and in the on-going
plan 2012–2014 of the Performance Share Plan was for the year 2013
replaced with the EBITDA criterion. The targets set for the earnings
period 2011–2013 were not met and therefore no reward will be paid
to the participants in 2014.

applied in the plan are EBITDA, Outokumpu share-price adjusted
with dividends and the achievement of Inoxum transaction related
synergies. The share rewards possibly to be delivered based on the
plan will be delivered in the spring 2016.

Under the Restricted Share Program 2010–2013 Outokumpu
granted restricted shares to retain, reward and motivate selected key
employees. In line with the terms and conditions of the program, in
total 48 000 shares were delivered to the program participants during
fall 2013. In addition, the participants received cash equaling the
taxes and social security charges imposed on the share award. No
more shares will be granted based on this program.

The Board of Directors will decide on the start of a new plan for the
Performance Share Plan 2012 and the Restricted Share Pool program
during April 2014.

The total estimated fair value of share-based incentive programs and
restricted share plans is EUR 3 million on December 31, 2013. This
value is recognized as an expense in the statement of income during
the vesting periods.

In 2013, the Board approved the commencement of the Plan 2013–
2015 of the Performance Share Plan and its participants, 164
Outokumpu Group managers and key employees. The earning criteria

Detailed information of the share-based incentive programs can be
found in Outokumpu’s home page www.outokumpu.com.

Share-based payments included in employee benefit expenses
€ million
Equity-settled share-based payment transactions
Cash-settled share-based payment transactions

Total carrying amount of liabilities for cash-settled arrangements on Dec 31

2013

2012

-1
-0
-1

-1
0
-0

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Share-based incentive programs

The general terms and conditions of the share-based incentive programs

Grant date
Vesting period
Vesting conditions

Market

Non-market

Other relevant conditions

Exercised

Share-based Incentive Program for
2009–2013

Vesting period
2011–2013

Performance Share Plan 2012
Vesting period
2012–2014

Vesting period
2013–2015

Jan 31, 2011
Jan 1, 2011–Dec 31, 2013

March 31, 2012
Jan 1, 2012–Dec 31, 2014

March 31, 2013
Jan 1, 2013–Dec 31, 2015

Total shareholder return (TSR)
ranking among peers.
Outokumpu Group earnings per
share (EPS) for the year 2011,
EBIT for the year 2012 and
EBITDA for the year 2013.
A salary-based limit for the
maximum benefits.
In shares and cash.

Total shareholder return (TSR)
ranking among peers.
EBIT for the year 2012 and
EBITDA for the year 2013.

Outokumpu share-price adjusted
with dividends.
Annual EBITDA for the year 2013
and achievement of Inoxum
transaction related synergies.

A salary-based limit for the
maximum benefits.
In shares.

The fair value of share-based incentive programs are determined using statistical modeling.

Number of shares to be distributed within share-based incentive programs
Number of shares 1)
On Jan 1
Shares granted to the programs
Shares rewarded to the participants 2)
Shares cancelled
On Dec 31

2013

7 014 659
13 550 500
-48 000
-2 404 230
18 112 929

2012

4 140 600
4 650 523
-
-1 776 464
7 014 659

1) Figures restated according to Share issue exercised in March–April 2012.
2) 8 000 shares of the 48 000 shares rewarded to the participants in 2013 had not been delivered to the participants as of December 31, 2013.

The figures include Share-based Incentive Program 2009–2013, Performance Share Plan 2012 and restricted share plans.

Share values used in valuations

Incentive share fair value at the grant date, €
Share price at the end of the reporting period, €

Share-based Incentive Program
for 2009–2013

Vesting period
2011–2013

3.56
0.41

Performance Share Plan 2012
Vesting period
2012–2014

1.57
0.41

Vesting period
2013–2015

0.59
0.41

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

19. Financial risk management, capital management and
insurances

The objectives of financial risk management are to reduce the impact
of price fluctuations and other factors of uncertainty in financial
markets on earnings, cash flows and capital structure, as well as to
ensure sufficient liquidity. The objective of capital management is to
secure the ability to continue as a going concern and to optimize the
cost of capital in order to enhance value to shareholders. The main
objectives of insurance management are to provide protection against
catastrophe risks and to reduce earnings variation caused by hazards.

The Board has approved the risk management policy, which defines
responsibilities, risk management process and other main principles
of risk management. The Board oversees risk management on a
regular basis and the Chief Financial Officer is responsible for
implementation and development of financial risk management. In
2013, the Group’s Financial Risk Policy was reviewed and changes to
it were approved by the Chief Executive Officer. Main changes to the
policy were related to metal risk management.

Financial risks consist of market, country, credit, liquidity and
refinancing risks. Subsidiary companies hedge their currency risk
against Treasury and Risk Management function, which does most
of the Group’s derivative contracts with banks and other financial
institutions. The function is also responsible for managing liquidity and
refinancing risk as well as interest rate, fuel and emission allowance
price risk. Credit risk management is partly centralized and Treasury
and Risk Management function monitors the risk. Energy function
is responsible for managing electricity price risk and Raw Material
Procurement function is responsible for managing Group’s metal price
risk. In addition, metal hedging activities have been carried out by
Outokumpu Nirosta, Outokumpu VDM and Acciai Speciali Terni.

Treasury and Risk Management function sources a substantial part
of the Group’s insurances. The most important insurance lines are
property damage and business interruption, liability, marine cargo and
credit. The Group’s captive insurance company Visenta Försäkrings AB
retains a selected part of risk.

Exposure to financial risk is identified as part of the Group’s
risk management process. This approach aims to secure, that
any emerging risk is identified early and each significant risk is

described, quantified, managed and communicated properly. In risk
quantification, both likelihood of an adverse event and the impact
on that event are assessed. For market risk, the adverse scenario is
based on a predefined price change in a risk factor, e.g. in exchange
rate or metal price. Furthermore, the impact analysis is based on
measured underlying exposure, e.g. the amount of forecasted currency
cash flow or the amount of net debt by currency. The likelihood of the
adverse scenario is based on the market volatility of the underlying
risk factor. Eventually, the impacts of key risks are quantified in terms
of changes in net earnings, cash flows and gearing.

Market risk

Market risk is caused by changes in foreign exchange and interest
rates, as well as commodity, energy and security prices. These price
changes may have a significant impact on Group’s earnings, cash
flows and capital structure.

Outokumpu uses derivative contracts to mitigate the above-mentioned
impacts of market price changes. Hedge accounting is applied to
committed currency denominated electricity purchases (EUR/SEK
spot rate risk), and to limited extend sales of stainless steel products
and purchases of raw materials (nickel price). The derivatives, for
which hedge accounting is not applied, have been entered into for
the purpose of reducing impacts of market price changes on earnings
and/or cash flows related to business or financing activities. The use
of non-hedge-accounted derivatives may cause timing differences
between derivative gains/losses and the earnings impact of the
underlying exposure.

Stainless steel business is highly cyclical, which in many cases result
in significant changes in the underlying exposures to different market
risk factors. Consequently applying hedging policies in a consistent
way may, from time to time, lead to rather big changes in the amounts
of outstanding and reported derivate contracts. Nominal amounts and
fair values of derivatives are presented in Note 20. Fair values and
nominal amounts of derivative instruments. Sensitivity of financial
instruments to market prices is described in the following table.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Sensitivity of financial instruments to market risks

€ million
+/-10% change in EUR/USD exchange rate
+/-10% change in EUR/SEK exchange rate
+/-10% change in USD nickel price
+/-10% change in electricity price
+/-10% change in share prices
+/-1% parallel shift in interest rates

2013

2012

In profit or loss

Other
comprehensive
income

In profit or loss

Other
comprehensive
income

-2/+2
-4/+5
-7/+7
-
+1/-1
-23/+23

-
-20/+24
+3/-3
+1/0
+0/-0
-

+9/-11
-6/+8
-1/+1
-
+4/-4
-19/+19

+0/-0
-22/+27
+4/-4
+4/-2
+1/-1
-

This sensitivity analyses applies to financial instruments only. Other assets, liabilities and off-balance sheet items such as sales and purchase
orders, are not in the scope of these analyses. The calculations are net of tax. During the year the volatility for nickel has been in the range 15–
25%. With +/-20% change in USD nickel price, the effect in profit or loss is about EUR-14/+14 million for nickel derivatives.

Foreign exchange rate risk

A major part of the Group’s sales is in euros and US dollars. A
significant part of expenses arise in euros, US dollars, Swedish
kronas, Mexican pesos, Chinese yuans and British pounds. In Europe,
Outokumpu’s products are priced mainly in euros and therefore costs
in Swedish krona and British pounds give rise to a significant foreign
exchange risk impacting profitability and cash flows. Following the
ramp-up of ferrochrome production, the US dollar price risk relating to
forecasted cash flows has increased and is significant.

Outokumpu hedges most of its fair value risk, e.g. risks related to
currency denominated accounts receivables, accounts payables,
interest-bearing debt, cash and loan receivables. Cash flow risk
related to firm commitments is hedged to a large extent, whereas
forecasted and probable cash flows can be hedged selectively and
with separate decisions only. The Group’s fair value currency position
is presented on a more detailed level in the table below.

Foreign exchange positions of EUR-based companies
2013

€ million
Trade receivables and payables
Loans and bank accounts 1)
Derivatives 2)
Net position

SEK

8
303
-43

268

USD

-49
1 157
-1 082

GBP

13
-87
51

-23

Other

18
-108
100

Foreign exchange positions of SEK-based companies
2013

€ million
Trade receivables and payables
Loans and bank accounts 1)
Derivatives 2)
Net position

SEK

53
13
-119

-53

USD

12
8
-21

-2

GBP

Other

-4
0
-3

-6

5
1
-11

-4

1) Includes cash, interest-bearing debt and receivables.
2) Includes derivatives to hedge committed cash flows.

SEK

6
456
-141
321

SEK

49
-15
-127
-93

2012

USD

-258
976
-852
-134

2012

USD

7
21
-37
-9

GBP

14
-38
-20
-44

Other
32
-96
60
-4

GBP

Other

-4
1
1
-3

12
2
-21
-7

Outokumpu has income translation risk in US dollars and based on the policy this risk is not hedged. The Group has significant currency
denominated net investment positions in US dollars, Swedish kronas, British pounds, Chinese yuans and Australian dollars. At the end of the year
there were no hedges related to net investment exposure. The effective portion of gains (EUR 15 million, net of tax) on earlier financial year net
investment hedges is recognized in other comprehensive income. Currency denominated debt at subsidiary companies and changes in currency
prices have an impact on Group’s capital structure. This exposure is also monitored centrally.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Interest rate risk

The Group’s interest rate risk is monitored as cash flow risk i.e. impact
of interest rate changes on net interest expenses, and fair value risk
i.e. impact of interest rate changes on fair value of monetary assets
and liabilities. In order to manage the balance between risk and cost
in an optimal way, a significant part of loans has short-term interest
rate as a reference rate. This approach typically helps to reduce
average interest rate of debt while it may also provide some mitigation
against a risk of adverse changes in business environment, which
tends to result to decrease in short-term interest rates.

Cash flow risk related to financial instruments is reduced with interest
rate swaps, where Outokumpu pays fixed rate and receives variable
rate. In 2013, Outokumpu entered into five fixed rate payer swaps
totaling USD 250 million and a EUR 100 million swaption transactions
in order to increase the duration of debt.

Euro, US dollar, Swedish krona and Chinese yuan have substantial
contribution to the overall interest rate risk. Approximately 84% of the
Group’s interest-bearing liabilities have an interest period of less than
one year and the average interest rate of long-term interest bearing
debt on December 31, 2013 was 4.3% (Dec 31, 2012: 4.2%). Interest
rate position is presented on a more detailed level in the table below.
In addition to exposures related to market level of interest rates,
Outokumpu is exposed to market level of credit margins. The volatility
of credit margins has been high and combined with the increase in
debt this risk is significant. The anticipated financing measures are
expected to lead to more stable credit margins.

Currency distribution and re-pricing of outstanding net debt

Dec 31, 2013

€ million
Currency
EUR
SEK
USD
Others

Net debt 1)

Derivatives 2)

Average rate, %

Duration, year

Rate sensitivity 3)

3 244
441
-183
39

3 540

-1 403
305
1 241
-129

4.6
3.9
0.5
13.5

0.9
0.7
0.4
0.2

12.5
5.1
6.4
-0.8

23.2

Dec 31, 2012

Net debt 1)

Derivatives 2)

Average rate, %

Duration, year

Rate sensitivity 3)

2 804
515
-135
80
3 264

-1 361
510
968
-94
22

4.4
3.5
6.2
9.8

1.1
1.1
0.1
0.0

7.2
4.6
7.0
-0.2
18.6

1) Includes cash and cash equivalents, interest-bearing debt and receivables.
2) Net derivative liabilities include nominal value of interest rate and cross currency swaps, interest rate options and currency forwards earmarked to the

interest-bearing net debt. Currency forwards are not included in average rate calculation.

3) The effect of one percentage point increase in interest rates to financial expenses over the following year.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Commodity and energy price risk

Security price risk

Outokumpu has investments in equity securities and loan receivables.
On December 31, 2013 the biggest investments were in Talvivaara
Sotkamo Ltd, Voimaosakeyhtiö SF and OSTP Holding Oy. The captive
insurance company Visenta Försäkrings AB has investments in highly
rated and liquid fixed income securities, such as bonds issued by
governments.

Country and credit risk

All external sales must be covered by approved credit limits or secured
payment terms. Most of the outstanding trade receivables have been
secured by credit insurances, which typically cover some 90% of an
insured amount. Part of the credit risk related to trade receivables
is managed with bank guarantees, letters of credit and advance
payments.

On December 31, 2013 the maximum exposure to credit risk of trade
receivables was EUR 564 million (2012: EUR 853 million). Large part
of trade receivables is covered by insurance or by secured payment
terms, however there are also unsecured trade receivables based on
separate decisions. For part of accounts receivable Outokumpu uses
factoring, which transfers substantial part of all risks and rewards
to the buyer of the receivables. The Group’s trade receivables are
generated by a large number of customers. However, there have been
a few significant customer credit risk concentrations during the year
2013 and at the end of the year. Age analysis of accounts receivables
is in Note 22. Trade and other receivables.

Treasury and Risk Management function monitors credit risk related
to receivables from financial institutions. Outokumpu seeks to reduce
these risks by limiting the counterparties to banks and other financial
institutions with good credit standing. For the derivative transactions,
Outokumpu prefers to have ISDA framework agreements in place.
Investments related to liquidity management are made in short-term
deposits and liquid financial instruments with low credit risk.

Outokumpu uses a substantial amount of raw materials and energy
for which prices are determined in regulated markets, such as London
Metal Exchange and NASDAQ OMX Commodities Europe. Timing
differences between raw material purchase and pricing of products;
changes in inventory levels and values; the capability to pass on
changes in raw material and energy prices to end-product prices; and
the impact on gross profit caused by the level of alloy metal prices and
the extent of purchase discounts (e.g. related to stainless steel scrap
purchases) all affect risks and hedging activities.

Nickel price is the most important commodity price risk for
Outokumpu. A majority of stainless steel sales contracts include an
alloy surcharge clause, with the aim of reducing the risk arising from
the time difference between raw material purchase and product
delivery. In 2013 Outokumpu introduced the daily alloy surcharge
pricing model, which aims to reduce Outokumpu’s metal price risk
while helping customers to manage their risk. Outokumpu’s exposure
to nickel price is caused by price fixed purchase orders, nickel-
containing material in inventories, price fixed sales orders and
forecasted but not yet ordered deliveries for the upcoming few weeks.
Following the review of hedging policy this long position in nickel has
been reduced with derivatives so that only some part of inventories
has been left unhedged. Risk related to purchase discounts and the
level of nickel price is not hedged.

Nickel derivatives and LME warehouse warrants have been used to
manage impacts of price changes on earnings. Metal prices have a
major impact on the Group’s working capital and thus cash flow from
operations. This risk has not been hedged with derivatives, however
strict working capital management helps to reduce the cash flow
risk. Outokumpu has managed molybdenum risk with similar type of
principles, which have been applied in managing nickel price risk.
The financial market for molybdenum is far less liquid compared with
nickel, which in many cases has led to decision not to use derivatives
in managing this particular risk. The underlying exposure to changes
in metal prices varies a lot due to the cyclical nature of stainless steel
business.

Outokumpu’s main sites in Europe are participating in the EU
Emissions Trading Scheme (ETS). Realized and forecasted carbon
dioxide emissions and granted emission allowances are monitored
centrally. Emission allowance price risk is managed with the aim of
securing the cost of compliance for the current trading period and
reducing the cost of compliance e.g. by swapping EUAs to Kyoto
credits within the limits set in ETS.

The Group has energy intensive production processes using electricity,
propane, natural gas and other fuels. The Group hedges both propane
and natural gas price risk by locking future purchase prices with
derivative contracts. Electricity used by the Nordic production sites
is purchased and managed centrally while at other sites electricity
is purchased locally. Electricity price risk is reduced with fixed price
supply contracts and ownerships in energy producing companies.
Electricity consumption of the Group’s Nordic production sites was 3.3
TWh (2012: 2.8 TWh).

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Liquidity and refinancing risk

Outokumpu raises most of its interest-bearing debt centrally. The
Group seeks to reduce liquidity and refinancing risk by having
sufficient amount of cash and credit lines available and by having
balanced maturity profile of debt. Efficient cash and liquidity
management is also reducing liquidity risk. Finance plans are
prepared and reviewed quarterly with a particular focus on the Group’s
forecasted cash flows, projected funding requirements and planned
funding transactions during the forecast period. The amount and
adequacy of liquidity reserves, the amounts of scheduled annual
repayments of long-term debt as well as forecasted gearing levels
are key targets and outcomes of the planning. Low profitability
combined with high gearing required significant financing measures to
be initiated during the last quarter of 2013. These measures aim to
reduce refinancing risk in 2014–2016 and to increase liquidity.

In July 2013, Outokumpu Oyj signed a EUR 900 million revolving credit
facility maturing in June 2015. Also a bilateral facility of EUR 100
million maturing in January 2014 became available. In October 2013,
Outokumpu Oyj agreed a EUR 50 million pension loan and amended
maturity date of a certain bilateral loan to January 2014. In November
2013, Outokumpu signed a sale and lease back transaction related
to a sale of local electricity grid at Tornio site. This transaction is
reported as a financial lease liability of EUR 63 million. In December
2013, Outokumpu Oyj signed an amendment to the backup facility
with ThyssenKrupp, shifting the maturity to January 2014. The EUR
900 million facility includes two financial covenants, one based on
gearing and the other on liquidity. Same financial covenants are
included in to certain other loans and facilities. There have been no
breaches of financial covenants in 2013.

At the end of November Outokumpu announced comprehensive plans
to strengthen the Group’s balance sheet. The financing measures
initiated include refinancing of the EUR 900 million revolving facility,
extending maturities of bilateral loans amounting some EUR 600
million and agreeing a new EUR 500 million liquidity facility. The
above mentioned financing measures are subject to successful
closing of Terni and VDM transaction. The extended maturities are
planned for February 2017, which is expected to have significant
reduction in refinancing risk during 2014–16. In connection with
financing measures Outokumpu Oyj is planning to grant security to
the 2015 and 2016 bonds as well as to majority of its bank loans.
The security is expected to include pledges on subsidiary shares
and certain real estates as well as guarantees granted by several
subsidiary companies. In addition, the upcoming fully committed
and underwritten rights issue of EUR 650 million will have a positive
impact on both capital structure and liquidity. The right issue is
subject to EGM approval and successful closing Terni and VDM
transaction.

The main funding programs and credit facilities are: a Finnish
Commercial Paper Program totaling EUR 800 million, a committed
revolving credit facility of EUR 900 million, a committed revolving
backup facility of EUR 160 million granted by ThyssenKrupp Nederland
Holding B.V., two committed revolving credit facilities of EUR 100
million each, a committed revolving credit facility of EUR 46 million
and two committed revolving credit facilities totaling SEK 2 933
million. As at December 31, 2013 Outokumpu had a total amount of
some EUR 1.6 billion committed credit facilities. Of these committed
credit facilities some EUR 310 million were unutilized in the end of
2013. More information on liquidity and refinancing is presented in
the following table.

Contractual cash flows

2013
€ million
Bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Loans from related party
Commercial papers
Trade payables
Other liabilities
Interest payments and facility charges
Interest rate derivatives
Other derivatives

Balance
Dec 31

399
1 645
223
266
1 443
187
815
1
62
26
2

2014

2015

2016

2017

2018

2019–

-
493
31
22
160
187
815
1
109
22
1

250
786
35
31
-
-
-
0
85
5
2

1 841

1 194

150
80
37
11
204
-
-
-
78
1
0

560

-
204
33
89
204
-
-
-
50
-
-

580

-
34
29
5
204
-
-
-
45
-
-

318

-
48
59
108
672
-
-
-
359
-
-

1 247

On December 31, 2013, the Group had cash and cash equivalent marketable securities amounting to EUR 607 million and committed and
available credit facilities, available and undrawn TyEL pension loans in Finland, and other agreed and undrawn loans totaling EUR 399 million.
The future interest cash flows include interest payments of ThyssenKrupp loan note some EUR 210 million, which can be deferred. The loan note
is planned to be used as a consideration for the planned transaction during the first quarter of 2014. However, at year end the loan note was
classified as long term debt and cash flows reported according to remaining contractual maturity.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

2012
€ million
Bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Loans from related party
Commercial papers
Trade payables
Other liabilities
Interest payments and facility charges
Interest rate derivatives
Other derivatives

Balance
Dec 31

399
1 286
210
218
1 230
301
1 210
10
21
39
-32

2013

-
362
37
14
-
301
1 210
4
77
10
-31
1 983

2014

2015

2016

2017

-
366
31
21
-
-
-
0
59
25
-2
500

250
200
35
30
-
-
-
5
62
4
-2
584

150
75
30
10
204
-
-
-
68
2
0
540

-
209
26
88
204
-
-
-
40
1
-
568

2018–

-
75
51
55
822
-
-
-
421
-
-
1 423

On December 31, 2012, the Group had cash and cash equivalent marketable securities amounting to EUR 222 million and committed and
available credit facilities, available and undrawn TyEL pension loans in Finland, and other agreed and undrawn loans totaling EUR 1 254 million.
The future interest cash flows include interest payments of ThyssenKrupp loan note some EUR 260 million, which can be deferred.

Capital management

The objective of the capital management is to secure the ability to
continue as a going concern and to optimize the cost of capital in
order to enhance value to shareholders. As part of this objective, the
Group seeks to maintain access to loan and capital markets at all
times despite the cyclical nature of the stainless steel industry. The
Board of Directors reviews the capital structure of the Group on a
regular basis.

The Group’s financial target is to maintain the gearing ratio below
75%. Financial objectives include also a return on capital employed of
over 13% and always the best among peers. Weighted average cost of
capital (WACC) is defined and applied to monitor efficiency of capital
use and to provide market driven guidance for managing capital
structure, making capital allocation decisions and assessing actions
on working capital management.

Capital structure and debt capacity are taken into account when
deciding on new investments. Practical tools to manage capital
include dividend policy, share buybacks and share issues. Debt
capital is managed considering the requirement to secure liquidity and
the capability to refinance maturing debt. Revolving facilities as well
as some other loans include two financial covenants, which relate to
gearing and liquidity.

The ThyssenKrupp loan note of EUR 1.28 billion is subordinated to
defined priority debt, which as at December 31, 2013 included e.g.
bank loans, bonds, pension loans, financial leases and commercial
paper of Outokumpu Oyj.

The Group’s internal capital structure is reviewed on a regular basis
with an aim to optimize it e.g. by applying internal dividends and equity
adjustments. Net investment and debt in foreign entities is monitored
and Outokumpu has capability to hedge this translation risk.

Outokumpu’s captive insurance company, Visenta Försäkrings AB,
has to comply with capital adequacy requirements set by authority.
During the reporting period Visenta has been well capitalized to meet
externally imposed requirements.

The management monitors Group’s capital structure on the basis of
gearing ratio, which is calculated as net debt divided by total equity.
Net debt is calculated as total current and long-term debt less cash
and cash equivalents.

On December 31, 2013, net interest-bearing debt was EUR 3 556
million (2012: EUR 3 431 million), total equity EUR 1 891 million
(2012: EUR 2 953 million) and gearing 188.0% (2012: 116.2%). The
increase in gearing during 2013 resulted primarily from negative
net earnings. The upcoming fully committed and underwritten rights
issue of EUR 650 million will have a positive impact on both capital
structure and liquidity. The right issue is subject to EGM approval and
successful closing Terni and VDM transaction.

Insurances

The Group’s business is capital intensive and key production
processes are rather tightly integrated and have interdependencies.
Property damage and business interruption is the most important
insurance line and substantial part of the insurance premiums relate
to these types of risks. Business operations, sales to auto industries
in particular, may cause significant liability risk. Outokumpu aims to
partly mitigate liability risk by having reasonable insurances in place.
Other significant insurance lines include marine cargo and credit.

Visenta Försäkrings AB can act as direct insurer and as reinsurer. The
captive insurance company is registered in Sweden and it has assets
worth some EUR 21 million. Visenta underwrites e.g. property and
business interruption insurance policies.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

20. Fair values and nominal amounts of derivative instruments

€ million
Currency and interest rate derivatives
Currency forwards incl. embedded
derivatives
Interest rate swaps
Cross-currency swaps
Currency options, bought
Currency options, sold
Interest options, bought
Interest options, sold

Metal derivatives

Forward and futures nickel contracts
Forward and futures molybdenum
contracts
Forward and futures copper contracts
Forward and futures cobalt contracts
Forward and futures aluminum contracts

Emission allowance derivatives

Propane derivatives

Natural gas derivatives

Total derivatives

Less long-term derivatives

Currency forwards
Interest rate swaps
Cross currency swaps
Interest options, bought
Interest options, sold
Forward and futures nickel contracts
Emission allowance derivatives
Natural gas derivatives

Short-term derivatives

Positive
fair value

2013

Negative
fair value

Net
fair value

2012

Net
fair value

2013
Nominal
amounts

2012

Nominal
amounts

16
1
0
0
-
1
-

-
-
-
-

0
1
-
1
-
0
-
-
21

17
9
15
-
0
-
3

-
-
-
-

4
9
-
-
2
0
-
-
35

-1
-9
-15
0
-0
1
-3

-2

-
-
-
-

-1

-27

-4
-8
-
1
-2
-0
-
-
-14

15
-16
-19
-
-
0
-4

2 518
714
67
3
3
290
290

3 099
543
69
-
-
193
93

Tonnes

21 865

21 432

-
-
-
-

12
600
16
50

725 000

250 000

25 000

20 000

MMBtu

1 372 182

2 164 493

-0
0
-0
0

-1

-8

1
-16
-19
0
-2
0
-0
-0
30

Fair values are estimated based on market rates and prices on reporting date, discounted future cash flows and, in respect of options, on
evaluation models.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Hedge accounted cash flow hedges

Outokumpu has hedged currency spot price risk related to SEK
denominated long-term electricity supply agreement for the Finnish
production sites. The currency derivatives, which hedge the currency
risk, mature in other periods (years 2014–2015) than the underlying
cash flows of electricity purchases. The derivatives will be prolonged
later to mature at the same period as the underlying cash flows. The
effective portion of hedges is recognized in other comprehensive

income net of tax and will be reclassified to profit and loss as
adjustment to purchases at the same period as the underlying
hedged cash flows affect income. During 2013, effective portion of
EUR 4 million gain was recognized in profit or loss as adjustment to
purchases (2012: gain of EUR 3 million). The ineffective portion of
the hedges, gain of EUR 4 million, (2012: gain of EUR 6 million) is
recognized in other operating income and expenses.

Maturity < 1 year
Maturity 1–5 years
Maturity 5–10 years

2013

2012

Nominal
amount,
SEK million

Fair value of out-
standing cash
flow hedges,
€ million

390
1 562
390
2 343

1
-4
-1
-4

Other
compre-
hensive
income,
€ million

2
8
2
12

Nominal
amount,
SEK million

Fair value of out-
standing cash
flow hedges,
€ million

390
1 562
781
2 733

2
8
5
15

Other
compre-
hensive
income,
€ million

3
11
7
21

Outokumpu has also some minor cash flow hedges mainly used to
hedge future cash flows against commodity price risks arising from
fixed price sales. Cash flows from future transactions are currently
hedged for a maximum of 36 months. At the end of the reporting

period, the fair value of these hedging instruments was EUR 2 million
negative. Ineffective portion of these hedges gain EUR 0 million is
recognized in other operating income and expenses.

Master netting agreements and similar agreements

Outokumpu enters into derivative transactions with most
counterparties under ISDA agreements. In general the amounts owed
by each counterparty on a single day in respect of all transactions
outstanding in the same currency are same currency are aggregated
into a single net amount that is payable by one party to the other.
In certain circumstances, e.g. when a credit event such as a default
occurs, all outstanding transactions under the agreement are
terminated, the termination value is assessed and only a single

amount is payable in settlement of all transactions. ISDA agreements
do not meet the criteria for offsetting in the statement of financial
position. The right to offset is enforceable only on the occurrence
future credit events. The following table sets out the carrying amounts
of recognized financial instruments that are subject to the agreements
described above.

€ million

Derivative assets

Gross amounts of recognized financial assets in the statements of financial position
Related financial instruments that are not offset

Derivative liabilities

Gross amounts of recognized financial liabilities in the statements of financial position
Related financial instruments that are not offset

1) 2012 figures exclude VDM, which is included in the derivative assets and
liabilities in the consolidated statement of financial position.

2013

2012 1)

23
19
5

50
19
31

30
24
6

57
24
33

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

21. Inventories

€ million
Raw materials and consumables
Work in progress
Finished goods and merchandise
Net realizable value reserve
Advance payments

2013

314
508
423
-29
1
1 216

2012 1)

581
962
789
-10
6
2 328

1) Restated due to completing the Inoxum acquisition accounting (see Note 4. Acquisitions and disposals).

The most important commodity price risk for Outokumpu is caused by fluctuation in nickel and other alloy prices. Majority of stainless steel sales
contracts include an alloy surcharge clause, with the aim of reducing the risk arising from the time difference between raw material purchase and
product delivery. However, the risk is remarkable, because the delivery cycle in production is longer than the alloy surcharge mechanism expects.
Thus, only the price for the products to be sold in near future is known. That is why a significant part of the future prices for the products to be
sold is estimated according to management’s best knowledge in net realizable value (NRV) calculations. Due to fluctuation in nickel and other
alloy prices, the realized prices can deviate significantly from what has been used in NRV calculations on the closing date.

22. Trade and other receivables

€ million

Non-current

Loans receivable
Other receivables

Current

Trade receivables
VAT receivable
Income tax receivable
Loans receivable
Prepaid insurance expenses
Other accruals
Other receivables 1)

Allowance for impairment of trade receivables

Allowance on Jan 1
Acquired subsidiaries
Additions
Disposed subsidiaries
Deductions
Recovery of doubtful receivables
Reclassification to assets held for sale
Allowance on Dec 31

Age analysis of trade receivables
Neither impaired, nor past due
Past due 1–30 days
Past due 31–60 days
More than 60 days

1) 2012 Restated due to completing the Inoxum acquisition accounting.

2013

2012

6
5
11

564
58
18
9
5
38
122
813

25
-
3
-0
-4
-2
-4
19

481
67
6
10
564

164
8
172

853
62
17
2
10
29
117
1 089

10
12
6
-2
-1
-0
-0
25

721
94
16
22
853

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

The maximum exposure to credit risk at the reporting date is the carrying amount of the loan and trade receivables. Most of the outstanding trade
receivables have been secured by credit insurance policies, which typically covers some 90% of an insured credit loss. Credit risks related to trade
receivables are presented in more detail in Note 19. Financial risk management, capital management and insurances.

As at December 31, 2013 Outokumpu has derecognized sales receivables totaling EUR 197 million (2012: EUR 242 million), which represents
fair value of the assets. Net proceeds received totaled EUR 182 million (2012: EUR 225 million). Underlying assets have maturity less than one
year. The maximum amount of loss related to derecognized assets are estimated to be EUR 5 million (2012: EUR 8 million). This estimation is
based on insurance policies and contractual arrangements of factoring companies and Outokumpu. The analysis does not include impact of any
operational risk related to Outokumpu’s contractual responsibilities.

23. Cash and cash equivalents

€ million
Cash at bank and in hand
Short term bank deposits

Bank overdrafts 1)

2013

592
16
607
-0
607

2012

215
7
222
-0
222

1) Presented in current debt in the statement of financial position.

Fair value of cash and cash equivalents does not significantly differ from the carrying value. The average effective interest rate of cash and cash
equivalents at the end of 2013 was 0.4% (Dec 31, 2012: 0.7%).

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

24. Equity

Share capital, premium fund and invested unrestricted equity reserve

€ million
On Jan 1, 2012
Shares subscribed with CEO's share incentive plan 1)
Rights issue in March–April 2012
Directed share issue to ThyssenKrupp AG
On Dec 31, 2012
Shares subscribed with Restricted share program 1)

On Dec 31, 2013
Treasury shares 1), 2)

Total number of shares on Dec 31, 2013

Number
of shares,
1 000

181 978
25
1 274 020
621 043
2 077 065
40

2 077 105
976

2 078 081

Share
capital

Premium
fund

Invested
unrestricted
equity reserve

311
-
-
-
311
-

311

714
-
-
-
714
-

714

-
-
972
491
1 462
-

1 462

Total

1 025
-
972
491
2 487
-

2 487

1) Shares granted from treasury shares without effect to share capital.
2) The company has not acquired treasury shares in 2012 nor in 2013.

According to the Articles of Association, the Outokumpu share does not have nominal value.

Premium fund includes proceeds from share subscription and other contribution based on the old Finnish Limited Liability Companies Act for the
part the contributions exceed the account equivalent value allocated to share capital.

Invested unrestricted equity reserve includes net proceeds from the rights issue in 2012 and directed share issue to ThyssenKrupp AG in 2012.

Fair value reserves

Retained earnings

Fair value reserves include movements in the fair values of available-
for-sale financial assets and derivative instruments used for cash flow
hedging. The figures are presented net of tax.

Retained earnings include remeasurements of defined benefit plans,
treasury shares, cumulative translation differences and other retained
earnings.

Distributable funds

On December 31, 2013 the distributable funds of the parent company
totaled EUR 1 504 million of which retained earnings totaled EUR 46
million.

€ million
Available-for-sale financial assets reserve
Hedge reserves

2013

-1
11
9

2012

1
21
22

Other reserves

Reserve fund includes amounts transferred from the distributable
equity under the Articles of Association or by a decision of the General
Meeting of Shareholders. Other reserves include other items based on
the local regulations of the Group companies.

€ million
Reserve fund
Other reserves

2013

2012

4
3
7

5
3
7

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

25. Employee benefit obligations

Outokumpu has established several defined benefit and defined
contribution plans in various countries. The most significant defined
benefit plans are in Germany and in the UK.

Risks associated with
defined benefit plans

Germany

In Germany Outokumpu has several defined benefit plans, of which
major plans include a management plan, open pension plans for
normal staff, and other pension promises, which are nearly all closed
for new entrants. Basis to all pension promises in Germany are
bargaining agreements and/or individual contracts (management
promises). Management plan and other pension promises are based
on annuity payments, whereas plans for normal employees are based
on one lump sum payment after retirement.

In addition, all the promises are embedded in Germany in the BetrAVG
law. The law contains rules for vested rights, pension protection
scheme and regulations for the pension adjustments. In Germany no
funding requirements exist, thus the plans are materially all unfunded.

The UK

The UK scheme provides pensions in retirement and death benefits
to members. Pension benefits are linked to a member's final salary at
retirement (or leaving if earlier) and their length of service. Since April
1, 2003 the UK scheme has been closed to new entrants, but is still
open to future accrual for members still employed by the company at
that date.

The scheme is registered under UK legislation and is contracted out
of the State Second Pension. The scheme is subject to the scheme
funding requirements outlined in UK legislation.

The scheme was established from October 1, 2001 under trust and
is governed under the scheme's current Trust Deed and Rules dated
April 5, 2006. The trustees are responsible for the operation and
governance of the scheme, including making decisions regarding
the scheme's funding and investment strategy. By law, one third of
the trustees must be member nominated. In 2013 there were four
employer nominated and four member nominated trustees.

Through its defined benefit pension plans, Outokumpu is exposed to a
number of risks, the most significant of which are detailed below:

Asset volatility: The level of equity returns is a key factor in the overall
investment return. If a plan holds significant proportion of equities,
which are expected to outperform corporate bonds in the long-term, it
might face higher volatility and risk in the short-term. The investment
portfolio might also be subject to a range of other risks typical of the
assets held, in particular credit risk on bonds and exposure to the
property market.

Change in bond yields: A decrease in corporate bond yields will
increase plan liabilities, although this will be partially offset by an
increase in the value of the plans' bond holdings (if any). In a situation
where the return on plan assets is lower than the corporate bond
yields, a plan may face a shortfall which might lead to increased
contributions.

Inflation risk: Inflation rate is linked to both future pension and salary
increase, and higher inflation will lead to higher liabilities.

Longevity: The majority of Outokumpu's defined benefit obligations
are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the plans' liabilities.

Funding

Funding requirements are generally based on pension fund's actuarial
measurement framework set out in the funding policies.

In the UK, a preliminary funding evaluation was made during November
2013. The valuation revealed a deficit of EUR 30 million. The valuation
is finalized during Q1 2014 and based on the results Outokumpu will
negotiate of the recovery plan to eliminate the possible shortfall.

Defined benefit obligations

Outokumpu adopted the revised IAS 19 standard in 2013. As the so-
called corridor method had already been waived in 2012, the effect
of the adoption of the revised standard was limited to the recognition
of previously unrecognized past service costs, aligning discount
rate and expected return on plan assets, and presentation of net
interest expense. Comparative figures for 2012 have been restated
accordingly.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Defined benefit cost recognized in the consolidated statements of income and comprehensive income
€ million
In operating result
In financial income and expenses
Defined benefit cost recognized in the consolidated statement of income
In other comprehensive income
Total defined benefit cost recognized

2013
-11
-10
-21
15
-6

Amounts recognized in the consolidated statement of financial position
€ million
Present value of funded defined benefit obligations
Present value of unfunded defined benefit obligations
Fair value of plan assets
Net defined benefit liability

2012
-5
-2
-7
-44
-51

2012
424
354
-406
372

372
61
-
434

2013
420
265
-411
275

275
42
0
317

Defined benefit liability
Other long-term employee benefit liabilities
Defined benefit assets
Net liability

Movement in net defined benefit liability

€ million
Jan 1
Current service cost
Interest expense/(income)
Remeasurements arising from

Return on plan assets
Demographic assumptions
Financial assumptions
Experience adjustment

Exchange differences
Employer contributions
Contributions by plan participants
Benefits paid
Acquired subsidiaries
Disposed subsidiaries
Reclassification to assets and liabilities held for sale
Other change
Dec 31

Present
value of
obligation
777
14
28

2013

Fair value
of plan
assets
-406
-
-16

Net defined
benefit
liability
372
14
12

Present
value of
obligation
427
5
20

2012

Fair value
of plan
assets
-379
-
-19

Net defined
benefit
liability
48
5
1

-
-0
-6
-2
-10
-
1
-27
-
-8
-81
-0
685

-6
-
-
-
8
-18
-1
27
-
-
0
0
-411

-6
-0
-6
-2
-2
-18
-
-
-
-8
-81
-0
275

-
1
49
4
6
-
1
-19
308
-
-22
-1
777

-9
-
-
-
-7
-8
-1
19
-3
-
-
1
-406

-9
1
49
4
-1
-8
-
-
305
-
-22
-0
372

The present value of obligations and the fair value of plan assets comprise mainly of German and UK plans. The present value of obligation for
German plans on December 31, 2013 was EUR 230 million (2012: EUR 308 million). For the UK, the present value of obligation was EUR 364
million (2012: EUR 359 million), and the fair value of plan assets was EUR 361 million (2012: EUR 355 million) on December 31, 2013.

The expected contributions to be paid to the defined benefit plans in 2014 are EUR 15 million.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Allocation of plan assets
€ million
Equity instruments
Debt instruments
Real estate
Investment funds
Other assets

2013
101
256
10
3
38
408

2012
119
229
12
3
40
402

Allocation of plan assets covers 99% of total defined benefit plan assets. The plan assets are mainly invested in quoted instruments. Debt
instruments include mostly government and corporate bonds (investment grade).

Asset-liability matching strategies

The majority of defined benefit assets are in the UK. The UK scheme’s benchmark asset allocation is 35%/65% return-seeking/liability matching.
This strategy reflects the scheme’s liability profile and the trustees’ and company’s attitude to risk. The trustee monitors the investment
objectives and asset allocation policy on a regular basis.

Significant actuarial assumptions

Discount rate, %

Future salary
increase, %

Inflation rate, %

Future benefit
increase, %

Medical cost trend
rate, %

Life expectancy

2013
2012
2013
2012
2013
2012
2013
2012
2013
2012

2013

2012

Germany
3.50
3.40
-
-
-
-
1.52
1.22
-
-
Modified from
RT 2005 G
Modified from
RT 2005 G

The UK
4.50
4.25
4.75
4.15
3.50
2.90
3.20
2.80
-
-
105 % SAPS All Pensioner
Amounts tables
105 % SAPS All Pensioner
Amounts tables

Other countries
4.34
3.74
2.68
2.76
-
-
-
-
6.80–7.10
6.50
Standard
mortality tables
Standard
mortality tables

The significant actuarial assumptions are presented separately for the significant countries, and for other countries a weighted average of the
assumptions is presented.

The weighted average duration of the overall defined benefit obligation is 17.6 years. In Germany and in the UK the weighted average durations are
13.5 and 21.6 years, respectively.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Sensitivity analysis of significant actuarial assumptions

Reasonably possible changes at the reporting date to one of the weighted principal assumptions, while holding all other assumptions constant,
would have affected the defined benefit obligation as shown below:

Germany

Discount rate
Future benefit increase
Life expectancy

The UK

Discount rate
Inflation rate
Future benefit increase
Future salary increase
Life expectancy

Other countries

Discount rate
Medical cost trend rate
Future salary increase
Life expectancy

Change in assumption
0.5%
0.5%
1 year

Change in assumption
0.5%
0.5%
0.5%
0.5%
1 year

Change in assumption
0.5%
0.5%
0.5%
1 year

Increase in assumption
Decrease by 6%
Increase by 4%
Increase by 2%

Increase in assumption
Decrease by 10%
Increase by 7%
Increase by 3%
Increase by 1%
Increase by 3%

Increase in assumption
Decrease by 6%
Increase by 6%
Increase by 1%
Increase by 3%

Decrease in assumption
Increase by 7%
Decrease by 4%

Decrease in assumption
Increase by 11%
Decrease by 7%
Decrease by 4%
Decrease by 1%

Decrease in assumption
Increase by 6%
Decrease by 5%
Decrease by 1%

Other long-term employee benefits

Other long-term employee benefits mainly relate to long-service remunerations and early retirement provisions in Germany as well as long-service
remunerations in Finland. In Germany, the employees are entitled to receive a one-time indemnity every ten years after 25 years of service.
Under the early retirement agreements, employees work additional time prior to retirement, which is subsequently paid for in instalments after
retirement. In Finland, the employees are entitled to receive a one time indemnity every five years after 20 years of service.

The other long-term employee benefit liabilities recognized in the consolidated statement of financial position on December 31, 2013 were EUR
42 million (2012: EUR 61 million).

Multi-employer defined benefit plans

ITP pension plans operated by Alecta in Sweden and plans operated by Stichting Bedrijfspensioenfonds voor de metaalindustrie in the
Netherlands are multi-employer defined benefit pension plans. However, it has not been possible to get sufficient information for the calculation of
obligations and assets by employer from the plan operators, and therefore these plans have been accounted for as defined contribution plans in
the consolidated financial statements.

The expected contributions to the ITP pension plans in Sweden are EUR 3 million in 2014. The contributions to the ITP pension plans vary
depending on e.g. unemployment rates and demographics. The average cost for 2014 is determined as 11.78% of total salary in total for white
collar employees in all companies in Sweden.

26. Provisions

€ million
Provisions on Jan 1, 2013 1)
Translation differences
Increases in provisions
Utilized during the financial year
Unused amounts reversed
Reclassification to held-for-sale
Disposed subsidiaries

Provisions on Dec 31, 2013

€ million
Non-current provisions
Current provisions 1)

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Restructuring
provisions

Environmental
provisions

Other
provisions

91
-0
49
-53
-6
-7
-2

49
-0
6
-1
-0
-1
-

17
-0
6
-4
-1
-2
0

2013

115
25
141

Total

156
-1
61
-58
-7
-10
-2

141

2012

119
37
156

1) Restated due to completing the Inoxum acquisition accounting (see Note 4. Acquisitions and disposals).

Restructuring provisions

Other provisions

Other provisions comprise mainly provisions for claims and are mainly
current nature.

Provisions are based on management’s best estimates at the end of
the reporting period.

As part of its intention to significantly reduce operating expenses and
return the company to profitability, Outokumpu announced plans to
result in job reductions in April 2013. The reductions relate to capacity
reductions particularly to the previously announced closure of Krefeld
melt shop in Germany, as well as streamlining overlapping activities
in sales, production, supply chain and support functions. As a result,
addition of EUR 49 million to restructuring provisions were recognized
in 2013. In addition, the restructuring provisions include provisions
recognized in previous years for reductions related to relocation of
Düsseldorf-Benrath production facility. The restructuring provisions are
expected to be paid between the years 2014–2021.

Environmental provisions

Majority of the environmental provisions are for closing costs of
production facilities and landfill areas, removal of problem waste
and landscaping in facilities in Finland, in the UK, in the US and
in Germany. Most of the EUR 6 million increase in 2013 relate to
expected increase in costs provided for landfill areas and cleaning
measures.

The outflow of economic benefits related to environmental provisions
is expected to take place mainly over a period of more than 10
years. Due to the nature of these provisions, there are uncertainties
regarding both the amount and the timing of the outflow of economic
benefits.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

27. Interest-bearing debt

€ million

Non-current
Bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Loans from related parties
Other long-term liabilities

Current

Loans from financial institutions
Pension loans
Finance lease liabilities
Commercial paper
Loans from related parties
Other current liabilities

2013

399
1 152
192
244
1 283
0
3 270

493
31
22
187
160
1
893

Part of the term loans and credit facilities include financial covenants, which are described in Note 19. Financial risk management, capital
management and insurances.

Bonds

€ million
2010 fixed rate bond maturing 2015
2012 fixed rate bond maturing 2016

Finance lease liabilities

Minimum lease payments

€ million
Not later than 1 year
Between 1 and 5 years
Later than 5 years
Future finance charges
Present value of minimum lease payments

Present value of minimum lease payments

€ million
Not later than 1 year
Between 1 and 5 years
Later than 5 years
Present value of minimum lease payments

Interest
rate, %

5.125
5.875

Notional
amount

250
150

2013

250
150
400

2013

36
187
313
-271
266

2013

21
136
108
266

Finance lease liabilities include lease payments on a building, which has been subleased with a finance lease agreement. Finance lease
receivable relating to this agreement is EUR 6 million (2012: EUR 6 million).

2012

399
924
173
204
1 230
6
2 935

362
37
14
301
-
4
718

2012

250
150
400

2012

20
67
315
-185
218

2012

14
46
158
218

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

28. Trade and other payables

€ million

Non-current
Accruals

Current

Trade payables 1)
Accrued employee-related expenses
Accrued interest expenses
VAT payable
Advances received
Withholding tax and social security liabilities
Other accruals
Other payables

1) Figure for 2012 Restated due to completing the Inoxum acquisition accounting (see Note 4. Acquisitions and disposals).

2013

815
98
62
47
7
9
41
57
1 136

2012

1 214
111
21
24
18
11
58
85
1 543

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

29. Commitments and contingent liabilities

€ million
Mortgages and pledges on Dec 31

Mortgages on real estate
Other pledges

Guarantees on Dec 31
On behalf of subsidiaries

For commercial and other guarantees

On behalf of associated companies

For financing

Other commitments

The Group has pledged real estate mortgages created in the Tornio
production plant for a value of EUR 250 million as security for its
pension loans and other commitments.

Outokumpu Oyj is, in relation to its shareholding in Kymppivoima
Tuotanto Oy and Etelä-Pohjanmaan Voima Oy, liable for the costs,
commitments and liabilities relating to electricity provided by Rapid
Power Oy. The net debt of Rapid Power Oy at the end of 2013
amounted to approximately EUR 65 million (2012: EUR 75 million),
out of which Outokumpu is liable for one third. Outokumpu Oyj is, in
relation to its shareholding in Etelä-Pohjanmaan Voima Oy, liable for
the costs, commitments and liabilities relating to electricity provided
by Tornion Voima Oy. The net debt of Tornion Voima Oy at the end
of 2013 amounted to approximately EUR 34 million (2012: EUR 36
million), out of which Outokumpu is liable for under one fifth. These
liabilities are reported under other commitments above.

Certain guarantees issued by ThyssenKrupp on behalf of Inoxum
companies have not yet been transferred to Outokumpu Oyj
as of December 31, 2013. However, Outokumpu Oyj has given
ThyssenKrupp a counter-guarantee for these commitments. The
outstanding amount of guarantees to be transferred totals EUR 72
million as of December 31, 2013, including guarantees for commercial
and financing. Part of the above mentioned guarantees has already
been replaced by Outokumpu Oyj and Outokumpu aims to replace the
remaining guarantees in the near future.

2013

284
8

Present value of minimum lease
payments on operating leases
€ million
Not later than 1 year
Between 1 and 5 years
Later than 5 years

2013

10
32
40
82

2012

320
9

2012

18
38
47
103

Operating leases include lease agreements on Group companies’
premises.

Group’s off-balance sheet investment commitments totaled EUR 47
million on December 31, 2013 (Dec 31, 2012: EUR 163 million).

Outokumpu has through Voimaosakeyhtiö SF approximately 15 %
ownership in nuclear power company Fennovoima Oy. Outokumpu is
liable for Fennovoima’s operating costs in proportion to its share of
ownership.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

30. Disputes and litigations

Civil Actions Regarding
Outokumpu’s Divested Fabricated
Copper Products Business

European Commission cartel investigation
in the sanitary copper tube sector

In September 2004, the European Commission imposed a fine on
Outokumpu in relation to cartel investigations in the sanitary copper
tube sector. The European Commission concluded that a number of
companies, including Boliden AB (“Boliden”), IMI Plc, IMI Kynoch Ltd
(together with IMI Plc, “IMI”), KME Group, Wieland Werke, Outokumpu
and Outokumpu Copper Products (now Luvata), were involved in price
fixing and market sharing in the sanitary copper tube sector in Europe
between June 1988 and March 2001.

In October 2012, a damages contribution claim was brought in the
courts of England and Wales against Outokumpu by Boliden and IMI
after Boliden and IMI were served claims on financial loss related to
the European Commission’s 2004 conclusion regarding price fixing
and market sharing in the sanitary copper tube sector in Europe by the
members of Travis Perkins PLC. Outokumpu believes that the claim is
without merit and plans to defend itself in any related proceedings. No
provisions have been booked in connection with these claims.

European Commission cartel investigation
in the industrial copper tube sector

In connection with the industrial copper tubes EU-cartel investigation,
completed in May 2009, Outokumpu has since 2006, been in the
process of addressing following civil complaints related to the cartel
investigations raised in the United States against Outokumpu and its
former fabricated copper products business in the United States.

A civil complaint in the United States, which was filed by Carrier
Corporation (“Carrier”) in 2006 against Outokumpu Oyj and
Outokumpu Copper Franklin, Inc. in the United States District Court
for the Western District of Tennessee, alleged that Outokumpu Oyj
and Outokumpu Copper Franklin, Inc. participated in a global price
fixing and market allocation cartel with respect to copper tubing for
air conditioning and heat exchangers and related applications (ACR
Tube) between at least 1989 and 2001. The complaint sought an
undisclosed amount of damages. In July 2007, Carrier’s complaint
was dismissed. Carrier subsequently filed an appeal and, in March
2012, the United States Court of Appeals for the Sixth Circuit reversed
the decision dismissing the complaint and remanded the case to the
United States District Court for the Western District of Tennessee for
further proceedings. In 2010, a civil action was brought in the courts
of England and Wales against Outokumpu (and two other defendant
groups) by the same claimant group as that brought the actions in
the United States. The claimants alleged that they suffered losses
across Europe because of the cartel and are seeking damages from
the three main defendant groups, either jointly or jointly and severally.
In April 2013, Outokumpu and Carrier signed a settlement agreement
that covers all damage suits against Outokumpu by Carrier in the US

and UK. The total settlement amount, including cost reimbursement,
was EUR 11 million. The settlement covers also all former Outokumpu
subsidiaries included in the claims. According to the settlement
agreement, all damage suits by Carrier against Outokumpu are now
released. The settlement amount has been booked as a non-recurring
item in the second quarter 2013 EBIT.

Customs Investigation of Exports
to Russia by Tornio Works

In March 2007, Finnish Customs authorities initiated a criminal
investigation into Outokumpu’s Tornio Works’ export practices
to Russia. It was suspected that a forwarding agency based in
Southeastern Finland had prepared defective and/or forged invoices
regarding the export of stainless steel to Russia. The preliminary
investigation focused on possible complicity by Outokumpu’s Tornio
Works in the preparation of defective and/or forged invoices by the
forwarding agent. In June 2009, the Finnish Customs completed its
preliminary investigation and forwarded the matter to the prosecution
authorities for consideration of possible charges. In November 2010,
the public prosecutor concluded that the Finnish Customs authorities’
suspicions regarding possible accounting offences and forgery were
groundless. Despite the public prosecutor’s conclusion, in March
2011, charges were filed against Outokumpu and five of its employees
for alleged money laundering in connection with the Russian export
practices by Tornio Works between 2004 and 2006. On behalf of the
Finnish State, the prosecutor also presented a claim for forfeiture of
the funds subject to money laundering. In June 2011, all claims were
dismissed and the Finnish State was ordered to pay Outokumpu EUR
1.2 million in compensation for legal costs. In August 2011, the Finnish
State prosecutor appealed the District Court judgment with respect
to Outokumpu and three of the charged employees and the order to
compensate Outokumpu for its legal costs. The appeal proceedings
commenced in the Kouvola Court of Appeal in February 2012 and in
April 2012, the Court issued a verdict dismissing all charges brought by
the prosecutor. In June 2012, Finland’s state prosecutor filed a petition
for leave to appeal to the Finnish Supreme Court.

Dispute over invention rights,
Outotec vs. Outokumpu

In January 2013, Outokumpu and Outotec entered into a legal dispute
over invention rights related to a ferrochrome production method. In
August 2013 Outotec submitted another application for summons
at the District Court of Helsinki regarding another patent relating to
the invention. The production method is developed by Outokumpu
and it has filed the patent applications related to this invention.
Outotec claims it has rights to the inventions. Outokumpu finds these
allegations to be completely without merit.

Lawsuits Regarding a Fire in AST’s
Turin Production Facility

In December 2007, a fire in line 5 at AST’s production facility in Turin,
Italy caused the death of seven AST employees. In May 2008, the
public prosecutor of Turin brought charges against AST and six of

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

its employees (three officers and three senior employees). AST was
charged with negligent manslaughter and negligent causation of
personal injury caused by the violation of workplace safety regulations.
AST’s CEO was charged with willful manslaughter, willful arson and
malicious removal or omission of safety measures at the workplace.
The remaining five AST employees were charged with negligent
manslaughter, negligent arson and malicious removal or omission of
safety measures at the workplace. Oral hearings took place between
January 2009 and April 2011, when the court announced its verdict.
All of the individual defendants were found guilty and given prison
sentences ranging from 10 years and 10 months to 16 years and
6 months. The court also sentenced AST to a EUR 1 million fine;
seizure of EUR 0.8 million worth of AST property (the amount of the
investment in the Turin production facility that allegedly would have
been necessary to prevent the fire); exclusion from public benefits,
financings, subsidies and aids for six months; a ban on advertising
its products or services for six months; and publication of the verdict
in several nationwide newspapers and the Terni city hall. In addition,
the defendants were found jointly and severally liable in criminal
proceedings for compensation payments amounting to approximately
EUR 5.8 million to 52 plaintiffs (namely, several institutions, former
employees of the Turin production facility and relatives of the victims
of the fire). The court ordered that line 5, which was seized as
evidence immediately after the fire, remain seized until the verdict
becomes final. All defendants and AST filed an appeal against that
judgment. In February 2013 the Turin Court of Assizes amended
the first degree judgment by reducing the criminal sentences for all
defendants to a range between 7 and 10 years of imprisonment.
Further, the Court of Assizes released Line 5. The court submitted
its written reasoning in May 2013. All defendants and AST have filed
an appeal to the Corte di Cassazione in Rome. First hearings are
expected to take place in April 2014.

With regard to civil claims, AST has entered into a settlement
agreement with 50 of the 52 plaintiffs who were awarded
compensation by the court in the criminal proceedings (the “Criminal
Settlement Agreement”). Under the terms of the Criminal Settlement
Agreement, the 50 plaintiffs waived any and all claims in connection
with the incident and agreed not to pursue any further claims during
the appeal. Pursuant to the Criminal Settlement Agreement, AST paid
the 50 plaintiffs a settlement amount of EUR 7.4 million (including
interests and legal expenses) in January 2012. Also in January 2012,
Inoxum paid the remaining two plaintiffs their portion of the court-
ordered settlement, which amounted to EUR 0.2 million. In 2008, prior
to the commencement of the court proceedings, Inoxum reached a
settlement agreement with the families of the deceased employees
(the “Pre-trial Settlement Agreement”). Pursuant to the Pre-trial
Settlement Agreement, Inoxum paid approximately EUR 13 million
(including fees) to the families of the deceased employees. The
settlement, which was paid in 2008, was fully covered by insurance
and it is expected that insurance will also cover the settlements paid
in January 2012. In the course of 2012 and 2013 several former
employees are relatives of employees of the Turin production facility
filed separate civil claims for reimbursement of damages totaling
to approximately EUR 5–10 million plus revaluation, interests and
expenses. All of these proceedings are on-going.

Cartel Fine Imposed by the
European Commission

In March 2011, the European Court of Justice upheld a EUR 3.2
million cartel fine imposed on ThyssenKrupp Stainless AG, a legal
predecessor of Nirosta, in a decision of the European Commission
from December 2006 (the “2006 Decision”). The 2006 Decision is
based on a 1998 European Commission finding (the “1998 Finding”)
that between 1993 and 1998, certain stainless steel producers,
including Inoxum and certain of its legal predecessors, had violated
Article 65(1) of the European Coal and Steel Community Treaty by
participating in a price-fixing arrangement with other stainless steel
producers.

The alleged price-fixing arrangement consisted of modifying and
applying in a concerted fashion the reference values used to
calculate the alloy surcharge to the base price of stainless steel.
The 1998 Finding was appealed and subsequently annulled on
procedural grounds with respect to Inoxum’s liability for one of its
legal predecessors. Subsequent to this annulment, the European
Commission opened new proceedings, which resulted in the 2006
Decision. Inoxum’s appeals of the 2006 Decision were unsuccessful.
In April 2011, Inoxum filed a complaint (Verfassungsbeschwerde)
with the German Constitutional Court (Bundesverfassungsgericht)
requesting that the Court declare the 2006 Decision incompatible
with certain fundamental rights under the German Constitution
(Grundgesetz). As at the end of the reporting period, the German
Constitutional Court has not decided whether it will to accept the
constitutional complaint. With accrued interest, Inoxum would be
liable to pay over EUR 4.9 million if its action with the German
Constitutional Court is unsuccessful and the fine imposed by the
2006 Decision is enforced.

Lawsuit Claiming Injuries from
Exposure to Asbestos

VDM is one of many defendants in a lawsuit filed in the courts of
the State of New York, United States, in which the plaintiff claims
injuries from exposure to aerospace asbestos-containing products
allegedly made from VDM steel, to which the plaintiff has allegedly
been exposed beginning at age 14 while performing brake repair work
on autos, while in the Navy working around boilers, during the 1960s
and 1970s performing other work including working with “pennies”
used as shock absorber with pile-driver hammers. The plaintiff claims
the pennies contained asbestos and that, while there is no claim that
the pile-driver hammers contained asbestos, some of the pile-driver
hammers were manufactured by “Krupp.” The plaintiff did not allege
that VDM made the pennies. ThyssenKrupp USA has already been
dismissed from the case. VDM is working to get the claims against it
dismissed as it is believed that the action is without merit.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

the German Renewable Energy Act foresees that certain energy-
intensive companies may apply for a reduction of that surcharge to
0.05 cent/KWh. Nirosta as well as VDM have benefited from that
exemption in the last years.

In 2013 the competent authority challenged the applications of
Nirosta and VDM for legal reasons. In the past years Nirosta and VDM
have both applied an exemption for certain aggregates in order to
meet the requirements set forth by the Renewable Energy Act. This
act stipulates that electricity intensive companies in the producing
sector can benefit from the exemption if their electricity consumption
is higher than at least 1 gigawatts and the ratio of electricity costs to
gross value added exceeds at least 14%. The act also foresees that
this application can also be undertaken by so-called independent
economic units (selbstständiger Unternehmensteil) in case the
whole legal entity does not fulfil the requirements mentioned above.
Therefore Nirosta applied that exemption for its melt shops in Krefeld
and Bochum and VDM applied for its units in Werdohl and Unna.
As said above, in the past year the competent authority always
recognized the melt shops in Krefeld and Unna as well as VDM’s
operations in Werdohl and Unna as independent economic units.
This year the competent authority denied that acknowledgement
as independent economic units – inter alia – with the argument
that these units do not have external turnovers and/or all relevant
functions (e.g. sales, purchasing) that are needed to be fully
independent and can therefore not be treated as real independent
economic units.

The economic risks for Nirosta for 2013 have been approximately EUR
20 million and for VDM approximately EUR 5–6 million. Nirosta and
VDM both filed complaints against the decision of the BAFA. After that,
Nirosta and VDM have been able to reach an agreement with BAFA
by which the exemption for 2013 was still granted. The complaint has
therefore been become redundant.

In December 2013 the EU Commission initiated a state-aid procedure
against Germany in connection with the Renewable Energy Charge
system and the exemptions for energy intensive industries. While
Nirosta and OTK will still receive such benefits in 2014, it cannot
be excluded that such benefits are endangered by that state aid
procedure for 2015. Certain legal disputes and litigations related
to the Terni remedy assets, certain service centers as well as the
VDM business will move over to ThyssenKrupp once the asset sale
transaction with ThyssenKrupp is completed.

U.S. Antidumping Order on
Stainless Steel Strip and Sheet
from Mexico, Germany and Italy

In July 1999, the U.S. Department of Commerce (the “USDOC”)
issued antidumping duty orders on imports of stainless steel strip
and sheet from Mexico, Germany and Italy, among other countries.
U.S. antidumping and countervailing duty laws permit an imposition
of special additional duties on imports that are determined to be
sold at less than fair value or to be subsidized by foreign government
actions. Mexinox USA, AST and Nirosta have been Inoxum’s importers
of record for stainless steel strip and sheet imported into the United
States since the antidumping duty order was issued. Therefore,
Mexinox USA, AST and Nirosta were responsible for making cash
deposits of estimated antidumping duties and would be liable for
finally assessed antidumping duties. The USDOC assesses duties
at annual reviews covering twelve-month periods. Mexinox USA has
been finally assessed approximately USD 27 million in duties during
the first five periods and will be automatically assessed amounts
for two other periods. Mexinox USA has potential antidumping duty
liability of approximately USD 36 million for the remaining five periods.
The Government of Mexico brought actions before the World Trade
Organization (“WTO”) Dispute Settlement Body with regard to these
determinations. Mexico received a favorable decision and compliance
proceedings are ongoing; however, WTO disputes normally are
prospective in nature and do not result in refunds of finally-assessed
duties. The antidumping duty orders on stainless steel strip and
sheet from Mexico, Germany and Italy were revoked effective July
2011 due to a negative determination by the USITC. Accordingly,
any antidumping deposits made on entries after this date should be
refunded with interest and no further antidumping duties should be
assessed on imports of stainless steel strip and sheet from Mexico,
Germany and Italy after that date, subject to the appeal proceedings
regarding imports from Mexico discussed below. The U.S. petitioners
in the antidumping case appealed the USITC’s determination to
the U.S. Court of International Trade in New York with regard to the
revocation of the antidumping duty order on imports from Mexico.
In November 2012, the court dismissed the appeal by the plaintiffs.
A complaint by the plaintiffs against that court order was rejected
by the U.S. Court of Appeals in January, 2014. The revocation of the
duty orders on stainless steel imports have therefore become legally
binding as the plaintiffs have no further means of challenging the
decision by the USITC.

Rejection of Exemption from
Renewable Energy Charges for
German Outokumpu Plants

In July 2013 Nirosta and VDM received rejections from the competent
authority Bundesamt für Wirtschaft und Ausfuhrkontrolle (“BAFA”)
with respect to their applications for an exemption from the German
Renewable Energy Charge. Under German law, there is a surcharge
which is added to the general electricity price for every consumer
of electric energy and which is used to subsidize renewable energy
producers. That surcharge has been increasing in the last years and
has reached an all-time high of 5.277 cent/KWh in 2013. However,

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

31. Related party transactions

Outokumpu’s related party includes key management of the company,
ThyssenKrupp AG, and associated companies and joint ventures. The
transactions with related parties are presented in the tables below.
Key management includes Leadership Team members and members
of the Board of Directors. The principal associated companies and
joint ventures are listed in Note 13. Investments in associated
companies and joint ventures. Subsidiaries are presented in Note 32.
Subsidiaries on December 31, 2013.

Transactions and balances with
associated companies and joint ventures

€ million
Sales
Purchases
Interest income

2013

161
-6
0

44
1

2012

0
-3
-

8
0

Outokumpu is an associated company to ThyssenKrupp AG and
Solidium Oy. ThyssenKrupp’s ownership in Outokumpu was 29.9% and
Solidium’s 21.8% on December 31, 2013.

Trade and other receivables
Trade and other payables

Other related party items

On December 31, 2012 the related party transactions included also a
purchase price receivable of EUR 2 million. The receivable relates to
the sale of 36% of the Outokumpu Stainless Tubular Products (OSTP)
business on September 30, 2011 to Tubinoxia, a company controlled
by the managing director of OSTP. The receivable was paid in January
2013.

Transactions and balances
with ThyssenKrupp AG

€ million
Sales
Purchases
Interest expenses

Trade and other receivables
Other financial assets
Trade and other payables
Loan note to ThyssenKrupp
Other interest-bearing debt
Other financial liabilities

2013

376
-175
-62

23
1
22
1 283
214
3

2012

-
-
-1

31
9
41
1 230
54
8

On November 30, 2013 Outokumpu announced to have signed a
binding agreement with ThyssenKrupp to sell the Terni remedy assets,
the VDM business and certain service centers to ThyssenKrupp.
Outokumpu’s loan note to ThyssenKrupp will be used as a
consideration for the transaction (Dec 31, 2013: loan note was EUR
1,283 million). The transaction is subject to approval by the European
Commission as well as other relevant regulatory approvals. The
transaction will also constitute final settlement of all remedy related
obligations between Outokumpu and ThyssenKrupp. Closing of the
transaction is expected for the first quarter 2014.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Employee benefits for key management

€ thousand
Short-term employee benefits
Termination benefits
Post-employment benefits 1)
Share-based payments

1) Includes only supplementary pensions.

Employee benefits for CEO and Deputy CEO

€ thousand
2013

CEO
Deputy to the CEO 2)

2012 3)

CEO 4)
Deputy to the CEO

2013

4 469
1 860
654
190
7 172

Salaries and
other short-term
benefits

Bonuses

Post-
employment
benefits

Share-based
payments

755
640

754
300

123
74

90
71

338
192

251
188

57
18

129
-

2012

2 706
-
434
129
3 269

Total

1 273
924

1 224
559

2) Reinhard Florey as of November 1, 2013; Esa Lager until October 31, 2013
3) Post-employment benefits have been added to the information reported on 2012 financial statements.
4) 2012 salaries and other short-term benefits include the compensation of EUR 142 thousand for taxes and social security contributions related to the

Inoxum transaction incentive scheme.

Outokumpu CEO’s retirement age is 63 and the targeted pension is 60% of the annual salary at the age of 63. The cost for the CEO’s post-
employment benefits include both the statutory pension expenses based on the Finnish Employees Pensions Act and the expenses for a defined
contribution pension plan arranged by Outokumpu. The current deputy to the CEO resides in Germany and is entitled to the pension benefits in
accordance with the German Essener Verband.

Employee benefits for Board of Directors
€ thousand
Chairman Jorma Ollila, as of March 18, 2013
Chairman Ole Johansson, until March 18, 2013
Vice Chairman Olli Vaartimo
Member Markus Akermann, as of March 18, 2013
Member Harri Kerminen, as of March 14, 2012
Member Heikki Malinen, as of March 14, 2012
Member Elisabeth Nilsson
Member Siv Schalin
Member Guido Kerkhoff, December 29, 2012–November 30, 2013
Member Iman Hill, until March 18, 2013
Member Evert Henkes, until March 14, 2012
Member Anna Nilsson-Ehle, until March 14, 2012
Member Jussi Pesonen, until March 14, 2012

2013
151
4
94
79
73
73
84
73
74
6
-
-
-
711

2012
-
93
59
-
44
45
58
49
-
49
8
10
4
418

There were no outstanding loans receivable from key management on December 31, 2013 (Dec 31, 2012: EUR - million). More information on key
management’s employee benefits can be found on the page Remuneration.

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

32. Subsidiaries on December 31, 2013

Country

Group
holding, %

Stainless EMEA

Outokumpu A/S
Outokumpu Benelux B.V.
Outokumpu B.V.
Outokumpu Chrome Oy
Outokumpu Distribution Hungary Kft.
Outokumpu Distribution Benelux B.V.
Outokumpu Distribution France S.A.S.
Outokumpu Distribution International GmbH
Outokumpu Distribution Polska Sp. z o.o.
Outokumpu Distribution UK Ltd.
Outokumpu EMEA GmbH
Outokumpu EMEA Oy
Outokumpu Tornio Infrastructure Oy
Outokumpu Istanbul Dis Ticaret Limited Sirketi
Outokumpu Kft.
Outokumpu, Lda.
Outokumpu Nirosta Precision GmbH
Outokumpu N.V.
Outokumpu PSC Finland Oy
Outokumpu Rossija Oy
Outokumpu S.A.
Outokumpu Shipping Oy
Outokumpu Sp. z o.o.
Outokumpu S.r.l.
Outokumpu s.r.o.
Outokumpu Stainless B.V.
Outokumpu Stainless Holding GmbH
Outokumpu Stainless Oy
Sogepar Ireland Limited
Sogepar UK Limited

Stainless Americas
Mexinox USA Inc.
Outokumpu Brasil Comercio de Metais Ltda.
Outokumpu Fortinox S.A.
Outokumpu Mexinox Distribution S.A. de C.V.
Outokumpu Mexinox S.A. de C.V.
Outokumpu Participations Mexico S.A. de C.V.
Outokumpu Stainless USA, LLC
ThyssenKrupp Mexinox CreateIT, S.A. de C.V.

Denmark
The Netherlands
The Netherlands
Finland
Hungary
The Netherlands
France
Germany
Poland
The UK
Germany
Finland
Finland
Turkey
Hungary
Portugal
Germany
Belgium
Finland
Finland
Spain
Finland
Poland
Romania
Czech Republic
The Netherlands
Germany
Finland
Ireland
The UK

The US
Brazil
Argentina
Mexico
Mexico
Mexico
The US
Mexico

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
100
80
100
100
100
100
100

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Country

China
India
Japan
China
Australia
Singapore
China
China
China
China
China

Sweden
Norway
Austria
Sweden
UAE
Sweden
Sweden
Sweden
The Netherlands
Germany
South Africa
Italy
Sweden
The US
The US
The UK
The US
The US
The US
Russia

Group
holding, %

100
100
100
100
100
100
100
100
100
100
60

100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

Stainless APAC

Outokumpu Asia Pacific Ltd
Outokumpu India Private Limited
Outokumpu K.K.
Outokumpu Management (Shanghai) Co., Ltd.
Outokumpu Pty Ltd
Outokumpu (S.E.A.) Pte. Ltd.
Outokumpu Stainless (GZ) Trading Co. Ltd.
Outokumpu Stainless International (Guangzhou) Ltd.
Outokumpu Stainless Steel (China) Co. Ltd.
Outokumpu Stainless Trading (Shanghai) Co Ltd
Shanghai Krupp Stainless Co., Ltd.

Specialty Stainless

Avesta Klippcenter AB
Outokumpu AS
Outokumpu Ges.m.b.H
Outokumpu Industriunderhåll AB
Outokumpu Middle East FZCO
Outokumpu Nordic AB
Outokumpu Prefab AB
Outokumpu Press Plate AB
Outokumpu PSC Benelux B.V.
Outokumpu PSC Germany GmbH
Outokumpu (Pty) Ltd
Outokumpu S.p.A.
Outokumpu Stainless AB
Outokumpu Stainless Bar, Inc.
Outokumpu Stainless Coil, Inc.
Outokumpu Stainless Ltd
Outokumpu Stainless Pipe, Inc.
Outokumpu Stainless Plate, Inc.
Polarit Welding, Inc.
ZAO Outokumpu

100

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

Other operations

2843617 Canada Inc.
AvestaPolarit Pension Trustees Ltd
Granefors Bruk AB
Orijärvi Oy
Outokumpu Americas, Inc.
Outokumpu Copper Fabrication AB
Outokumpu Holding Germany GmbH
Outokumpu Holding Italia S.p.A.
Outokumpu Holding Nederland B.V.
Outokumpu Holding UK Limited
Outokumpu Metals Off-Take Oy
Outokumpu Mines Inc.
Outokumpu Mining Australia Pty. Ltd.
Outokumpu Mining Oy
Outokumpu Nirosta GmbH
Outokumpu Stainless Holdings Ltd
Outokumpu Treasury Belgium N.V./SA
Outokumpu Zinc B.V.
Viscaria AB
Visent Invest AB
Visenta Försäkrings AB

Discontinued operations

Acciai Speciali Terni S.p.A.
Aspasiel S.r.l.
Outokumpu Celik Servis Merkezi A.S.
Outokumpu Distribution Iberica, S.A.
Outokumpu Gebouwen B.V.
Outokumpu GmbH
Outokumpu S.A.S.
Outokumpu VDM Australia Pty. Ltd.
Outokumpu VDM Austria GmbH
Outokumpu VDM Benelux B.V.
Outokumpu VDM Canada Ltd.
Outokumpu VDM de Mexico S.A. de C.V.
Outokumpu VDM France S.A.S.
Outokumpu VDM GmbH
Outokumpu VDM (Guangzhou) Trading Co. Ltd.
Outokumpu VDM High Performance Metals Trading Co. Ltd.
Outokumpu VDM Italia S.r.l.
Outokumpu VDM Japan K.K.
Outokumpu VDM Korea Co. Ltd.
Outokumpu VDM Schweiz AG
Outokumpu VDM UK Limited
Outokumpu VDM USA, Inc.
Società delle Fucine S.r.l.
Terninox S.p.A.
Tubificio di Terni S.p.A.

Foreign branches

Outokumpu Asia Pacific Ltd., branch office in Republic of Korea
Outokumpu Asia Pacific Ltd., agencies in China and Taiwan
Outokumpu (S.E.A.) Pte. Ltd., agency in Thailand

This list does not include all dormant companies or all holding companies.

The Group holding corresponds to the Group’s share of voting rights.
1) Established company
2) Name changed
*) Shares and stock held by the parent company

Country

Group
holding, %

*) 1), 2)

Canada
The UK
Sweden
Finland
The US
Sweden
Germany
Italy
The Netherlands
The UK
Finland
Canada
Australia
Finland
Germany
The UK
Belgium
The Netherlands
Sweden
Sweden
Sweden

Italy
Italy
Turkey
Spain
The Netherlands
Germany
France
Australia
Austria
The Netherlands
Canada
Mexico
France
Germany
China
China
Italy
Japan
South Korea
Switzerland
The UK
The US
Italy
Italy
Italy

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
97

101

Outokumpu Annual Report 2013 nOtes tO the cOnsOlidated financial stateMents

33. Events after the end of the reporting period

EGM called for February 14, 2014

Strategic review of operations in Nyby,
Kloster and Dahlerbrück concluded

Proved ore reserves of the Kemi mine
significantly larger after new drillings

EU Commission approves the
Terni and VDM transaction

On February 12, the European Commission approved the sale of the
Terni, VDM business and certain service centers to ThyssenKrupp.
Most of the other regulatory approvals have also been obtained.

Update on financing plan

On January 27, 2014 Outokumpu told that it is proceeding with the
comprehensive measures to strengthen the company’s balance sheet
as announced on November 30, 2013. The company has received
commitments to, and signed a mandate letter for, a new EUR 900
million revolving credit facility maturing in February 2017. This facility
will replace the facility for the same amount signed on July 12, 2013
and maturing in June 2015. Outokumpu has also made progress
in extending and amending its bilateral loan portfolio of about EUR
600 million. Outokumpu has obtained the required consent from
most lenders to extend the loan maturities until February 2017, and
expects to complete this process in February 2014. Outokumpu
and ThyssenKrupp have also agreed to amend and extend the
outstanding credit facility in the amount of EUR 250 million granted
by ThyssenKrupp. This facility will be settled at the closing of the
sale of the Terni and VDM units to ThyssenKrupp to end all financing
agreements between the two companies.

102

Outokumpu Annual Report 2013 Key financial figures Of the grOup

Key financial figures
of the Group

Scope of activity

Sales
- change in sales
- exports from and sales outside Finland, of total sales

Capital employed on Dec 31
Operating capital on Dec 31

Capital expenditure, continuing operations
- in relation to sales

Depreciation and amortization
Impairments

Research and development costs
- in relation to sales

Personnel on 31 Dec 3)
- average for the year 4)

Profitability

Operating result
- in relation to sales

EBITDA

€ million
%
%

€ million
€ million

€ million
%

€ million
€ million

€ million
%

€ million

Share of results of associated companies and joint ventures

€ million

Result before taxes
- in relation to sales

Net result for the financial year
- in relation to sales

Return on equity
Return on capital employed
Return on operating capital

€ million
%

%
%
%

2013

2012 1), 2)

2011

2010

2009

6 745
48.6
96.9

4 265
4 266

183
2.7

332
13

26
0.4

4 538
-9.4
95.7

5 623
5 626

3 155
69.5

230
105

19
0.4

5 009
18.4
95.7

3 770
3 730

255
5.1

235
106

21
0.4

4 229
60.1
94.3

4 176
4 222

161
3.8

235
20

22
0.5

2 641
-52.3
94.6

3 642
3 701

248
9.4

214
15

19
0.7

12 561
13 150

16 649
7 853

8 253
8 651

8 431
8 475

7 754
8 091

-510
-7.6

-165

-2

-822
-12.2

-1 003
-14.9

-41.4
-10.3
-10.3

-385
-8.5

-50

-0

-524
-11.5

-536
-11.8

-21.4
-8.2
-8.2

-251
-5.0

-5

-244
-4.9

-180
-3.6

-8.2
-6.3
-6.3

-83
-2.0

172

-10

-143
-3.4

-124
-2.9

-5.2
-2.1
-2.1

-441
-16.7

-212

-13

-479
-18.1

-336
-12.7

-12.8
-11.7
-11.4

103

Outokumpu Annual Report 2013 Key financial figures Of the grOup

Financing and financial position

2013

2012 1), 2)

2011

2010

2009

Liabilities

€ million

5 884

5 949

3 177

3 271

2 400

Net interest-bearing debt 5)
- in relation to sales 5)

Net financial expenses
- in relation to sales

Net interest expenses
- in relation to sales

Interest cover

Share capital
Other equity

Equity-to-assets ratio
Debt-to-equity ratio 5)

Net cash generated from operating activities 6)

Dividends

€ million
%

€ million
€ million

%
%

€ million

3 556
52.7

3 431
75.6

1 991
39.7

2 269
53.6

1 538
58.2

310
4.6

197
2.9

-3.2

311
1 580

21.5
188.0

- 7)

138
3.1

66
1.5

-6.9

311
2 641

30.5
116.2

266

-11
-0.2

65
1.3

-2.8

50
1.2

38
0.9

25
0.9

22
0.8

-2.8

-21.2

311
1 739

311
2 026

309
2 144

39.3
97.1

338

41.7
97.0

-497

50.6
62.7

201

1) Figures for 2012 have been restated due to completing the Inoxum acquisition accounting.
2) Figures for 2012 have been restated due to adoption of revised IAS 19 Employee Benefits standard. Years 2011–2009 have not been restated accordingly.
3) Personnel reported as headcount. Year 2009 reported as full-time equivalent. Year 2013 reported for continuing operations.
4) Year 2012 average personnel does not include Inoxum personnel as it was on December 31, 2012. Year 2013 reported for continuing operations.
5) Definition for net interest-bearing debt has been changed. Years 2012–2009 have been adjusted accordingly.
6) Cash flow for 2013 presented for continuing operations.
7) The Board of Directors’ proposal to the Annual General Meeting.

104

Outokumpu Annual Report 2013 Key financial figures Of the grOup

Share-related key figures

Earnings per share 1), 2)
Earnings per share, continuing operations

Cash flow per share 1)

Equity per share 2), 3)

Dividend per share
Dividend payout ratio
Dividend yield

Price/earnings ratio

Development of share price 5)
Average trading price
Lowest trading price
Highest trading price
Trading price at the end of the period
Change during the period 6)

Change in the OMXH index during the period

€
€

€

€
%
%

€
€
€
€
%

Market capitalization at the end of the period

€ million

2013
-0.48
-0.40

0.02

0.91

-4)
neg.
0.0

neg.

0.53
0.35
0.85
0.41
-48.8

26.5

845

2012
-0.46
-

0.23

1.41

-
neg.
0.0

neg.

0.97
0.64
2.10
0.79
-40.3

8.3

2011
-0.62
-

1.20

2010
-0.68
-

-2.74

2009
-1.86
-

1.11

11.19

12.84

13.54

-
neg.
0.0

neg.

2.25
1.21
3.78
1.33
-63.4

-30.1

0.25
neg.
1.8

neg.

13.84
12.03
17.88
13.88
4.7

0.35
neg.
2.6

neg.

11.49
7.72
15.67
13.26
60.1

18.7

19.5

1 650

930

2 540

2 413

Development in trading volume
Trading volume 7)
In relation to weighted average number of shares 1)

1 000 shares
%

1 564 532
75.3

1 297 738
112.5

337 942
120.5

331 397
182.3

355 102
196.4

Adjusted average number of shares 8), 9)
Number of shares at the end of the period 8), 10)

2 077 080 035 1 156 005 029
2 078 081 348 2 077 065 460

280 526 501
181 977 861

181 751 107
181 937 361

180 825 569
180 969 654

1) 2012 and 2011 calculated based on the rights-issue-adjusted weighted average number of shares. 2010–2009 have not been restated.
2) Figures for 2012 have been restated due to adoption of revised IAS 19 Employee Benefits standard. Years 2011–2009 have not been restated accordingly.
3) 2012 includes shares and equity effect of the March–April, 2012 rights issue and the directed share issue to ThyssenKrupp AG in connection with the

Inoxum acquisition in December.

4) The Board of Directors’ proposal to the Annual General Meeting.
5) 2011 share prices adjusted according to the effect of the rights issue. 2010–2009 have not been adjusted.
6) 2011 calculated based on the unadjusted comparable share prices. 2012 calculated based on the adjusted comparable share prices.
7) Includes only NASDAQ OMX Helsinki trading.
8) Excluding treasury shares.
9) 2011 presented as rights-issue-adjusted weighted average. The actual number of shares was 181 970 316. 2010–2009 have not been adjusted.
10) Rights-issue-adjusted number of shares at the end of the period for 2011 is 280 538 133 and 2010 is 280 475 698. Figure for 2009 are not available.

105

Outokumpu Annual Report 2013 Key financial figures Of the grOup

Definitions of key financial figures

Capital employed =

Total equity + net interest-bearing debt + net derivative liabilities + net
accrued interest expenses – net assets held for sale – loans receivable
– available for sale financial assets – investments at fair value through
profit or loss – investments in associated companies and joint ventures

Operating capital = Capital employed + net deferred tax liability

Research and development costs =

Research and development expenses in the income statement
(including expenses covered by grants received)

Underlying operational result =

Operating result excluding raw material-related inventory gains/losses
and non-recurring items

EBITDA = Operating result before depreciation, amortization and impairments

Return on equity =

Net result for the financial year
Total equity (average for the period)

Return on capital employed (ROCE) =

Return on operating capital (ROOC) =

Operating result
Capital employed (average for the period)

Operating result
Operating capital (average for the period)

Net interest-bearing debt = Long-term debt + current debt – cash and cash equivalents

Interest cover =

Result before taxes + net interest expenses
Net interest expenses

Equity-to-assets ratio =

Total equity
Total assets – advances received

Debt-to-equity ratio =

Net interest-bearing debt
Total equity

Earnings per share =

Net result for the financial year attributable to the equity holders
Adjusted average number of shares during the period

Cash flow per share =

Net cash generated from operating activities
Adjusted average number of shares during the period

Equity per share =

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

Dividend per share =

Dividend for the financial year
Adjusted number of shares at the end of the period

Dividend payout ratio =

Dividend for the financial year
Net result for the financial year attributable to the equity holders

Dividend yield =

Dividend per share
Adjusted trading price at the end of the period

Price/earnings ratio (P/E) =

Adjusted trading price at the end of the period
Earnings per share

Average trading price =

EUR amount traded during the period
Adjusted number of shares traded during the period

Market capitalization at end of the period =

Number of shares at the end of the period ×
Trading price at the end of the period

Trading volume =

Number of shares traded during the period, and in relation to the
weighted average number of shares during the period

106

× 100

Outokumpu Annual Report 2013 parent cOMpany financial stateMents, fas

Parent company financial
statements, FAS

Income statement of the parent company

€ million

Sales
Cost of sales

Gross margin
Other operating income
Selling and marketing expenses
Administrative expenses
Research and development expenses
Other operating expenses

Operating result
Financial income and expenses

Result before extraordinary items
Result before appropriations and taxes
Appropriations

Change in depreciation difference

Income taxes

Result for the financial year

2013

460

-423

-3
-36
-101
-0
-343
-446
-108
-554
-554

-0
-0
-554

2012

300

-230

12
-45
-75
-4
-39
-83
-61
-144
-144

-0
-0
-144

The parent company’s financial statements have been prepared in accordance with Finnish accounting standards (FAS).
The parent company’s complete financial statements (available only in Finnish) can be read on the company’s internet pages www.outokumpu.com.

107

Outokumpu Annual Report 2013 parent cOMpany financial stateMents, fas

Balance sheet of the parent company

2013

2012

2 724

1 419

4 189

4 228

2 602

144

2 746

473

3 219

7 447

2 973

888

159

4 057

4 105

2 852

127

2 979

3 060

7 165

€ million

ASSETS

Non-current assets

Intangible assets

Property, plant and equipment

Financial assets

Shares in Group companies
Loan receivables from Group companies
Shares in associated companies
Other shares and holdings
Other financial assets

Total non-current assets

Current assets

Current receivables
Interest-bearing
Non interest-bearing

Cash and cash equivalents

Total current assets

TOTAL ASSETS

108

Outokumpu Annual Report 2013 parent cOMpany financial stateMents, fas

€ million

EQUITY AND LIABILITIES

Shareholders' equity

Share capital
Premium fund
Invested unrestricted equity reserve
Retained earnings
Result for the financial year

Untaxed reserves

Accumulated depreciation difference

Liabilities

Non-current liabilities
Interest-bearing
Non interest-bearing

Current liabilities

Interest-bearing
Non interest-bearing

Total liabilities

2013

2012

311

720

1 459

600

-554

2 536

311

720

1 459

744

-144

3 090

2 979

1 576

355

1 932

4 910

2 678

1 266

130

1 396

4 074

TOTAL EQUITY AND LIABILITIES

7 447

7 165

109

Outokumpu Annual Report 2013 parent cOMpany financial stateMents, fas

Cash flow statement of the parent company

€ million
Cash flow from operating activities

Result for the financial year
Adjustments for

Taxes
Depreciation and amortization
Impairments
Gain/loss on sale of intangible assets, property, plant and equipment
Interest income
Dividend income
Interest expense
Change in provisions
Losses from disposal of financial assets
Exchange gains and losses
Rights issue expenses
Other adjustments

Change in working capital

Change in trade and other receivables
Change in trade and other payables

Dividends received
Interest received
Interest paid
Income taxes paid

Net cash from operating activities

Cash flow from investing activities
Acquisition of subsidiaries and other shares and holdings 1)
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from disposal of subsidiaries and other disposals
Capital recovery from subsidiaries
Proceeds from disposal of other shares and holdings
Proceeds from sale of property, plant and equipment
Proceeds from sale of intangible assets
Change in other long-term receivables

Net cash from investing activities
Cash flow before financing activities
Cash flow from financing activities
Rights issue
Rights issue expenses
Borrowings of long-term debt
Repayments of long-term debt
Change in current debt
Cash flow from group contributions
Other financing cash flow

Net cash from financing activities

Net change in cash and cash equivalents

Net change in cash and cash equivalents in the balance sheet

1) Cash flow from investing activities includes the cash flow related to the acquisition of Inoxum subsidiary shares.

110

2013

2012

-554

333

-130

-13

185

-7

429

145

-91

-0

-2

-0

-5

-442

-446

-412

-2

1 107

-716

164

251

804

392

-144

-60

-11

-12

-0

102

-70

-0

-23

-22

-53

-1

-5

212

-170

-12

-34

1 006

-35

611

-378

-145

-1 029

Outokumpu Annual Report 2013 parent cOMpany financial stateMents, fas

Statement of changes in equity of the parent company

€ million
Equity on Jan 1, 2012
Result for the financial year 1)
Rights issues 2)
Equity on Dec 31, 2012
Result for the financial year

Equity on Dec 31, 2013

Distributable funds on Dec 31
€ million
Retained earnings 1)
Result for the financial year
Invested unrestricted equity reserve
Distributable funds on Dec 31

Share
capital

311

Premium
fund

720

Invested
unrestricted
equity reserve
-
-
1 459
1 459
-

1 459

Retained
earnings
744
-144
-
600
-554

2013
600
-554
1 459
1 504

Total
equity
1 775
-144
1 459
3 090
-554

2 536

2012
744
-144
1 459
2 059

1) Including amendment, amount of -3.5 EUR million, to the accounting principles related to the Employee Benefits.
2) Shares issued in the Outokumpu rights issue in March–April 2012 and in the directed share issue to ThyssenKrupp AG in connection with the Inoxum

acquisition.

Commitments and contingent liabilities at the parent company

€ million
Mortgages and pledges on Dec 31

Mortgages on real estate
Other pledges

Guarantees on Dec 31
On behalf of subsidiaries

For financing
For commercial and other guarantees

On behalf of associated companies

For financing

Other commitments

2013

2012

-
-

525
35

-
-

264
26

Outokumpu Oyj is, in relation to its shareholding in Kymppivoima Tuotanto Oy and Etelä-Pohjanmaan Voima Oy, liable for the costs, commitments
and liabilities relating to electricity provided by Rapid Power Oy. The net debt of Rapid Power Oy at the end of 2013 amounted to approximately
EUR 65 million (2012: EUR 75 million), out of which Outokumpu is liable for one third. Outokumpu Oyj is, in relation to its shareholding in Etelä-
Pohjanmaan Voima Oy, liable for the costs, commitments and liabilities relating to electricity provided by Tornion Voima Oy. The net debt of Tornion
Voima Oy at the end of 2013 amounted to approximately EUR 34 million (2012: EUR 36 million), out of which Outokumpu is liable for under one
fifth. These liabilities are reported under other commitments above.

Certain guarantees issued by ThyssenKrupp on behalf of Inoxum companies have not yet been transferred to Outokumpu Oyj as of December 31,
2013. However, Outokumpu Oyj has given ThyssenKrupp a counter-guarantee for these commitments. The outstanding amount of guarantees to
be transferred totals EUR 72 million as of December 31, 2013, including guarantees for commercial and financing. Part of the above mentioned
guarantees has already been replaced by Outokumpu Oyj and Outokumpu aims to replace the remaining guarantees in the near future.

Outokumpu Oyj will guarantee between February 2014–January 2017 certain subsidiaries’ ability to satisfy their financial liabilities when due.

111

Outokumpu Annual Report 2013 cOrp Orate gO vernance

Corporate Governance
in 2013

Regulatory framework

Outokumpu’s organizational structure

Outokumpu Oyj, the Group’s parent company, is a public limited liability
company incorporated and domiciled in Finland. In its corporate
governance and management, Outokumpu Oyj complies with Finnish
legislation, the company’s Articles of Association and the Corporate
Governance Policy resolved and approved by the company’s Board of
Directors.

In 2013, the Outokumpu organization consisted of four business
areas. Business area names were changed in February 2014 and are
Stainless EMEA, Stainless Americas, Stainless APAC and Specialty
Stainless. All business areas are supported by Group-level functions
and with each business area fully accountable for sales, profit,
production and supply chain management.

Outokumpu Oyj follows the Finnish Corporate Governance Code
(available at http://cgfinland.fi/en/), effective as of October 1, 2010
issued by the Securities Market Association and adopted by the
NASDAQ OMX Helsinki stock exchange. Outokumpu Oyj complies with
all regulations and recommendations issued by NASDAQ OMX Helsinki.

Tasks and responsibilities
of governing bodies

The governing bodies of the parent company Outokumpu Oyj, i.e.
the General Meeting of Shareholders, the Board of Directors and
the President and Chief Executive Officer (CEO), have the ultimate
responsibility for Group management and Group operations. The
Outokumpu Leadership Team reports to the CEO and is responsible for
the efficient management of the Group’s operations.

Outokumpu’s primary corporate governance information source is the
Group’s corporate governance website at
www.outokumpu.com/en/investors/Governance/. Please visit the
website for the latest Corporate Governance Statement and the latest
corporate governance information.

General Meeting of Shareholders

The General Meeting of Shareholders usually convenes once a year.
Under the Finnish Companies Act, certain important decisions such
as the approval of financial statements, decisions on dividends and
increases or reductions in share capital, amendments to the Articles
of Association, and election of the Board of Directors and auditors fall
within the exclusive domain of the General Meeting of Shareholders.

The Board of Directors convenes a General Meeting of Shareholders.
The Board of Directors can decide to convene a General Meeting on
its own initiative, but is obliged to convene a General Meeting if the
auditor or shareholders holding at least 10% of Outokumpu’s shares so
request. In addition, each shareholder has the right to bring before a
General Meeting any matter that falls within the domain of the General
Meeting, provided that a written request to do so has been received by
the Board of Directors early enough to allow the matter to be placed
on the agenda included in the notice announcing the General Meeting.
According to its Articles of Association, Outokumpu has only one single
class of shares and all shares have equal voting rights at General
Meetings.

Organization

CEO

CFO’s Office

CTO’s Office

Marketing, Communications
and Sustainability

Human Resources, Health
and Safety and IT

Stainless EMEA

Stainless Americas

Stainless APAC

Specialty Stainless

Organization as of November 2013. Business area names were changed in February 2014.

112

Outokumpu Annual Report 2013 cOrp Orate gO vernance

Board of Directors

The general objective of the Board of Directors is to direct
Outokumpu’s business in a manner that secures a significant and
sustained increase in the value of the company for its shareholders.

Board members offer their expertise and experience for the benefit of
the company. The tasks and responsibilities of the company’s Board of
Directors are determined on the basis of the Finnish Companies Act as
well as other applicable legislation. The Board of Directors has general
authority to decide and act in all matters not reserved for other
corporate governance bodies by law or under the provisions of the
company’s Articles of Association. The general task of the Board of
Directors is to organize the company’s management and operations.
In all situations, the Board of Directors must act in accordance with
the company’s best interests.

The Board of Directors has established rules of procedure which
define its tasks and operating principles. The main duties of the Board
of Directors are as follows:

With respect to directing the company’s business and strategies:
· To decide on Outokumpu’s basic strategy and monitor its

implementation.

· To decide on annual limits for the Group’s capital expenditure,

monitor related implementation, review quarterly plans and decide
on changes.

· To decide on major and strategically important investments.
· To decide on major and strategically important business acquisitions

and divestments.

· To decide on any significant financing arrangements.
· To decide on any other commitments by any Group companies that

are out of the ordinary in terms of either their value or nature, taking
into account the size, structure and field of the Group’s operations.

With respect to organizing the company’s management and operations:
· To nominate and dismiss the CEO and his deputy, and to decide on

their terms of service, including incentive schemes, on the basis of a
proposal made by the Board’s Remuneration Committee.

With respect to financial control and risk management:
· To discuss and approve interim reports and annual accounts.
· To monitor significant risks related to the Group’s operations and the

management of such risks.

· To ensure that adequate procedures concerning risk management

are in place.

The Board of Directors also assesses its own activities on a regular
basis.

The Board of Directors shall have a quorum when more than half of its
members are present. A decision by the Board of Directors shall be
the opinion supported by more than half of the members present at
a meeting. In the event of a tie, the Chairman shall have the casting
vote.

The Annual General Meeting elects the Chairman, the Vice Chairman
and the other members of the Board of Directors for a term expiring
at the close of the following Annual General Meeting. The entire Board
of Directors is therefore elected at each Annual General Meeting. A
Board member may be removed from office at any time by a resolution
passed by a General Meeting of Shareholders. Proposals to the Annual
General Meeting concerning the election of Board members which
have been made known to the Board of Directors prior to the Annual
General Meeting will be made public if such a proposal is supported by
shareholders holding a minimum of 10% of all the company’s shares
and voting rights and the person being proposed has consented to
such nomination.

Under the company’s Articles of Association, the Board shall have
a minimum of five and a maximum of twelve members. A Board
consisting of eight members was elected at the 2013 Annual
General Meeting. Following the transaction between Outokumpu and
ThyssenKrupp AG announced on November 30, 2013, Mr. Kerkhoff
tendered his resignation from the Board of Directors, effective
immediately. The Board of Directors meets at least five times each
year. In 2013, the Board of Directors met 15 times and the average
attendance rate was 93%.

· To nominate and dismiss members of the Outokumpu Leadership

See the Members of the Board of Directors on p. 14.

Team, to define their areas of responsibility, and to decide on their
terms of service, including incentive schemes, on the basis of a
proposal made by the Board’s Remuneration Committee.
· To monitor the adequacy and allocation of the Group’s top

management resources.

· To decide on any significant changes to the Group’s business

organization.

· To define the Group’s ethical values and working methods.
· To ensure that policies outlining the principles of corporate

governance are in place.

· To ensure that policies outlining the principles behind managing the

company’s insider issues are being observed.

· To ensure that the company has guidelines for any other matters

which the Board deems necessary and which fall within the scope of
the Board’s duties and authority.

With respect to the preparation of matters to be resolved by General
Meetings of Shareholders:
· To establish a dividend policy and issue a proposal on dividend

distribution.

· To make other proposals to General Meetings of Shareholders.

Shares and options of the members of the
Board of Directors on December 31, 2013
Member
Jorma Ollila
Olli Vaartimo
Markus Akermann
Harri Kerminen
Heikki Malinen
Siv Schalin
Elisabeth Nilsson

Shares
96 969
92 167
41 558
54 999
54 999
65 239
65 239
471 170

113

Outokumpu Annual Report 2013 cOrp Orate gO vernance

Board committees

The Board of Directors has set up two permanent committees
consisting of Board members and has confirmed rules of procedure for
these committees. Both committees report to the Board of Directors.

The Audit Committee comprises four Board members. The task of
the Audit Committee is to deal with matters relating to financial
statements, auditing work, internal controls, the scope of internal and
external audits, fees paid to auditors, the Group’s tax position, the
Group’s financial policies and other procedures for managing Group
risks. In addition, the Audit Committee prepares a recommendation
for the Annual General Meeting concerning the election of an external
auditor and auditing fees. The Audit Committee met seven times
during 2013 and the average attendance rate was 100%.

The Remuneration Committee comprises the Chairman of the Board
and three other Board members. Following the resignation of Guido
Kerkhoff from the Board of Directors, the Remuneration Committee
comprises the Chairman of the Board and two other Board members.
The task of the Remuneration Committee is to prepare proposals for
the Board of Directors concerning the appointment of the company’s
top management and principles relating to the compensation they
receive. The Board of Directors has authorized the Remuneration
Committee to determine the terms of service and benefits enjoyed by
the Outokumpu Leadership Team members other than the company’s
CEO. The Remuneration Committee met six times during 2013 and the
average attendance rate was 91%.

To handle specific tasks, the Board of Directors can also set up temporary
working groups consisting of Board members. These working groups
report to the Board of Directors. A temporary working group, the Board
Finance Working Group, was set up during 2013 and the working group
comprises the Chairman and Vice Chairman of the Board and one other
Board member. The main task of the working group is to oversee and
review in greater detail the status of and activities relating to company’s
strategic roadmap, capital structure, balance sheet, major transactions,
major corporate finance activities and other matters having strategic
significance for the company. The Board Finance Working Group met four
times during 2013 and the average attendance rate was 100%.

Nomination Board

Outokumpu’s Annual General Meeting has established a Nomination Board
to annually prepare proposals on the composition of the Board of Directors
along with director remuneration for the Annual General Meeting.

The Outokumpu 2013 Annual General Meeting decided that, according
to the Charter of the Nomination Board, the Nomination Board consists
of the representatives of Outokumpu’s four largest shareholders,
registered in the Finnish book-entry securities system on October 1,
who accept the assignment and that the Chairman of the Board should
act as an expert member of the Nomination Board.

Outokumpu’s largest shareholders were determined on the basis of
shareholdings registered in the Finnish book-entry system. Holdings
of shareholders who have an obligation under the Finnish Securities
Markets Act to disclose changes in shareholdings (the flagging
obligation) are divided into several funds or registers and will be
summed when calculating the related share of voting rights, provided
that a written request to this effect was presented by the shareholder

114

or shareholders concerned to the Board of Directors of the Company no
later than September 30, 2013. Should a shareholder not wish to use
the nomination right, the right to nominate is transferred to the next
largest shareholder who would otherwise not have a right to nominate.

Shareholder representatives on the Nomination Board in 2013 were:
ThyssenKrupp AG, Solidium Oy, the Social Insurance Institution
of Finland and Varma Mutual Pension Insurance Company. These
shareholders chose the following individuals as their representatives
on the Nomination Board: Guido Kerkhoff, CFO of ThyssenKrupp AG
and also a member of the Outokumpu Board of Directors; Kari Järvinen,
Managing Director of Solidium Oy; Tuula Korhonen, Investment Director
of the Finnish Social Insurance Institution and Pekka Pajamo, CFO of
Varma Mutual Pension Insurance Company. Kari Järvinen was elected
as Chairman of the Nomination Board and Jorma Ollila, Chairman of the
Outokumpu Board of Directors, served as an expert member. Following
the transaction between Outokumpu and ThyssenKrupp AG, announced
on November 30, 2013, Mr. Kerkhoff tendered his resignation from
the Nomination Board on December 2. The Nomination Board has
submitted its proposals regarding Board composition and director
remuneration to Outokumpu’s Board of Directors, and the Board
has incorporated these proposals into the notice announcing the
Outokumpu 2014 Annual General Meeting of Shareholders.

CEO and deputy to the CEO

The Chief Executive Officer (CEO) is responsible for the company’s
operational management, in which the objective is to secure significant
and sustainable growth in the value of the company for its shareholders.

The CEO prepares matters on which decisions are to be made by the
Board of Directors, develops the Group’s operations in line with the
targets agreed with the Board of Directors, and ensures the proper
implementation of Board decisions. The CEO is also responsible
for ensuring that existing legislation and applicable regulations are
observed throughout the Group.

The CEO chairs the meetings of the Outokumpu Leadership Team. The
deputy to the CEO is responsible for attending to the CEO’s duties in
the event that the CEO is prevented from doing so. Since 2011, the
Group’s Chief Financial Officer has acted as deputy to the CEO.

Leadership Team

The task of the Outokumpu Leadership Team is the overall
management of Outokumpu’s business. Members of the team have
extensive authority in their individual areas of responsibility and their
duty is to develop the Group’s operations in line with the targets set by
the Board of Directors and the CEO.

At the end of 2013, the members of the Outokumpu Leadership Team held
the following positions: President and Chief Executive Officer, Executive
Vice President – Chief Financial Officer, President – Stainless EMEA,
President – Stainless APAC, President – Stainless Americas, President –
Specialty Stainless, Executive Vice President – Marketing, Communications
and Sustainability, Executive Vice President – Chief Technology Officer
and Executive Vice President – Human Resources, Health, Safety & IT. The
Leadership Team typically meets at least once a month.

See the members of the Leadership Team on p. 12.

Outokumpu Annual Report 2013 cOrp Orate gO vernance

Shares and options of the Leadership Team members on December 31, 2013

Member
Mika Seitovirta
Austin Lu
Jarmo Tonteri
Reinhard Florey
Kari Tuutti
Kari Parvento
Johann Steiner
Pekka Erkkilä
Total
Board and Leadership Team

Share-based incentive programmes

2011–2013
96 000
-
-
-
-
36 000
-
-

2012–2014
544 000
65 200*
-
-
65 200
170 000
-
-

2013–2015
1 063 500
324 000*
-
324 000
324 000
324 000
324 000
270 000

Restricted
Share Pool
2012–2014
-
-
-
117 284
-
-
-
-

Shares
200 000
-
144 282
-
20 000
8 000
-
100 000
472 282
943 452

* Due to local legislation, the possible LTI reward will be paid in cash instead of shares.

Group management

Remuneration

Outokumpu’s corporate management consists of the Chief Executive
Officer (CEO), members of the Outokumpu Leadership Team, and
managers and experts who assist the CEO and members of the
Leadership Team.

The task of corporate management is to manage the Group as a
whole. Duties include the coordination and execution of strategy
and corporate planning, integration, financial control, tax, internal
audit, human resources, environment, energy, health and safety, IT,
marketing, communications and corporate responsibility, R&D, legal
affairs, corporate affairs and compliance and IPR, investor relations
as well as treasury and risk management. Certain support functions
have also been centralized at Group level. The Outokumpu Group is
managed in accordance with the organization of its business, in which
the Group’s legal company structure also provides the legal framework
for Outokumpu’s operations. Clear financial and operational targets
have been established for all the Group’s operational businesses.

In 2013, Outokumpu’s organization was based on four Business
Areas with sales, profit, production and supply chain management
responsibility, with the focus being on improving the ability to respond
rapidly to customer needs, while Group-level functions with global
processes ensure efficiency.

The Business Areas were renamed in February 2014 and are:

· Stainless EMEA
· Stainless Americas
· Stainless APAC
· Specialty Stainless

As confirmed by the 2013 Outokumpu Annual General Meeting, annual
remuneration for members of Outokumpu’s Board of Directors are
as follows: Chairman EUR 140 000, Vice Chairman EUR 80 000 and
other members EUR 60 000, with 40% of this paid as Outokumpu
shares purchased from the market and 60% paid in cash.

The annual fee is paid once a year and members of the Board are
not entitled to any other share-based rewards. In addition to their
annual remuneration, all members of the Board of Directors are paid
a meeting fee of EUR 600 (EUR 1 200 for members of the Board of
Directors residing outside Finland). The meeting fee is also payable for
attending meetings of Board committees.

The service contract of Outokumpu’s CEO is valid until further
notice and may be terminated by Outokumpu with 12 months’
notice or by the CEO with six months’ notice. Upon termination by
Outokumpu or a material change in ownership of Outokumpu, the
CEO will receive additional compensation equivalent to his basic
salary in the preceding 12 months plus the monetary value of his
employee benefits at the moment of termination, provided that his
employment is not terminated due to neglect caused by him. For
the other members of the Leadership Team, who are employed in
Finland, the notice period is six months for both parties, in addition
to which there will be additional compensation equivalent to their
basic salary in the preceding 12 months plus the monetary value of
their employee benefits at the moment of termination, provided that
their employment is terminated for another reason than one caused
by the employee. The termination benefits of the Leadership Team
members employed outside of Finland vary in line with the local
market practices.

As well as being responsible for their own sales, the Business Areas
are responsible for profit and operating cash flow and are supported by
Group-level functions in key areas such as financial control, taxation,
human resources, environment, energy, health and safety, IT, marketing
and communications, corporate responsibility, R&D, legal affairs,
compliance and IPR, as well as treasury and risk management. The
Business Areas are geared to achieve the Group’s business and synergy
targets while maintaining the focus on responding to customer needs.

The Outokumpu Business Areas report directly to individual
Leadership Team members.

In the 2013 financial year, the performance-based incentive payable
to the Group CEO and members of the Leadership Team in addition
to their base salary and employee benefits was based on an EBITDA
target (earnings before interest, taxes, depreciation and amortization)
and operational targets with emphasis on cash flow, working capital
and delivery of synergies. The maximum incentive payment was 50%
of the annual base salary for the CEO and the other members of
the Leadership Team. The total amount of short-term and long-term
incentives must not exceed 200% of an individual’s annual salary.
Should this limit have been exceeded, the share-based reward would
have been reduced accordingly.

115

Outokumpu Annual Report 2013 cOrp Orate gO vernance

No separate remuneration is paid to the Group CEO or members of
the Leadership Team for membership of this committee or the Group’s
other internal governing bodies.

The retirement age for the members of the Leadership Team is 63
years and they participate in the local retirement programs applicable
to employees in the country where their employing company is
located. The members residing in Finland participate in the Finnish
TyEL pension system, in addition to which they are entitled to a
defined contribution pension plan. The targeted pension is 60% of

the annual salary at the age of 63 and the maximum premium is 25%
of an individual’s annual earnings. The member of the Leadership
Team who is employed in Sweden belongs to Swedish ITP pension
plan and the member who resides in Germany is entitled to pension
benefits in accordance with the Essener Verband. One member of the
Leadership Team resides in China and is covered by the state pension
plan in China, in addition to which cash compensation is paid for a
supplementary pension plan. In line with Outokumpu’s policy, the
CEO’s retirement age is 63 and the targeted pension is 60% of the
annual salary at the age of 63.

Fees, salaries and employee benefits paid

2013
€
Board of Directors
Chairman of the Board, Johansson 1)
Chairman of the Board, Ollila
Vice Chairman of the Board, Vaartimo
Board member, Akermann
Board member, Nilsson
Board member, Schalin
Board member, Kerminen
Board member, Malinen
Board member, Kerkhoff 1)
Board member, Hill 1)

CEO, Seitovirta
Deputy to the CEO 2)
Other Leadership Team Members 4)

Salaries and fees
with employee
benefits

Performance/
project-related
bonuses

Annual
remuneration 3)

Options

Total

3 600
10 800
14 400
19 200
24 000
12 600
12 600
13 200
14 400
6 000

-
-
-
-
-
-
-
-
-
-

755 040
449 445
2 664 604

157 500
77 175
353 274

-
140 000
80 000
60 000
60 000
60 000
60 000
60 000
60 000
-

-
-
-

-
-
-
-
-
-
-
-
-
-

-
-
-

3 600
150 800
94 400
79 200
84 000
72 600
72 600
73 200
74 400
6 000

912 540
526 620
3 017 878

1) Johansson and Hill January 1–March 18, 2013, Kerkhoff January 1–November 30, 2013.
2) Lager January 1–October 31, 2013 and Florey November 1–December 31, 2013.
3) Annual remuneration: 40% is paid as Outokumpu shares purchased from the market and 60% paid in cash.
4) Including Kotilainen January 1–February 28, 2013 and Albrecht-Früh January 1–June 13, 2013.

2012
€
Board of Directors
Chairman of the Board, Johansson
Vice Chairman of the Board, Vaartimo
Board member, Henkes 1)
Board member, Nilsson
Board member, Nilsson-Ehle 1)
Board member, Pesonen 1)
Board member, Schalin
Board member, Hill
Board member, Kerminen
Board member, Malinen

Salaries and fees
with employee
benefits

Performance/
project-related
bonuses

Annual
remuneration 3)

Options

Total

12 600
13 800
8 400
21 600
9 600
3 600
12 600
13 200
7 800
9 000

-
-
-
-
-
-
-
-
-
-

80 000
45 500
-
36 000
-
-
36 000
36 000
36 000
36 000

-
-
-

-
-
-
-
-
-
-
-
-
-

-
-
-

92 600
59 300
8 400
57 600
9 600
3 600
48 600
49 200
43 800
45 000

972 692
370 977
1 584 426

CEO, Seitovirta
Deputy CEO, Lager
Other Group Executive Committee Members 4)

882 692 2)
300 341
1 390 112

90 000
70 636
194 314

1) March 1–March 31, 2012.
2) This figure includes the compensation of 271 223 euros for the value of the shares of the Inoxum transaction scheme at the time of the delivery and taxes

and social security contributions related to that.

3) Annual remuneration: 40% is paid as Outokumpu shares purchased from the market and 60% paid in cash.
4) Including Hautala January 1–December 28, 2012 and Albrecht-Früh, Florey, Lu and Tuutti December 29–December 31, 2012.

116

Outokumpu Annual Report 2013 cOrp Orate gO vernance

Outokumpu did not provide any guarantees or other similar
commitments on behalf of members of its Board of Directors in 2013.
No members of the Board of Directors or the Leadership Team or
closely-related persons or institutions have any significant business
relationships with the Group.

Insider management

Outokumpu’s insider rules are based on and comply with the
Guidelines for Insiders issued by the NASDAQ OMX Helsinki stock
exchange. Permanent insiders with a duty to declare consist of
members of the company’s Board of Directors, the Auditor in Charge,
the CEO, and other members of the Outokumpu Leadership Team.

Outokumpu maintains a public register of permanent insiders who
have the duty to declare. Employees of the Group who receive
inside information on a regular basis as a result of their position or
the duties they perform are registered in a non-public register of
permanent company-specific insiders. Permanent insiders must not
purchase or sell securities issued by the company in the 14 days prior
to the publication of interim reports or the company’s annual accounts
(the so-called “closed window”).

Separate, non-public, project-specific insider registers are maintained
for insider projects. Persons defined as project-specific insiders are
those who, in the course of their duties in connection with a project,
receive information concerning the Group which, if or when realized,
is likely to have a significant effect on the value of the company’s
publicly-traded securities.

Outokumpu’s Head of Corporate Affairs and Compliance is responsible
for the coordination and supervision of insider issues.

See the year-end 2013 shareholding of the Board of Directors on p.
113 and Leadership Team on p. 115.

Up-to-date information on holdings by Outokumpu’s permanent insiders
who have a duty to declare is available on Outokumpu’s website.

Financial reporting

According to the Finnish Limited Liability Companies Act and the
Finnish Code of Corporate Governance, the Board of Directors is
responsible for a company’s internal controls. The purpose of this
section is to provide shareholders and other parties with a description
of how internal control and risk management of financial reporting is
organized in Outokumpu.

As a listed company, the Group has to comply with a variety of
regulations. To ensure that all the stated requirements are met,
Outokumpu has introduced principles for financial reporting and
internal control and distributed these throughout the company’s
organization.

Control environment

The foundation for Outokumpu’s control environment is the business
culture established within the Group and its associated methods
of operation. The basis for the company’s compliance and control

routines is provided by Group policies and principles which define the
way in which Outokumpu’s organization operates. These policies and
principles are, for example, the Group’s Corporate Responsibility Policy
and Ethical Principles. The Outokumpu Code of Conduct describes the
Group’s basic values and offers standardized, practical guidelines for
managers and employees to follow. Outokumpu’s compliance program
targets at globally mitigating legal risks for the Group as well as for
each individual employee and specifically to prevent any infringements
of regulations on antitrust, corruption and export controls by a set of
preventive and supervisory measures. The Outokumpu performance
management process is a key management activity and an important
factor in enabling an efficient control environment. In all sections of
the Group’s operations, planning activities and the setting of both
operational and financial targets are executed in accordance with
Outokumpu’s overall business targets. Management follow-up of
related achievements is carried out through monthly management
reporting routines and in performance review meetings.

Outokumpu operates in accordance with the risk management policy
approved by the Group’s Board of Directors. This policy defines the
objectives of risk management activities, the approaches to be taken
and areas of responsibility. As well as supporting the Outokumpu
strategy, risk management activities help in defining a balanced risk
profile from the perspective of shareholders and other stakeholders
such as customers, suppliers, personnel and lenders. More
information on risk management within Outokumpu can be found in
the Risk management section on p. 120.

Outokumpu’s control process for financial reporting is based on Group
policies, principles and instructions relating to financial reporting, as
well as on the responsibility and authorization structure within the
Group. Policies relating to financial reporting are usually owned and
approved by the CEO, the CFO or the Corporate Controller. Financial
reporting in Outokumpu is carried out in a harmonized way using a
common chart of accounts.

Financial reporting is prepared in accordance with International
Financial Reporting Standards (IFRS). The Outokumpu Accounting
Principles (OAP) are Outokumpu’s application guidance as regards
IFRS. The aim of the OAP and other financial reporting instructions is
to ensure that uniform financial processes and reporting practices
are used throughout the Group. Financial statements by the
parent company and stand-alone Finnish subsidiaries are prepared
in accordance with generally accepted accounting principles in
Finland, while foreign subsidiaries follow local accounting principles.
Outokumpu also complies with regulations regarding financial
reporting published by the Financial Supervisory Authority (FIN-FSA)
and NASDAQ OMX Helsinki.

The Outokumpu Controller’s Manual contains financial reporting
policies and instructions. Policies and instructions for financial
reporting are reviewed on a regular basis and revised when necessary.
During the 2013 financial year, instructions relating to defined benefit
pension plans, termination benefits, provisions and accounting of
certain by-products in the manufacturing process were specified and
updated.

Some changes were also due to amendments in applicable IFRS
standards, mainly relating to employee benefits. In 2014, Outokumpu
will continue to follow changes in IFRS standards closely. No major
impact on the financial reporting due to the implementation of new
standards is expected in 2014.

117

Outokumpu Annual Report 2013 cOrp Orate gO vernance

Integration of the acquired Inoxum companies into Outokumpu’s
accounting and reporting processes was ongoing in 2013 and is still
continuing in 2014. This includes further specification of accounting
and reporting roles and responsibilities, and implementation of
harmonized ways of working and reporting timetables within the
Group. In relation to the Inoxum transaction, the measurement of
acquired assets and liabilities at fair value was prepared in 2013. In
accordance with the commitments given to the European Commission
in the context of the merger with Inoxum to divest the AST (Acciai
Speciali Terni) stainless steel operations in Terni, Italy and certain
European service centers and other remedy assets, Outokumpu has
held the remedy assets separate and ring-fenced from the operations
of the Group. In 2014, special attention will also be paid to ensuring
smooth outsourcing of certain European Group companies’ accounting
and reporting procedures to the new external service provider.

Information technology and solutions play an important role
in guaranteeing that the Group’s internal controls have a solid
foundation. A new consolidation system project has been started to
ensure timely and uniform financial and management reporting from
the Group entities and an effective closing process within the whole
Group. The system will be implemented in 2014.

Information and communication

Group-wide policies and principles are available to all Outokumpu
employees. Instructions relating to financial reporting are
communicated to all the parties involved. The main communication
channels employed are Outokumpu’s intranet and other easily-
accessible databases. Face-to-face controller meetings are also
organized. Senior Controller meetings are organized on a quarterly
basis or more frequently when this is considered necessary to share
information and discuss issues of topical interest to the Group.

Outokumpu has established different networks and communities
in which financial reporting and internal control issues and related
instructions are discussed and reviewed. These networks usually
consist of personnel from the Business Areas and Group functions.
The aim of these networks, communities and common instructions is
to ensure that unified financial processes and reporting practices are
used throughout the Group. The networks and communities play an
important role in establishing the effectiveness of internal controls
relating to financial reporting and in developing Outokumpu policies,
instructions and processes.

Follow-up

Both management in all Outokumpu companies and personnel in
accounting and controlling functions are responsible for the follow-
up and monitoring of internal controls connected with financial
reporting. The Internal Audit and Risk Management functions also
engage in follow-up and control activities. The findings of the follow-up
procedures are reported to the Audit Committee and the Outokumpu
Leadership Team on a regular basis.

Risk identification and assessment

Risk management processes connected with the Group’s financial
reporting are coordinated by Outokumpu’s Treasury and Risk
Management function. Related risks are classified as operational
risks and can arise as a consequence of inadequate or failed internal
processes, employee actions, systems or other events such as
misconduct or crime. The aim of the Outokumpu risk management
process is to identify, evaluate, control and mitigate such risks.
Major risks are reported to and evaluated by the Audit Committee
on a regular basis. Outokumpu’s risk management process includes
arranging workshops on the identification of key risks, including
operational risks, for Business Areas and other Group functions.
Deliverables include risk maps and risk identification plans.

Internal audit

Outokumpu’s Internal Audit function has an independent role and
a twofold objective: to provide assurance and to offer consulting
services which add value and improve the organization’s operations.
Internal Audit’s most important task is assisting the Audit Committee
and the Leadership Team in fulfilling their control functions. To do
this, Internal Audit identifies and monitors significant operational
risks within the Group, ascertains the adequacy and effective
operation of internal controls and provides the Audit Committee and
the Leadership Team with a direct source of correct and reliable
information. Other tasks carried out by Internal Audit include
monitoring the Group’s principles, controls and policies and follow-up
of the audit conclusions by the company’s external auditors.

The internal auditor reports to the Audit Committee and
administratively to the CEO.

Control activities

In addition to the Board of Directors and Audit Committee, operational
management teams in Outokumpu are responsible for ensuring that
internal controls relating to financial reporting are in place at all
Outokumpu units. The aim of control activities is to discover, prevent
and correct potential errors and deviations in financial reporting.
Control activities also aim to ensure that authorization structures
are designed and implemented in a way that conflicting divisions of
work do not exist (i.e. one person performing an activity and also
being responsible for controlling that activity). Control activities
consist of different kind of measures and include reviews of financial
reports by Group management and in Business Area management
teams, the reconciliation of accounts, analyses of the logic behind
reported figures, forecasts compared to actual reported figures and
analyses of the Group’s financial reporting processes, among others.
A key component is the monitoring of monthly performance against
financial and operational targets. These control activities take place
at different levels of the organization. The most important accounting
items in Outokumpu are the valuation and reporting of inventories
and other items of working capital. Also, in difficult market situations,
asset impairment calculations and related sensitivity analyses are
increasingly important. These items are carefully monitored and
controlled both within Business Areas and at Group level. Impairment
calculations were prepared on a quarterly basis during 2013.

118

Outokumpu Annual Report 2013 cOrp Orate gO vernance

Auditors

Under its Articles of Association, the company shall have a minimum
of one and a maximum of two auditors who are qualified auditors or
firms of independent public accountants authorized by the Central
Chamber of Commerce of Finland.

The Annual General Meeting elects the auditors to a term of office
ending at the close of the next Annual General Meeting. Proposals
to the Annual General Meeting on the election of auditors which
have been made known to the Board of Directors prior to the Annual
General Meeting will be made public if the proposal is made by the
Board Audit Committee or if it is supported by shareholders holding
a minimum of 10% of all the company’s shares and voting rights and
the person or company proposed has consented to such nomination.
The company’s auditors submit the statutory auditor’s report to the
company’s shareholders in connection with the company’s financial
statements. The auditors also report their findings to the Board Audit
Committee on a regular basis and at least once a year to the full
Board of Directors. The parent company, Outokumpu Oyj, is audited by
KPMG Oy Ab, and the responsible auditor is Virpi Halonen, Authorized
Public Accountant. KPMG Oy Ab is also responsible for overseeing and
coordinating the auditing of all Group companies.

Both Outokumpu and KPMG Oy Ab emphasize the requirement that
an auditor be independent of the company being audited. In its global
independence policy, KPMG has stated its commitment to observing
and complying with the Code of Ethics of the International Federation
of Accountants (IFAC).

Outokumpu’s Board Audit Committee continuously monitors non-audit
services purchased by the Group from KPMG Oy Ab at a global level. In
2013, auditors were paid fees totaling EUR 3.7 million, of which non-
auditing services accounted for EUR 1.0 million.

119

Risk management

Outokumpu Annual Report 2013 risK ManageMent

Outokumpu operates in accordance with the risk management policy
approved by the company’s Board of Directors. This defines the
objectives, approaches and areas of responsibility in the Group’s risk
management activities. As well as supporting Outokumpu’s strategy,
the aim of risk management is identifying, evaluating and mitigating
risks from the perspective of shareholders, customers, suppliers,
personnel, creditors and other stakeholders.

Risk management organization

The Outokumpu Board of Directors carries ultimate responsibility for
risk management within the Group. Outokumpu’s CEO and members
of the Leadership Team are responsible for defining and implementing
risk management procedures, and for ensuring that risks are both
properly addressed and taken into account in strategic and business
planning. Business Areas and Group functions are responsible
for managing risks connected with their own operations. Auditors
and Internal Audit monitor risk management processes, and the
Leadership Team, the Board’s Audit Committee and the Board of
Directors review both key risks and actions taken to manage these
risks on a regular basis. The Treasury and Risk Management function
supports implementation of Outokumpu’s risk management policy,
facilitates and coordinates risk management, and prepares quarterly
risk reports for management, the Board’s Audit Committee and the
auditors.

Risk management process

Outokumpu has defined risk as anything that could have an adverse
impact on achieving the Group’s objectives. Risks can therefore be
threats, uncertainties or lost opportunities connected with current or
future operations. Outokumpu’s appetite for risk and risk tolerance
are defined in relation to Group earnings, cash flows and capital
structure. The risk management process is an integral part of the
overall management processes and it is divided into four stages: risk
identification, risk evaluation, risk prioritization and risk mitigation.
Within Outokumpu, the risk management process is monitored and
controlled at different organizational levels in a systematic manner.
Regular risk updates are performed to make sure that the process is
operating in an uninterrupted manner. The monitoring and analysis
of results and risk updates also ensure that accurate information is
provided both internally – to Business Area management teams and
members of the Leadership Team – and externally to parties such as
shareholders and other stakeholders.

Focus areas 2013

The reporting year 2013 was highlighted by the integration work for
risk management as well, as the completion of the Inoxum transaction
took place on December 28, 2012. During the year risk management
policy was updated and risk management processes were aligned
for the combined Outokumpu. The integrated process includes

Risk management process in Outokumpu

Enterprise-wide risks

y
t
i
l
i

b
i
s
n
o
p
s
e
R

s
k
s
i
r

r
o
f

Top-down
Policies,
guidelines and
requirements.

Bottom-up
Identification,
evaluation, mitigation
and reporting.

Risk
reporting
(external/
internal)

Regular risk
updates

Identification

Leadership Team

Evaluation and
prioritization

Business areas and
Group functions

Risk monitoring
and control

Mitigation

Operations

120

Outokumpu Annual Report 2013 risK ManageMent

stronger focus on operational risks with SAP based risk management
software, being applied as a group-wide reporting tool for consistent
identification and reporting of operational risks. Additionally, the
Group’s key risks were updated during 2013 as well.

In 2013, Outokumpu continued its systematic fire safety and loss
prevention audit programs. Some 30 fire safety and loss prevention
audits were carried out in 2013 using the Group’s own resources and
expertise in co-operation with external advisors.

One of the main focus areas was to monitor and strengthen
Outokumpu’s financial position, as low profitability and stretched
balance sheet led to increased risk of financial distress for Outokumpu
during 2013. In order to increase its tolerance of risk, Outokumpu
decided to initiate significant financing measures in connection
with the planned sale of the Terni and VDM operations. All these
measures will significantly derisk Outokumpu by improving liquidity,
strengthening the balance sheet, reducing variation of free cash flow
and decreasing exposure to operational risks.

Strategic and business risks

Outokumpu’s turnaround plan

On November 30, 2013, Outokumpu announced plans to deleverage
and strengthen its balance sheet, and to divest Terni and VDM.
Outokumpu has signed a binding agreement with ThyssenKrupp
whereby Outokumpu will sell the Terni remedy assets, the VDM
business and certain service centers to ThyssenKrupp. The
future development of Outokumpu will depend on the successful
implementation of Outokumpu’s turnaround plan and its ability to
achieve the targeted financial objectives. Outokumpu’s ability to
meet its goals is subject to several risks and uncertainties, many of
which are beyond Outokumpu’s control, including, Outokumpu’s ability
to: increase production and sales in the Americas upon ramp-up of
production at the Calvert integrated production facility; implement the
new industrial restructuring plan for its operations in Europe; achieve
the anticipated synergy benefits, reduction of cost and release of
cash from working capital; improve overall profitability and enhance
operational efficiencies; and achieve growth outside Europe, in
particular in Asia and the Americas as well as in other growth markets.

Some of Outokumpu’s credit facilities and other loans include financial
covenants based on gearing and liquidity levels. If Outokumpu is
not able to comply with the financial covenants included in its credit
facilities and other loans, this could have a material adverse effect on
its financial condition. A significant portion of Outokumpu’s financing
will mature in 2017 and there can be no certainty that additional
financing will be available to Outokumpu at a commercially reasonable
cost, or at all.

Outokumpu believes that ongoing and planned re-structuring actions,
including the new industrial plan in the EMEA region, the ramp-up of
the Calvert mill in the USA and the ongoing cost saving programs will

help to continue to make significant progress in all key areas to return
Outokumpu to sustainable profitability and maintain its position in
global stainless steel markets.

Stainless steel industry and markets

In recent years, stainless steel production capacity in Asia, particularly
in China, has increased significantly and Asia has transitioned
from being a net importer of European stainless steel to being a
significant exporter of stainless steel to Europe. Rapid growth in
Chinese stainless steel production capacity combined with low growth
in European stainless consumption and decreasing exports from
Europe to formerly undersupplied Asian markets has exacerbated
overcapacity in Europe and limited growth opportunities for European
stainless steel producers. This kind of overcapacity can distort the
structure of the stainless steel market especially in Europe, impact
Outokumpu’s profitability and could also limit Outokumpu’s future
growth.

The stainless steel market is cyclical and demand for stainless
steel products is affected by global, regional and national economic
conditions, levels of industrial investment activity and levels of
industrial production. The demand for stainless steel in 2013
continued to be influenced by the prevailing economic conditions.
Growth dynamics of the stainless steel industry differed significantly
from region to region. While demand decreased slightly during 2013 in
Europe, there was some growth in the demand rates in the Americas
and APAC regions. Outokumpu faces significant exposure to the
economic conditions, levels of industrial investment activity and levels
of industrial production in particular in Europe.

Stainless steel prices are volatile, reflecting the cyclical nature
of the global stainless steel market. Low stainless steel prices
have an adverse effect on stainless steel producers due to lower
revenues and margins as well as potential inventory write-downs.
Asian price advantages resulted in Asian materials being imported
into the European market. The price advantages result from high
investments of Asian mills in new, state-of-the-art facilities with high
production capacities, economies of scale and partially significant
cost advantages, for example, from using alternative raw materials,
such as nickel pig iron. Due to fluctuations in stainless steel prices,
the expected selling price of stainless steel may at times deviate
significantly from the book value of material in inventory, which could
result in inventory write-downs and thus have an adverse effect on
Outokumpu’s profitability.

However, Outokumpu has clear operational priorities for the future
which include implementation of the savings programs, finalization
of the Calvert ramp-up, actions related to the new industrial plan in
Europe and improvement in customer satisfaction through enhanced
delivery reliability, enabling Outokumpu to achieve sustainable
profitability.

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Outokumpu Annual Report 2013 risK ManageMent

Ferrochrome business risks

Legal risks

Since global demand for stainless steel is forecasted to increase
in the long term, Outokumpu expects that global demand for
ferrochrome, a key ingredient in stainless steel production, will
increase correspondingly. Outokumpu produces ferrochrome at its
Tornio ferrochrome production facility using chromite extracted from
its Kemi chrome mine, aiming to maintain both a high utilization rate
at its ferrochrome production facility and the Group’s competitive
position in the ferrochrome market by consuming a significant amount
of ferrochrome internally and also by selling certain volumes on
the global market. However, in global terms, ferrochrome markets
continue to be in a situation of oversupply and as new production
capacity is coming on stream in Asia, the risk of a decline in the
ferrochrome price exists. There is also the risk that costs associated
with Outokumpu’s ferrochrome production will be raised by increases
in the costs of electrical power and metallurgical coke, changes
in the exchange rate of the US dollar and increased costs related
to tightening environmental legislation in Europe. The investment
program to double the annual ferrochrome production capacity
and the increase of production capacity of the Kemi chromite mine
was finalized in Q4 2012 and is scheduled to be ramped up to full
production capacity in 2015.

Raw materials

Stainless steel and ferrochrome production requires consumption of
substantial amounts of certain raw materials (primarily nickel, recycled
stainless steel, ferrochrome, chromite, molybdenum, recycled carbon
steel and titanium) and supplies. Most of these raw materials and
supplies are subject to significant price volatility due to fluctuating
customer demand, speculation and scarcity, which may, from time to
time, be compounded by decreases in extraction and production due
to natural disasters, political or financial instability or unrest.

Outokumpu is exposed to price volatility of raw materials and supplies,
which it purchases primarily under short- or long-term contracts,
but also on the spot market. Increases in the prices of certain
raw materials, such as nickel, ferrochrome, molybdenum and iron,
are generally passed on to customers through alloy surcharges.
Outokumpu has historically hedged a part of its exposure to changing
nickel prices and, on a case-by-case basis, molybdenum prices.

Although the alloy surcharge is intended to allow stainless steel
producers to pass on the costs of raw materials to customers, it does
not eliminate Outokumpu’s exposure to raw materials price volatility.
Therefore, Outokumpu may not be able to pass on all of its raw
materials costs to customers, which can have negative impacts on
Outokumpu’s profitability.

As of January 1, 2014, Outokumpu has applied a daily alloy surcharge
instead of the previous monthly model for certain customers in
Europe. In this model, Outokumpu communicates the alloy surcharges
on a daily basis for its customers on its website. Customers can
decide whether to fix the alloy surcharge on the order date or on
any other date between the order and mid-week prior to the delivery
week. Outokumpu believes that the daily alloy surcharge system
decreases volatility in raw material prices because Outokumpu can
reflect changes in raw material prices faster in its products and makes
hedging of raw materials positions easier.

Outokumpu and its subsidiaries are subject to several litigation cases.
For a company such as Outokumpu, there is a general risk, which
mainly relates to Outokumpu being litigated against by business
partners and/or in connection with its business activities in the future.
For the specific risks relating to existing litigations, please see Note
32 to the financial statements, “Disputes and litigations”

Outokumpu’s products are used in a wide range of applications.
For instance, certain of Outokumpu’s products are used in safety-
critical applications, such as pipes used in the oil, gas, chemical
and petrochemical industries. In addition, certain of Outokumpu’s
stainless steel products are used in the automotive industry, where
key customers require extensive third-party certifications regarding
the products purchased. Therefore, Outokumpu is exposed to product
liability claims arising eg. from automotive industry customers.
Such claims may result in severe damages and have impacts on
Outokumpu’s profitability.

Outokumpu may be exposed to unfair trade and pricing practices by
competitors and other protectionist measures in any of the markets
in which it operates. In addition, several countries grant substantial
subsidies to companies active in their respective local stainless
steel industries. The pricing advantage enjoyed by these producers
on their subsidized products may impair or eliminate Outokumpu’s
ability to compete with such producers. This and other practices may
have a material adverse effect on Outokumpu’s profitability to the
extent heavily subsidized stainless steel products are exported into
Outokumpu’s key markets, the EU and the United States. In addition,
Outokumpu has significant exposure to the effects of trade actions
and barriers due to the global nature of its operations. Such trade
actions and barriers could limit Outokumpu’s further growth and
access to stainless steel markets.

Outokumpu manages and mitigates its legal risks by running internal
governance and compliance programs and policies. The instructions
these programs and policies provide, should be followed even if they
extend beyond local minimum legal requirements. Outokumpu has
incorporated compliance rules into the Code of Conduct used by all
its businesses, and has also made it clear that all personnel whose
activities violate existing policy or rules, or risk breaching competition
legislation and regulations in other ways, will be subject to disciplinary
measures.

Environmental (business) risks

Outokumpu faces environmental risks related to its business
operations. The main environmental for Outokumpu are business
risks related to emission trading scheme and new environmental and
consumer protection demands.

The European Union’s Emission Trading Scheme (ETS) forms a
business risk for the Group, indirectly in electricity prices and directly
from the buying of emission allowances. Outokumpu has however
secured part of its future electricity supply – and the associated prices
– through long-term contracts. Additionally, the Group is participating
in nuclear power projects.

Outokumpu operates its business in accordance with prevailing laws
and regulations, including environmental, chemical and product safety

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legislation. EU regulatory activity in this area has developed rapidly,
and new consumer safety, environment and ecology-related initiatives,
directives and other regulations have been generated by the European
Commission at a high rate in recent years. Radical changes in this
kind of legislation could have long-term impacts on Outokumpu’s
operations. The Group attempts to mitigate risks of this type through
the systematic identification and management of environmental,
chemical and product safety risks, through emissions trading, by
launching environmental initiatives and by maintaining a proactive
dialogue with both stakeholders and parties involved in the framing of
environmental legislation.

Operational risks

Major disasters and business interruptions

Outokumpu’s production processes are dependent on the continuous
operation of critical production equipment, including furnaces,
continuous casters, rolling mills and electrical equipment (e.g. electric
motors and transformers), and production downtime may occur as a
result of unexpected mechanical failures or other events. Operations
may also be disrupted for a variety of other reasons including
fire, explosion, flooding, the release of substances harmful to the
environment or health, strikes, transportation disruptions or acts of
God. Furthermore, accidents may lead to production downtimes that
affect specific items of machinery or production plants, or possibly
result in plant closures, including closure for the duration of any
ongoing investigation. This type of disruptions may cause significant
business interruptions and impact negatively on Outokumpu’s
profitability.

Primarily because of the high temperatures required for production,
fire is a significant risk for Outokumpu. Most of the Group’s
production facilities are located in extensive industrial zones. A fire
in any industrial zone could lead to major damage to property and
interruptions in production. Extreme weather conditions and natural
disasters may also affect Outokumpu’s operations, especially as
a result of physical risks such as damage to property or the loss
of production through flooding, hurricane or drought. Outokumpu
monitors such risks by continuously evaluating its production facilities
and production processes from a risk management perspective and
also by arranging regular fire-safety audits. Insurances cover a large
proportion of the associated risks.

Environmental accidents

The main environmental accident risks at production sites are related
to use of acids, production of hazardous waste, landfill activities,
long-term contamination of soil or groundwater or long-term effects
of hazardous pollutants. The Group also has environmental liabilities
and risks at old mines and old sites. Outokumpu has certified
environmental management systems in place at several production
sites to manage the environmental accident risks in a systematic
way. Maintaining such management systems also includes external
environmental audits. In addition, Outokumpu also started internal
environmental auditing program during 2013 to monitor and to
ensure local legal compliance and the level of environmental risk
management.

Project risks

Currently, Outokumpu has an approximately 15 percent indirect
ownership interest in Fennovoima Oy (“Fennovoima”), which was
granted a decision-in-principle by the Government of Finland to build
a new nuclear power plant in Finland. In 2013, Fennovoima selected
Rosatom Overseas CJSC as a power plant supplier. According to
the plans, infrastructure work at the site will begin in 2015 and is
expected to last approximately two to three years. The construction
of the plant would begin after the infrastructure work and the power
plant would start commercial operations in 2024. The project
involves a number of potential risks for Outokumpu, including delays,
cancellation, non-completion (for external or internal reasons),
technical risks (including tightening nuclear safety regulations in
the future), budget overruns (including non-competitive cost of
power or increased cost of production), financing risks (including
cost and availability of financing) and political risks (including public
acceptance risks). Fennovoima’s articles of association provide that
all of its shareholders are responsible for financing the project in
proportion to their ownership during the construction period. When
operational, shareholders will be able to procure electricity at cost
against payment of their pro rata share of operating expenses of the
power plant (the so-called “Mankala” principle). Accordingly, there can
be no assurance that one or more of the project risks will not occur or
that Outokumpu’s share of financing the project will not increase as a
result of any future defaults by other shareholders in Fennovoima.

IT dependency and security risks

Outokumpu has a number of information technology (IT) applications
and different software programs in use at several locations. The
primary risk associated with these IT systems is the potential loss of
availability in global or critical applications. Outokumpu’s most critical
application or system is SAP, which covers, among others, part of
Outokumpu’s sales and purchase processes. The loss of SAP or other
critical applications or hardware could have a significant negative
impact on Outokumpu’s business. Problems with IT systems could also
result in leakages of sensitive information, the theft of intellectual
property and production systems being unavailable, all of which could
have a similar impact if realized. Furthermore, the integration of IT
systems after the Inoxum transaction may be time consuming and
costly and there can be no assurance that the integration process
will proceed as currently expected. System integration might also
result in the loss of critical data or malfunctions in processing data. IT
security threats have increased significantly during the past years and
Outokumpu is becoming a more interesting target due to its position
in stainless market. Cyber-attacks use weaknesses in computers
and computer networks to target not only IT systems or company
information, but also value chains and physical infrastructure such as
automation systems in factories. Outokumpu is taking all necessary
steps to ensure that the IT systems and solutions used by the Group
are reliable, and is also instituting secure information management
at all company locations to avoid data loss or situations in which
mission-critical information becomes unavailable. Additionally,
Outokumpu aims to improve its cyber readiness in the near future in
order to prevent possible cyber attacks.

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Outokumpu Annual Report 2013 risK ManageMent

Personnel

Outokumpu’s ability to continue and grow its business as well as
provide high-quality products depends, to a large extent, on the
contributions made by its leadership team and key personnel. The loss
of key individuals or other employees who have specific knowledge
of, or relationships with, trade customers in markets in which
Outokumpu operates could have significant impacts on Outokumpu’s
business. If Outokumpu is unable to attract, retain and motivate
qualified employees at all levels, it could have a material adverse
effect on Outokumpu’s business, financial condition and results of
operations. There can be no assurance that Outokumpu will be able
to retain such senior managers and key employees and successfully
manage them, which could disrupt Outokumpu’s business and have
a material adverse effect on its business, financial condition and
results of operations. Outokumpu has deployed HR processes to
attract and retain senior managers for key positions in the Group.
Succession planning for group key positions is also undertaken as part
of the talent review process to mitigate the loss of senior managers.
Outokumpu’s People Strategy also highlights the need to proactively
develop the Group’s resource and competence base and leadership
capabilities to meet the rapidly-changing requirements of our business
and the environment in which we operate.

Compliance, crime and reputational harm

Outokumpu operates globally and its activities span multiple
jurisdictions and complex regulatory frameworks at a time of
increased enforcement activity and enforcement initiatives globally
in areas such as competition law and anti-corruption. Outokumpu’s
governance and compliance processes may not prevent breaches
of law or governance standards. Outokumpu also faces the risk of
fraud by its employees, losses of critical research and development
data, misconduct as well as violations at its joint ventures and other
companies in which it has an interest, particularly if it only has a
minority stake and does not control accounting or other rules and
protocols for the conduct of business. Outokumpu’s failure to comply
with applicable laws and other standards could subject it to fines, loss
of operating licenses and reputational harm. Effective internal controls
are necessary for Outokumpu to provide reliable financial reports and
effectively prevent and detect fraud. If Outokumpu cannot provide
reliable financial reports or prevent fraud, this could have a material
adverse effect on its financial results. Additionally, at the operational
level, individual employees may not comply with Outokumpu’s policies
and guidelines and as a result may cause Outokumpu to incur
compliance costs and cause reputational damage. Inadequate internal
controls could also cause investors and other third parties to lose
confidence in Outokumpu’s reported financial information, which could
have a material adverse effect on Outokumpu’s business, financial
condition and results of operations.

Financial risks

Key current financial risks for Outokumpu are:

· Changes in the prices of electrical power, fuels, nickel and

molybdenum

· Currency developments affecting the euro, the Swedish krona and

the US dollar

· Interest rate changes connected with, the US dollar, the euro and

the Swedish krona

· Developments in the Talvivaara share price
· Other credit-related uncertainties
· Risks related to refinancing and liquidity
· Risks and uncertainties related to the implementation of the

announced financing measures.

Both the financial risks listed above and related processes for risk
management within Outokumpu are described in additional detail in
Note 19 to the Group’s consolidated financial statements.

Internal audit

Outokumpu’s Internal Audit as independent, objective assurance,
control and consulting function within the Group supports the
organization in achievement of its objectives through systematic,
disciplined approach to evaluate and improve the effectiveness and
efficiency of governance processes, the internal control system and
the risk management system.

With commitment to integrity and accountability, Internal Audit
provides value to governing bodies and senior management as an
objective source of independent advice. Internal Audit performs its
function on behalf of and directly reporting to the Audit Committee
and to the Leadership Team, but is functionally assigned to the CEO.
The annual operational audit plan is approved by the Audit Committee.

In 2013 Internal Audit performed six extended operational audits and
ten condensed audits. Two regular audits (IT & AAF) were assigned
to external service providers. The results of all performed audits
including their risk appraisals have been reported in writing. In view
of the Outokumpu Code of Conduct and the Corporate Responsibility
Policy, no major risks have been identified.

The confidential whistleblowing hotline (“Helpline”) available on
the company intranet and on the Internet is set up to anonymously
inform Internal Audit about any activities or observations which
may have caused or could result in risk exposure or damage for the
Group. Investigation of one communicated case in 2013 resulted in
no evidence of potential misconduct. Same results came out from
three further investigations based on allegations brought forward
through other channels. No incidents have been observed in view of
discrimination or human rights violation.

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Outokumpu Annual Report 2013 risK ManageMent

125

Shares and shareholders

Outokumpu Annual Report 2013 shares and sharehOlders

Shares and share capital

Shareholders by group on December 31, 2013

ThyssenKrupp AG 29.9%

Solidium Oy* 21.8%

Varma Mutual Pension
Insurance Company 1.1%

Ilmarinen Mutual Pension
Insurance Company 1.1%

The Social Insurance Institution
of Finland 3.0%

Other Finnish organizations 9.0%

Finnish households and private

persons 22.1%

International shareholding 12.0%

* Solidium Oy is wholly-owned by The Finnish State.

627 206 596

Shareholders by group on December 31, 2013
Shareholders by group
Foreign investors
The public sector and public
organizations
Households/private persons
Nominee accounts held by custodian
banks
Private corporations
Financial and insurance institutions
Non-profit organizations

240 395 074
86 716 798
51 771 942
20 590 308

591 299 827
460 100 803

30.18

28.45
22.14

11.57
4.17
2.49
0.99

Total

2 078 081 348

100.00

Outokumpu’s shares are listed on the NASDAQ OMX Large Cap list of
the Helsinki Stock Exchange under the trading code OUT1V and are
incorporated into the Finnish book-entry securities system. The total
share capital has not changed during 2013 and was EUR 311 million
at the end of the year. The total number of Outokumpu shares was
2 078 081 348, and Outokumpu held 975 888 of its own shares.

All Outokumpu’s shares carry equal voting and dividend rights.
The follwing tables and graphs illustrate Outokumpu’s shareholder
structure at the end of 2013. Up-to-date information is available at
www.outokumpu.com/en/investors/share-info/shareholders.

Outokumpu in the capital markets

Outokumpu’s regular and active dialogue with global investors and
analysts continued in 2013. The completion of the Inoxum transaction
at the end of 2012, the disposal process of the Terni remedy asset
as well as the new Outokumpu strategic roadmap met high interest
from the capital markets. Towards the end of the year, an important
topic was the comprehensive plan to strengthen the company’s capital
structure, including the divestiture of the Terni remedy assets and the
VDM business to ThyssenKrupp, as well as a financial plan to renew
the company’s debt portfolio and the planned rights issue.

In addition to the Annual General Meeting held in Helsinki in March
2013, Outokumpu hosted quarterly results webcasts for analysts,
investors and media representatives. Outokumpu management
attended several industry seminars and road shows to meet with
investors. A total of 11 roadshows in Europe and in the US were
arranged during the year. Cities visited by roadshows included New
York, Boston, Frankfurt, Geneva, Helsinki, London, Paris, Oslo and
Stockholm. Outokumpu also met investors at five industry seminars in
Chicago, Copenhagen, Helsinki, and London. In addition, Outokumpu
hosted a Capital Markets Day in London in May 2013 with 68
investors and analysts attending.

In addition Outokumpu organized three site visits for analysts and
institutional investors in 2013, two to the chrome mine in Kemi
and the stainless steel plant in Tornio, Finland and one to our new
stainless steel plant in Calvert, USA. In total, more than 200 one-on-
one meetings, conference calls and video conferences with investors
were held during the year.

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Outokumpu Annual Report 2013 shares and sharehOlders

Share price development and
market capitalization

The continued losses of Outokumpu in 2013, the weak stainless
steel market development as well as the uncertainty related to the
divestment of the Terni remedy assets were reflected in Outokumpu’s
share price. The Outokumpu share price declined by 48% and reached
EUR 0.41 at the last trading day of 2013 (EUR 0.79 on December 28,
2012). During 2013, the price of the Outokumpu share peaked at
EUR 0.85 and was EUR 0.35 at its lowest (2012 high/low: EUR 2.10/
EUR 0.64). At the end of 2013, the company’s market capitalization
was EUR 845 million, compared to EUR 1 650 million at the previous
year’s end.

In 2013, the average daily turnover in Outokumpu shares on the
NASDAQ OMX Helsinki exchange was 6.0 million shares. This does not
include the extraordinary peak in trading volume of 77.3 million shares
on December 2, 2013 following the announcement of Outokumpu’s
plan to sell the Terni remedy assets as well as the VDM business to
ThyssenKrupp and to further deleverage and strengthen its balance
sheet with a comprehensive financial package.

In total, 1 564.5 million Outokumpu shares were traded on the
NASDAQ OMX Helsinki Stock Exchange during 2013, representing
a value of EUR 835 million (2012: 1 129.7 million shares which
corresponded EUR 1 773.9 million).

In addition to the NASDAQ OMX Helsinki Stock Exchange,
Outokumpu’s share is traded also on various alternative trading
platforms. The volume of Outokumpu’s shares traded on the NASDAQ
OMX Helsinki Stock Exchange represented 74% of the total volume of
Outokumpu’s shares traded in 2013 (source: Fidessa Fragmentation
Index, www.fragmentation.fidessa.com).

More information about shares at
www.outokumpu.com/en/Investors/Share-info

Market capitalization and share price development

€ million
3 000

2 400

1 800

1 200

600

Month-end market capitalization
Share price

Source: NASDAQ OMX Helsinki.

€/share
5.0

4.0

3.0

2.0

1.0

0.0

Monthly trading volume

million shares

300

250

200

150

100

Source: Fidessa. Including all trading venues. Note that during 2012,

Outokumpu increased its number of shares twice as results of
a rights offering and a directed share issue.

Trading venue development 2010–2013

%
100

NASDAQ OMX Helsinki

Others, including MTFs, OTC and Dark pool trading.

Source: Fidessa.

Outokumpu share price development in 2013

%, Dec 31, 2012 = 100
130

120

110

100

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct Nov Dec

Outokumpu
NASDAQ OMX

127

Outokumpu Annual Report 2013 shares and sharehOlders

Share-based incentive programs

Outokumpu’s Board of Directors has confirmed that share-based
incentive programs are part of the incentive and commitment scheme
for the company’s key personnel.

The objectives are to reward key personnel for good performance and
thereby support Outokumpu’s strategy, and to direct management
attention towards increasing Outokumpu’s profitability and
shareholder value. The programs offer the possibility of receiving
Outokumpu shares as an incentive, provided that the targets set by
the Board for each earnings period are achieved.

Share-based incentive programs

Earnings period
2011–2013
2012–2014
2013–2015

The number of people in scope
on Dec 31, 2013
95
87
154

Performance criteria and pay-out history
of share-based incentive programs

of 95 people remained as participants in the plan. If the performance
targets set by the Board of Directors for the plan are attained in full,
the maximum number of shares to be delivered to the remaining
participants will be no more than 3 784 600 gross shares, from which
applicable taxes will be deducted and the remaining net value will be
delivered to the participants as Outokumpu shares.

Plan for 2013–2015
The second plan commenced at the beginning of 2013 and any share
rewards to be delivered based on the second plan will be delivered
in spring 2016. The earnings criteria applied in the plan 2013–2015
are: EBITDA for the year 2013, EBIT improvement for the year 2014,
the Outokumpu share price adjusted by dividends at the end of the
three-year period, and the achievement of annual Inoxum transaction-
related synergies.

On February 13, 2013 the Board of Directors approved 164 people to
fall within the scope of the program for the 2013–2015 plan. At the
end of the year, 154 people remained as participants in the plan. If
the maximum level of performance set by the Board of Directors for
the 2013–2015 plan is attained, the maximum number of shares to
be delivered to the remaining participants is no more than
12 837 750 gross shares, from which applicable taxes will be
deducted and the remaining net value will be delivered to the
participants as Outokumpu shares.

Share-based incentive program 2009–2013

Restricted Share Pool

In February 2009, the Board of Directors confirmed a five-year share-
based incentive program comprising three earnings periods, each
lasting three calendar years and commencing at the beginning of
2009, 2010 and 2011. The earning criteria for the program were
based on the development of total shareholder return (TSR) and
earnings per share (EPS) until 2011, earnings before interest and
taxes (EBIT) for the year 2012, and earnings before interest, taxes,
depreciation and amortization (EBITDA) for the year 2013. The Board
of Directors has confirmed that the targets set for the earnings
periods 2009–2011, 2010–2012 and 2011–2013 were not met,
therefore, no reward was paid to participants in the program.

Performance Share Plan 2012

The Board of Directors of Outokumpu approved on January 31, 2012,
the establishment of a share-based incentive plan, Performance
Share Plan 2012, which is part of the remuneration and commitment
program for the key management of Outokumpu Group. The plan offers
a possibility to receive Outokumpu shares as a long-term incentive
reward if the targets set by the Board of Directors for each earnings
period are achieved. Performance Share Plan consists of annually
commencing performance share plans. Each plan contains a three-year
earnings period, after which any share rewards earned will be delivered
to the participants.

Plan for 2012–2014
The first plan commenced at the beginning of 2012 and any share
rewards to be delivered based on it will be delivered in spring 2015.
The earnings criteria applied in the 2012–2014 plan are: EBIT for the
year 2012, EBITDA for the year 2013 and EBIT improvement for the
year 2014, and relative total shareholder return (TSR) over the three-
year earnings period.

The Board of Directors approved 98 people to fall within the scope of
the program for the 2012–2014 plan. On December 31, 2013, a total

128

The Board of Directors of Outokumpu approved on January 31, 2012,
the establishment of a Restricted Share Pool program, which enables
long-term rewards for selected individual employees of Outokumpu
Group.

The Restricted Share Pool is a part of the remuneration and
commitment program for selected key resources of Outokumpu Group.
It consists of annually commencing plans with a three-year vesting
period, after which the allocated share rewards will be delivered to
the participants provided that their employment with Outokumpu
continues uninterrupted throughout the duration of the plan and
until the shares are delivered. Restricted share grants are approved
annually by the CEO on the basis of the authorization granted by the
Board of Directors, with the exception of any allocations to Leadership
Team members, which will be approved by the Board of Directors.

The first plan commenced at the beginning of 2012 and the share
rewards to be delivered based on the plan will be delivered in spring
2015. In line with the authorization relating to the first plan within
the Restricted Share Pool, the maximum number of shares that
could be allocated within the first plan was 800 000 gross shares.
In 2012, four people were invited to participate in the 2012–2014
plan and they were granted in total 322 123 gross shares, from which
applicable taxes will be deducted, and the remaining net value will be
delivered to the participants in Outokumpu shares.

The second plan of the Program commenced at the beginning of
2013 and any share rewards will be delivered in spring 2016. The
maximum number of shares that could be allocated within the second
2013–2015 plan was 2 000 000 gross shares. In 2013, three people
were invited to participate in the 2013–2015 plan and they were
granted in total 122 500 gross shares, from which applicable taxes
will be deducted and the remaining net-value will be delivered to the
participants in Outokumpu shares.

Outokumpu Annual Report 2013 shares and sharehOlders

Other terms

The aggregate reward of an individual participant under the above
programs, together with other short-term and long-term incentives of
the participant, may not exceed 200% of the participant’s annual base
salary.

No new shares will be issued in connection with the above share-
based incentive programs and therefore the programs have no diluting
effect.

According to the share ownership plan of the Outokumpu Group, the
members of the Leadership Team are obliged to own Outokumpu
shares received under incentive programs to the value of their annual
gross base salary. Fifty percent of the net shares received from
the Performance Share Plan and Restricted Share Pool programs
described above must be used to fulfill the above ownership
requirement.

Inoxum transaction-related incentive scheme

In 2012, the Board of Directors of Outokumpu approved a
retention plan for the members of the Leadership Team to ensure
that Outokumpu has key employees in place for the successful
implementation of the Inoxum Transaction and the integration of
Inoxum into Outokumpu’s existing stainless steel business.

For the CEO, the plan is a share-based scheme pursuant to which
25 000 reward shares were granted to the CEO in February 2012.
Outokumpu has paid the taxes and any social security contributions
related to the reward shares.

The reward shares may not be transferred or disposed of in any other
manner until March 31, 2015. In addition, the CEO would forfeit the

reward shares if his service contract were terminated or notice of the
termination of his service contract were given before March 31, 2015.
Furthermore, the reward shares are subject to a claw-back provision
until March 31, 2015. The reward shares are subject to Outokumpu’s
share ownership guidelines applicable to its executive management.
Outokumpu’s limitations on variable pay were applied in connection
with the delivery of the reward shares.

For the other members of the Leadership Team, the retention plan was
a cash-based plan according to which they were entitled to receive a
cash reward of two months’ gross base salary on December 31, 2012
and March 31, 2013 if the criteria for payment were met. In line with
the plan, the second cash reward was paid on March 31, 2013 to the
Leadership Team members who were part of the Leadership Team in
2012.

Management shareholding

On December 31, 2013, members of the Outokumpu Board
of Directors and the Leadership Team held a total of 943 452
Outokumpu shares, corresponding to 0.05% of the company’s shares
and voting rights. If the members of the Leadership Team were to
receive the maximum number of shares for the 2012–2014 and
2013–2015 periods of the performance share and restricted share
plans (a total of 3 915 184 shares) their shareholding obtained via the
programs would amount to 0.19% of the company’s shares and voting
rights.

Details of Outokumpu’s management shareholdings can be found in
the section “Board of Directors and Leadership Team”.

Principal shareholders on December 31, 2013

ThyssenKrupp AG
Solidium Oy
The Social Insurance Institution of Finland
Varma Mutual Pension Insurance Company
Ilmarinen Mutual Pension Insurance Company
State Pension Fund
Mutual Insurance Company Pension Fennia
Taaleritehdas Arvomarkka Osake Fund
Nordea Fennia Fund
Kaleva Mutual Insurance Company
Nordea Pro Suomi Fund
Ili 122-8016778
Nordea Life Assurance Finland Ltd.
Eestilä Matti Juha

Nominee accounts held by custodian banks
Treasury Shares
Other shareholders

Total

621 042 572
453 802 237
62 493 263
23 690 337
23 153 368
11 000 000
9 599 537
8 500 000
8 000 000
7 000 000
4 925 000
4 600 000
4 027 000
3 000 000

1 244 833 314
240 395 074
975 888
591 877 072

2 078 081 348

29.89
21.84
3.01
1.14
1.11
0.53
0.46
0.41
0.38
0.34
0.24
0.22
0.19
0.14

59.9
11.57
0.05
28.53

100.00

129

Outokumpu Annual Report 2013 shares and sharehOlders

Distribution of shareholders on December 31, 2013

Number of shares
1–100
101–1 000
1 001–10 000
10 001–100 000
100 001–1 000 000
1 000 001–10 000 000
10 000 001–100 000 000
100 000 001–
Shares in nominee accounts held by custodian banks
Shares not transferred to book-entry securities system total

Number of
shareholders

%
of shareholders

Total
shares

%
of share capital

Average
shareholding

3 289
18 028
33 823
9 694
614
39
4
2
-

5.02
27.53
51.64
14.80
0.94
0.06
0.01
0.00
-

199 899
10 398 330
133 942 920
261 136 106
140 443 113
96 384 129
120 336 968
1 074 844 809
240 395 074
762

0.01
0.50
6.45
12.57
6.76
4.64
5.79
51.72
11.57

61
577
3 960
26 938
228 735
2 471 388
30 084 242
537 422 404
-

65 493

100.00 2 078 081 348

100.00

Information for investors

Payment of dividend

Annual General Meeting 2014
Outokumpu Oyj’s Annual General Meeting 2014 will be held on
Monday, April 14, 2014 at 2.00 pm EET at the Dipoli Congress Center.
The address is Otakaari 24, Espoo, Finland. To attend the Annual
General Meeting, shareholders must be registered on April 2, 2014 in
the company’s shreholders’ register held by Euroclear Finland Ltd.

A holder of nominee-registered shares has the right to participate in
the Annual General Meeting by virtue of such shares, based on which
he/she on April 2, 2014 would be entitled to be registered in the
shareholders’ register of the company held by Euroclear Finland Ltd.
The right to participate in the Annual General Meeting requires, in
addition, that the shareholder on the basis of such shares has been
registered into the temporary shareholders’ register held by Euroclear
Finland Ltd. at the latest by April 9, 2014 by 10.00 am EET. The
account management organization of the custodian bank has to register
a holder of nominee-registered shares, who wants to participate in the
Annual General Meeting, into the temporary shareholders’ register of
the company at the latest by the time stated above.

Shareholders who wish to attend the Annual General Meetings must
notify Outokumpu no later than April 9, 2014 by 10.00 am EET.
Notifications can be made at
www.outokumpu.com/en/investors/General-meetings/, by e-mail to the
address agm.outokumpu@innovatics.fi, by telefax: +358 (0)9 421 2428,
by telephone: +358 (0)9 421 2474 or +358 (0)9 421 3808 (Mon to
Fri, from 12.00 noon to 4.00 pm EET), registration by phone starts on
Friday, March 14, 2014 or by regular mail to:

Outokumpu Oyj
Share Register
P.O. Box 140
FI-02201 Espoo, Finland.

Shareholders may attend and vote at the AGM in person or by proxy.
In accordance with Finnish practice, Outokumpu does not send proxy
forms to its shareholders. Shareholders wishing to vote by proxy
should therefore submit their own proxy forms to Outokumpu’s Share
Register during the registration period.

Outokumpu’s Board of Directors proposes that no dividend be paid for
the 2013 financial year.

Investor information

Information for investors can be obtained from the Outokumpu
website at www.outokumpu.com/en/Investors. Outokumpu’s financial
reports include annual and interim reports, as well as stock exchange
and press releases. Outokumpu’s stock exchange releases are
available in English and Finnish.

To order financial reports, please contact Outokumpu Corporate
Communications:

Outokumpu Oyj
Corporate Communications
Riihitontuntie 7 B, PO Box 140
02201 Espoo
Finland
e-mail: corporate.comms@outokumpu.com

Dividend/share

€
0.5

0.4

0.3

0.2

0.1

The complete notice to the AGM and additional information
concerning the AGM is available on the Outokumpu website on the
Annual General Meeting webpage.

Years 2011 and 2012 no dividend was paid. For 2013, the Board
proposes that no dividend will be paid.

130

Outokumpu Annual Report 2013 shares and sharehOlders

Stock exchange releases in 2013

Outokumpu supplements its listing particulars
Outokumpu – Tubinoxia becomes majority shareholder in the OSTP tubular joint venture
Outokumpu – Shareholders’ Nomination Board to give its proposal for the composition of the Board of Directors by the end of January
Outokumpu – Publishing of the 2012 Annual Accounts Bulletin
Outokumpu and Outotec enter into a legal dispute over invention rights
Outokumpu – Proposal by the Nomination Board to the Annual General Meeting

January 2
January 18
January 22
January 23
January 24
January 28
February 14 Outokumpu changes its reporting segments
February 14 Outokumpu’s Annual Accounts Bulletin 2012: Positive operating cash flow but negative operating results in a weak market

environment

Outokumpu appoints Olli-Matti Saksi as Senior Vice President – Sales, Stainless Coil EMEA
Outokumpu – Resolutions of the Annual General Meeting 2013
Outokumpu Board decisions at their first meeting
Outokumpu – Publishing of the first-quarter 2013 financial results
Outokumpu supplies lean duplex for a pioneering solar plant project in Nevada, USA
Outokumpu proceeds with efficiency measures
Outokumpu – Unsatisfactory results in a weaker than expected market environment
Outokumpu has reached a settlement with Carrier regarding civil proceedings pursuant to EU industrial tube cartel decision
Outokumpu stainless steel creates lighter tanks and lower maintenance costs
Outokumpu conducts a strategic review of its VDM high performance alloys business
Outokumpu unveils new vision, products and pricing model, comments on its strategy progress
Outokumpu inaugurates new ferrochrome works in Tornio, Finland
Outokumpu comments on the Terni divestment process
Outokumpu supplies 12 250 tonnes of tailor-made stainless steel for Stolt chemical tankers
Outokumpu signs a strategic agreement with Sinopec, China’s largest energy and chemical company
Outokumpu renews leadership team to accelerate strategy execution
Outokumpu changes its financial reporting schedule 2013
Outokumpu – Publishing of the second-quarter 2013 financial results
Outokumpu signs EUR 900 million revolving credit facility
Outokumpu – Good progress on synergies, cost saving and ferrochrome offset by weak market and disappointing progress in Americas
Outokumpu appoints Reinhard Florey as Chief Financial Officer
Outokumpu wins a new contract with Casa de Moneda de Mexico
Outokumpu provides stainless steel façade for China’s highest skyscraper

February 14 Outokumpu – CFO Esa Lager intends to leave his position by end of 2013
February 14 Outokumpu – Share-based incentive schemes
February 14 Outokumpu – Notice to the Annual General Meeting
February 20 Outokumpu comments on the Terni divestment
February 25 Outokumpu Annual Report 2012 published
February 28 Outokumpu’s stainless steel supports cable in the demanding Gorgon natural gas project in Australia
March 4
March 18
March 18
April 9
April 17
April 25
April 25
May 2
May 7
May 13
May 22
June 5
June 7
June 10
June 13
June 14
June 18
July 10
July 12
July 24
July 24
July 31
August 12
September 2 Outokumpu stainless steel efficiently removes SO2 emissions at power plant
September 6 Outokumpu appoints Johanna Henttonen as Head of Investor Relations
September 13 Outokumpu’s sustainability performance again recognized by Dow Jones Sustainability Indexes
October 1
October 7
October 9
October 10
October 16
November 1 Outokumpu – Financial results still unsatisfactory – but positive operating cash flow of EUR 124 million
November 1 Outokumpu introduces daily alloy surcharge pricing model in Europe
November 12 Outokumpu stainless steel shines in the New Street station in Birmingham, UK
November 21 Outokumpu Chief Medical Officer Markku Huvinen’s long-term study published in British Medical Journal
November 26 Outokumpu sells electricity distribution network at Tornio site to OFI InfraVia
November 30 Outokumpu announces comprehensive measures to strengthen its balance sheet and divests Terni and VDM to ThyssenKrupp
December 2 Outokumpu – Announcement regarding an agreement which, if completed, will result in change of holdings

Outokumpu introduces new industrial plan in Europe to improve financial performance
Outokumpu – Publishing of the third-quarter 2013 financial results
Outokumpu – Financial reporting schedule for the year 2014
Outokumpu featured in Climate Disclosure and Performance Leadership Indexes
Outokumpu’s shareholders’ Nomination Board held its first meeting

(Chapter 9, Section 10 of the Finnish Securities Market Act)

December 2 Outokumpu – Announcement regarding an arrangement which, if completed, will result in change of holdings

(Chapter 9, Section 10 of the Finnish Securities Market Act)

December 2 Outokumpu – Announcement regarding an arrangement which, if completed, will result in change in holdings

(Chapter 9, Section 10 of the Finnish Securities Market Act)

December 6 Outokumpu – Krefeld melt shop ramp-down completed
December 9 Outokumpu comments the transaction with ThyssenKrupp announced on November 30, 2013
December 19 Outokumpu granted 25 million euros relief from the German renewable energy charge for 2013
December 19 Outokumpu sells Luvata vendor note to Proventus Capital Partners
December 20 Outokumpu supplies 700 tonnes of heat-resistant stainless steel for thermal power plant in India

Release archive: www.outokumpu.com/en/news-events/news

131

Outokumpu Oyj

Corporate Management
Riihitontuntie 7 B, P.O. Box 140
FI-02201 Espoo, Finland
Tel. +358 9 4211
Fax +358 9 421 3888