Outokumpu Oyj Annual Report 2015

FY2015 Annual Report · Outokumpu Oyj

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Annual report 2015

This Annual report includes Financial statements
and corporate governance. For our environmental
and social reporting, please check our
Sustainability report 2015.

Sustainability report 2015

CONTENTS

CEO review
Outokumpu and stainless steel market in 2015
Highlights
Market environment
Members of the Leadership Team
Members of the Board of Directors
Review by the Board of Directors 2015
Auditor’s report

Consolidated financial statements, IFRS
Consolidated statement of income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements

Key financial figures of the Group
Group key figures
Share-related key figures
Definitions of key financial figures

1
2
4
8
12
14
16
29

30
30
32
34
36
37

89
89
91
92

93
Parent company financial statements, FAS
93
Income statement of the parent company
94
Balance sheet of the parent company
Cash flow statement of the parent company
96
Statement of changes in equity of the parent company 97

Corporate Governance in 2015
Risk management
Shares and shareholders

98
107
112

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Outokumpu Annual report 2015
CEO review

CEO review

A s far as materials go, stainless

steel has to be up there with
the best of them. Decades of
continued product development

into its properties – among them, durability,
corrosion-resistance, recyclability and
aesthetics – has made it into a material
with endless possibilities for just about
every industry.

Outokumpu’s dedication and

experience in stainless steel is in a class
of its own. I had first-hand experience
of this when I started as the new CEO
in January 2016. During the first weeks
I visited all of our main sites and met a
wealth of expertise and a genuine passion
for stainless steel at each site I visited.
Our customers also recognize these
traits in us. In 2015, we won a number of
prestigious projects where our stainless
grades matched specific needs for
exceptional strength and corrosion-
resistance, lifecycle cost, durability
or beauty. Among those projects were
material for the tower structures of La
Sagrada Família basilica, a UNESCO world
heritage site in Barcelona, Spain; and 400
tonnes of stainless cladding for New York’s
new 3 World Trade Center skyscraper.
Despite our strengths, our financial

performance is still lagging. In 2015,
the divestments in Mexico and China
reduced our net debt significantly, pushed
our gearing to a more robust level of
69 percent and improved our financial
stability. The transactions also helped us
reach a positive net result for the full year,
but the underlying EBIT was still negative at
-101 million euros.

At the end of 2015, we closed the
synergy and P250 programs as planned,
achieving the targeted 470 million
euros in savings since the merger with
Inoxum. Outokumpu has now successfully
implemented the industrial restructuring
and established a strong presence in both
Europe and the Americas. However, we
need to become much more resilient in our
operational performance to safeguard our
financial stability regardless of external
conditions.

After a thorough analysis of the
company’s operations, we are confident
about what needs to be done to
improve the financial performance and
competitiveness of the company in both
the short and long term. On an immediate
term, we will take swift and precise
measures to address three particular areas
– overhead costs, general procurement and
working capital – to achieve substantial
cost reductions and release working capital.
To drive long-term competitiveness, we

will have renewed vigor in manufacturing
excellence. Outokumpu has made a huge
effort to form a strong, well-balanced
industrial footprint. Now, we will take a
very systematic approach to make the
most of this competitive advantage: to
improve the efficiency of our manufacturing
processes and bring the operational
capability and productivity to a world-class
level. This will also further enhance our
commercial capability through improved
quality and delivery reliability, thus enabling
differentiation through a superior customer
experience.

The year 2016 has started around
the world with minimal expectations for
economic growth, and all commodity
markets and prices continue to face
enormous pressure. There is little reason
to expect the stainless steel market to
be any better, but Outokumpu must and
will be. We expect Coil EMEA to further
benefit from the new industrial set-up and a
gradual improvement for Coil Americas. The
measures we will take across the entire
company to improve cost efficiency and
reduce working capital are geared towards
further reducing our debt.

Everything I have seen so far at
Outokumpu has only strengthened my
belief in this company. The competence,
commitment and passion of our people
and their will to succeed are a strong
foundation to build upon. The quality and
capabilities of our mills can compete
with the best that I have seen in the
metals industry: modern, well-maintained
equipment with a high level of automation.
We will now move ahead from the merger

“Outokumpu’s
dedication and
experience in
stainless steel is in
a class of its own.”

and integration phase into an era of
strong customer orientation and steady
operational improvements with a lean,
efficient cost structure. This will give us
the power to successfully compete and
perform in any market condition, and
thereby deliver solid, long-term value to our
shareholders.

Roeland Baan
CEO

Outokumpu Annual report 2015
Outokumpu and stainless steel market in 2015

Outokumpu and
stainless steel
market in 2015

Sales, 6 384 € million

Coil EMEA 59%

Coil Americas 17%

APAC 6%

Quarto Plate 6%

Long Products 6%

Other operations 6%

Group key figures

Sales (€ million)

EBITDA (€ million)

Underlying EBITDA (€ million)

EBIT (€ million)

Underlying EBIT (€ million)

Net result for the period (€ million)
Net cash generated from operating activities
(€ million)

Capital expenditure (€ million)

2015

6 384

2014

6 844

531

196

228

-101

-34

154

104

232

-243

-88

-439

-126

127

Stainless steel deliveries (1 000 tonnes)

2 381

2 554

Personnel at the end of the period

11 002

12 125

Americas
In Americas, real demand decreased
by 1% compared to 2014. Consumption
in the NAFTA region grew at 1%, driven
by robust growth of 9% in Mexico,
whereas growth in the US stagnated.
Outokumpu is making progress in
bringing its integrated stainless steel
mill in Calvert, US to full commercial
capability over the coming years. While
order intake improved during the second
half of 2015, Coil Americas posted a
heavy loss as a result of lower deliveries
and intense price pressure. Measures to
improve profitability continue.

Outokumpu Annual report 2015
Outokumpu and stainless steel market in 2015

Capital structure

Combined savings*

Non-current debt (€ million)

Current debt (€ million)

Cash and cash equivalents (€ million)

Net debt at the end of the year (€ million)

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

2015

1 249

547

186

1 610

69.1

2014

1 597

569

191

1 974

92.6

€ million
600

500

400

300

200

100

* Synergies, P250 and EMEA restructuring, 2016–2017 forecast.

APAC
In APAC total stainless consumption
slowed down to only 2%, mainly driven
by China, where growth slowed to 4%
after the average of around 12% per
annum in 2011–2014. India was the
bright spot as it was showing robust
demand growth of around 6%. Following
the divestment of SKS, Outokumpu
business in APAC consists of service
centers in China and Australia, as well
as warehouses and sales offices in
various Asian countries. The key focus
is on selected customer and product
segments in which the Outokumpu
offering is differentiated from its
competitors.

EMEA
Stainless steel real demand in
EMEA was flat from 2014 despite
the expected fragile recovery of
the European economy. Growth in
Western Europe stagnated and in the
Middle East contracted, while Eastern
Europe and Africa showed robust
growth rates. While imports into EU
from China and Taiwan decreased
significantly compared to the previous
year as a result of the antidumping
duties, they were partly replaced by
import material from other countries.
The financial performance of the Coil
EMEA business area improved despite
clearly lower deliveries year-on-year as
the restructuring measures together
with improved optimization between
production facilities developed well.

Production locations Service center locations Number of locations

Outokumpu Annual report 2015
Highlights

Highlights 2015

The turnaround to profitability sustained with decisive measures. Restructuring continued:
The synergy and savings programs related to Inoxum transaction were closed at the end
of 2015 achieving full benefits of EUR 470 million. Closure of the Bochum melt shop
took place in June, a key element in the continuing European industrial restructuring.
The subdued global market made its mark in the year 2015 which was difficult for
Outokumpu. Despite the good progress in savings programs and industrial footprint,
Outokumpu’s operational profitability weakened. Yet the proceeds from divestments
boosted Outokumpu’s net profit for 2015 into positive territory after several years of losses.

Segment highlight:
Automotive industry

Segment highlight:
Building & construction

Segment highlight:
Energy

While people are increasingly moving and
cities are growing, new and ever more
stringent environmental requirements are
putting car manufacturers under a lot of
pressure. The need to decrease emissions
means that manufacturers need to reduce
the weight of their vehicles. Here, stainless
steel, which is an extremely strong and safe
material even with thin walls, offers many
opportunities for car manufacturers.

Outokumpu’s sales and R&D teams work in
cooperation with the customers to create
ever lighter yet strong components for
vehicles, such as the new Forta H-series. For
the automotive sector, that means lower CO2
emissions and better passenger safety.

As the standard of living rises and with
people increasingly living in cities, cities
are getting bigger and growing upwards.
This trend is setting new requirements for
buildings. Durable, yet aesthetic façades
and a longer service life are required
from these tall buildings. In many cases,
the world’s population is concentrated
in high-corrosion areas with exposure to
coastal climate and high pollution levels.
The sustainable design and construction
of skyscrapers almost require the use of
stainless steel – for instance in façades,
in reinforcing concrete structures, and in
escalators and elevators. Outokumpu has
several showcases in skyscrapers all over
the globe’s metropolises, for example in New
York, US, where 3 World Trade Center chose
Outokumpu stainless steel for its façade.
As a sustainable, durable, low-maintenance
material, stainless steel is enjoying
increasing popularity for cladding the outside
of buildings.

Every year, the world uses more resources
than the planet actually has. As resources
are limited, there is a huge demand for
environmental responsibility and renewable
energy sources. Solar power, wind power and
products for higher fuel efficiency require
materials that are durable and can withstand
high temperatures. The depletion of raw
materials is increasing the need for materials
with high recyclability. Outokumpu’s
stainless steel is a good example of both.
In heat exchangers, Outokumpu duplex
takes the heat, and in tank-building for
oils and chemicals in extreme corrosive
environments it offers great cost-
efficiency in manufacturing. Moreover, as
it is maintenance-free, durable and fully
recyclable, stainless steel keeps application
life cycles very high and the carbon footprint
of the product as small as possible.

Outokumpu Annual report 2015
Highlights

"Тhe properties of 316plus allow
thinner wall thickness, resulting
in lower overall weight."

New 316plus grade answers
customer needs
Developed based on customer demand,
the new austenitic grade Supra 316plus
makes Langh Group’s corrosive liquid
tank and transportation containers more
durable. The properties of 316plus allow
thinner wall thickness, resulting in lower
overall weight. The grade was accepted
into six ASTM standards.

New leaders for Coil Americas and APAC
Outokumpu revised Coil Americas’ volume outlook down
and announced new leadership for the business area.
Michael Williams was appointed President and Head
of Coil Americas. Williams brought the Outokumpu
Leadership Team a deep understanding of the market
and long relationships with many of the company’s key
customers in the United States. In the APAC business
area, Outokumpu announced the appointment of Jan
Hofmann as President.

EUR 250 million bond
Outokumpu launched a senior
unsecured convertible bond
issue of EUR 250 million.
The issuance was part of the
plan to actively diversify the
company’s funding base and
to reduce financing costs.

European Union
antidumping measures
The European Commission
announced provisional antidumping
duties on cold rolled stainless steel
imports from China and Taiwan. The
final decision on the duties was made
in September.

Outokumpu wins ISSF New Applications Award
A stainless steel fuel tank developed by Outokumpu
and the Swedish fuel system company TechROi
received a New Applications Award from the
International Stainless Steel Forum in the Best New
Development category. The use of the Outokumpu
HyTens® steel grade allowed extremely thin walls
and tailored strength, making the tank around three
kilograms lighter than a conventional fuel tank made
of plastic, thus reducing the overall vehicle weight,
as well as making the car less fuel-consuming and
consequently mitigating emissions.

Outokumpu Annual report 2015
Highlights

"The most anticipated industry event
Outokumpu Experience 2015 was attended
by 5 00 guests from over 50 countries."

New product portfolio
By arranging its products according to
performance, such as strength, heat-
resistance and corrosion-resistance,
Outokumpu puts customer needs first.
The new portfolio structure features nine
product ranges launched at Outokumpu
Experience, a global customer event
attended by more than 500 customers
and stainless steel professionals, in
Berlin, Germany. In connection with the
event, new innovations saw the light:
Core 4622 ferritic containing no nickel,
and the high-strength, lightweight Forta
H-series for the automotive industry.

Duplex delivers up to 20
years longer service life
Outokumpu delivered one of the largest
orders to date for tank building, 245
tonnes of lean duplex stainless steel for
the construction of three big oil storage
tanks at the Antwerp harbor in Belgium.
Outokumpu’s Forta LDX 2101 is the
material of choice for long-lasting tanks:
the expected service life is 50 to 60
years, compared to 30 to 40 years in
the past.

Bochum melt shop closed
The Bochum melt shop ramp-down in Germany was
completed. The last melt was marked with a ceremony
honoring the over 100 years of stainless steel operations
in Bochum. All of the employees in Bochum were found
new employment or other solutions. The positive financial
impact of the Bochum melt shop ramp-down is over
EUR 30 million annually from 2016 onwards. The closure is
part of the EMEA restructuring program.

Outokumpu increases share in Fennovoima
Outokumpu decided to increase its share in the Finnish
Fennovoima nuclear power plant project by 1.8 percentage points,
raising its share to around 14 percent. The power plant is expected
to be running in 2024. Fennovoima will provide electricity to its
owners at cost price. The Outokumpu mills in Tornio are the single
largest user of electricity in Finland, thus it is important to secure
stable, cost-effective and reliable energy sources with zero or low
carbon emissions.

Outokumpu Annual report 2015
Highlights

"In 2015, Outokumpu’s stainless
solutions realized various
pristine customer projects."

Six years in a row a climate
disclosure leader
Outokumpu was again included in the
Nordic Climate Disclosure Leadership
Index. Outokumpu earned its position
by disclosing high-quality data on
climate change-related information with
the best possible disclosure score of
100, providing investors with a level
of comfort for assessing corporate
accountability and preparedness for
changing markets and emissions
regulations.

La Sagrada Família basilica
relies on stainless
Outokumpu supplies stainless steel
for the La Sagrada Família basilica, a
UNESCO world heritage site, in rebar,
bar, machined components and plasma-
cut plate products. Stainless steel rebar
was selected first in 2013 in the tower
structures due to its high strength,
exceptional corrosion resistance and
reduced lifecycle costs.

New CEO
Roeland Baan was appointed as the new Chief Executive
Officer of the Outokumpu Group in October. With extensive
merits in the process and metals industry, Baan started
in his position on January 1, 2016. Reinhard Florey,
Chief Financial Officer and deputy to the CEO, acted as
the interim CEO until then. In November, Outokumpu
announced the appointment of Liam Bates as President
and Head of the Quarto Plate business area.

Divestment of non-core assets
The divestment of the joint venture Fischer
Mexicana in Mexico and SKS cold rolling mill in
China were completed. Divestments also enabled
refinancing and debt maturity extensions. These
significantly reduced Outokumpu’s net debt and
strengthened its balance sheet.

Outokumpu Annual report 2015
Market environment

Market
environment

Our market position

In 2015, total global steel production was
1.6 billion tonnes, of which approximately
2.6% was stainless steel. Stainless steel
is a versatile and widely used material that
plays a key role in many important areas,
including urbanization, transportation,
energy, and the production and consumption
of food, water and other beverages. Stainless
steel’s attractive properties, which include
corrosion resistance, high strength-to-weight
ratio, heat tolerance, aesthetic qualities
and recyclability, 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 2016

Outokumpu is one of the world’s leading
stainless steel producers and is widely
recognized for its product quality,
excellence in both standard and special
grades and as a global leader in research,
development and technical support.
Outokumpu operates around the world.
Its main production facilities are located
in Finland, Germany, Sweden, the UK,
the US and Mexico. The site in Tornio,
Finland is one of the world’s most cost-
efficient and highly integrated single site
stainless steel production facilities that
focus on high-volume standard grades of
stainless steel. The Group’s production
sites in Germany focus on more customized
deliveries of ferritic and austenitic grades,
including bright annealed surfaces, and
the production sites in Sweden focus on
special grades. Outokumpu is ramping up
a new and fully integrated production site
in Calvert, Alabama, US, which produces
both austenitic and ferritic grades and
complements the product portfolio of the

Mexican plant that specializes in bright
annealed products.

The global crude stainless steel capacity

in 2015, including flat and long products,
totaled approximately 68.4 million tonnes,
up slightly from 68.1 million tonnes in
2014. The largest producers based on
crude stainless capacity are Tsingshan,
TISCO, POSCO, Outokumpu, Baosteel,
Acerinox, Aperam and LISCO. Global
crude stainless steel production was 42.1
million tonnes in 2015, a decrease of 1.7%
compared to 2014. This was the first time
since 2009 that production shrank, and
the decline was broad-based between
the regions. In Europe, stainless steel
production was 7.1 million tonnes in 2015,
a decrease of 1.4% compared to 2014.
In China, stainless steel production grew
at an annual average pace of around 19%
in 2007–2014, but decreased by 2.0% to
22.3 million tonnes in 2015. Of the major
regions and countries, only India and South
Africa increased output in 2015 compared
to 2014. Outokumpu had an approximately
30% share of cold-rolled stainless steel
deliveries in Europe and an approximately
8% share globally in 2015.

Source: Eurofer and SMR February 2016

Major stainless steel producers

million tonnes
Tsingshan
TISCO
POSCO
Outokumpu
Baosteel
Acerinox
Aperam
LISCO

2015
5.6
4.5
3.9
3.6
3.4
2.9
2.0
2.0

2016
5.4
4.5
3.9
3.3
2.7
2.9
2.0
2.0

Source: Global crude stainless steel capacity,
SMR February 2016

End-uses of stainless steel
in 2015

Consumer Goods & Medicals 47%

Chemical, Petrochemical & Energy 16%

Automotive & Heavy Transport 10%

ABC & Infrastructure 15%

Industrial & Heavy Industry 8%

Others 3%

Source: SMR, stainless steel fi nished
products*, February 2016.

* Rolled and forged products excl.

13Cr tubes, profi les.

"Global crude stainless
steel production
was 42.1 million
tonnes in 2015, a
decrease of 1.7%
compared to 2014."

In heavy industry applications, maintenance and down time of structures and machinery is difficult
and expensive; stainless steel offers a significant cost advantage throughout its life cycle – from the
raw materials that enable production, through to a reduced need for repairs and replacement.

Outokumpu Annual report 2015
Market environment

P o p u lation growth and urbanizatio

Others
1.10 million tonnes
(2015: 1.05)
CAGR 2.3%

As fuel emissions regulations tighten,
the need for new lightweight possibilities
has never been more urgent. The Forta
H series of stainless steel provides
lightweight structures for vehicles,
offering reduced emissions
alongside better passenger
safety.

b ilit

Increasin g m

Industrial &
Heavy Industry
3.01 million tonnes
(2015: 3.09)
CAGR -1.4%

Automotive &
Heavy Transport
4.11 million tonnes
(2015: 3.89)
CAGR 2.7%

Building & Infrastructure
6.12 million tonnes
(2015: 5.62)
CAGR 4.3%

Expected global
consumption of
stainless steel
products in 2017

39.2

million tonnes
(37.7 in 2015)

Consumer Goods & Medicals
19.14 million tonnes
(2015: 17.87)
CAGR 3.5%

Clim

Chemical, Petrochemical
& Energy
5.70 million tonnes
(2015: 6.16)
CAGR -3.8%

ate change Scarcity of r e s o u r

Outokumpu supplied duplex stainless
steel to Marina Bay Pedestrian Bridge,
Singapore with a 100 year design life, low
maintenance costs, and resistance to
corrosion cracking and chloride stress.

Outokumpu’s stainless has superb
heat resistance. In one of the
world’s largest solar energy plants
our stainless steel withstands
temperatures up to 600 degrees
Celsius.

d e n ergy

s a

Stainless steel is corrosion-resistant,
helping goods in heavy usage: Outokumpu
delivers stainless flat plates to Miele of
Germany, who make some of the world’s
longest lasting washing machines and
driers.

Source: SMR, stainless steel finished products,
February 2016
CAGR = Compound Annual Growth Rate

Outokumpu Annual report 2015
Market environment

Market price comparison with competing materials

Stainless steel price*

2006=100
300

250

200

150

100

06 07 08 09 10 11 12 13 14 15

Stainless steel*
Zinc
Carbon steel galvanized sheet

Aluminium
Carbon steel cold rolled coil
Copper

Source: CRU, LME and Metal Bulletin. Including December 2015.

* Stainless steel prices are for grade 1.4301.

EUR/t
5 000

4 000

3 000

2 000

1 000

97 9 8 99

Base price

Alloy surcharge

06
09 10
14
07
Transaction price

15 16

Source: CRU. Including January 2016.

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

Market review

Global real demand for stainless steel
products reached 37.7 million tonnes in
2015, with a modest increase of around
2% from 37.1 million tonnes in 2014,
after annual average growth of around
8% in 2011–2014. The deceleration of
growth was most pronounced in the APAC
and Americas regions, where the growth
slowed markedly below the average rates
of previous years. Slowing economies in
emerging markets, notably China, broad-
based weakness in global manufacturing
and deteriorating nickel prices resulted in
weaker demand growth in 2015 compared
with previous years. Of the end-use
segments, the Chemical, Petrochemical
and Energy segment contracted by
2% amid retreating oil prices, whereas
the Automotive & Heavy Transport and
Consumer Goods & Medical segments were
the most resilient, both at 3% growth in
2015, compared with 2014.

Real demand in the EMEA region
reached 7.2 million tonnes in 2015, flat
from 2014 despite the expected fragile
recovery of the European economy on the
back of a weaker euro, low oil prices and
less expensive credit. Growth in Western
Europe stagnated and the Middle East
contracted, while Eastern Europe and
Africa showed robust growth rates of 10%
and 5%, respectively. Of the major Western
European countries, Germany and Italy
both grew at 2%, while consumption levels
in France and Benelux shrank. Countries in
the CIS region saw a slump of 16% in their
consumption levels in 2015 compared with
2014. The Automotive & Heavy Transport
segment, growing at 4%, outperformed
other segments in 2015 as it grew even

more quickly than in the past few years.
In contrast, Chemical, Petrochemical and
Energy and Industrial & Heavy Industry
segments were the weakest as their
demand shrank by 3% and 2%, respectively,
compared with 2014.

In the Americas region, demand was
at 3.6 million tonnes, a decrease of 1%
compared with 2014, after average annual
growth of around 10% during 2011–2014.
Consumption in the NAFTA region grew
at 1%, driven by robust growth of 9% in
Mexico. Growth in the US stagnated on the
back of weakness in the manufacturing
sector driven by collapsed investment
in the oil & gas industry, and secondly
on weaker exports due to the strong
dollar. Meanwhile, consumption levels in
South America were 12% lower in 2015
compared with 2014, amid a slump of 14%
in Brazil. Automotive & Heavy Transport
outperformed the other segments, as
it was able to grow even faster than in
the past few years, at 4%. The Chemical,
Petrochemical and Energy segment was
the weakest performer, as it shrank by 12%
compared with 2014.

In the APAC region, consumption has
been growing rapidly in recent years, at
an annual average of 9% in 2011–2014,
which has been the main factor supporting
global growth. In 2015, however, growth
slowed down to only 2% resulting in
consumption of 26.9 million tonnes.
This was mainly driven by decelerated
growth in China, which slowed to 4% in
2015 after the average of around 12%
per annum in 2011–2014. The slowdown
in China resulted from decreased metals
consumption driven by the balancing
of the economy from investment and
manufacturing towards services and

consumption. The slowdown was also
largely broad-based between the other
countries in the APAC region. In contrast,
India was the bright spot, showing robust
growth of around 6% in its consumption
levels in 2015. Also, all the segments
except Automotive & Heavy Industry
showed markedly slower growth compared
with the past few years. The Consumer
Goods & Medical segment showed the
strongest growth at 4%, whereas Chemical,
Petrochemical and Energy was the
weakest, with flat growth compared with
2014.

Source: SMR February 2016

According to CRU, average cold-rolled
stainless steel transaction prices
decreased in all regions in 2015 compared
with 2014. In Europe, transaction prices
were most resilient, partly as a result of
the depreciated EUR against USD, with a
decrease of 3% from 2014 in EUR terms.
In the US and China, transaction prices
were down by 18% and 20% respectively in
USD terms. In Europe, most of the decline
in transaction price came from the alloy
surcharge (-4%), whereas the base price
was down by 2% from 2014. In the US,
the base price eased by 3% and the alloy
surcharge by 29% in USD terms on the
back of weaker prices of alloying metals
across the board.

Source: CRU January 2016

Outlook

The long-term prospects for stainless steel
consumption remain robust. Key global
megatrends in urbanization, modernization
and increased mobility, combined with

Outokumpu Annual report 2015
Market environment

"Between 2016 and 2019,
global stainless consumption
is expected to increase at
an annual average growth
rate of around 3%."

Nickel price

USD/t
40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

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 38.0 and 39.2 million
tonnes in 2016 and 2017, respectively.
Between 2016 and 2019, global
consumption is expected to increase at an
annual average growth rate of around 3%,
driven mainly by increased consumption of
around 3% in APAC. Meanwhile, demand
in EMEA and Americas is estimated to
increase by around 1% in both regions.
Growth is expected to be broad-based
between the end-use segments, with the
Consumer Goods & Medical and ABC
& Infrastructure segments showing the
most robust annual growth of around 4%
between 2016 and 2019. The Automotive
& Heavy Industry and Industrials & Heavy
Industries segments are estimated to
grow at average rates of 3% and 1%,
respectively. Meanwhile, the Chemical,
Petrochemical & Energy segment is
forecast to show no growth between 2016
and 2019.

Source: SMR Real Demand February 2016

Source: LME settlement, monthly average prices,
including December 2015.

Molybdenum price

USD/lb
30

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

Ferrochrome price

USD/lb
2.0

1.5

1.0

0.5

Source: Quarterly contract prices agreed between South African
ferrochrome producers and European buyers, including Q1/2016.

Outokumpu Annual report 2015
Members of the Leadership Team

Leadership Team

Roeland
Baan

Liam
Bates

Pekka
Erkkilä

Reinhard
Florey

Jan
Hofmann

Roeland Baan
b. 1957, Dutch citizen
M.Sc. (Econ.)
President and Chief Executive Officer 2016–
Chairman of the Outokumpu Leadership Team 2016–
Responsibility: Group management, strategy and
sustainability, legal and internal audit
Employed by the Outokumpu Group since 2016

Work experience
Executive Vice President and CEO: Aleris Europe and
Asia 2013–2015
Executive Vice President and CEO, Global Rolled and
Extruded Products: Aleris 2011–2013
Executive Vice President and CEO, Europe and Asia:
Aleris 2008–2011
Executive Vice President and member of the
Management Committee, Global Pipes and Tubes
Division and the South African carbon steel operations:
Arcelor Mittal Group 2006–2007
Chief Executive Officer: Mittal Steel Europe 2004–2006
Senior Vice President, Operations: SHV Energy BV
2001–2004
Chief Executive Officer: Thyssen Sonnenberg Recycling
GmbH & Co. KG 1998–2001
Senior Vice President, Business Development and Asia
Operations: SHV NV 1996–1998
Various management positions in Europe, Africa and the
Americas: Shell International Petroleum Co. 1980–1996

Positions of trust
Board member: Borusan Mannesmann Boru Sanayi ve
Ticaret A.Ş. 2012–, member of the Audit Committee
2012–, Chairman of the Corporate Governance
Committee 2013– and member of the Risk Committee
2013–
Board member: Eurofer 2004–2005 and 2015–
Board member: International Stainless Steel
Forum 2016–
Vice Chairman: European Aluminium Association
2014–2015

Liam Bates
b. 1971, UK citizen
B.Sc. hons Economics, MBA
President – Quarto Plate 2015–
Member of the Outokumpu Leadership Team 2015–
Responsibility: Quarto Plate business area
Employed by the Outokumpu Group since 1993

Work experience
Senior Vice President – Quarto Plate Europe: Outokumpu
Stainless AB 2014–2015
Vice President – Mergers & Acquisitions: Outokumpu Oyj
2012–2014
Vice President – Business development: Outokumpu Oyj
2011–2012
Head of Pricing Office: Outokumpu Oyj 2009–2011
Head of Architecture, Building & Construction cluster:
Outokumpu Oyj 2008–2009
Head of Degerfors Stainless, Long Products: Outokumpu
Stainless AB 2002–2005
Various other positions in Outokumpu since 1993

Pekka Erkkilä
b. 1958, Finnish citizen
M.Sc. (Eng.)
Executive Vice President, Chief Technology Officer
2013–
Member of the Outokumpu 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
Board member: Association of Finnish Steel and Metal
Producers 2016–
Board member: Metallurgiska Forskningsbolaget i Luleå
AB (Swerea MEFOS) 2015–
Chairman of the Board: Manga LNG Oy 2013–2015
Board member: Voimaosakeyhtiö SF 2014–
Board member: University of Oulu 2009–2015

Reinhard Florey
b. 1965, Austrian citizen
M. Sc. (Eng.), M.A.
CFO 2013–
Interim CEO October 26–December 31, 2015
Member of the Outokumpu Leadership Team 2012–
Responsibility: Financial services and reporting,
business controlling and planning, treasury and
risk management, taxation, corporate affairs and
compliance, investor relations and metal desk
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
Board member: Shanghai Krupp Stainless Co. Ltd.
2011–2015
Executive Member of the Board: Acciai Speciali Terni
S.p.A. 2011–2014

Jan Hofmann
b. 1979, German citizen
M.Sc. (Econ.)
President – APAC 2015–
Member of the Outokumpu Leadership Team 2015–
Responsibility: APAC business area
Employed by the Outokumpu Group since 2012

Work experience
Chief Financial Officer – APAC: Outokumpu Oyj 2015
Senior Vice President – Group Strategy and Business
Excellence: Outokumpu Oyj 2012–2014
Vice President – Business Development: Inoxum GmbH
2011–2012
Head of Business Development: ThyssenKrupp Stainless
AG 2009–2011
Various positions at ThyssenKrupp 2005–2009

Positions of trust
Board member: Shanghai Krupp Stainless Co., Ltd.
2015–
Board member: Outokumpu Nirosta GmbH 2012–2014
Board member: ThyssenKrupp VDM GmbH 2011–2012

Leadership Team

Outokumpu Annual report 2015
Members of the Leadership Team

Olli-Matti
Saksi

Johann
Steiner

Saara
Tahvanainen

Kari
Tuutti

Michael
Williams

Olli-Matti Saksi
b. 1967, Finnish citizen
M.Sc. (Eng.)
President – Coil EMEA 2014–
Member of the Outokumpu Leadership Team 2014–
Responsibility: Coil EMEA business area
Employed by Outokumpu Group since 2013

Work experience
Senior Vice President – Head of Sales EMEA:
Outokumpu 2013–2014
SVP and General Manager, Division Rolled Products:
Aleris 2011–2013
VP, Sales and Marketing: Aleris 2008–2011
VP, Sales and Marketing: ArcelorMittal 2004–2008
VP, Sales: Rautaruukki 2000–2004
Business Development and Corporate Planning: Fundia
1998–2000
Various positions: Rautaruukki 1991–1998

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

Work experience
Executive Vice President – Human Resources and
Health, Safety and Sustainability: Outokumpu Oyj 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

Michael Williams
b. 1960, US citizen
B.Sc. (Information science)
President – Coil Americas 2015–
Member of the Outokumpu Leadership Team 2015–
Responsibility: Coil Americas business area
Employed by the Outokumpu Group since 2015

Work experience
Senior Vice President, Strategic Planning & Business
Development: United States Steel Corporation
2013–2015
Senior Vice President, North American Flat-Roll
Operations: United States Steel Corporation
2009–2013
Vice President, Midwest Flat-Roll Operations: United
States Steel Corporation 2008–2009
General Manager, Gary Works Complex: United States
Steel Corporation 2006–2008
Vice President, Commercial Products: Special Metals
Corporation 2006
Chairman & Chief Executive Officer: Ormet Corporation
2004–2006
President & Chief Operating Officer: Ormet Corporation
2002–2004
Vice President, Operations & Sales, Ormet Aluminum
Mill Products: Ormet Corporation 2000–2002
Vice President, Operations Ormet Aluminum Mill
Products: Ormet Corporation 1999–2000
Various positions as Division Manager, Gary Works:
United States Steel Corporation 1994–1999
Various positions: United States Steel Corporation
1992–1994
Senior Information & Automation Engineer: Armco Steel
Corporation 1989–1992
Manager – Plant Manufacturing Systems: Koppers
Corporation 1987–1989
Senior Systems & Project Manager: Omega Systems
1985–1987
Various positions: Commonwealth Clinical Systems
1983–1985

Saara Tahvanainen
b. 1974, Finnish citizen
M.Sc. (Soc.) in communications
Executive Vice President – Communications &
Marketing 2014–
Member of the Outokumpu Leadership Team 2014–
Responsibility: Communications and marketing
Employed by the Outokumpu Group since 2012

Work experience
Vice President – Communications: Outokumpu Oyj
2013–2014
Director – External Communications: Outokumpu Oyj
2012
Senior Communications Manager: Nokia 2007–2012
Communications Manager: Nokia 2006–2007
Communications Manager: Fazer 2004–2006
Project Manager, change and leadership
communications: Ericsson 2001–2004
Communications Officer: Ericsson 2000–2001

Kari Tuutti
b. 1970, Finnish citizen
M.Sc. (Econ.)
President – Long Products 2014–
Member of the Outokumpu Leadership Team 2012–
Responsibility: Long Products business area
Employed by the Outokumpu Group since 2011

Work experience
Executive Vice President – Marketing, Communications
and Sustainability: Outokumpu Oyj 2013–2014
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 2009–2011
Vice President, Communications: Nokia 2008
Director, Communications, Multimedia Business Group:
Nokia 2002–2007
Senior Manager, Investor Relations: Nokia 1999–2002
Manager, Treasury, Finland and Geneva: Nokia
1995–1999
Analyst, Treasury: Merita Bank 1994–1995

Positions of trust
Board member: Fagersta Stainless AB 2015–
Chairman of the Board: Fagersta Stainless AB
2014–2015
Chairman of the Board: Euro Inox 2013–2015

Outokumpu Annual report 2015
Members of the Board of Directors

Board of Directors on Dec 31, 2015

Jorma
Ollila

Olli
Vaartimo

Markus
Akermann

Roberto
Gualdoni

Positions of trust
Chairman of the Board: Valmet Automotive Oy
2003–2014
Board member: Valmet Automotive Oy 2014–
Board member: Kuusakoski Oy 2008–
Board member: Kuusakoski Group Oy 2008–
Board member: Alteams Oy 2008–2014
Board member: Northland Resources SA 2013–2014

Independent of the company and its significant
shareholders.

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

Work experience
Chief Executive Officer: Holcim Group 2002–2012
Chairman of the Board: Holcim Group Support Ltd
2002–2012
Member of the Board: Holcim Ltd 2002–2013
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
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.

Roberto Gualdoni
b. 1956, German citizen
MBA, M.Sc. (Eng.)
Outokumpu Board member 2014–
Member of the Remuneration Committee

Work experience
Chief Executive Officer: Styrolution Group 2011–2014
President, Styrenics: BASF SE 2010–2011
Senior Vice President, Global Procurement Raw
Materials: BASF SE 2007–2010
Senior Vice President, Global Procurement Basic
Products: BASF SE 2006–2007
Group Vice President, Business Unit Engineering Plastics
Europe: BASF SE 2001–2005
Group Vice President, Business Unit Foam Products
Europe: BASF SE 1998–2001
Chief Controller, Regional Division Central Europe: BASF
SE 1996–1998
Controlling, Sales Division Germany: BASF SE
1994–1996
European Market Coordinator – Specialty Chemicals:
BASF SE 1991–1994
Market Coordinator North Europe/Germany – Specialty
Chemicals: BASF SE 1991
Product manager, Superabsorbers and Dispersing
Agents: BASF SE 1990–1991
Marketing Manager, Textile, Leather, Paper and Specialty
Chemicals: BASF Argentina S.A. 1988–1989
Assistant to the General Manager: BASF Argentina S.A.
1987–1989
Commercial Coordinator: Tenaris 1983–1986

Positions of trust
Chairman of the Supervisory Board: Styrolution Europe
and Styrolution Americas 2012–2014
Chairman of the Board: BGS, Schwarzheide, 2001–2005
Member of the Steering Board: PlasticsEurope,
Brussels/Belgium, 2012–2014
Board member: FIW, Munich, 1998–2001
Board member: BASF Intertrade AG, Zug/Switzerland,
2006–2007
Vice President: EXIBA, Brussels, 1998–2001

Independent of the company and its significant
shareholders.

Jorma Ollila
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

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

Positions of trust
Chairman of the Board: Miltton Oy 2015–
Chairman of the Board: Royal Dutch Shell Plc
2006–2015
Vice Chairman of the Board: Otava Ltd 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–
Advisory Partner: Perella Weinberg Partners 2014–

Independent of the company and its significant
shareholders.

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

Work experience
CFO: Metso Oyj 2003–2010
Executive Vice President, Deputy to the President and
CEO: Metso Oyj 2003–2010
Member of the Executive Team 1999–2010 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

Board of Directors on Dec 31, 2015

Outokumpu Annual report 2015
Members of the Board of Directors

Stig
Gustavson

Heikki
Malinen

Saila
Miettinen-
Lähde

Elisabeth
Nilsson

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
Chairman: Svenska Bergsmannaföreningen 2007–2009
Member: Royal Swedish Academy of Engineering
Science IVA 2007–
Member: Skandia Council 2014–
Board Member: Boliden 2015–
Board member: Northland Resources SA 2013–2014
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.

Stig Gustavson
b. 1945, Finnish citizen
M.Sc. (Eng.)
Dr.Tech. (hon.) Tampere University of Technology
Dr.Tech. (hon.) Aalto University Helsinki
Finnish Honorary title Vuorineuvos
Outokumpu Board member 2014–
Member of the Remuneration Committee

Work experience
President and CEO: Konecranes Plc 1994–2005
President: KONE Oy/KONE Cranes 1988–1994
President: KONE Oy/KONE Wood 1985–1988
Director: KONE Oy/KONE Roxon, 1982–1985
Various executive positions within leading Finnish and
Swedish companies, 1970–1982

Positions of trust
Board memberships and Chairmanships in over 20
major Finnish and Scandinavian companies and over
10 Finnish, Scandinavian and European organizations,
trusts and charities, including present positions:
Chairman of the Board: Konecranes Plc 2005–
Chairman of the Board: Suomi Gas Distribution Oy
2015–
Vice Chairman of the Supervisory Board: Tampere
Technical University 2013–
Supervisory Board Member: Varma Mutual Pension
Insurance Company 2000–
Senior Advisor: IK Investment Partners 1997–
Board Member: IK Investment Partners Funds 2014–
Past Chairman 2011–2015 and present Vice Chairman
of the Board: Ahlstrom Capital Oy 2015–
Past Chairman of the Board and Executive Committee
2007–2015 and present Chairman of the Finance
Committee: Technology Academy (Finland) 2015–
Past Chairman 2002–2007 and present Vice Chairman
of the Board: Mercantile Oy Ab 2007–

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: Posti Group Corporation (formerly
Itella Corporation) 2012–
President and CEO: Pöyry PLC 2008–2012
Executive Vice President, Strategy, member of the UPM
Executive Team: UPMKymmene 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) 2009–2014
Board member: Ilmarinen Mutual Pension Insurance
Company 2014–
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: Finnish Fair Corporation
2014–
Supervisory Board member: Ilmarinen Mutual Pension
Insurance Company 2013

Independent of the company and its significant
shareholders.

Saila Miettinen-Lähde
b. 1962, Finnish citizen
M.Sc. (Eng.)
Outokumpu Board member 2015–
Member of the Audit Committee

Work experience
Chief Financial Officer: F-Secure Corporation 2015–
Deputy CEO 2012–2014 and CFO 2005–2015:
Talvivaara Mining Company Plc
Founding Partner: SIDOS Partners Oy 2004–2005
Director: Carnegie Investment Bank 2000–2004
Vice President Business Development: Orion Oyj 2000
Director: The Finnish Innovation Fund Sitra: 1998–1999
Various managerial positions: Leiras Oy 1993–1998

Positions of trust
Member of the Board: LeaseGreen Group Oy 2015–
Member of the Board: Rautaruukki Oyj 2012–2014
Member of the Board: Biohit Oyj 2011–2013
Member of the Board: Talvivaara Mining Company Plc
2007–2012
Chairman of the Board: Valuecode Oy 2014–2015 and
member of the Board 2008–2014

Independent of the company and its significant
shareholders.

Outokumpu Annual report 2015
Review by the Board of Directors

Review by the Board
of Directors 2015

Outokumpu’s operational profitability weakened in 2015. Although the
savings programs were successfully completed and the profitability
of the largest business area Coil EMEA improved, the Group’s
underlying EBIT declined compared to 2014 as a result of difficult
market environment, lower delivery volumes, and decreasing prices. In
Americas, the technical issues in Calvert during the previous year were
still burdening the performance particularly during the first half of 2015,
but Coil Americas’ order intake started to improve towards the end
of the year. While the operational performance fell behind the targets
in 2015, Outokumpu took decisive steps to strengthen its financial
position through divestments. The divestments of Fischer Mexicana and
especially Shanghai Krupp Stainless Co., Ltd enabled significant debt
reduction and strengthening of the balance sheet. The proceeds from
the divestments boosted Outokumpu’s net profit for 2015 into positive
territory after several years of losses. Strengthening of the financial
position and decisive actions to improve profitability will continue in 2016.

Update on profitability
improvement programs

Since the acquisition of Inoxum at the end of 2012, Outokumpu
has implemented significant profitability improvement programs to
restructure the company’s asset base, reduce costs and improve
efficiencies. Two of these programs, Synergies and P250, were closed
at the end of 2015 following the achievement of the targeted savings.
Likewise, the P400 program which aimed to release cash from net
working capital was completed at the end of 2015. The ongoing EMEA
restructuring plan continues as planned and targets EUR 100 million in
savings by the end of 2017.

By the end of 2015, EUR 217 million out of the estimated EUR 220
million of the one-time initial cash costs (excluding capital expenditure
and impairments) for all three savings programs had been recorded as
provisions (December 31, 2014: EUR 191 million). The cash outflow of
the provisions was EUR 94 million in 2015 (2014: EUR 36 million), and
the estimated impact for 2016 is EUR 50 million.

Synergy savings

Cumulative synergy savings achieved the target of EUR 200 million
at the end of 2015. The majority of the total savings related to
production optimization since the start of the program in 2013, and a
significant part of the total savings came from raw material and general
procurement. The Krefeld melt shop closure at the end of 2013 and the
headcount reductions also contributed to the overall achievement.

P250 savings

When the program was launched at the beginning of 2013, the
initial target was to achieve savings of EUR 150 million. In 2014,
the program was expanded to EUR 250 million by the end of 2015.
The P250 program achieved the targeted total cumulative savings of
EUR 250 million at the end of 2015. The savings were mainly driven
by the Coil EMEA and Coil Americas business areas and are derived
from procurement, IT and operational costs, as well as general and
administration costs including headcount reductions.

Outokumpu Annual report 2015
Review by the Board of Directors

EMEA restructuring savings

Cumulative savings from the EMEA restructuring program amounted
to EUR 20 million by the end of 2015. The majority of the EMEA
restructuring savings came from the Bochum melt shop closure at the
end of June 2015. The next milestones will be the Benrath site closure
in 2016 and the completion of the investment in ferritic stainless steel
capacity in Krefeld by 2017. An additional savings of EUR 60 million are
expected for 2016, with the full cumulative savings of EUR 100 million
by the end of 2017.

Net working capital reduction

Outokumpu achieved its target of releasing EUR 400 million in cash from
the net working capital reduction by the end of 2015 versus the 2012
level in the P400 program. The cumulative cash release reached EUR
574 million at the end of 2015. The majority of the cash release during
2015 was driven by lower metal prices as there was no reduction in
absolute inventory amount in tonnes.

The total inventory days, Outokumpu’s key metric for inventory efficiency,
went down to 92 at the end of 2015. Outokumpu reports inventory days
by comparing the current inventories with deliveries planned in following
three months.

Outokumpu’s management has identified significant further potential to
improve working capital and inventory efficiency, and that is one of the
key priorities during 2016.

Ongoing ramp-ups

Calvert

Outokumpu is making progress in bringing its new integrated stainless
steel mill in Calvert, Alabama, US to full commercial capability over the
coming years, with 2018 being the first year of steady-state operations.
The technical ramp-up of the Calvert mill was completed at the end of
2014. All production steps have been tested and capabilities proven for
both austenitic and ferritic grades as well as widths ranging from 36 to
72 inches.

Production in both the melt shop and the cold-rolling lines is showing
good quality, and operational performance was running largely according
to plan throughout 2015. All the cold-rolling lines have been back in
production since the beginning of 2015 following the earlier technical
issues. Lower utilization rates following the weak order intake in the
early part of the year have helped to reduce the late order backlog, and
both delivery performance and yields are improving.

Degerfors

The EUR 100 million investment project to expand capacity to 150,000
tonnes and to enhance the offering in tailored and standard quarto plate
was completed in Degerfors, Sweden in 2014. The expanded capacity
will be taken into use over the coming years.

Production at the Degerfors mill ran largely according to plan in 2015.
Volumes in Degerfors grew 16% and reached 87,000 tonnes compared

to 75,000 tonnes a year earlier. An additional 10% growth in Degerfors
delivery volumes is targeted for 2016 with an increasing share of
standard grades.

Strengthening of the financial position

Outokumpu took decisive steps to strengthen its financial stability
and balance sheet towards the end of the year by completing two
divestments.

Following its strategy to differentiate in the APAC region with specialty
grades and tailored solutions, Outokumpu divested its 60% shareholding
in SKS in China in December 2015. SKS operated a cold rolling mill
in Shanghai with over 450 employees and SKS focused on the most
common stainless steel grades.In total, Outokumpu recorded a non-
recurring capital gain of EUR 389 million (net of withholding taxes) for
the sale of SKS in the 2015 result.

In December 2015, Outokumpu completed the divestment of its stake in
Fischer Mexicana, a joint venture between F.E.R. Fischer Edelstahlrohre
GmbH and Outokumpu in Mexico. In the transaction, Outokumpu
divested its 50% stake in the joint venture for EUR 57 million. The gain
on the sale, net of withholding taxes, was EUR 43 million.

Market development

Stainless steel demand

In 2015, global apparent stainless steel consumption declined by 1.1%
compared to 2014. Decrease was particularly strong in the Americas
with the decline of 7.3%, while EMEA saw a decrease of 2.8% and
APAC an increase of 0.2%. The apparent consumption was impacted by
destocking as a result of very low nickel price.

According to research institute SMR, global real demand for stainless
steel products reached 37.7 million tonnes in 2015, a modest increase
of 1.6% from 37.1 million tonnes in 2014. Slowing economies in
emerging markets, notably China, broad-based weakness in global
manufacturing, and deteriorated nickel prices resulted in weaker
consumption growth in 2015 compared to 2011-2014 which saw
average annual demand growth of about 8%. The deceleration was
most pronounced in the APAC and Americas regions where growth
slowed down to 2.4%, substantially below the average rates of the past
years, and in the Americas region, where demand shrank by 1.4%. Real
demand for stainless steel products in the EMEA region grew at a rate of
0.2% in 2015 compared with 2014.

Consumer Goods & Medical and Automotive & Heavy Transport
outperformed the other end-use segments in 2015, with real
demand growing by 3.1% and 2.5% respectively compared to 2014.
The Chemical, Petrochemical and Energy segment was the weakest
performer with demand declining by 2.2% amid retreating oil prices. Real
demand in the ABC & Infrastructure and Industrial & Heavy Industries
segments grew at 1.6% and 0.6% respectively in 2015.

EU cold-rolled imports from third countries are expected to have reached
a level of 24.7% of total consumption in 2015, clearly down from the
average of 30.6% in 2014. The decline was driven by substantially lower
volumes from China and Taiwan, after the imposition of anti-dumping

Outokumpu Annual report 2015
Review by the Board of Directors

duties by the European Commission in March 2015. Meanwhile,
imported volumes from other countries, namely South Korea, India,
South Africa, Turkey and some other Asian countries, increased.

Source: Eurofer and Foreign Trade Statistics January 2016

NAFTA cold-rolled imports from third countries are expected to have
reached a level of 23.7% of total consumption in 2015, higher than the
average of 19.5% in 2014. Imports from Asia, namely from South Korea,
Taiwan and China, as well as from Brazil, South Africa and Turkey rose.
Meanwhile, total imports from Europe decreased.

Source: Foreign Trade Statistics, January 2016

Stainless steel transaction prices

According to CRU, average transaction prices decreased in all regions
in 2015 compared to 2014. In Europe, transaction prices were most
resilient, partly as a result of the weaker EUR against the USD, with
a decrease of 3.3% from 2014 in EUR terms. In the US and China,
transaction prices were down by 17.8% and 20.4%, respectively, in
USD terms. In Europe, most of the decline in transaction prices came
from the alloy surcharge (-4.1%), whereas the base price was down
by 2.4% from 2014. In the US, the base price eased by 3.4% and the
alloy surcharge by 29.4% in USD terms on the back of weaker prices of
alloying metals across the board.

Price development of alloying metals

Nickel prices1 trended lower during the year as slowing demand, from
the stainless steel sector predominantly, weighed down prices. Also,
the rapidly strengthening US dollar in the first half of the year, growing
stocks and mounting concerns over the Chinese economy and its metals
demand were eroding prices, which hit 12-year lows of 8,160 USD/tonne
in late November. The average price of the year of 11,808 USD/tonne,
was 30.0% lower than 16,864 USD/tonne in 2014.

The European benchmark price2 for ferrochrome fell from 1.15 USD/lb in
the fourth quarter of 2014 to 1.08 USD/lb in the first quarter of 2015.
The price rolled over at 1.08 USD/lb for the second and third quarter
and eased further to 1.04 USD/lb for the fourth quarter on soft demand
and deflated production costs.

Molybdenum prices3 weakened during the year and the average price in
2015 was down by 41.8%, to 6.67 USD/lb from 11.45 USD/lb in 2014.
Soft demand, especially from the Oil and Gas sector together with ample
supply weighed down prices during the year.

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 Metal Bulletin - Molybdenum Drummed molybdic oxide Free market $ per

lb Mo in warehouse

Sales, 6 384 € million

Coil EMEA 59%

Coil Americas 17%

APAC 6%

Quarto Plate 6%

Long Products 6%

Other operations 6%

Business areas

Coil EMEA

The key focus of Coil EMEA is to maintain and expand Outokumpu’s
strong European stainless steel position through customer service and
product leadership. A clear target is to improve financial performance
and to drive cost efficiency by increasing capacity utilization levels
and by leveraging the company's own chrome mine and expanded
ferrochrome production. To this end, the successful completion of the
industrial plan to restructure the company’s European operations will be
essential. In line with the program, the Bochum melt shop closure was
completed in June 2015.

Overall, stainless steel markets in the EMEA region were challenging
in 2015. End-customer demand remained relatively healthy, but the
decline in the nickel price to historically low levels in the second half of
the year had an impact on stainless demand in the region. This resulted
in continued destocking as distributors held back orders. In addition,
fluctuating imports to Europe impacted demand balances during the
year. While imports from China and Taiwan decreased significantly
compared to the previous year as a result of the antidumping duties,
they were partly replaced by import material from other countries.

Deliveries for 2015 declined by 5.3% to 1,577,000 tonnes (2014:
1,666,000 tonnes) and sales were EUR 4,134 million (2014: EUR 4,520
million). Coil EMEA’s average base price for standard austenitic grades
in deliveries decreased by about EUR 20/tonne in 2015.

The ferrochrome production was 457,000 tonnes in 2015, below the
initial target mainly due to maintenance issues in the second quarter.

For 2015, Coil EMEA recorded an underlying EBIT of EUR 107 million
compared to EUR 62 million in 2014. The financial performance
improved despite clearly lower deliveries year-on-year as the
restructuring measures together with improved optimization between
the production facilities developed well. Particularly, the good progress
in the savings programs, and improved utilization rates in Tornio and
Avesta contributed to the improvement in profitability. In 2015 Coil
EMEA reported non-recurring items of EUR -31 million consisting of
redundancy costs and impairments relating to EMEA restructuring
program (2014: EUR -164 million of redundancy costs, impairments and
environmental provisions relating to site closures). The net effect of raw
material-related inventory and metal derivative gains/losses was EUR 25
million in 2015 (2014: EUR 16 million).

Outokumpu Annual report 2015
Review by the Board of Directors

Coil Americas

Coil Americas’ key target is to build a strong position in the Americas
market by focusing on product quality, technical service and delivery
reliability. Improvement in Coil Americas’ financial performance is a
priority and is driven by the ramp-up of the Calvert facility. Following
the completion of the technical ramp-up at Calvert in 2014, the
implementation of the commercial ramp-up will continue over the
coming years with 2018 being the first year of steady-state operations.
In addition, Coil Americas is focusing on ensuring the continued growth
and performance improvements of the Mexican operations.

The operating environment for Coil Americas was difficult overall in
2015. Stainless steel imports into the NAFTA region peaked at close
to 30% in the first half of the year resulting in intense competition
and strongly declining base prices for the entire year. While the import
pressure eased towards the year-end, there was little incentive for
distributors to replenish their stocks as the nickel price remained
historically low and destocking continued. Coil Americas’ average base
price dropped about USD 260/tonne during the year.

Outokumpu has since the summer of 2015 implemented decisive
measures to improve Coil Americas’ volumes and profitability, and
delivery volumes grew during the second half of the year. However, full
year 2015 deliveries of 509,000 tonnes remained 5.9% below the levels
reached in 2014 mostly due to weak order intake which was also partly
affected by the earlier cold-rolling technical issues at Calvert in 2014.
Sales in 2015 declined to EUR 1,111 million (2014: EUR 1,158 million),
mostly due to lower transaction prices.

For 2015, the financial performance of Coil Americas deteriorated
considerably compared to the previous year as a result of lower volumes
and intense price pressure. Underlying EBIT for 2015 was EUR -163
million (2014: EUR -93 million). In 2015 Coil Americas reported net non-
recurring items of EUR -17 million relating to the 2014 technical issues
in the cold rolling lines in Calvert (2014: EUR -21 million). The net effect
of raw material-related inventory and metal derivative gains/losses was
EUR -35 million in 2015 (2014: EUR 10 million).

APAC

The APAC business area’s key focus is on selected customer and
product segments in which the Outokumpu offering is differentiated
from its competitors in the APAC region. Following the divestment of
SKS, the APAC business area consists of service centers in China and
Australia, as well as warehouses and sales offices in various Asian
countries. SKS is included in the APAC figures up to the closing of the
divestment in December 2015.

The overall market situation in the APAC region remained tough
throughout 2015, as economic growth slowed down, the nickel
price declined strongly and stainless demand continued to erode.
The continued weakness in the stainless market was also reflected
in commodity stainless steel prices which have been under severe
pressure for the past 1.5 years in the region. While overcapacity remains
and demand growth estimates for the coming years have been revised
downwards, APAC is the fastest-growing region according to SMR with
3-5% demand growth rates for 2016-2017.

For the year 2015, deliveries were 197,000 tonnes, compared to
220,000 tonnes in 2014. Underlying EBIT was EUR -18 million,
significantly weaker than the EUR -6 million in 2014. The decline

in profitability was mostly driven by external pressures on the SKS
business, impacted by the spread between the cost of the locally
sourced hot band raw material and the continuous pressure on the cold-
rolled sales price in China.

Quarto Plate

The Quarto Plate business area is a global leader in tailored quarto
plate material, with key operations in Degerfors in Sweden and in New
Castle, Indiana in the US. Both mills produce quarto plate in standard
and special stainless steel grades for use in projects and by the process
industry. Outokumpu also operates a European plate service center
network that provides further services such as cutting to customer
requirements. Quarto plate products are used in heavy industry and
construction, and consumption is related to the global investment cycle.

A clear priority for the Quarto Plate business area is to ramp up the recent
investment in Degerfors, and to leverage its position in both tailored and
standard plate. Simultaneously, cost reduction and efficiency improvement
measures are being implemented to improve profitability.

For 2015, deliveries grew 7.0% reflecting progress in the Degerfors
investment ramp-up. However, the pace of growth decelerated
throughout the year as the market situation became weaker and the
nickel price continued to slide. While annual delivery volumes grew
and cost take-out measures started to gain traction towards year-end,
they were not enough to compensate for the negative impacts from low
demand and intense price pressure. The Quarto Plate business area
remained at a loss for the full year 2015, with underlying EBIT of EUR -23
million compared to EUR -30 million a year earlier.

Long Products

The Long Products business area focuses on specialty stainless
long products, with production operations in Sheffield in the UK and
Degerfors in Sweden, as well as Richburg and Wildwood in the US.
Long Products produces wire rod, rod coil, bar, rebar, billet and other
long products that are used in a wide range of industries, such as
transportation, consumer durables, metal processing, chemical, energy,
and construction. Long Products’ melt shop in Sheffield, UK has an
important role in Outokumpu’s production platform, as it is one of the
suppliers of feedstock to Outokumpu’s Quarto Plate and Coil EMEA
businesses, in addition to supplying the Long Products’ downstream
units and external customers.

Overall demand for long products was weak throughout 2015. The
declining nickel price had a negative impact on the order intake and
the low oil price kept Oil & Gas sector subdued, resulting in decreased
project activity. Prices were under pressure in Europe since the
beginning of the year, and prices also deteriorated in the US in the
summer. During the second half of the year, tightening competition in
standard grades and increasing imports added further pressure to prices.

Deliveries for 2015 declined to 213,000 tonnes (2014: 248,000
tonnes). The underlying EBIT of EUR 7 million was clearly lower compared
to EUR 32 million in 2014 reflecting the difficult market environment,
subdued Oil & Gas sector, and low prices for long products.

Outokumpu Annual report 2015
Review by the Board of Directors

Financial performance

Sales and profitability

Outokumpu’s financial performance weakened in 2015 mainly as a
result of lower delivery volumes, downward pressure on base prices as
well increase in scrap costs. While demand among end-users remained
solid, distributors held back orders and destocking continued particularly
during the second half of the year. The decline in profitability was
partly offset by progress in savings programs, including a reduction in
headcount. In Coil EMEA restructuring measures together with improved
optimization between the mills developed well and profitability improved.
Coil Americas, in turn, was suffering from the previous year’s cold rolling
issues, which together with weaker demand resulted in lower delivery
volumes, and profitability deteriorated significantly.

Deliveries

For 2015, delivery volumes decreased from the previous year by 6.8%
to 2,381,000 tonnes (2014: 2,554,000 tonnes). The decline was
mostly driven by weak demand among distributor customers as the
nickel price decreased to 12-year lows. As Coil EMEA and Coil Americas
have significant sales to stainless steel distributors, these business
areas were mostly affected, with deliveries declining by 5.3% and
6.1%, respectively. Deliveries in APAC declined partly as a result of the
divestment of SKS, while Long Products volumes were impacted by
weak demand. Quarto Plate was able to grow its delivery volumes by
7.0% as the ramp up in Degerfors progressed. The full-year ferrochrome
production was at 457,000 tonnes, below the initial target mainly due to
maintenance issues in the second quarter.

About 75% of the stainless steel products Outokumpu delivers to
customers are cold rolled products, and the share of semi-finished
products in delivery mix continued to decrease in 2015.

The utilization rate in melting was 85% and in cold rolling 75% in 2015
(2014: 80% and 75%). Overall, capacity utilization rates have improved from
previous years as a result of the restructuring of the company’s production
set-up, reflecting the closure of the Krefeld and Bochum melt shops and the
progress in the Calvert mill ramp-up. In 2013–2015, melting utilization has
increased from 65% to 85% and in cold rolling from 70% to 75%.

Deliveries

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

2015
1 767
346
102
63
222
95
128
9
2 509
2 381

2014
1 880
373
89
64
271
138
133
9
2 686
2 554

2013
1 879
370
77
62
398
186
212
12
2 797
2 585

1) Black hot rolled, slabs, billets and other stainless steel products
2014 and 2013 presented for continuing operations.

Sales for the full-year 2015 amounted to EUR 6,384 million, compared
to EUR 6,844 million in 2014. Global real demand for stainless steel
grew by only 0.9% in 2015 with slowing markets during the second half
of the year and heavy destocking among distributors. The 6.7% decline
in sales was a result of both lower deliveries as well as lower prices. 59%
of Outokumpu sales are generated by Coil EMEA while Coil Americas
accounts for 17% of the sales. Stainless steel benchmark transaction
price for austenitic 304 grade in Europe decreased by 3.3% and in the
US by 17.8%, driven mostly by low nickel price and alloy surcharge.

Outokumpu’s average base price in deliveries decreased slightly in 2015
compared to 2014 driven mostly by the pricing pressure in the US, as
well as in Europe. The CRU benchmark base price for austenitic 304
grade in Europe declined by 2.4% and in the US by 3.4%.

Sales

€ million
Coil EMEA
Coil Americas
APAC
Quarto Plate
Long Products
Other operations
Intra-group sales
The Group

Sales by market area

2015
4 134
1 111
403
459
551
663
-937
6 384

2014
4 520
1 158
444
450
651
689
-1 068
6 844

2013
5 067
906
388
406
556
538
-1 116
6 745

Europe 65% (Finland 3%)

North America 21%

Asia and Oceania 12%

Other countries 2%

EBIT

€ million
800

600

400

200

-200

-400

-600

-800

Outokumpu Annual report 2015
Review by the Board of Directors

Profitability
EUR million
Underlying EBIT 1)

Coil EMEA
Coil Americas
APAC
Quarto Plate
Long Products
Other operations
and intra-group items
Raw material-related inventory gains/
losses, unaudited
Group underlying EBIT

Non-recurring items in EBIT
Net of raw material-related inventory
and metal derivative gains/losses,
unaudited 2)

EBIT

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

EBIT margin, %
Return on capital employed, %
Earnings per share, EUR 3)
Earnings per share, continuing
operations, EUR 3)
Earnings per share, discontinued
operations, EUR 3)

2015

2014

2013

107
-163
-18
-23
7

-11

n/a
-101
360

-31
228

49
-149
127
-41

-
86

3.6
5.8
0.23

62
-93
-6
-30
32

-52

n/a
-88
-186

31
-243

7
-223
-459
8

-111
-262
-7
-17
-10

-25

56
-377
-78

-56
-510

-2
-310
-822
-11

-450

-832

11
-439

-3.6
-5.8
-1.24

-170
-1 003

-7.6
-10.3
-7.52

-1.27

-6.23

0.03

-1.29

Net cash generated from operating
activities 4)

-34

-126

1) BA profitabilities for 2013 presented as EBIT excl. non-recurring items.

The reporting of BA underlying profitability was started in 2014.
2) 2013 presented as Raw material-related inventory gains/losses,
unaudited. Metal derivative gains/losses were excluded from the
underlying profitability from 2014 onwards.

3) 3) Calculated based on the rights-issue-adjusted weighted average

number of shares. Comparative figures for 2013 adjusted for the effects
of the rights-issue and the reverse split on June 20, 2014.

4) Years 2014 and 2013 reported for continuing operations.

Underlying EBIT amounted to EUR -101 million in 2015, weaker against
EUR -88 million a year ago. This was mostly a result of lower deliveries,
pressure on base prices as well as scrap benefits. The decline in
profitability was partly offset by progress in savings programs, including
reduction in headcount. In Coil EMEA, restructuring measures together
with improved optimization between the mills was developing well and
profitability improved. Coil Americas, in turn, was suffering from earlier
cold rolling issues, which together with weaker demand resulted in lower
delivery volumes and the profitability deteriorated significantly.

On the other hand, EBIT for the full year improved significantly to
EUR 228 million compared to EUR -243 million in 2014 as a result
of the SKS divestment that yielded a significant capital gain of
EUR 409 million, excluding taxes.

The share of result from associated companies and joint ventures in
2015 includes the gain on the divestment of the Fischer Mexicana joint
venture, amounting to EUR 49 million, excluding taxes.

The net financial income and expenses for the full year 2015 decreased
by EUR 71 million to EUR -149 million (2014: EUR -223 million).
This was mainly due to decreased cost of committed credit
facilities and a decrease in interest expenses to EUR -130 million
(2014: EUR -141 million). The interest expenses declined as a result of
reduction in debt levels and increased utilization of commercial paper
program. Market price gains amounted to EUR 3 million compared to
market price losses of EUR -15 in 2014.

The net result for 2015 improved significantly to EUR 86 million driven
by the divestment of SKS and Fischer Mexicana which combined had
EUR 432 million positive impact on the net result for the period (2014:
-439 million). Earnings per share was EUR 0.23 (2014: EUR -1.24).

Cash flow

The operating cash flow in 2015 was EUR -34 million, compared to
EUR -126 million in 2014. The change in working capital for 2015 was
EUR 94 million (2014: EUR -50 million). The net cash from investing
activities was EUR 239 million in 2015, compared to EUR -162 million in
2014.

Earnings per share

€
2

-1

-2

-3

-4

-5

-6

-7

-8

2014 and 2013 calculated based on the rights-issue-adjusted weighted
average number of shares. 2012–2011 have not been restated.

Outokumpu Annual report 2015
Review by the Board of Directors

Capital expenditure

Equity-to-assets ratio

%
60

Net debt

€ million
4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

Debt-to-equity ratio

%
200

175

150

125

100

Capital expenditure amounted to EUR 154 million in 2015
(2014: EUR 127 million). The majority of the expenditure related to
the maintenance and the ongoing investment into ferritic cold rolling
capacity in Krefeld, Germany.

Capital expenditure

€ million
Coil EMEA
Coil Americas
APAC
Quarto Plate
Long Products
Other operations
The Group

Depreciation and amortization

2015
92
19
1
4
7
31
154

302

2014
67
15
2
16
6
21
127

2013
81
44
3
33
9
14
183

320

332

2014 and 2013 presented for continuing operations.

Capital expenditure and depreciation

€ million
1 000

800

600

400

200

%
10

Capital expenditure

Depreciation

15
Capital expenditure, % of sales

Balance sheet

Total assets at the end of 2015 decreased to EUR 5,874 million,
compared to EUR 6,411 million at the end of 2014.

Non-current debt decreased to EUR 1,249 million (December 31, 2014:
EUR 1,597 million), driven by scheduled repayment of debt as well
as prepayments following asset disposals. Current debt amounted to
EUR 547 million (December 31, 2014: EUR 569 million). Provisions of
EUR 136 million were clearly down from the EUR 224 million recorded
on December 31, 2014, mainly as a result of payments related to
restructuring provisions in the first quarter.

Mainly as a result of the SKS divestment, net debt at the end of 2015
decreased significantly to EUR 1,610 million (December 31, 2014:
EUR 1,974 million). Gearing decreased clearly to 69.1% compared to
92.6% on December 31, 2014.

Outokumpu Annual report 2015
Review by the Board of Directors

reductions are related to site closures and restructurings in Europe, as
well as streamlining all overlapping activities in sales, production, supply
chain and support functions. To date, Outokumpu has reduced about
2,330 jobs since the beginning of the programs.

Total wages and salaries amounted to EUR 585 million in 2015
(2014: EUR 592 million, 2013: EUR 583 million). Indirect employee
costs totaled EUR 177 million in 2015 (2014: EUR 262 million, 2013:
EUR 222 million).

The lost-time injury rate (lost-time accidents per million working hours) in
2015 was 3.0 (2014: 2.7) against the target of less than 2.5. There were
two serious incidents in 2015. In the first quarter, an operator became
trapped in a coil stacking machine. The operator recovered and returned
to work. The incident was fully investigated and corrective measures
were put in place. Another serious incident occurred in the second
quarter causing a fatality at the Mexinox mill. This incident was also
fully investigated and corrective actions to avoid similar accidents in the
future were implemented.

Personnel

Dec 31
Coil EMEA
Coil Americas
APAC
Quarto Plate
Long Products
Other operations
The Group

2015

2014

2013

7 008
2 150
112
773
658
301
11 002

7 582
2 128
602
838
651
324
12 125

8 120
2 006
630
746
674
385
12 561

2014 and 2013 presented for continuing operations.

Personnel on December 31, 2015

20 000

15 000

10 000

5 000

Key financial indicators on financial position

€ million
Net debt

Non-current debt
Current debt

Cash and cash equivalents
Net debt

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

Financing

2015

2014

2013

1 249
547
-186
1 610

2 329
3.9
69.1
39.6
125

1 597
569
-191
1 974

2 132
-17.3
92.6
33.3
139

3 270
893
-607
3 556

1 891
-41.4
188.0
21.5
197

Cash and cash equivalents were at EUR 186 million at the end of
2015 (December 31, 2014: EUR 191 million), and the overall liquidity
reserves were approximately EUR 1.1 billion (December 31, 2014:
EUR 1.4 billion). The overall liquidity position decreased as some of the
liquidity facilities were cancelled in connection with the balancing of the
debt maturity profile.

In February 2015, Outokumpu issued senior unsecured convertible
bonds due February 2020 convertible into ordinary shares in
Outokumpu. The principal amount of the bonds was EUR 250 million.
Following the issue of the convertible bonds, Outokumpu cancelled the
remaining unutilized EUR 250 million of its EUR 500 million liquidity
facility that was agreed in February 2014. The bonds carry a coupon
of 3.25% per annum payable semi-annually in arrears. The bonds may
be converted into maximum of 33,661,873 new ordinary shares in
Outokumpu representing 8.1% of the outstanding shares prior to the
issuance. The conversion period commenced in April 2015 and will end
in February 2020.

The divestment of SKS enabled significant debt reduction and extension
of the credit facilities and balancing of the debt maturity profile. In
December Outokumpu prepaid and cancelled EUR 100 million of its
EUR 900 million revolving credit facility and signed an amendment
and extension agreement relating to the remaining EUR 800 million.
The amended facility includes a new EUR 655 million tranche that
matures in February 2019, and the remaining EUR 145 million matures
in February 2017. In addition, Outokumpu cancelled and prepaid some
EUR 240 million of its bilateral loans, including pension loans, and
extended two bilateral facilities by a total amount of EUR 120 million to
February 2019. The key credit facilities are covered by the same security
package as earlier, and the syndicated revolving credit facility includes
two financial covenants, one based on gearing and the other on liquidity.

People

Outokumpu’s headcount continued to decrease and totaled 11,002 at
the end of 2015, a clear reduction versus 12,125 at the end of 2014 (in
2013: 12,561). This was mostly due to restructuring in Coil EMEA that
resulted in headcount reduction of more than 570 as well as reductions
in Quarto Plate and other operations. The divestment of SKS reduced
the Group’s personnel by over 450.

Overall, Outokumpu plans to reduce up to 3,500 jobs globally in 2013–
2017 in connection with its efficiency improvement programs. The

Outokumpu Annual report 2015
Review by the Board of Directors

Environment

Risks and uncertainties

Emissions into air and discharges into water remained within permitted
limits and the minor breaches that occurred were temporary, were
identified and had only a minimal impact on the environment.
Outokumpu is not a party to any significant juridical or administrative
proceedings concerning environmental issues, nor is it aware of any
realized environmental risks that could have a material adverse effect
on its financial position.

Outokumpu operates in accordance with the risk management policy
approved by the Board of Directors which 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 to identify, evaluate and mitigate risks from the
perspective of shareholders, customers, suppliers, personnel, creditors
and other stakeholders.

The EU Emissions Trading Scheme (ETS) is continuing with the third
trading period 2013–2020. Outokumpu’s operations under the EU
ETS will continue to receive free emissions allocations according to
efficiency-based benchmarks and historical activity. The total allocation
is estimated to be sufficient for Outokumpu operations during 2016.
Excess emission allowance account balance was rolled forward until
December 2016 to be used for future deficit.

Outokumpu has defined risks 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 it is divided into four stages: risk
identification, risk evaluation, risk prioritization and risk mitigation. Key
risks are assessed and updated on a regular basis.

Outokumpu was awarded for the sixth consecutive year with a position
on the Nordic Climate Disclosure Leadership Index (CDLI). Recognized as
a Nordic leader for the quality of climate change-related information that
it has disclosed to investors and the global marketplace through CDP,
Outokumpu earned its position on the index by disclosing high quality data
on carbon targets, emissions and energy efficiency through CDP’s climate
change program with the best possible disclosure score, 100.

The focus areas in risk management are aligned with Outokumpu’s
efforts to improve its profitability, the key topics in 2015 being: an
increased focus on financial risk management, improved prevention
of business interruptions within loss prevention audits, systematic
operational risk management through a group-wide reporting tool,
and detailed analysis of cyber-risk exposures. There were two serious
accidents in 2015, one of them causing a fatality at the Mexinox mill.

In the first quarter of 2016, all Outokumpu production sites, now also
including Calvert and Mexico, will be covered by certified ISO 14001
environment management systems in order to ensure compliance and
systematic continuous improvement.

Research and development

Outokumpu’s research & development (R&D) involves process, product,
application and technical market development. R&D works closely
together with the customers to align the company’s activities with
customers’ current and future needs. Outokumpu’s R&D operations are
concentrated in three research centers, located at Avesta in Sweden, at
Krefeld and Benrath in Germany and at Tornio in Finland. Each research
center has certain focus areas of activity, and they employed around
240 people in 2015. In addition to the research centers, R&D activities
also take place at the production sites.

In 2015, Outokumpu’s R&D expenditure totaled EUR 23 million, 0.4% of
sales (2014: EUR 23 million and 0.3%, 2013: EUR 26 million and 0.4%).

During 2015, process development teams continued to support
EMEA restructuring and the ramp-up of the Calvert operations. A job
rotation program and networking of technical experts was launched
to transfer technical knowledge between R&D and production units.
Commercialization of several new steel grades continued, including
extensive activities related to the new Forta H-series steels targeted at
the automotive industry. The highlights of the application and market
development activities included the stainless steel fuel tank, which
received the New Applications Award from ISSF (the International
Stainless Steel Forum), and publication of the 11th edition of the
Outokumpu Corrosion Handbook.

In late 2015, Outokumpu strengthened its financial position with the
divestments of SKS and Fischer Mexicana, resulting in significant
proceeds from the divestments and a meaningful reduction in net debt.
Additionally, Outokumpu’s refinancing risk was further reduced by the
extension of key loan facilities from 2017 to 2019 by a total amount of
EUR 775 million.

Strategic and business risks

Outokumpu’s key strategic and business risks currently include: risks
and uncertainties in implementing reductions of costs and the release
of cash from working capital as well as implementation of the EMEA
restructuring actions; risks related to possible failures or delays in or
inadequate profitability of ramping up the stainless steel mill in Calvert;
risks related to developments in the stainless steel and ferrochrome
market and competitor actions; the risk of changes in raw material
and metal prices impacting Outokumpu’s profitability and amounts of
cash tied up in working capital; fluctuations of exchange rates affecting
global competitive environment in stainless; and the risk of litigation or
adverse political action affecting trade or changes that have an impact
on environmental legislation.

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 machinery breakdown and
consequent business interruptions, environmental accidents; IT
dependency and security risks; project implementation risks; risks
related to compliance, crime and reputational harm; and personnel-

Outokumpu Annual report 2015
Review by the Board of Directors

related risks. To minimize possible damage to property and business
interruptions that could result from a fire occurring at some of its major
production sites, Outokumpu has systematic fire and security audit
programs in place.

terms and conditions under any finance agreement, leading to an event
of default. Possible adverse changes in the global political and economic
environment may have a significant adverse impact on Outokumpu’s
business.

Financial risks

Significant legal proceedings

Key financial risks for Outokumpu include: changes in the prices of
nickel, iron, molybdenum, power and fuels; currency developments
affecting the euro, the US dollar, the Swedish krona and the British
pound; interest rate changes connected with the US dollar, the euro and
the Swedish krona; changes in levels of credit margins; counterparty risk
related to customers and other business partners, including financial
institutions; risks related to liquidity and refinancing; risk of breaching
financial covenants or other loan conditions leading to an event of
default; and risk related to prices of equities and fixed-income securities
invested under defined benefit pension plans.

The nickel price decreased during 2015 from approximately 15,000
USD/tonne in January to a level of 8.500 USD/tonne by the end of
the year. This price decline had a negative impact on Outokumpu’s
profitability, while nickel hedging helped to partly mitigate the negative
financial impacts. The continued decline in fuel prices caused a
negative result for Outokumpu’s propane hedges, whereas the actual
cost of fuels declined in 2015.

Outokumpu issued a convertible bond of EUR 250 million in February
2015 to actively diversify the funding base and reduce financing costs.
In December 2015, Outokumpu took decisive measures in reducing
debt levels and to strengthen Outokumpu’s financial position with the
divestments of SKS and Fischer Mexicana. Additionally, Outokumpu’s
refinancing risk was further reduced by extending the maturities of
certain loan facilities from 2017 to 2019 by a total amount of EUR 775
million. Outokumpu evaluates both liquidity and refinancing risks in
connection with capital management as well as in connection with major
investment decisions. Outokumpu’s liquidity reserves remained clearly
above one billion euros at the end of each quarter during 2015.

Short-term risks and uncertainties

Outokumpu is exposed to the following risks and uncertainties in the
short-term: risks and uncertainties in implementing the turnaround in
the company profitability, including: major failures or delays in achieving
the anticipated cost reductions, release of cash from working capital
and the implementation of the Coil EMEA restructuring actions; risks
related to failures, delays in and inadequate profitability of ramping up
the Calvert mill; risks related to market development in stainless steel
and ferrochrome as well as competitor actions; risk of changes in metal
prices impacting amounts of cash tied up in working capital; changes in
the prices of electrical power, fuels, nickel and molybdenum; currency
developments affecting the euro, US dollar, Swedish krona and British
pound; counterparty risk related to customers and other business
partners, including financial institutions; risks related to refinancing and
liquidity and a risk of breaching financial covenants or other relevant

Dispute over invention rights,
Outotec vs. Outokumpu

In January 2013, Outokumpu and Outotec entered into a legal dispute
over invention rights related to a ferrochromenickel production method.
In August 2013, Outotec submitted an 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. In February 2014, Outotec
filed a request with Arbitration Institute of the Finland Chamber
of Commerce for commencing proceedings against Outokumpu
concerning the same invention rights being subject to the District Court
proceedings. Simultaneously Outotec filed a proposal to the District
Court for postponement of further stages in these proceedings until
the Arbitration Court will render its arbitration award. In August 2015,
the Arbitration Court rendered its award, in which it ruled that Outotec’s
employee had contributed to the inventions and accordingly granted
Outotec partial rights to the patents in question. The Arbitration Court
ruled also that commercial use of the patent rights by Outotec is subject
to agreement between the parties. In 2016, Outotec has withdrawn its
claims against Outokumpu concerning the invention rights.

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 Outokumpu Nirosta GmbH (“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 Nirosta’s liability for one of
its legal predecessors. Subsequent to this annulment, the European
Commission opened new proceedings, which resulted in the 2006
Decision. Nirosta’s appeals of the 2006 Decision were unsuccessful. In
April 2011, Nirosta 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 accept the constitutional complaint. In case of a
successful complaint, Nirosta is able to reclaim EUR 4.2 million from the
European Commission.

Outokumpu Annual report 2015
Review by the Board of Directors

Claim in Spain related to the
divested copper companies

Outokumpu divested all of its copper business in 2003–2008. One of
the divested companies domiciled in Spain later faced bankruptcy. The
administrator of the bankruptcy has filed a claim against Outokumpu
Oyj and two other non-Outokumpu companies, for recovery of payments
made by the bankrupt Spanish company in connection with the
divestment. The Bilbao court of first instance in Spain has accepted the
claim of EUR 20 million brought against Outokumpu and the two other
companies. Outokumpu and the two other companies have appealed the
court’s decision.

Claim in Italy related to former
tax consolidation group

In December 2015 Outokumpu Holding Italia and Acciai Speciali Terni
(AST) entered into a dispute among relating to the tax consolidation
of the former ThyssenKrupp Tax Group in Italy. AST claims payment of
approximately EUR 23 million resulting from the former tax consolidation
of the Italian tax group managed by ThyssenKrupp. Outokumpu Holding
Italia is the former ThyssenKrupp holding company and was transferred
to Inoxum as part of the carve-out in 2011. The EUR 23 million claim
resulted from former tax instalments paid by ThyssenKrupp Italia in
2006 which not have been properly settled towards AST in the following
years. Outokumpu is currently preparing the defense against the claim
as it holds the claim unjustified.

Share development and shareholders

Outokumpu’s share capital was unchanged at EUR 311 million at the
end of 2015. The total number of Outokumpu shares was 416,374,448,
and Outokumpu held 885,140 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.

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

Solidium Oy (owned by the Finnish State)
JPMorgan Chase & Co.1)

Dec 31
2015
29.6
30.9
26.8
9.0
3.0
0.7

Dec 31
2014
30.3
33.9
18.3
11.3
5.4
0.8

26.2
> 5

29.9
-

1) Based on a notification to Outokumpu
Information regarding shares and shareholders is updated daily on
Outokumpu’s website.

Share information

Fully paid share capital at the end of the period

€ million

Average number of shares outstanding 1), 2)

Number of shares at the end of the period 3)
Number of shares outstanding at the end of the period 2), 3)
Number of treasury shares held at the end of the period

Share price at the end of the period 1) 3)
Average share price 1) 3) )
Highest price during the period 1) 3)
Lowest price during the period 1) 3)

Market capitalization at the end of period
Share turnover 3) 4)
Value of shares traded 4)

€
€
€
€

€ million
million shares
€ million

Source of share information: Nasdaq Helsinki (only includes Nasdaq Helsinki trading)

1) 2014 figures presented as rights-issue-adjusted.
2) The number of own shares repurchased is excluded.
3) 2014 figures adjusted to reflect the reverse split in June 2014.
4) 2014 figures include the effect of share subscription rights traded during March 10–19, 2014.

Jan–Dec 2015
311.1

Jan–Dec 2014
311.1

415 473 976

338 032 061

416 374 448
415 489 308
885 140

416 374 448
415 426 724
947 724

2.73
4.49
7.76
2.06

1 138
1 345.5
6 013.4

4.77
5.16
7.50
3.37

1 987
695.2
3 609.1

Outokumpu Annual report 2015
Review by the Board of Directors

Management shareholdings and
share based incentive programs

As of December 31, 2015, the members of the Board of Directors and
the members of the Outokumpu Leadership Team (OLT) held altogether
180,681 shares, or 0.04% of the total shares outstanding.

Outokumpu has established share-based incentive programs for the
OLT members and for selected managers and key employees. The first
plan for 2012–2014, of the Performance Share Plan 2012 ended on
December 31, 2014. The earnings criteria set for the plan were: TSR
(total shareholder return) compared to a peer group, with 30% weighting
of the maximum reward, as well as EBIT excluding non-recurring items
for the year 2012, EBITDA for the year 2013 and EBIT improvement for
the year 2014 representing 70% weighting of the maximum reward.
Based on the achievement of the targets, the participants received
23.3% of the maximum number of shares as reward. After deductions
for applicable taxes, altogether 48,234 shares were delivered to 69
persons in spring 2015. In addition, cash of EUR 257,949 was paid in
taxes and rewards settled in cash.

The first plan for 2012–2014, of the Restricted Share Pool 2012 also
ended on December 31, 2014. After deductions for applicable taxes, in
total 14,350 shares were delivered to three participants in spring 2015.
In addition, cash of EUR 73,779 was paid in taxes.

Outokumpu used its treasury shares for the reward payments and
subsequently the number of treasury shares decreased to 885,140 at
the end of 2015 (Dec 31, 2014: 947,724).

More details on the share-based incentive programs and information regarding
shares and shareholders can be found on the Outokumpu website.

Corporate governance

Outokumpu's Corporate Governance Statement can be found on the
Outokumpu website.

Changes in Outokumpu Leadership Team

On April 29, 2015, Outokumpu appointed Jan Hofmann as President
and Head of the APAC business area and a member of the Outokumpu
Leadership Team. Prior to this, he held key positions in the company,
such as the Head of strategy and finance for APAC, and the Head of
strategy at Outokumpu.

On June 16, 2015, Outokumpu announced the appointment of Michael
Williams as the President and Head of the Coil Americas business area
and a member of the Outokumpu Leadership Team as of July 1, 2015.
Williams has over two decades of experience in the metals industry.

On November 5, 2015, Outokumpu announced the appointment of Liam
Bates as the President and Head of the Quarto Plate business area
and a member of the Outokumpu Leadership Team. Before this, Bates
had been leading Quarto Plate operations in Europe and the production
unit in Degerfors, Sweden. Prior to that, he had held several senior
management positions at Outokumpu.

Outokumpu Leadership Team consists of following members as of
January 1, 2016:

· Roeland Baan, President and Chief Executive Officer
· Reinhard Florey, Chief Financial Officer
· Olli-Matti Saksi, President – Coil EMEA
· Michael Williams, President – Coil Americas
· Jan Hofmann, President – APAC
· Liam Bates, President – Quarto Plate
· Kari Tuutti, President – Long Products
· Pekka Erkkilä, Executive Vice President – Chief Technology Officer
· Johann Steiner, Executive Vice President – Human Resources, IT,

Health and Safety

· Saara Tahvanainen, Executive Vice President – Communications

and Marketing

Annual General Meeting

The Annual General Meeting was held on March 26, 2015, in Espoo,
Finland. The Meeting approved the financial statements and discharged
the management of the company from liability for the financial year
2014. The Meeting decided that no dividend be paid for 2014 and
approved the proposals regarding the authorization to the Board of
Directors to repurchase the company’s own shares and to decide on the
issuance of shares as well as other special rights entitling to shares.

The meeting decided that the number of Board members continues
to be eight, and the annual remuneration for the Board remains
unchanged. Markus Akermann, Roberto Gualdoni, Stig Gustavson, Heikki
Malinen, Elisabeth Nilsson, Jorma Ollila and Olli Vaartimo of the current
members were re-elected to the Board, and Saila Miettinen-Lähde was
elected as a new member for the term of office ending at the end of the
next Annual General Meeting. Jorma Ollila was elected as the Chairman
and Olli Vaartimo as the Vice Chairman of the Board of Directors.

Shareholders' Nomination Board

Shareholders' Nomination Board prepares annually proposals on the
composition of the Board of Directors and director remuneration for the
Annual General Meeting. The Shareholders' Nomination Board consists
of the representatives of the four largest shareholders registered in the
shareholders’ register of the company on October 1 and the Chairman of
the Board of Directors as an expert member.

On October 26, 2015, Outokumpu announced the appointment of
Roeland Baan as President and CEO of Outokumpu and the Chairman of
the Leadership Team as of January 1, 2016. Before joining Outokumpu,
Baan was the Executive Vice President and CEO of Aleris Europe and Asia.
Previously, Baan has worked for Arcelor Mittal, Mittal Steel, SHV and Shell.

On October 1, 2015, the four largest shareholders of Outokumpu were
Solidium Oy, Varma Mutual Pension Insurance Company, the Social
Insurance Institution of Finland and Ilmarinen Mutual Pension Insurance
Company. They have appointed the following representatives to the
Shareholders' Nomination Board:

Mika Seitovirta left his position as President and CEO of Outokumpu and
the Outokumpu Leadership Team on October 26, 2015. CFO Reinhard
Florey served as the interim CEO from October 26 until December 31,
2015.

· Kari Järvinen, Managing Director of Solidium Oy
· Pekka Pajamo, CFO of Varma Mutual Pension Insurance Company
· Tuula Korhonen, Investment Director of the Social Insurance Institution

of Finland

· Timo Ritakallio, President and CEO of Ilmarinen Mutual Pension

Insurance Company

Outokumpu Annual report 2015
Review by the Board of Directors

The Shareholders' Nomination Board proposes that the Board of
Directors would consist of nine members and Markus Akermann,
Roberto Gualdoni, Stig Gustavson, Heikki Malinen, Saila Miettinen-
Lähde, Elisabeth Nilsson, Jorma Ollila and Olli Vaartimo would be re-
elected, and Kati ter Horst would be elected as new member for the
term of office ending at the end of the next Annual General Meeting.
Jorma Ollila would be re-elected as the Chairman and Olli Vaartimo as
the Vice Chairman of the Board of Directors. According to the proposal,
the annual remuneration of the Board would be kept at the same level
as during the previous term.

Market and business outlook

Market outlook

Total global demand for 2016 is forecast at 38.2 million tonnes, an
increase of 1.1% compared to 2014. Growth is expected to be strongest
at 2.3% in APAC, whereas the Americas and EMEA are expected to
shrink by 2.9% and 1.3%, respectively.

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.
Growth in stainless steel consumption between 2016 and 2019 is
expected be relatively well-balanced between the end-use segments. SMR
forecast growth rates of 4.0% in Architecture/Building/Construction &
Infrastructure, 3.6% in Consumer Goods & Medical, 3.3% in Automotive
& Heavy Transport, and 1.3% in Industrial and Heavy Industries.
Meanwhile, it expects Chemical/Petrochemical & Energy segment to
shrink by 0.3% per year on average.

Business and financial outlook for
the first quarter of 2016

The year 2016 has started with downward revisions to economic growth
outlooks and pressure in the materials sector. Outokumpu estimates no
meaningful pick up in the stainless steel markets for the first quarter,
and while distributor stocks have come to more normalized levels, the
low nickel price continues to curtail distributor buying activity. On the
positive note, demand among end-customers outside of Oil & Gas has
remained healthy. In both Coil EMEA and Coil Americas order intake
levels are on track for the ongoing quarter and the lead-times from the
mills are competitive.

Market uncertainties warrant prudence in the outlook statement.
Outokumpu estimates first-quarter delivery volumes to remain at a
similar level as in the fourth quarter of 2015 and the Group’s underlying
EBIT to be still negative. With current prices, the net impact of raw
material-related inventory and metal derivative gains/losses on
profitability is expected to be approximately EUR 30 million negative.

Outokumpu is finalizing plans for new savings from operational
improvements and working capital optimization. The scale, details and
time frame for these will be communicated in the next couple of months.
Outokumpu expects that already in the first quarter continued cost
streamlining will mitigate some of the current downward pressure on
base prices as well as increase in scrap costs.

This outlook reflects the current scope of operations. Outokumpu’s
operating result may be impacted by costs associated with restructuring
programs.

Key targets

Outokumpu has implemented significant industrial restructuring and
established a strong presence in both Europe and Americas following
the acquisition of Inoxum in 2012. While progress has been made and
Outokumpu’s financial stability restored, the current unsatisfactory
financial performance shows that these improvements are not enough.
Management is currently detailing the plans to take the company to
the next level of competitiveness and performance with a two-phased
approach.

On an immediate term, Outokumpu is moving ahead with the Coil
Americas turnaround as well as finalizing the European restructuring.
Additionally, swift and precise measures to reduce selling, general and
administration cost as well as general procurement costs and to reduce
inventory levels are taken. The measures to improve cost efficiency
and reduce working capital are geared towards further debt reduction.
The scale, details and time frame for the savings and working capital
reduction will be communicated in the next couple of months.

To drive long-term competitiveness, Outokumpu will have renewed vigor
in manufacturing excellence, because there is significant potential to
increase efficiency and lower our production costs. Outokumpu has
made a huge effort to form a strong, well-balanced industrial footprint.
Now, a very systematic approach will be taken to make the most of this
competitive advantage: improve the efficiency of the manufacturing
processes and bring the operational capability and productivity to a
world class level.

Board of Directors’ proposal
for profit distribution

In accordance with the Board of Directors’ established dividend policy,
the payout 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 parent company’s financial statements on December
31, 2015 distributable funds totaled EUR 2,149 million, of which
retained earnings were EUR 26 million.

The Board of Directors is proposing to the Annual General Meeting
scheduled for April 6, 2016 that no dividend be paid from the parent
company’s distributable funds and that net result for the financial year
2015 be allocated to retained earnings.

Tornio, February 10, 2016

Board of Directors

Jorma Ollila
Olli Vaartimo
Markus Akermann
Roberto Gualdoni
Stig Gustavson
Heikki Malinen
Saila Miettinen-Lähde
Elisabeth Nilsson

Outokumpu Oyj

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

Outokumpu Annual report 2015
Review by the Board of Directors

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 December 31, 2015. 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 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.

Helsinki, February 10, 2016

KPMG Oy Ab

Virpi Halonen
Authorized Public Accountant

Outokumpu Annual report 2015
Consolidated financial statements, IFRS

Consolidated financial
statements, IFRS

Consolidated statement of income

€ 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

EBIT

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

Earnings per share for result attributable to the equity holders of the Company
(basic and diluted), € 1)

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

Note

2015

2014

6 384

-6 273

6 844

-6 714

111

472
-107
-212
-23
-13

228

4
-130
3
2
-29
-149

127

-41

96
-9

-
-
0.23

130

47
-112
-219
-23
-65

-243

3
-141
-15
2
-70
-223

-459

-450

-439

-434
-5

-1.27
0.03
-1.24

1) 2014 figures calculated based on the rights-issue-adjusted weighted average number of shares and adjusted to reflect the reverse split on June 20, 2014.

Outokumpu Annual report 2015
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

Change in exchange differences
Reclassification adjustments from other comprehensive income to profit or loss

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

Share of other comprehensive income in associated companies and joint ventures

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

Share of other comprehensive income in associated companies and joint ventures

Other comprehensive income for the financial year, net of tax

Total comprehensive income for the financial year

Attributable to
Equity holders of the Company
Non-controlling interests

Note

2015

2014

-439

75
-17

-1
-
0

3
0
-1

3
-7

-1

142

150
-8

71
-

3
3
-1

-11
-2
3

-0

-14
-12

-398

-394
-4

Outokumpu Annual report 2015
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
Defined benefit plan 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

TOTAL ASSETS

Note

2015

2014

11
12
13
16
17
20
9
25
22

21
16
17
20
22
23

498
3 005
63
40
1
0
16
35
40
3 698

1 251
0
16
37
686
186
2 177

5 874

567
3 138
78
26
2
1
44
36
12
3 904

1 527
0
4
36
749
191
2 507

6 411

Outokumpu Annual report 2015
Consolidated financial statements, IFRS

Note

2015

2014

311
714
2 103
11
-810
2 329

311
714
2 103
10
-1 006
2 132

2 329

2 132

1 249
9
16
369
113
48
1 805

547
50
23
32
1 089
1 741

5 874

1 597
18
31
372
198
47
2 262

569
87
26
32
1 303
2 016

6 411

27
20
9
25
26
28

27
20
26
9
28

€ 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
Non-current debt
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

TOTAL EQUITY AND LIABILITIES

Outokumpu Annual report 2015
Consolidated financial statements, IFRS

Consolidated statement of cash flows

€ million

Cash flow from operating activities

Net result for the financial year

Adjustments for

Taxes
Depreciation and amortization
Impairments
Share of results in associated companies and joint ventures
Gain/loss on sale of intangible assets and property, plant and equipment
Gain/loss on sale of financial assets
Gain/loss on disposal of subsidiaries
Interest income
Dividend income
Interest expense
Exchange rate differences
Other non-cash adjustments

Change in working capital

Change in trade and other receivables
Change in inventories
Change in trade and other payables
Change in provisions, and defined benefit and other long-term employee benefit
obligations

Dividends received
Interest received
Interest paid
Income taxes paid

Net cash from operating activities

Note

2015

2014

-439

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

41
302
2
-49
-19
-0
-409
-3
-0
120
-8
-74
-96

121
318
-216

-130
94

0
4
-111
-11

-34

-8
320
32
-7
-10
-0
-
-5
-0
131
15
4
471

148
-259
111

-50
-50

3
2
-111
-2

-126

Outokumpu Annual report 2015
Consolidated financial statements, IFRS

€ million

Note

2015

2014

Cash flow from investing activities
Investments in associated companies and joint ventures
Purchases of available-for-sale financial assets
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from the disposal of subsidiaries, net of cash and tax
Proceeds from sale of property, plant and equipment
Proceeds from sale of intangible assets
Change in other non-current receivables

Net cash from investing activities

Cash flow before financing activities

Cash flow from financing activities
Rights issue

Capital contribution by the non-controlling interest holder
Borrowings of non-current debt
Repayments of non-current 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

2014 cash flows are presented for continuing operations.

13
16
12
11
4
12
11

-7
-15
-120
-10
375
20
4
-8

239

205

41
316
-612
78
-37
0

-213

-8

191
2
-
-8
186

-6
-8
-118
-11
-50
17
13
2

-162

-289

640

-
1 022
-1 483
-277
-22
3

-116

-404

607
0
-12
-404
191

Outokumpu Annual report 2015
Consolidated financial statements, IFRS

Consolidated statement of changes in equity

Invested unrestricted
Other reserves
equity reserve

Attributable to the equity
holders of the Co m pany
Other retained earnings
Cu m ulative translation
defined benefit plans
Re m easure m ents of
Fair value reserves
Treasury shares
N on-controlling
Total equity
differences
interests

Share capital

Pre miu m fund

€ million

Equity on Jan 1, 2014

Net result for the financial year
Other comprehensive income
Total comprehensive income for
the financial year
Transactions with equity holders of
the Company

Contributions and distributions

Rights issue
Share-based payments
Changes in ownership interests

Acquisition of a non-controlling
interest

Disposal of subsidiary

Other

Equity on Dec 31, 2014

Net result for the financial year
Other comprehensive income
Total comprehensive income for
the financial year
Transactions with equity holders of
the Company

Contributions and distributions

Convertible bond
Capital contribution by the non-
controlling interest holder
Share-based payments
Changes in ownership interests
Disposal of non-controlling
interest

N ote

24
4

24
18

311
-
-

714 1 462
-
-

-
-

640

-
-

311
-
-

714
-
-

2 103
-
-

-
-

Equity on Dec 31, 2015

311

714

2 103

7
-
-

-
-

-
-1
-2

5
-
-

-
-

9
-
-5

-5

-
-

-
-
-

5
-
1

-
-

-119
-
70

-
-

-
-
-

-49
-
57

-
-

-65
-
-27

-27

-
-

-
4
-

-89
-
-4

-4

-
-

-24
-
-

-410
-434
1

1 887
-434
40

-433

-394

-
1

-
-
-

-
1

-3
-3
2

640
2

-3
-
-

4
-5
1

-4

-
-

-0
-0
-

1 891
-439
41

-398

640
2

-3
-0
-

-23
-
-

-846
96
-1

2 132
96
55

0 2 132
86
-9
56
1

-
2

150

-8

142

-
-0

-
1

41
-

41
1

-32

-92

-21

-704

2 329

- 2 329

Outokumpu Annual report 2015
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 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 and creates 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 some 11 000 professionals in more than 40 countries.

In its meeting on February 10, 2016 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, 2015. 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 2015 have
been prepared on a going concern basis.

As from January 1, 2015 Outokumpu has applied the following new and
amended standards and interpretations.
· IFRIC 21 Levies (effective in the EU for financial years beginning

on or after June 17, 2014): The interpretation clarifies the accounting
treatment of levies. A liability for a levy is recognized 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
Outokumpu’s consolidated financial statements.

· Annual Improvements to IFRSs (2011–2013 cycle, and 2010–2012
cycle,) (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.

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

Change in accounting estimate of useful
lives of property, plant and equipment

During 2015 Outokumpu has reviewed the useful lives of its property,
plant and equipment and concluded that its maintenance and operating
practices call for a change in the useful lives of machinery and
equipment. As certain existing machinery and equipment have been and
will be used for longer than previously anticipated, the estimated useful
lives of these assets have been lengthened. For heavy machinery and
equipment, the useful life estimate has been changed to 15–30 years
compared to the previous 15–20 years. The new accounting estimate
has been applied prospectively from October 1, 2015 onwards. The
reduction of Group’s annual depreciation expense is estimated to be
approximately EUR 75 million.

Outokumpu Annual report 2015
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, 2015).
· Annual Improvements to IFRSs (2012–2014 Cycle*) (effective for
financial years beginning on or after January 1, 2016): 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 four standards. Their
impacts vary standard by standard but are not significant.

· Amendment to IAS 1 Presentation of Financial Statements:

Disclosure Initiative* (effective for financial years beginning on or
after January 1, 2016). The amendments are designed to encourage
companies to apply judgement in determining what information to
disclose in the financial statements. For example, the amendments
clarify the application of the materiality concept and judgement when
determining where and in what order information is presented in the
financial disclosures. Then interpretation is not assessed to have a
significant impact on Outokumpu’s consolidated financial statements.

· Amendments to IFRS 10 Consolidated Financial Statements and
IAS 28 Investments in Associates and Joint Ventures – Sale or
Contribution of Assets between an Investor and its Associate
or Joint Venture* (Effective for financial years beginning on or
after January 1, 2016): The amendments address an inconsistency
between the requirements in IFRS 10 and those in IAS 28, in dealing
with the sale or contribution of assets between an investor and its
associate or joint venture. A full gain or loss is recognized when a
transaction involves a business (whether it is housed in a subsidiary
or not). A partial gain or loss is recognized when a transaction involves
assets that do not constitute a business, even if these assets are
housed in a subsidiary. The amendments are not assessed to have an
impact on Outokumpu’s consolidated financial statements.

· Amendments to IFRS 11 Joint Arrangements - Accounting for

Acquisitions of Interests in Joint Operations* (effective for financial
years beginning on or after January 1, 2016): The amendments add
new guidance to IFRS 11 on how to account for the acquisition of an
interest in a joint operation that constitutes a business, i.e. business
combination accounting is required to be applied. The amendment
is not assessed to have an impact on Outokumpu’s consolidated
financial statements.

· IFRS 15 Revenue from Contracts with Customers* (effective for
financial years beginning on or after January 1, 2018): IFRS 15
establishes a comprehensive framework for determining whether,
how much and when revenue is recognized. It replaces existing
revenue recognition guidance, including IAS 18 Revenue, IAS 11
Construction Contracts and IFRIC 13 Customer Loyalty Programmes.
Under IFRS 15 an entity shall recognize revenue in an amount that
reflects the consideration to which the entity expects to be entitled
in exchange for goods delivered or services rendered. Outokumpu is
currently assessing the potential impact on its consolidated financial
statements resulting from the application of IFRS 15.

· IFRS 9 Financial Instruments* (effective for financial years
beginning on or after January 1, 2018): IFRS 9 replaces the
existing guidance in IAS 39 Financial Instruments: Recognition and
Measurement. IFRS 9 includes revised guidance on the classification
and measurement of financial instruments, including a new expected

credit loss model for calculating impairment on financial assets, and
the new general hedge accounting requirements. It also carries forward
the guidance on recognition and derecognition of financial instruments
from IAS 39. Outokumpu is assessing the impact of IFRS 9.

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 uses external advisors
to assist in evaluating the fair values of assets acquired and liabilities
assumed. The procedures include for example analysis of market
conditions, market data covering 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 includes a study of the major
assets at facilities and research in the marketplace in order to identify
replacement costs, useful lives and other pertinent information used in the
valuation process. No business combinations occurred in 2015 or 2014.

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

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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. See note 21.

Fair values of derivatives and
other financial instruments

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 non-current 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 determining the 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.

Income taxes

Group operates and earns income in numerous countries and is subject
to changing tax laws in multiple jurisdictions within the countries.
Significant judgements 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 judgement 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.
See note 9.

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 judgement 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. See note 15.

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.

Provisions

The most significant provisions in the statement of financial position
relate to restructuring programs and primarily include termination
benefits to employees. The judgement applied 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. See note 26.

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. The Group controls an
entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of
subsidiaries are included in the consolidated financial statements from
the date on which control commences until the date on which 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

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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.

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

Companies, where Outokumpu generally holds voting rights of 20–
50% and in which Outokumpu otherwise has significant influence, but
not control 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.

The Group’s share of the associated company’s result for the period
is separately disclosed below EBIT 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.

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.

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.

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 five reportable operating segments which represent the strategic
business areas of the Group.

The operating segments are responsible for sales, profitability and
production. They are located in different geographical areas, managed
separately and are reported separately in internal management

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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 the IFRS accounting principles.

Usually this means that revenue is recognized upon delivery of goods to
customers in accordance with agreed terms of delivery.

Pricing of intersegment transactions is based on arm’s length prices.
EBIT 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. EBIT is defined 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 EBIT 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.

Outokumpu ships stainless steel products to customers under a variety
of delivery terms. The used terms are based on Incoterms 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 (Germany, the UK, Italy, the Netherlands, Sweden and the US)
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 by the end of the reporting period.
Generally, deferred tax is recognized 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.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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
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.

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, 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:

Software
Capitalized development costs
Intangible rights

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.

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 allowances are
recognized as other operating income in the statement of income.

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
15–30 years
3–15 years

Land is not depreciated, except for leased land, 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. During 2015 Outokumpu has reviewed the useful lives of its
property, plant and equipment and concluded that its maintenance and
operating practices call for a change in the useful lives of machinery and
equipment. As certain existing machinery and equipment have been and
will be used for longer than previously anticipated, the estimated useful
lives of these assets have been lengthened. For heavy machinery and
equipment, the useful life estimate has been changed to 15–30 years
compared to the previous 15–20 years. The new accounting estimate
has been applied prospectively from October 1, 2015 onwards. The

Outokumpu Annual report 2015
Notes to the consolidated financial statements

reduction of Group’s annual depreciation expense is estimated to be
approximately EUR 75 million.

Leases

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.

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 EBIT.

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.

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 debt.
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 other 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.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Financial instruments

Financial assets

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

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.

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.

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.

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.

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 assets at fair value through profit or loss

Financial liabilities

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. In some cases also share investments can be classified
in this category.

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 and 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.

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,
bonds, 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.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Convertible bonds

The Group classifies convertible bonds as compound instruments.
The component parts of the bonds are classified separately as
financial liabilities and equity in accordance with the substance of the
arrangement.

The liability component is recognized initially at fair value of a similar
liability. The equity component is recognized initially at the difference
between the fair value of the bond as a whole and the fair value of the
liability component. Transaction costs are allocated to the liability and
equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component is measured
at amortized cost using the effective interest method. The equity
component of the bond is not remeasured to initial recognition except
on conversion expiry.

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 qualifying for
hedge accounting are recognized in EBIT 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
cash 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 can be
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

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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.

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

Post-employment and other long-
term employee benefits

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.

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 funds
or 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 liability recognized in the statement of
financial position is the defined benefit obligation at the closing date
less the fair value of plan assets. Current service costs, past service
costs and gains or losses on non-routine settlements are recognized
in functional costs above EBIT. Net interest expense or income is
recognized in financial items under interest expense or interest 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 payouts and the limits have been taken into account in the fair value
measurement of the benefits.

EBIT

In Outokumpu Group, EBIT 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

Outokumpu Annual report 2015
Notes to the consolidated financial statements

performance stainless steel special grades. Below is a description of the
activities of the five reportable segments:

Coil 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 and appliances, chemical,
petrochemical and energy sectors, as well as other process industries.
The business area has three business lines, Tornio, Nirosta and Avesta,
with production facilities in Finland, Germany and Sweden, as well as
a finishing plant in the Netherlands. EMEA has extensive coil service
center and sales network across Europe, Middle East and Africa.

Coil 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.

APAC includes coil and plate service center in China, as well as a coil
service center in Australia. The service center in China specializes in
selling, processing and distributing high quality stainless steel products.
Shanghai Krupp Stainless (SKS), a cold rolling mill in Shanghai, China,
was divested in December 2015. For more information see note 4.

Quarto 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. It
has also plate service centers in Finland, Germany, Italy, Sweden, the
Netherlands and the UK.

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 five 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.

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 EBIT. Exchange
gains and losses and fair value changes of derivatives are included
in EBIT, if they arise from business-related items. Otherwise they are
recognized in financial items.

Non-recurring items

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.

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 instrument is converted. Furthermore, the profit or
loss used in the calculation is adjusted for the interest expense related
to the instrument and recognized in the period, net of tax. However,
potential ordinary shares are only dilutive if the adjustments decrease
the earnings per share ratio.

3. Segment information

Outokumpu's business is divided into five business areas which are Coil
EMEA, Coil Americas, APAC, Quarto Plate and Long Products. In addition
to the business area structure, Group Functions cover the CFO's office,
CTO's office, HR, IT, Health and Safety, Communications and Marketing,
Strategy, Legal, and Internal audit.

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 EBIT 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 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

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Operating segments

2015

Non-recurring items in EBIT

Gain on the SKS divestment
Redundancy costs
Net costs related to technical issues
in Calvert
Impairments related to EMEA
restructuring

Depreciation and amortization

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

Liabilities in operating capital
Other financial liabilities
Deferred tax liabilities
Total liabilities

Operating capital
Net deferred tax asset
Capital employed

Coil
EMEA

Coil
Americas

3 777
357
4 134
285
100

1 074
37
1 111
-138
-215

-
-
-
-
-
-

-
-25

-6
-179

-
-
-
-
-
-

-
-

-17

-
-77

3 396

1 437

-
-
-
-

1 213
-
-
-

2 183
-
-

-
-
-
-

208
-
-
-

1 229
-
-

Quarto
Plate

Long
Products

Reportable
segments
total

Other

operations Eliminations

Reconciliation

399
60
459
-1
-19

389
162
551
10
2

6 031
627
6 658
150
-152

-
-
-
-
-
-

-
-

-
-
-
-
-
-

-
-

-
-18

-
-8

-
-
-
-
-
-

-
-25

-17

-6
-296

352
311
663
379
378

-
-
-
-
-
-

409
-

-
-6

-
-938
-938
2
2

-
-
-
-
-
-

-
-

Group

6 384
-
6 384
531
228

49
9
-159
127
-41
86

409
-25

-17

-6
-302

326

212

5 424

296

-214

5 505

-
-
-
-

117
-
-
-

209
-
-

-
-
-
-

66
-
-
-

146
-
-

-
-
-
-

1 620
-
-
-

3 805
-
-

-
-
-
-

239
-
-
-

56
-
-

-
-
-
-

-203
-
-
-

-11
-
-

63
290
16
5 874

1 656
1 874
16
3 546

3 850
0
3 850

APAC

393
10
403
-6
-20

-
-
-
-
-
-

-
-

-
-14

-
-
-
-

16
-
-
-

38
-
-

Outokumpu Annual report 2015
Notes to the consolidated financial statements

2014

€ million
External sales
Inter-segment sales
Sales
EBITDA
EBIT
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 in EBIT

Redundancy costs
Impairments related to EMEA
restructuring
Environmental provisions related
to site closures
Net costs related to technical
issues in Calvert

Depreciation and amortization

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

Liabilities in operating capital
Other financial liabilities
Deferred tax liabilities
Total liabilities

Operating capital
Net deferred tax asset
Capital employed

Coil EMEA

Coil
Americas

4 032
488
4 520
142
-86

1 131
27
1 158
-33
-104

APAC

434
10
444
8
-6

Reconciliation

Quarto
Plate

Long
Products

Reportable
segments
total

Other

operations Eliminations

387
63
450
-7
-26

463
188
651
40
33

6 447
776
7 223
149
-188

397
292
689
-40
-49

-
-1 068
-1 068
-5
-5

-
-
-
-
-

-
-

-112

-27

-25

-
-201

-
-
-
-
-

-
-

-
-
-
-
-

-
-

-
-
-
-
-

-
-

-
-
-
-
-

-
-

-21
-71

-
-13

-
-19

-
-7

-
-
-
-
-

-
-

-112

-27

-25

-21
-310

-
-
-
-
-

-
-

-1

-
-10

-
-
-
-
-

-
-

Group

6 844
-
6 844
104
-243

7
4
-227
-459
8

-450

11
-439

-113

-27

-25

-21
-320

3 684

1 467

263

351

249

6 014

174

-173

6 014

-
-
-
-

1 279
-
-
-

2 405
-
-

-
-
-
-

272
-
-
-

1 195
-
-

-
-
-
-

79
-
-
-

184
-
-

-
-
-
-

133
-
-
-

218
-
-

-
-
-
-

82
-
-
-

167
-
-

-
-
-
-

1 845
-
-
-

4 169
-
-

-
-
-
-

271
-
-
-

-97
-
-

-
-
-
-

-160
-
-
-

-13
-
-

78
275
44
6 411

1 956
2 292
31
4 279

4 059
13
4 072

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Geographical information

€ million

2015
Sales by destination
Sales by origin
Non-current assets

2014
Sales by destination
Sales by origin
Non-current assets

Finland

Germany

Sweden

The UK

Other
Europe

North
America

Asia and
Australia

Other
countries

Inter-area

Group

217
3 088
1 604

227
2 997
1 687

1 437
1 367
324

1 576
1 650
303

148
1 326
311

193
1 251
342

572
515
71

637
650
66

1 753
460
120

1 764
429
137

1 337
1 343
1 047

1 488
1 424
988

795
407
22

853
446
178

125
60
3

106
45
4

-
-2 182
-

-
-2 048
-

6 384
6 384
3 503

6 844
6 844
3 706

Sales by destination is presented for external sales.
Sales by origin and non-current assets are presented by the locations of the Group companies.
Non-current assets exclude investments in associated companies and joint ventures, financial instruments, deferred tax assets and defined benefit plan assets.

4. Acquisitions and disposals

Acquisitions

Outokumpu made no acquisitions during 2015 nor 2014.

Disposals

Year 2015

In December 2015 Outokumpu divested its shares in Shanghai Krupp
Stainless Co., Ltd. (SKS) in China following its strategy to differentiate
from the competition in China and the Asia-Pacific region with specialty
grades and tailored solutions. SKS employed over 450 people. The
gain on the transaction net of withholding taxes was EUR 389 million,
including EUR 8 million transaction costs and EUR 5 million cumulative
foreign exchange gains reclassified from equity to profit or loss. The gain
is presented in other operating income (EUR 409 million) and income
taxes (EUR -20 million) in the consolidated statement of income.

Effect of the SKS disposal on the
financial position of the Group

€ million
Non-current assets
Current assets
Non-controlling interest
Non-current liabilities
Current liabilities

Consideration received in cash
Withholding taxes
Cash and cash equivalents of the company disposed of
Net cash inflow
Receivable

2015

156
52
-32
-18
-137

358
-20
-15
323
75

In December 2015 Outokumpu divested its share in joint venture Fischer
Mexicana. The divestment was carried out by selling the shares in the
subsidiary Outokumpu Participations Mexico S.A. de C.V. through which
the share in Fischer Mexicana was owned. The consideration received in
cash was EUR 57 million. The gain on the sale net of taxes was EUR 43
million, including EUR 1 million transaction costs and EUR 12 million of
cumulative foreign exchange gains reclassified from equity to profit or
loss. The gain is presented in share of results in associated companies
and joint ventures (EUR 49 million) and income taxes (EUR -6 million) in
the consolidated statement of income. In the consolidated statement of
financial position the divestment mainly affected the item investments
in associated companies and joint ventures, which decreased by EUR 18
million. Cash and cash equivalents of the divested subsidiary were EUR
0 million.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Year 2014

Result from discontinued operations

Outokumpu divested VDM business and the remedy assets, which
included Terni and certain service centers to ThyssenKrupp on February
28, 2014. The loss on the sale, net of transaction costs, amounted
to EUR 5 million, out of which a gain of EUR 22 million was included in
the net result from discontinued operations in 2014. Transaction costs
of EUR 27 million were already recognized in the 2013 net result from
discontinued operations. The loss also included transaction costs of
EUR 7 million in 2014 and foreign exchange losses of EUR 4 million
reclassified into profit or loss.

Effect of disposal on the financial position of the Group

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

2014

594
-579
-4
11
1
11

The cash flows of companies disposed of during January 1–February 28,
2014 amounted to as follows: net cash from operating activities EUR 5
million and net cash from investing activities EUR -17 million.

€ million
Assets held for sale
Cash and cash equivalents
Net of current receivables and payables
Liabilities attributable to assets held for sale

Cash and cash equivalents of the companies disposed of
Compensation related to the working capital and net debt
Net cash outflow
Loan note used as consideration
Total consideration

2014

2 268
10
17
-1 074
1 220

-10
-41
-50
1 292
1 242

The cash and cash equivalents of the companies disposed of EUR 10
million and the compensation related to working capital and net debt
of EUR 41 million were presented in the statement of cash flows in line
item proceeds from the disposal of subsidiaries, net of cash.

In connection with the disposal, Outokumpu settled the outstanding
amount of EUR 160 million under the credit facility granted by
ThyssenKrupp. Furthermore, ThyssenKrupp sold all of its Outokumpu
shares, representing a 29.9% stake in Outokumpu prior to the
transaction and as a result the companies were no longer each other's
related parties.

5. Discontinued operations

In 2015, Outokumpu had no discontinued operations.

In 2014, Outokumpu's discontinued operations consisted of VDM
business and the remedy assets, which included Terni and certain
service centers, which were divested to ThyssenKrupp on February 28,
2014. The result from discontinued operations includes both the net
result of the disposed operations for January 1–February 28, 2014 and
the result from the disposal.

6. Income and expenses

Depreciation and amortization by function

€ million
Cost of sales
Selling and marketing expenses
Administrative expenses
Research and development expenses

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

Gain on the SKS divestment
Gains on sale of intangible assets and
property, plant and equipment
Other income items

2015

-288
-1
-12
-1
-302

2014

-304
-1
-13
-1
-320

2015

2014

409

20
12
472

-
-

12
34
47

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Other operating expenses

Auditor fees – KPMG

€ million
Audit
Audit related services
Tax advisory
Other services

2015

-2.0
-
-0.1
-0.1
-2.1

7. Employee benefit expenses

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

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

2015

-585
-21
-72

-12
-55
-2
-1
-15
-762

2014

-2.0
-0.1
-0.1
-1.2
-3.4

2014

-592
-103
-89

-7
-45
-7
-2
-9
-855

Profit-sharing bonuses based on the Finnish Personnel Funds Act were
not recognized in 2015 nor 2014.

More information on employee benefits for key management can be
found in Note 31 and in chapter Corporate Governance on the page
Remuneration.

€ 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
Impairments
Losses on sale of intangible assets and
property, plant and equipment
Other expense items

2015

2014

-
-1

-1
-11
-13

-28

-25
-27

-2
-11
-65

In 2015, the market price gains and losses from derivative financial
instruments included a gain of EUR 0 million from ineffective portion of
cash flow hedges. (2014: a gain of EUR 0 million)

Non-recurring items in EBIT

€ million
Gain on the SKS divestment
Redundancy costs
Net costs related to technical issues in
Calvert
Impairments related to EMEA restructuring
Environmental provisions related to site
closures

2015

409
-25

-17
-6

-
360

2014

-
-113

-21
-27

-25
-186

Out of the total non-recurring items in EBIT, EUR -39 million was included
in gross margin in 2015 (2014: EUR -167 million).

In December, 2015 Outokumpu divested its shares in Shanghai Krupp
Stainless Co., Ltd. in China (SKS). See note 4.

In 2015 Outokumpu proceeded with closures of operations and other
restructuring measures in Germany and Sweden in accordance with
the EMEA restructuring plan. Relating to these measures non-recurring
redundancy costs of EUR 25 million and impairments of EUR 6 million
were recorded. In 2014 Outokumpu restructured its operations in Europe
by closing the Kloster operations in Sweden to reduce capacity and to
streamline production and supply chain of the thin strip operations, and
proceeding with the closure of Bochum melt shop in Germany. Relating
to these actions, non-recurring redundancy costs of EUR 113 million,
impairments of EUR 27 million, and environmental provisions of EUR 25
million were recognized.

In the second half of 2014, Calvert mill in the US experienced technical
issues in its cold rolling lines. The interruption and transfer of production
to Group's other mills, and repair and maintenance costs were partly
compensated by insurance, but non-recurring net costs of EUR 17
million mainly in the first quarter of 2015 and EUR 21 million in 2014
were recognized.

Outokumpu Annual report 2015
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

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

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

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

Exchange gains and losses in the
consolidated statement of income

€ million
In sales
In purchases 1)
In other income and expenses 1)
In financial income and expenses 1)

2015

2014

1
2

0
2
6

-98
-14
-9

-9
2
-1
-
-21
-8
-159

-92
86

-
3
3

1
2

0
2
4

-107
-15
-10

-10
1
-4
-0
-46
-20
-212

-107
105

-1

-13
-0
-15

-149

-223

2015

2014

13
-35
8
-6
-21

37
-54
-0
-2
-18

1) Includes exchange gains and losses on elimination of intra-group

transactions.

Exchange gains and losses include EUR 84 million net exchange loss on
derivative financial instruments (2014: EUR 103 million net exchange
gain) of which EUR 8 million gain on derivatives has been recognized in
other operating income, EUR 0 million gain as adjustment to purchases
and EUR 92 million loss in financial items.

9. Income taxes

Income taxes in the consolidated
statement of income

€ million
Current taxes
Deferred taxes

2015

2014

-35
-6
-41

-17
26
8

The applicable Finnish corporate tax rate for the financial years 2015
and 2014 was 20.0%. The applicable tax rates for companies outside
Finland range from 0.0% to 38.8% (2014: 0.0% to 39.3%).

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

2015
-1
-1
-4

2
-4

2014
-0
-1
-4

9
4

As of December 31, 2015 tax loss carry forwards amount to EUR 3 573
million (2014: EUR 3 038 million), in particular EUR 906 million (2014:
EUR 907 million) in Finland, EUR 421 million (2014: EUR 401 million) in
Sweden, EUR 1 404 million (2014: EUR 897 million) in the US and EUR
485 million (2014: EUR 444 million) in Germany. 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, 2015
tax loss carry forwards of the Outokumpu Group for which no deferred
tax asset is recognized amount to EUR 3 190 million (2014: EUR 2 675
million). No deferred tax liabilities were recorded on undistributed profits
on foreign subsidiaries, as such profits are not to be distributed in the
foreseeable future.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Tax losses carried forward

€ million
Expire in less than 5 years
Expire between 5 and 9 years
Expire later than 9 years
Never expire

Deferred income taxes in the
statement of financial position

2015

188
616
1 489
1 280

3 573

2014

260
481
1 173
1 124

3 038

€ million
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset

2015

2014

16
-16
0

44
-31
13

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
Non-current 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
assets

2015
Deferred tax
liabilities

11
32
31
17
5
4
58

69
15
9
20
1 050

1 320
-1 080
-224

-2
-173
-1
-8
-9
-2
-0

-22
-18
-0
-3
-

-240
-
224

-16

Net

8
-142
30
9
-4
2
57

47
-4
8
17
1 050

1 080
-1 080
-

2014

Deferred tax
assets

Deferred tax
liabilities

11
85
0
15
4
17
55

65
25
11
49
853
1 190
-951
-195
44

-9
-158
-3
-9
-10
-6
-2

-17
-8
0
-5
-
-226
-
195
-31

Net

2
-73
-3
6
-6
11
53

48
17
11
44
853
964
-951
-
13

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.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Movement in deferred tax assets and liabilities during the financial year

€ million
Intangible assets
Property, plant and equipment
Other financial assets
Inventories

Derivative financial assets
Trade and other receivables
Non-current and current debt
Defined benefit and other long-term employee benefit obligations
Provisions
Derivative financial liabilities
Trade and other payables
Tax losses carried forward

Valuation allowance

€ million
Intangible assets
Property, plant and equipment
Other financial assets
Inventories
Derivative financial assets
Trade and other receivables
Non-current and current debt
Defined benefit and other long-term employee benefit obligations
Provisions
Derivative financial liabilities
Trade and other payables
Tax losses carried forward

Valuation allowance

Net deferred
taxes
Jan 1, 2015

Translation
differences

Recognized in
profit or loss

Recognized
in other
comprehensive
income

Net deferred
taxes
Dec 31, 2015

2
-73
-3
6

-6
11
53
48
17
11
44
853

964
-951

0
3
-0
1

-0
0
0
2
0
0
3
48

58
-57

6
-72
33
3

3
-9
4
4
-21
-3
-31
151

68
-74

-6

-
-
0
-

-1
-
-
-7
-
-
-
-

-7
-

-7

8
-142
30
9

-4
2
57
47
-4
8
17
1 050
1 080
-1 080
0

Net deferred
taxes
Jan 1, 2014

Translation
differences

Recognized in
profit or loss

Recognized
in other
comprehensive
income

Net deferred
taxes
Dec 31, 2014

3
-72
0
9
-4
-12
69
44
18
13
25
629
723
-724
-1

0
5
-0
0
0
0
0
2
0
-0
3
38
49
-52
-3

-1
-6
-2
-4
-5
23
-17
13
-1
-1
15
186
201
-175
26

-
-
-1
-
2
-
-
-10
-
-
-
-
-9
-
-9

2
-73
-3
6
-6
11
53
48
17
11
44
853
964
-951
13

In 2015 the income tax expense of EUR 41 million presented in the financial statements is EUR 16 million higher than the expected income tax
expense of EUR 25 million, which would result if the Finnish corporate tax rate of 20.0% was applied to the Group's result before taxes. For financial
year 2014 the reported income tax benefit of EUR 8 million was EUR 84 million lower than the expected income tax benefit of EUR 92 million
calculated with the Finnish corporate tax rate of 20.0%. The following table reconciles the expected income tax benefit to the income tax benefit or
expense presented in the consolidated statement of income:

Outokumpu Annual report 2015
Notes to the consolidated financial statements

€ 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 1)
Tax effect of losses for which no deferred tax asset is recognized
Taxes for prior years
Impact of the changes in the tax rates on deferred tax balances 2)
Other items 1)
Income taxes in the consolidated statement of income

2015
-25
18
88
-116
25
-1
-28
-41

2014
92
53
-37
-156
75
0
-19
8

1) In 2015 the gain on the sale of shares in subsidiaries is fully or partly not taxable in the jurisdictions of the sellers, which resulted in a reconciliation effect
of EUR 119 million. However, the gains are subject to withholding tax expense in the countries, in which the sales took place. The withholding taxes of EUR
-26 million are included in Other items. See note 4.

2) In 2015 as well as in 2014, enacted changes in tax rates had only little impact on deferred tax balances.

Tax audit in Outokumpu Oyj was concluded in November 2014 and did not result in proposed changes to the company's taxation. The Tax Recipients'
Legal Service Unit has appealed against the outcome of the tax audit.

10. Earnings per share

Result attributable to the equity holders of the Company, € million
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 1)
Diluted average number of shares, in thousands 1), 2)

Earnings per share for result attributable to the equity holders of the Company, € 1), 2)

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

2015

96
-
-

2014

-434
-445
11

415 474
415 474

349 559
349 559

0.23
-
-

-1.24
-1.27
0.03

1) 2014 figures calculated based on the rights-issue-adjusted weighted average number of shares and adjusted to reflect the reverse split on June 20, 2014.
2) 33 662 thousand potentially convertible shares with an impact of 29 235 thousand shares on the average number were excluded from the diluted average

number of shares because their effect would have been anti-dilutive. In 2014, Outokumpu did not have any diluting effect instruments.

11. Intangible assets

€ million

Historical cost on Jan 1, 2015
Translation differences
Additions
Disposals
Disposed subsidiaries
Reclassifications 2)

Historical cost on Dec 31, 2015

Accumulated amortization and impairment on Jan 1, 2015
Translation differences
Disposals
Disposed subsidiaries
Amortization

Accumulated amortization and impairment on Dec 31, 2015

Carrying value on Dec 31, 2015
Carrying value on Jan 1, 2015

Historical cost on Jan 1, 2014
Translation differences
Additions
Disposals
Reclassifications 2)
Historical cost on Dec 31, 2014

Accumulated amortization and impairment on Jan 1, 2014
Translation differences
Disposals
Amortization
Accumulated amortization and impairment on Dec 31, 2014

Carrying value on Dec 31, 2014
Carrying value on Jan 1, 2014

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Other intangible
assets 1)

Goodwill

299
9
4
-6

-80
1

229

-199
-3
6
7
-10

-198

30
100

298
5
1
-6
1
299

-193
2
6
-14
-199

100
105

474
1
-
-
-
-

475

-7
-1
-
-
-

-8

467
467

472
2
-
-0
-
474

-7
-
-
-
-7

467
465

Total

774
10
4
-6

-80
1

704

-206
-3
6
7
-10

-206

498
567

770
7
1
-6
1
774

-200
2
6
-14
-206

567
570

1) Other intangible assets include capitalized land-use rights, development costs, patents, licenses and software.
2) 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.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Impairment testing of goodwill

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

€ million
Coil EMEA
APAC
Quarto Plate
Long Products

2015

451
1
6
9
467

2014

451
1
7
9
467

In Outokumpu, goodwill is tested on operating segment level. Operating
segments are the Group's cash-generating units. Goodwill has been
allocated to the operating segments mentioned above. During the year
2015, impairment testing of goodwill was carried out on a quarterly basis.

The recoverable amounts of the cash-generating units are based on
value-in-use calculations which are prepared 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 plans
approved by the management for 2016–2019 after which cash flows
are projected for a period of 2 years, including terminal value based on
conservative assumptions.

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. Goodwill of Coil EMEA presents 97% of the
total goodwill of the Group and the pre-tax WACC used for Coil EMEA is
9.6% (2014: 10.5%).

In the terminal value, growth rate assumption of 0.5% (2014: 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.

Growth rate assumption used for stainless steel deliveries is
conservative, and generally lower than 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 cost savings
have been included in the cash flow projections.

The estimated recoverable amount of Coil EMEA exceeds its carrying
amount by approximately EUR 971 million. Increase of 2.5 percentage
point in after-tax WACC would cause the recoverable amount to equal
the carrying amount. Also, 12% decrease in annual delivery volumes
or 6% decrease in base prices would cause the recoverable amount to
equal the carrying amount. Terminal growth rate of 0% would not lead to
impairment.

As a result of the performed impairment test to Group's cash-generating
units, no impairment losses were recognized in 2015 or 2014.

Emission allowances

Outokumpu had eight active sites operating under EU's Emissions
Trading Scheme (ETS) in 2015. These include the production plants in
Tornio, Finland; Avesta, Degerfors and Nyby in Sweden; Sheffield in the
UK; as well as Krefeld, Dillenburg and Benrath in Germany.

The pre-verified carbon dioxide emissions under ETS were approximately
1,018,000 tonnes in 2015 (2014: 1,103,000 tonnes). For the trading
period 2013–2020, all relevant Outokumpu sites have applied free
emission allowances according to efficiency-based benchmarks and
historical activity. Preliminary allocation for years 2016 and 2017 is
estimated to be some 1 million tonnes annually in total. Considering
the Group's operations and the Group’s current emission allowance
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 for information
on the management of the emission allowance price risk.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

12. Property, plant and equipment

€ million
Historical cost on Jan 1, 2015
Translation differences
Additions
Disposals
Disposed subsidiaries
Reclassifications

Historical cost on Dec 31, 2015

Accumulated depreciation and impairment on Jan 1, 2015
Translation differences
Disposals
Disposed subsidiaries
Reclassifications
Depreciation
Impairments

Land

145
3
0
-12
-
-

136

-9
-0
3
-
-
-0
-6

Accumulated depreciation and impairment on Dec 31, 2015

-14

Carrying value on Dec 31, 2015
Carrying value on Jan 1, 2015

Historical cost on Jan 1, 2014
Translation differences
Additions
Disposals
Reclassifications
Historical cost on Dec 31, 2014

Accumulated depreciation and impairment on Jan 1, 2014
Translation differences
Disposals
Reclassifications
Depreciation
Impairments
Accumulated depreciation and impairment on Dec 31, 2014

Carrying value on Dec 31, 2014
Carrying value on Jan 1, 2014

122
136

146
3
1
-5
-
145

-9
-0
-
-
-0
-
-9

136
137

Mine
properties

Buildings

Machinery
and
equipment

Other
tangible
assets

Advances
paid and
construction
work in
progress 1)

46
-
12
-
-
8

-12
-
-
-
-
-3
-

-15

51
34

46
-
-
-
-
46

-9
-
-
-
-3
-
-12

34
37

1 275
28
1
-17
-19
0

1 269

-543
-5
17
3
-
-47
-

-575

693
732

1 260
18
6
-27
19
1 275

-520
1
22
0
-45
-0
-543

732
740

4 631
145
29
-109
-92
32

4 635

-2 565
-41
108
23
2
-237
5

-2 705

1 930
2 065

4 600
74
39
-139
57
4 631

-2 462
14
138
6
-252
-8
-2 565

2 065
2 139

132
1
1
-5
-
3

131

-70
-0
5
-
-1
-5
-

-71

60
63

132
-1
1
-
0
132

-66
0
-
-
-5
-
-70

63
66

128
2
86
-1
-0
-45

170

-20
-0
-
-
-0
-0
-

-21

149
108

184
4
70
-36
-93
128

-49
2
38
8
-
-19
-20

108
134

Total

6 357
179
129
-145
-112
-3

6 407

-3 219
-47
132
25
0
-292
-1

-3 402

3 005
3 138

6 368
98
117
-208
-18
6 357

-3 115
16
199
13
-306
-27
-3 219

3 138
3 254

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.

Borrowing costs amounting to EUR 2 million were capitalized on investment projects during the financial year (2014: EUR 1 million). Total interest
capitalized on December 31, 2015 was EUR 33 million (December 31, 2014: EUR 35 million). Outokumpu determines separate capitalization rates for
each quarter. The average rate used during 2015 was 5.6%.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Impairments

In 2015 or 2014 no impairment losses were recognized as a result
of the impairment test performed to Group's cash-generating units.
However, due to restructuring in Germany, impairment losses of EUR 6
million were recognized in 2015 relating to land (2014: EUR 27 million
relating to construction work in progress and machinery and equipment).

Assets leased by finance lease agreements

€ million
Historical cost
Accumulated depreciation
Carrying value on Dec 31,
2015

Historical cost
Accumulated depreciation
Carrying value on Dec 31,
2014

Land

Buildings

Machinery
and
equipment

29
-1

33
-5

36
-6

236
-87

149

253
-73

180

Total

298
-93

205

318
-79

239

13. Investments in associated
companies and joint ventures

Outokumpu has the following associated companies and joint ventures
which are all equity accounted. Based on the amounts reported in the
Group's consolidated financial statements, it is concluded that the
investments are immaterial.

Associated companies

OSTP Holding Oy
Rapid Power Oy
Manga LNG Oy 1)
Hernandez Edestahl GmbH 1)

1) Acquired in 2015.

Domicile Ownership, %

Finland
Finland
Finland
Germany

49
33
45
33

Summarized financial information
on associated companies

€ million
Carrying value of investments in associated
companies
Group's share of total comprehensive income

2015

2014

48
-4

45
4

Joint ventures

Fagersta Stainless AB

Domicile Ownership, %

Sweden

Summarized financial information on joint ventures

€ million
Carrying value of investments in joint ventures
Group's share of total comprehensive income 1)
Gain from disposal of Fisher Mexicana S.A. DE
C.V.

2015

2014

14
3

32
3

1) Group's share of total comprehensive income in 2015 includes the

divested joint venture Fisher Mexicana S.A. DE C.V. until December 2015.
See note 4.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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

Measured at

2015
€ million

Non-current financial assets
Available-for-sale financial assets
Investments at fair value through profit
or loss
Trade and other receivables
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
Non-current debt
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)
d)

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

f)
d)

f)
f)
e)
d)

-
40
-

-
624
186
-
-
849

1 249
-

547
957
-
-
2 752

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,
2015

Fair value
on Dec 31,
2015

-
-
-

-
-
-
5
-
9

-
-

-
-
1
-
1

1
-
0

16
-
-
-
32
49

-
9

-
-
-
49
58

1
40
0

16
624
186
5
32
944

1 249
9

547
957
1
49
2 811

1
40
0

16
624
186
5
32
944

1 245
9

547
957
1
49
2 807

Cost

-
-
-

-
-
-
-
-
36

-
-

-
-
-
-
-

Outokumpu Annual report 2015
Notes to the consolidated financial statements

2014
€ 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
Non-current debt
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

b)
e)
d)

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

f)
d)

f)
f)
e)
d)

10
-
-

-
694
191
-
-
895

1 597
-

569
1 172
-
-
3 337

Measured at

Fair value
recognized
in other
comprehensive
income

Fair value
recognized
through
profit or loss

Carrying
amount
on Dec 31,
2014

Fair value
on Dec 31,
2014

-
0
-

-
-
-
0
-
6

-
-

-
-
14
-
14

-
-
1

4
-
-
-
35
42

-
18

-
-
-
73
91

10
0
1

4
694
191
0
35
964

1 597
18

569
1 172
14
73
3 442

10
0
1

4
694
191
0
35
964

1 581
18

568
1 172
14
73
3 425

Cost

-
-
-

-
-
-
-
-
21

-
-

-
-
-
-
-

Outokumpu Annual report 2015
Notes to the consolidated financial statements

15. Fair value hierarchy of financial assets and liabilities

Carrying
amount

Level 1

Level 2

Level 3

Total

Fair value

2015
€ 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

2014
€ 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

Financial liabilities not measured at fair value
Non-current debt

1 249

465

780

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

Carrying
amount

Level 1

Level 2

Level 3

Total

Fair value

5
16
5
33

1
58

0
16
-
-

-
-

3
-
5
33

1
58

6
6
0
36
48

14
91
105

0
4
-
-
5

-
-
-

2
-
0
36
39

14
91
105

1
1
-
-

-
-

5
16
5
33
59

1
58
59

1 245

3
2
-
-
4

-
-
-

6
6
0
36
48

14
91
105

1 581

Financial liabilities not measured at fair value
Non-current debt

1 597

407

1 174

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Reconciliation of changes on level 3

2015
€ million
Carrying value on Jan 1
Fair value changes

Carrying balance on Dec 31

2014
€ million
Carrying value on Jan 1
Fair value changes
Carrying balance on Dec 31

Available-for-sale
financial assets

Investment at fair value
through profit or loss

3
-2

2
-1

Available-for-sale
financial assets

Investment at fair value
through profit or loss

0
3
3

15
-13
2

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 2015.

Available-for-sale financial assets at hierarchy level 3 relate to investments in energy producing companies in 2015. Valuation model of energy
producing companies is based on discounted cash flow (model), which takes into account the future prices of electricity, discount rate, inflation rate,
the estimated amount of electricity to be received and estimated production costs. The valuation is mainly driven by electricity price. +/- 10% change
in electricity price leads to an increase of EUR 0 million or decrease of EUR 0 million in valuation.

16. Available-for-sale financial assets

€ million
Carrying value on Jan 1
Translation differences
Additions
Fair value changes
Disposals
Impairments
Gains and losses from disposals reclassified to profit or loss
Change in other comprehensive income due to impairment
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

2015

2014

27
0
15
-1
-0
-
-
-
40

0
40
0
40

0
4
36
40

2015

40
36
4
-1
3

19
0
8
3
-2
-4
0
3
27

0
26
0
27

0
5
21
27

2014

27
22
5
-1
4

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Unlisted equity securities and other investments at cost include EUR
35 million holdings in Voimaosakeyhtiö SF providing ownership to
Fennovoima Oy. During 2015 Outokumpu invested EUR 15 million in
Voimaosakeyhtiö SF. As the Fennovoima project is at an early stage,
the fair value cannot be reliably measured. Unlisted equity securities
at fair value include 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.

17. Investments at fair value
through profit or loss

€ million
Carrying value on Jan 1
Translation differences
Additions
Disposals
Fair value change
Carrying value on Dec 31

2015

2014

6
0
11
-0
-1
16

19
-0
0
-
-13
6

The carrying value comprises mainly of investment by Group's captive
insurance company Visenta Försäkrings AB in state bonds, covered bonds,
and funds.

The fair value change in 2014 relates to write-down of Outokumpu's 16%
holding in Talvivaara Sotkamo Ltd.

In December 2014, the Board of Directors approved the commencement
of the new plan (plan 2015–2017) of Performance Share Plan 2012 as
of the beginning of 2015. The maximum number of gross shares (taxes
included) that could be allocated from the plan is 2,900,000. At the end
of the reporting period 133 persons participated in the plan. The plan's
earnings criteria for the year 2015 were EBIT excluding non-recurring
items and business cash flow, in addition to which return on capital
employed (ROCE) ranking among peers in 2017 was confirmed as one
earnings criteria.

In December 2014 the Board also approved the commencement of the
new plan (plan 2015–2017) of Restricted Share Pool Program 2012
as of the beginning of 2015. 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 maximum number of gross shares (taxes included) that could be
allocated from the plan is 320,000. At the end of the reporting period 6
persons participated in the plan.

The EBIT improvement criterion previously applied to the Performance
share plans 2013–2015 and 2014–2016 was for the year 2015
replaced with the same EBIT excluding non-recurring items criterion as
applied to the new plan 2015–2017. In addition, criterion on the return
on capital employed in 2016 was added to the plan 2014–2016.

In December 2015, the Board of Directors approved the commencement
of the fifth plan 2016–2018 regarding both Performance Share Plan
2012 and Restricted Share Pool Program 2012. Furthermore, the Board
approved the details of a Matching Share Plan of the new Outokumpu
CEO. They all commence at the beginning of 2016.

The total estimated fair value of the Performance share plan and
Restricted share pool is EUR 4 million on December 31, 2015. This
value is recognized as an expense in the statement of income during the
vesting periods.

18. Share-based payment plans

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

During the year 2015 Outokumpu’s share based payment programs
included Performance Share Plan 2012 (Plans 2013–2015, 2014–2016
and 2015–2017) and Restricted Share Pool Program (Plans 2013–2015,
2014–2016 and 2015–2017). 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.

The Performance Share Plan 2012–2014 ended and based on the
achievement of the targets the participants received 23.3% of the
maximum number of shares of the plan as reward. After deductions
for applicable taxes, altogether 48,234 shares were delivered to 69
persons. In addition, cash of EUR 258 thousand was paid for taxes and
rewards settled in cash. Regarding the Restricted Share Pool Program,
plan 2012–2014, after deductions for applicable taxes in total 14,350
shares were delivered to three participants based on the conditions
of the plan. In addition, cash of EUR 74 thousand was paid for taxes.
Outokumpu used its treasury shares for the reward payment.

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

2015

2014

-1

0
-1

-2

-1
-2

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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

Grant date
Vesting period
Vesting conditions

Market

Non-market

Other relevant conditions

Exercised

Grant date

Vesting period
Vesting conditions

Exercised

Performance Share Plan 2012

Vesting period
2013–2015

Vesting period
2014–2016

Vesting period
2015–2017

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

May 31, 2014
Jan 1, 2014–Dec 31, 2016

Feb 11, 2015
Jan 1, 2015–Dec 31, 2017

Outokumpu share-price adjusted
with dividends at the end of
2015

EBITDA for the year 2013; EBIT
improvement for the year 2014;
EBIT excluding non-recurring
items for the year 2015; and
achievement of annual Inoxum
transaction related synergies
A salary-based limit for the
maximum benefits
In shares and cash

-
EBIT improvement for the year
2014; EBIT excluding non-
recurring items for the year
2015; underlying EBITDA for the
year 2016; a cash flow measure
for the years 2014, 2015 and
2016; and return on capital
employed (ROCE) in 2016
A salary-based limit for the
maximum benefits
In shares and cash

Restricted Share Pool Program 2012

EBIT excluding non-recurring
items and a cash flow measure
for the year 2015; and return on
capital employed (ROCE) ranking
among peers and debt-to-equity
ratio (gearing) in 2017
A salary-based limit for the
maximum benefits
In shares and cash

Vesting period
2013–2015
April 30, 2013

Vesting period
2014–2016
May 31, 2014

Vesting period
2015–2017
April 30, 2015

Jan 1, 2013–Dec 31, 2015
Continuation of employment
until the shares are delivered,
a salary-based limit for the
maximum benefits
In shares and cash

Jan 1, 2014–Dec 31, 2016
Continuation of employment
until the shares are delivered,
a salary-based limit for the
maximum benefits
In shares and cash

Jan 1, 2015–Dec 31, 2017
Continuation of employment
until the shares are delivered,
a salary-based limit for the
maximum benefits
In shares and cash

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

Share values used in valuations

€
Performance Share Plan

Vesting period 2013–2015
Vesting period 2014–2016
Vesting period 2015–2017
Restricted Share Pool Program
Vesting period 2013–2015
Vesting period 2014–2016
Vesting period 2015–2017

Share price at the end of the
reporting period

Incentive share fair value at the
grant date

2.73
2.73
2.73

5.18
6.46
4.82

4.61
6.46
5.41

Outokumpu Annual report 2015
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
adequate 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 mitigation against catastrophe
risks and to reduce earnings variation caused by hazards.

The Board has approved the risk management policy, which defines
responsibilities, 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 2015, the Group’s Financial Risk Policy
was reviewed and changes to it were approved by the Interim CEO.
Main changes to the policy were related to metal, foreign exchange and
energy risk management.

Financial risks consist of market, country, credit, liquidity and refinancing
risks. Subsidiary companies hedge their currency and metal price
risk with Outokumpu Oyj, which does most of the Group's foreign
exchange and metal derivative contracts with banks and other financial
institutions. The Treasury and Risk Management function is responsible
for managing foreign exchange, interest rate, liquidity and refinancing
risk as well as 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 and fuel
price risks. Metal Desk function is responsible for managing Group's
metal price risk.

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. 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, free cash flow, net debt and equity.

Market risk

Market risk is caused by changes in foreign exchange and interest rates,
interest margins 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 partially mitigate the above-
mentioned impacts of market price changes. Hedge accounting is
applied selectively and based on separate decisions. 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 big changes in the amounts of reported
derivate contracts. Nominal amounts and fair values of derivatives are
presented in Note 20. Sensitivity of financial instruments to market
prices is described in the following table.

Outokumpu Annual report 2015
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 nickel price in USD
+/-10% change in propane price in USD
+/-1% parallel shift in interest rates

2015

2014

In profit or loss

-2/+3
-9/+11
-1/+1
+1/-1
-5/+1

In other
comprehensive
income

-
-13/+15
+0/-0
-
-

In profit or loss

-0/+0
-9/+10
-9/+9
+2/-2
-10/+10

In other
comprehensive
income

-
-15/+19
+1/-1
-
-

The sensitivity analyses apply 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 of 24–38%. With
+/-30% change in USD nickel price, the effect in profit or loss is about EUR -2/+2 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 and British pounds. Due to the disposal of SKS shares the
exposure to changes in yuan exchange rate decreased clearly. 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. Due to
significant amount of captive ferrochrome production and related
revenues being linked to US dollar, the EUR/USD exchange rate risk for

the Group is significant. In addition, stainless steel contribution margin
is impacted by the value of US dollar.

Outokumpu hedges most of its fair value risk which relates to currency
denominated accounts receivables, accounts payables, 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

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

SEK

4
302
-135

170

2015

USD

-99
930
-798

Foreign exchange positions of SEK-based companies

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

EUR

-2
17
-144

-129

2015

USD

5
6
-25

-14

1) Includes cash and cash equivalents, loan receivables and debt.
2) Includes derivatives to hedge committed cash flows

GBP

18
-8
-22

-12

GBP

-4
1
-8

-11

Other

5
9
-12

Other

4
0
-15

SEK

0
315
-105
210

EUR

46
1
-166
-119

2014

USD

-103
692
-585
4

2014

USD

13
19
-66
-33

GBP

10
-31
-5
-26

Other

8
-111
108
6

GBP

Other

-8
1
9
2

8
3
-10
0

Outokumpu has income translation risk mainly in US dollars, Swedish
kronas and British pounds; based on the policy this risk is not hedged.
The Group has significant currency denominated net investment
positions in US dollars, Swedish kronas and British pounds. At the end of
the year there were no hedges related to net investment exposure. The

effective portion of gains (EUR 17 million, net of tax) on earlier financial
year net investment hedges is recognized in other comprehensive
income. In 2015 Outokumpu reduced currency denominated equity e.g.
in Australia and Mexico. Currency denominated debt and changes in
currency rates have an impact on Group's capital structure.

Outokumpu Annual report 2015
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 debt 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 is reduced mainly with interest rate
swaps, where Outokumpu pays fixed rate and receives variable rate.

Currency distribution and re-pricing of outstanding net debt

US dollar, euro and Swedish krona have substantial contribution to the
overall interest rate risk. Approximately 59% of the Group’s debt (2014:
71%) have an interest period of less than one year and the average
interest rate of non-current debt on December 31, 2015 was 5.4% (Dec
31, 2014: 4.3%). Interest rate position is presented on a more detailed
level in the table below. Outokumpu is also exposed to market level of
applicable credit margins, mainly in regards of any new financing.

€ million
Currency
EUR
SEK
USD

Others

€ million
Currency
EUR
SEK
USD
Others

Dec 31, 2015

Net debt 1)

Derivatives 2)

Average rate, %

Duration, year

Rate sensitivity 3)

1 385
283
21

-44

1 646

-1 107
294
894

-78

5.5
4.1
21.2

2.7

11.5
0.3
0.3

0.2

-4.8
4.3
6.0

-0.9

4.5

Dec 31, 2014

Net debt 1)

Derivatives 2)

Average rate, %

Duration, year

Rate sensitivity 3)

1 557
377
-50
77
1 960

-601
137
617
-135
18

4.9
4.3
3.1
7.9

4.2
0.4
0.4
-0.1

2.7
4.1
3.6
-0.4
10.0

1) Includes cash and cash equivalents, loan receivables and debt.
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 2015
Notes to the consolidated financial statements

Metal and energy price risk

Security price 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 Commodities. Timing differences between alloy
metal purchases and pricing of products; changes in inventory levels;
the capability to pass on changes in raw material and energy prices to
end-product prices; and the amount of stainless steel scrap purchase
discounts all affect risk.

Outokumpu has investments in equity securities and loan
receivables. On December 31, 2015 the biggest investments were
in Voimaosakeyhtiö SF (equity investment EUR 35 million) and OSTP
Holding Oy (equity investment of EUR 21 million and loan receivable EUR
3 million). The captive insurance company Visenta Försäkrings AB has
investments in highly rated and liquid fixed income securities, such as
bonds issued governments and banks and other funds.

Changes in nickel price is the most important metal 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.
Outokumpu's nickel position consists of price fixed purchase orders,
nickel-containing material in inventories, price fixed sales orders and
forecasted but not yet ordered monthly alloy surcharge based deliveries
for the upcoming few weeks. Based on financial risk policy applied in
2015 most of the identified price risk should be hedged. In 2015 the
nickel risk hedging ratio has typically varied between 15 and 40%. Metal
price hedging has been done against US dollar, however based on the
updated policy metal hedging will be done against base currencies in
2016. Risk related to stainless steel scrap purchase discounts is not
hedged and the risk related to Molybdenum has been managed only
partially due to illiquid markets.

Nickel derivatives and LME 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 therefore 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’s main sites in Europe are participating in the EU Emissions
Trading Scheme (ETS). The amounts of 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. In certain situations the market price of
power is partly based on price of carbon dioxide emissions. This indirect
exposure to emission prices can be significant for Outokumpu.

The Group has energy intensive production processes using power,
propane, natural gas and other oil products, e.g. bunker fuels. The
Group hedges both propane and natural gas price risk by locking future
purchase prices with derivatives and supply contracts. Due to continued
decline in price of crude oil and fuels, the valuation of propane hedges
had an adverse impact on 2015 reported earnings. Power used by the
production sites located in Finland, Sweden, the UK and Germany are
managed centrally while at other sites power risk is managed is locally.
Price risk is reduced with fixed price supply contracts and ownerships in
energy producing companies.

Country and credit risk

All 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 percent 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, 2015 the maximum exposure to credit risk of trade
receivables was EUR 442 million (2014: EUR 536 million). A 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. The portion of unsecured receivables has varied
between 13 to 15 percent of all trade receivables. For part of trade
receivables Outokumpu uses factoring, which transfers substantial part
of all risks and rewards to the buyer of the receivables. The Group’s
trade receivables include some risk concentration, but most of the
receivables are generated by a large number of customers. In 2015, Coil
EMEA booked a EUR 5 million impairment related to a certain customer
receivable. Age analysis of accounts receivables is in Note 22.

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.

Liquidity and refinancing risk

Outokumpu raises most of its 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, planned funding transactions during the forecast period
and headrooms for financial covenants. The amount and adequacy of
liquidity reserves, the amounts of scheduled annual repayments of non-
current debt as well as forecasted gearing levels are key targets and
outcomes of the planning. Low profitability and high gearing required
significant measures which were implemented in late 2015. Proceeds
from disposal of Group’s ownership in SKS and in Fischer Mexicana
were mainly used to reduce debt. These disposals and the extension
of certain loan maturities resulted to significant reduction in 2017 loan
maturities and thus clear reduction in refinancing risk.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

In February 2015 Outokumpu Oyj issued a EUR 250 million unsecured
convertible bond maturing in 2020 carrying a coupon of 3.25% per
annum payable semi-annually in arreas. The bonds may be converted
into maximum of 33,661,873 new ordinary shares in Outokumpu
representing 8.1% of the outstanding shares at the year end. The
conversion period commenced in April 2015 and will end in February 14,
2020. As at year end the conversion price was EUR 7.4268. In December
2015 a total of EUR 655 million under the Revolving Facility as well as
two bilateral loans, totaling EUR 120 million were extended by two years.
The original maturities of all extended loans was 28 February 2017. In
connection with the extension of loans a corresponding extension related
to the security package was done as well.

The main funding programs and credit facilities are: a committed
revolving facility of EUR 800 million, two committed revolving bilateral
credit facilities of EUR 120 million, two committed revolving credit
facilities totaling SEK 2,633 million and a Finnish commercial paper
program totaling EUR 800 million. As at December 31, 2015 Outokumpu
had a total amount of some EUR 1.2 billion committed credit facilities.
Of these committed credit facilities some EUR 0.9 billion were unutilized
in the end of the year. Certain legal entities and many of Outokumpu’s
lenders benefiting from the security package have signed an
intercreditor agreement in February 2014. More information on liquidity
and refinancing risk is presented in the following table.

Contractual cash flows

2015
€ million
Bonds
Convertible bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Commercial papers
Trade payables
Interest payments and facility charges
Interest rate derivatives
Other derivatives

Balance
Dec 31

398
210
467
174
208
339
830
20
7
15

2016

2017

2018

2019

2020

2021–

150
-
20
9
28
339
830
83
4
12

1 475

-
-
369
34
66
-
-
60
3
3

534

-
-
6
38
5
-
-
54
1
-

103

250
-
66
34
3
-
-
41
1
-

395

-
250
6
31
3
-
-
21
-
-

310

-
-
5
29
102
-
-
151
-
-

287

On December 31, 2015, the Group had cash and cash equivalent marketable securities amounting to EUR 186 million and committed and available
credit facilities, available and undrawn TyEL pension loans in Finland, and other agreed and undrawn loans totaling EUR 928 million.

2014
€ million
Bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Commercial papers
Trade payables
Other liabilities
Interest payments and facility charges
Interest rate derivatives
Other derivatives

Balance
Dec 31
547
939
192
244
243
1 031
0
23
11
56

2015
150
110
35
31
243
1 031
0
105
6
49
1 760

2016
150
25
52
11
-
-
0
89
3
6
337

2017
-
785
26
89
-
-
-
44
2
-
945

2018
-
10
23
5
-
-
-
31
0
-
70

2019
250
5
19
3
-
-
-
27
0
-
304

2020–
-
10
38
105
-
-
-
165
-
-
318

On December 31, 2014, the Group had cash and cash equivalent marketable securities amounting to EUR 191 million and committed and available
credit facilities, available and undrawn TyEL pension loans in Finland, and other agreed and undrawn loans totaling EUR 1,201 million.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Capital management

Insurances

The Group’s business is capital intensive and key production processes
are rather tightly integrated and have therefore interdependencies.
Property damage and business interruption (PDBI) insurance, covering
e.g. fires, machinery breakdowns and natural catastrophies, is the most
important insurance line and most of the insurance premiums paid
relate to these types of risks. Business operations may cause significant
liability risks related e.g. to people, environment or Outokumpu's
products. Outokumpu aims to mitigate liability risk by risk management
measures and having reasonable insurances in place. Other significant
insurance lines include marine cargo and credit insurances.

During the reporting year there were no serious fire or machinery
breakdown incidents. Also, there were no significant liability insurance
claims in 2015. Fire safety and machinery breakdown audits were
carried out mainly as planned. The loss settlement for the machinery
breakdown which took place in June 2014 in Calvert continued during
2015 and at the year end the claim was still open. In 2015 Group’s
insurance coverage for environmental liability was increased by
purchasing additional policy coverage.

Visenta Försäkrings AB can act as direct insurer and as reinsurer. The
captive insurance company is registered in Sweden and it has assets
totaling EUR 28 million (2014: EUR 21 million). Visenta underwrites
PDBI insurance policy and until fall of 2015 gradual pollution insurance
policy. In 2015 Visenta issued a significant surety bond to support the
AvestaPolarit pension scheme in the UK.

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. As part of this objective, the Group
seeks to maintain access to loan and capital markets at all times
despite of the cyclical nature of the stainless steel industry. The Board
of Directors reviews the capital structure of the Group on a regular basis.

Capital structure and debt capacity are taken into account when
deciding on new investments. Tools to manage equity capital include
dividend policy, share buybacks and issues of equity or equity-linked
securities. Debt capital is managed considering the requirement to
secure liquidity and the capability to refinance maturing debt. Tools
to manage debt capital structure include prepayments and liability
management measures, such as the tender offers of issued notes.
Revolving facilities and some of the loans include two financial
covenants, which are based on gearing and liquidity. The bond maturing
in 2019 includes an incurrence based financial covenant on gearing. The
bond covenant level for gearing is 145% until March 31, 2016, 140%
from April 1, 2016 until December 31, 2016 and 130% thereafter.

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. In 2015
Outokumpu repatriated equity by divedends and equity reductions from
certain subsidiaries located e.g. in Belgium, Italy, Australia and Mexico.
In Finland equity was injected to two subsidiaries. Equity was also
injected to Visenta Försäkring Ab in Sweden.

Outokumpu’s captive insurance company, Visenta Försäkrings AB,
has to comply with capital adequacy requirements set by the financial
supervisory authority in Sweden. During the reporting period Visenta
has been profitable and well capitalized to meet externally imposed
requirements. The equity of Visenta was increased in order to support
issuance of guarantees.

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 non-current debt less cash and
cash equivalents.

On December 31, 2015, net debt was EUR 1,610 million (2014: EUR
1,974 million), total equity EUR 2,329 million (2014: EUR 2,132 million)
and gearing 69.1% (2014: 92.6%). The decrease in gearing resulted
primarily from disposal of SKS.

Outokumpu Annual report 2015
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
Currency options, bought
Interest options, bought
Interest options, sold

Metal derivatives

Forward and futures nickel contracts
Forward and futures molybdenum
contracts

Emission allowance derivatives

Propane derivatives

Natural gas derivatives

Total derivatives

Less long-term derivatives

Interest rate swaps
Forward and futures nickel contracts
Molybdenum derivatives
Propane derivatives
Natural gas derivatives

Short-term derivatives

Positive
fair value

2015

Negative
fair value

Net
fair value

2014

Net
fair value

2015
Nominal
amounts

2014

Nominal
amounts

23
0
-
-
-

0
0
-
-
-
37

17
7
-
-
-

7
2
-
1
0
50

5
-7
-
-
-

-4

-3

-0

-12

-1

-22

-6
-2
-
-1
-0
-12

-34
-11
0
0
-1

-3

2 284
578
-
-
-

1 178
606
16
143
43

Tonnes

32 623

51 094

212

654

2 400 000

1 900 000

-22

61 500

89 000

MMBtu

705 000

2 025 000

-2

-68

-11
-0
-1
-5
-0
-52

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

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 in year 2016 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 profit or loss. During 2015, effective portion of EUR 0 million gain
was recognized in profit or loss as adjustment to purchases (2014: gain
of EUR 1 million). The ineffective portion of the hedges, gain of EUR 0
million (2014: gain of EUR 0 million), is recognized in other operating
income and expenses.

Maturity < 1 year
Maturity 1–5 years

2015
Fair value of
outstanding cash
flow hedges,
€ million

1
4

Nominal
amount,
SEK million

391
1 171

1 562

Equity,
€ million

1
2

2014
Fair value of
outstanding cash
flow hedges,
€ million

-3
-10
-14

Nominal
amount,
SEK million

390
1 562
1 952

Equity,
€ million

0
0
0

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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 11 months. At the end of the reporting period, the fair value
of these hedging instruments was EUR 1 million negative. Ineffective
portion of these hedges loss EUR 0 million is recognized in other
operating income and expenses.

21. Inventories

€ million
Raw materials and consumables
Work in progress
Finished goods and merchandise
Advance payments

2015

340
476
434
1
1 251

2014

370
606
551
1
1 527

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. NRV write-downs amounting to EUR 21 million were
recognized in income statement during the financial year (2014: reversal
of write-downs of EUR 15 million).

Master netting agreements
and similar arrangements

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 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 statement of financial position
Related financial instruments that are not
offset

Derivative liabilities

Gross amounts of recognized financial
liabilities in the statement of financial position
Related financial instruments that are not
offset

2015

2014

30
8

30
29

31
6

105

31
74

Outokumpu Annual report 2015
Notes to the consolidated financial statements

22. Trade and other receivables

23. Cash and cash equivalents

€ million
Cash at bank and in hand
Short term bank deposits 1)

Bank overdrafts 2)

2015

145
41
186
-0
186

2014

176
15
191
-
191

1) Including a short-term deposit EUR 30 million which has been pledged.
2) 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 2015 was 1.3% (December 31, 2014: 1.2%).

€ million

Non-current

Loans receivable
Other receivables

Current

Trade receivables
VAT receivable
Income tax receivable
Loans receivable
Prepaid insurance expenses
Other accruals
Other receivables

Allowance for impairment of trade receivables

Allowance on Jan 1
Additions
Deductions
Recovery of doubtful receivables
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

2015

2014

3
37
40

443
52
29
7
3
30
122
686

19
6
-4
-2
19

390
39
5
9
443

10
2
12

536
60
23
3
6
25
96
749

19
8
-2
-5
19

466
52
14
4
536

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.

As of December 31, 2015 Outokumpu has derecognized trade receivables
totaling EUR 287 million (2014: EUR 261 million), which represents fair
value of the assets. Net proceeds received totaled EUR 271 million (2014:
EUR 250 million). Underlying assets have maturity less than one year. The
maximum amount of loss related to derecognized assets are estimated
to be EUR 17 million (2014: EUR 9 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.

Allowance for impairment of trade and other receivables on December 31,
2015 include EUR 10 million of receivables from associated companies
(December 31, 2014: EUR - million).

Outokumpu Annual report 2015
Notes to the consolidated financial statements

24. Equity

Share capital, premium fund and invested unrestricted equity reserve

€ million
On Jan 1, 2014
Shares granted from the share-based payment programs 1)
Rights issue in March 2014
Reverse share split in June 2014 2)
On Dec 31, 2014
Shares granted from the share-based payment programs 1)

On Dec 31, 2015
Treasury shares 1)

Total number of shares on Dec 31, 2015

Number
of shares,
1 000

2 077 105
28
8 308 534
-9 970 241
415 427
63

415 489
885

416 374

Share
capital

Premium
fund

Invested
unrestricted
equity reserve

311
-
-
-
311
-

311

714
-
-
-
714
-

714

1 462
-
640
-
2 103
-

2 103

Total

2 487
-
640
-
3 127
-

3 127

1) Shares granted from treasury shares without effect to share capital.
2) The Extraordinary General Meeting held on June 16, 2014 decided that the number of shares would be reduced without reducing the share capital by

merging each 25 shares to 1 share by means of a reverse share split.

According to the Articles of Association, the Outokumpu share does not
have nominal value.

Retained earnings

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 issues in 2014 and 2012.

Fair value reserves

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.

€ million
Available-for-sale financial assets reserve
Hedge reserves

2015

2014

3
3
6

4
0
5

Other reserves

Other reserves includes amounts transferred from the distributable
equity under the Articles of Association or by a decision of the General
Meeting of Shareholders, and other items based on the local regulations
of the Group companies.

Retained earnings include remeasurements of defined benefit plans,
treasury shares, cumulative translation differences and other retained
earnings and losses.

Distributable funds

On December 31, 2015 the distributable funds of the parent company
totaled EUR 2 149 million of which retained earnings were EUR 26
million.

Non-controlling interest

In December 2015 Outokumpu divested the subsidiary Shanghai Krupp
Stainless Co., Ltd. (SKS) incorporated in China, which had a 40% non-
controlling interest (see note 4).

In 2015 Outokumpu's profit attributable to SKS's non-controlling interest
amounted to EUR -9 million (2014: EUR -5 million). SKS's non-controlling
interest in consolidated total equity amounted to EUR 0 million in 2014.
EUR 41 million of SKS's share capital was paid up by the non-controlling
interest holder in 2015. Summarized IFRS financial information for SKS
before intercompany eliminations but including fair value adjustments
was as follows:

€ million
Sales
Net result for the financial year 1)
Total assets
Total liabilities

1) In 2015 until the loss of control.

2015

322
-23
-
-

2014

354
-12
215
181

Outokumpu Annual report 2015
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 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 on 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 2015 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 UK
preliminary pension fund's valuation was completed in 2015 with a
deficit of GBP 27 million, which was agreed to be satisfied by 2017.
The valuation is not based on the the same assumptions as the IFRS
valuation, which shows a surplus.

2015
-12
-7
-18
3
-15

2015
489
323
-516
295

2015
331
38
-35
334

2014
-7
-10
-17
-14
-31

2014
471
321
-498
295

2014
331
41
-36
336

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Defined benefit cost recognized in the consolidated statements of income and comprehensive income

€ million
In EBIT
In financial income and expenses
Defined benefit cost recognized in the consolidated statement of income
In other comprehensive income
Total defined benefit cost recognized

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

€ million
Defined benefit liability
Other long-term employee benefit liabilities
Defined benefit assets
Net liability

Movement in net defined benefit liability

€ million
On 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
Settlements
Past service cost
Other change
On Dec 31

Present
value of
obligation
792
11
26

2015

Fair value
of plan
assets
-498
-
-19

Net defined
benefit
liability
295
11
7

Present
value of
obligation
685
10
28

2014

Fair value
of plan
assets
-411
-
-18

Net defined
benefit
liability
275
10
10

-
-3
-18
-0
31
-
1
-27
-
0
-3
812

18
-
-
-
-30
-13
-1
27
-
-
-
-516

18
-3
-18
-0
2
-13
-0
-
-
0
-3
295

-
-4
83
-16
35
-
1
-24
-2
-3
-2
792

-49
-
-
-
-30
-14
-1
24
2
-
-0
-498

-49
-4
83
-16
5
-14
-
-
-0
-3
-2
295

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, 2015 was EUR 275 million (December 31, 2014: EUR 274 million). For the UK, the present value of obligation was EUR 433
million (December 31, 2014: EUR 410 million), and the fair value of plan assets was EUR 468 million (December 31, 2014: EUR 446 million) on
December 31, 2015.

The expected contributions to be paid to the defined benefit plans in 2016 are EUR 43 million, covering also the deficit reduction in the UK according
to the agreed payment schedule.

Allocation of plan assets

€ million
Equity instruments
Debt instruments
Real estate
Investment funds
Other assets
Total plan assets

Outokumpu Annual report 2015
Notes to the consolidated financial statements

2015
82
346
7
3
75
514

2014
78
333
6
3
74
493

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 30%/70% 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

2015
2014
2015
2014
2015
2014
2015
2014
2015
2014

2015

2014

Germany
2.25
2.26
-
-
-
-
1.52
1.51
-
-
Modified from
RT 2005 G
Modified from
RT 2005 G

The UK
4.00
3.75
3.80
3.60
3.30
3.10
3.00
2.90
-
-
110% SAPS All Pensioner
Amounts tables
110% SAPS All Pensioner
Amounts tables

Other countries
3.86
3.51
2.23
2.53
-
-
-
-
7.30–7.80
6.20–6.30

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 17.3 years. In Germany and in the UK the weighted average durations are
14.1 and 20.2 years, respectively.

Outokumpu Annual report 2015
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

2015
Discount rate
Future benefit increase
Life expectancy

2014
Discount rate
Future benefit increase
Life expectancy

The UK

2015
Discount rate
Future benefit increase
Future salary increase
Life expectancy

2014
Discount rate
Future benefit increase
Future salary increase
Life expectancy

Other countries

2015
Discount rate
Medical cost trend rate
Future salary increase
Life expectancy

2014
Discount rate
Medical cost trend rate
Future salary increase
Life expectancy

Change in assumption
0.5%
0.5%
1 year

Increase in assumption
Decrease by 7%
Increase by 4%
Increase by 3%

Decrease in assumption
Increase by 7%
Decrease by 4%

0.5%
0.5%
1 year

Decrease by 7%
Increase by 4%
Increase by 2%

Increase by 8%
Decrease by 4%

Change in assumption
0.5%
0.5%
0.5%
1 year

0.5%
0.5%
0.5%
1 year

Change in assumption
0.5%
0.5%
0.5%
1 year

0.5%
0.5%
0.5%
1 year

Increase in assumption
Decrease by 9%
Increase by 6%
Increase by 1%
Increase by 3%

Decrease by 9%
Increase by 6%
Increase by 1%
Increase by 3%

Increase in assumption
Decrease by 6%
Increase by 8%
Increase by 1%
Increase by 5%

Decrease by 7%
Increase by 8%
Increase by 1%
Increase by 5%

Decrease in assumption
Increase by 10%
Decrease by 5%
Decrease by 1%

Increase by 10%
Decrease by 5%
Decrease by 1%

Decrease in assumption
Increase by 7%
Decrease by 6%
Decrease by 1%

Increase by 7%
Decrease by 6%
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, 2015 were EUR 38
million (December 31, 2014: EUR 41 million).

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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.

26. Provisions

€ million
Provisions on Jan 1, 2015
Translation differences
Increases in provisions
Utilized during the financial year
Unused amounts reversed
Reclassifications

Provisions on Dec 31, 2015

€ million
Non-current provisions
Current provisions

Restructuring
provisions

Environmental
provisions

Other
provisions

138
0
26
-94
-10
-

68
1
5
-9
-2
-

18
0
7
-4
-2
-6

2015

113
23
136

Total

224
2
38
-107
-14
-6

136

2014

198
26
224

Restructuring provisions

Other provisions

Outokumpu continued its measures to improve profitability in 2015.
The increase in restructuring provisions relates mainly to closures of
operations and other restructuring measures in Germany and Sweden
in accordance with the EMEA restructuring plan. The restructuring
provisions are expected to be paid between the years 2016–2024.

Other provisions comprise mainly provisions for product and other claims
and are mainly current in nature. Most of the increase is due to product
claims. Reclassifications occurred between provisions and other current
liabilities.

Provisions are based on management's best estimates at the end of the
reporting period.

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.
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 2015
Notes to the consolidated financial statements

27. Debt

€ million

Non-current

Bonds
Convertible bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Other non-current liabilities

Current
Bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Commercial paper
Other current liabilities

2015

248
210
447
165
179
0
1 249

150
20
9
28
339
0
547

The bond maturing in 2019 and most of the bank loans include financial covenants, which are described in note 19.

Bonds

€ million
2010 fixed rate bond maturing on June 24, 2015
2012 fixed rate bond maturing on June 7, 2016
2014 fixed rate bond maturing on Sept 30, 2019

Convertible bonds

€ million
2015 fixed rate bond maturing on Feb 26, 2020

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

Interest rate, %

5.125
5.875
6.625

Outstanding amount

2015

-
150
250
400

Outstanding amount

Interest rate, %

3.25

2015

250

2015

43
122
253
-211
207

2014

397
-
829
157
213
0
1 597

150
110
35
31
243
0
569

2014

150
150
250
550

2014

45
153
267
-221
244

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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

28. Trade and other payables

€ million

Non-current
Accruals

Current

Trade payables
Accrued employee-related expenses
Accrued interest expenses
VAT payable
Advances received
Withholding tax and social security liabilities
Other accruals
Other payables

29. Commitments and contingent liabilities

€ million
Mortgages and pledges on Dec 31

Mortgages
Other pledges

Guarantees on Dec 31

On behalf of subsidiaries for commercial and other commitments
On behalf of associated companies for financing
On behalf of other companies for financing
On behalf of other companies for commercial and other commitments

Other commitments

2015

28
77
102
207

2015

830
81
20
45
2
9
50
53
1 089

2014

31
108
105
244

2014

1 031
91
22
49
8
9
39
53
1 303

2015

2014

3 559
30

3 593
-

30
7
1
2

27
6
1
1

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Mortgages relate mainly to the refinancing measures which became
effective in 2014. A major part of Outokumpu's borrowings are secured
partly by security to the real property of the Group's main production
plants and partly by share pledges over the shares in selected Group
companies.

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 2015 amounted
to approximately EUR 22 million (2014: EUR 43 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 2015
amounted to approximately EUR 21 million (2014: EUR 25 million), out
of which Outokumpu is liable for under one fifth. These liabilities are
reported under other commitments above.

Guarantees on behalf of other companies included guarantees issued by
Outokumpu on behalf of the companies sold to ThyssenKrupp in 2014
that have not yet been transferred to ThyssenKrupp as of December 31,
2015.

One remaining guarantee issued by ThyssenKrupp on behalf of Inoxum
companies has not yet been transferred to Outokumpu Oyj as of
December 31, 2015. However, Outokumpu Oyj has given ThyssenKrupp
a counter-guarantee for this commitment amounting to EUR 4 million.

30. Disputes and litigations

Dispute over invention rights,
Outotec vs. Outokumpu

In January 2013, Outokumpu and Outotec entered into a legal dispute
over invention rights related to a ferrochromenickel production method.
In August 2013, Outotec submitted an application for summons at
the District Court of Helsinki regarding another patent relating to the
invention. The production method has been developed by Outokumpu
and it has filed the patent applications related to this invention. Outotec
claims it has rights to the inventions. In February 2014 Outotec filed a
request with Arbitration Institute of the Finland Chamber of Commerce
for commencing proceedings against Outokumpu concerning the
same invention rights being subject to the District Court proceedings.
Simultaneously Outotec filed a proposal to the District Court for
postponement of further stages in these proceedings until the Arbitration
Court would render its arbitration award. In August 2015 the Arbitration
Court rendered its award, in which it ruled that Outotec’s employee
had contributed to the inventions and accordingly granted Outotec
partial rights to the patents in question. The Arbitration Court ruled
also that commercial use of the patent rights by Outotec is subject
to agreement between the parties. In 2016 Outotec has withdrawn
its claims against Outokumpu concerning the invention rights.

In 2015 Outokumpu agreed a security, including a pledge of shares of a
subsidiary company, related to AvestaPolarit pension scheme.

Cartel fine imposed by the
European Commission

Present value of minimum lease
payments on operating leases

€ million
Not later than 1 year
Between 1 and 5 years
Later than 5 years

2015

10
24
38
72

2014

10
19
33
63

Operating leases include lease agreements on Group companies'
premises.

In 2015, Outokumpu increased its share in the Fennovoima nuclear
power plant project by 1.8 percentage points to 14%. Outokumpu’s
share of the investment is about EUR 250 million of which EUR 35
million has been paid by the end of the reporting period. Annual capital
expenditure related to the project is expected to be around EUR 10–20
million in the coming years, and approximately half of the investment
is expected to be paid only at the end of the construction phase in
2022–2023. Outokumpu is liable for Fennovoima's operating costs in
proportion to its share of ownership.

Group's other off-balance sheet investment commitments totaled EUR
60 million on December 31, 2015 (December 31, 2014: EUR 66 million).

Claim in Spain related to the
divested copper companies

Outokumpu divested all of its copper business in 2003–2008. One of
the divested companies domiciled in Spain later faced bankruptcy. The
administrator of the bankruptcy filed a claim against Outokumpu Oyj
and two other non-Outokumpu companies, for recovery of payments
made by the bankrupt Spanish company in connection with the
divestment. The Bilbao court of first instance in Spain has accepted the
claim of EUR 20 million brought against Outokumpu and the two other
companies. Outokumpu and the two other companies have appealed
the court’s decision.

Claim in Italy related to former
tax consolidation group

In December 2015 Outokumpu Holding Italia and Acciai Speciali Terni
(AST) entered into a dispute among relating to the tax consolidation
of the former ThyssenKrupp Tax Group in Italy. AST claims payment
of approximately EUR 23 million resulting from the former tax
consolidation of the Italian tax group managed by ThyssenKrupp.
Outokumpu Holding Italia is the former ThyssenKrupp holding company
and was transferred to Inoxum as part of the carve-out in 2011. The
EUR 23 million claim resulted from former tax installments paid by
ThyssenKrupp Italia in 2006 which not have been properly settled
towards AST in the following years. Outokumpu is currently preparing the
defense against the claim as it holds the claim unjustified.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

31. Related party transactions

Outokumpu's related parties include the key management of the
company, associated companies and joint ventures, and Solidium
Oy. 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 and subsidiaries
are presented in Note 32.

Solidium Oy, a limited company fully owned by the State of Finland,
owns 26.2% of Outokumpu on December 31, 2015. Solidium's mission
is to strengthen and stabilize Finnish ownership in nationally important
companies and increase the value of its holdings in the long run.

Transactions and balances with
associated companies and joint ventures

€ million
Sales
Purchases
Interest income

Trade and other receivables
Trade and other payables

2015

137
-6
1

64
1

2014

162
-8
1

41
1

EUR 10 million of receivables from associated companies were
impaired on December 31, 2015 (December 31, 2014: EUR - million).
Property, plant and equipment with sales price of EUR 8 million was
sold to an associated company party in 2015.

In 2014, the related party transactions included sales of EUR 56
million, purchases of EUR 20 million and interest expenses of EUR 10
million with ThyssenKrupp between January 1–February 28, 2014.

Employee benefits for the
key management

€ thousand
Short-term employee benefits
Termination benefits
Post-employment benefits 1)
Share-based payments
Remuneration to the Board of
Directors

1) Includes only supplementary pensions.

2015

4 187
2 681
1 307
273

721
9 169

2014

5 157
-
1 123
749

693
7 721

Outokumpu Annual report 2015
Notes to the consolidated financial statements

Employee benefits for CEO and Deputy CEO

€ thousand

2015

CEO, Jan 1–Oct 26
Deputy to the CEO

2014
CEO
Deputy to the CEO

Salaries and
other short-
term benefits

Termination
benefits

Bonuses

Post-
employment
benefits

Share-based
payments

635
512

749
512

1 821
-

-
-

304
250

302
503

424
515

-
-

297
95

Total

2 758
1 015

1 773
1 372

Regarding the CEO, the figures 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 deputy to the CEO resides in Germany and is entitled to the pension benefits in
accordance with the German Essener Verband.

Remuneration to Board of Directors

€ thousand
Chairman Jorma Ollila
Vice Chairman Olli Vaartimo
Member Markus Akermann
Member Roberto Gualdoni, as of April 14, 2014
Member Stig Gustavson, as of April 14, 2014
Member Heikki Malinen
Member Saila Miettinen-Lähde, as of March 26, 2015
Member Elisabeth Nilsson
Member Siv Schalin, until March 26, 2015
Member Harri Kerminen, until April 14, 2014

2015
154
92
84
88
72
73
69
86
4
-
721

2014
152
93
82
71
65
71
-
82
71
5
693

More information on key management's employee benefits can be found in chapter Corporate Governance on the page Remuneration.

Outokumpu Annual report 2015
Notes to the consolidated financial statements

32. Subsidiaries on December 31, 2015

Country

Group
holding, %

Coil EMEA

AO Outokumpu
Avesta Klippcenter AB
Outokumpu AS
Outokumpu A/S
Outokumpu Benelux B.V.
Outokumpu B.V.
Outokumpu Chrome Oy
Outokumpu Distribution Benelux B.V.
Outokumpu Distribution France S.A.S.
Outokumpu Distribution Hungary Kft.
Outokumpu Distribution Polska Sp. z o.o.
Outokumpu Distribution UK Ltd.
Outokumpu EMEA GmbH
Outokumpu EMEA Oy
Outokumpu Ges.m.b.H
Outokumpu Istanbul Dis Ticaret Limited Sirketi
Outokumpu Kft.
Outokumpu, Lda.
Outokumpu Middle East FZCO
Outokumpu Nirosta GmbH
Outokumpu Nirosta Precision GmbH
Outokumpu Nordic AB
Outokumpu N.V.
Outokumpu (Pty) Ltd
Outokumpu S.A.
Outokumpu Shipping Oy
Outokumpu S.p.A.
Outokumpu S.r.l.
Outokumpu s.r.o.
Outokumpu Stainless AB
Outokumpu Stainless B.V.
Outokumpu Stainless Coil, Inc.
Outokumpu Stainless Oy
Outokumpu Tornio Infrastructure Oy
Sogepar UK Limited

Coil Americas

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 Stainless USA, LLC
ThyssenKrupp Mexinox CreateIT, S.A. de C.V.

Russia
Sweden
Norway
Denmark
The Netherlands
The Netherlands
Finland
The Netherlands
France
Hungary
Poland
The UK
Germany
Finland
Austria
Turkey
Hungary
Portugal
United Arab Emirates
Germany
Germany
Sweden
Belgium
South Africa
Spain
Finland
Italy
Romania
Czech Republic
Sweden
The Netherlands
The US
Finland
Finland
The UK

Brazil
Argentina
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
100
100
100

100
100
100
100
100
100

Outokumpu Annual report 2015
Notes to the consolidated financial statements

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.

Quarto Plate

Outokumpu Industriunderhåll AB
Outokumpu Prefab AB
Outokumpu Press Plate AB
Outokumpu PSC Benelux B.V.
Outokumpu PSC Finland Oy
Outokumpu PSC Germany GmbH
Outokumpu Stainless Plate, LLC

Long Products

Outokumpu Stainless Bar, LLC
Outokumpu Stainless Ltd
Outokumpu Stainless Pipe, Inc.
Polarit Welding, Inc.

Other operations

2843617 Canada Inc.
Granefors Bruk AB
Orijärvi Oy
Outokumpu Americas, Inc.
Outokumpu Chrome Holding Oy
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 Mining Australia Pty. Ltd.
Outokumpu Mining Oy
Outokumpu Stainless Holding GmbH
Outokumpu Stainless Holdings Ltd
Outokumpu Treasury Belgium N.V./SA
Outokumpu Zinc B.V.
Viscaria AB
Visent Invest AB
Visenta Försäkrings AB

Country

China
India
Japan
China
Australia
Singapore
China
China
China

Sweden
Sweden
Sweden
The Netherlands
Finland
Germany
The US

The US
The UK
The US
The US

Canada
Sweden
Finland
The US
Finland
Germany
Italy
The Netherlands
The UK
Finland
Australia
Finland
Germany
The UK
Belgium
The Netherlands
Sweden
Sweden
Sweden

Group
holding, %

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

In addition Outokumpu has agents and branch offices in Argentina, Bulgaria, Chile, Colombia, Egypt, Estonia, Greece, Israel, South Korea, Lebanon,
Peru, Slovenia, Switzerland, Taiwan, Thailand, Venezuela and Vietnam.

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 in 2015
*) Shares and stock held by the parent company

Key financial figures
of the Group

Outokumpu Annual report 2015
Key financial figures of the group

Group key figures

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 Dec 31 1)
- average for the year 2)

Profitability

EBIT
- 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
%

%
%
%

2015

2014

2013

2012

2011

6 384
-6.7
96.6

3 850
3 850

154
2.4

302
1

23
0.4

6 844
1.5
96.7

4 072
4 059

127
1.0

320
27

23
0.3

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

3 149
69.4

230
105

19
0.4

5 009
18.4
95.7

3 770
3 730

254
5.1

235
106

21
0.4

11 002
11 833

12 125
12 540

12 561
13 150

16 649
7 853

8 253
8 651

228
3.6

531

127
2.0

86
1.4

3.9
5.8
5.8

-243
-3.6

104

-459
-6.7

-439
-6.4

-21.8
-5.8
-5.8

-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

Outokumpu Annual report 2015
Key financial figures of the group

Financing and financial position

2015

2014

2013

2012

2011

Liabilities

Net debt
- in relation to sales

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

Net cash generated from operating activities 3)

Dividends

€ million

3 546

4 279

5 884

5 949

3 177

1 610
25.2

1 974
28.8

3 556
52.7

3 431
75.6

1 991
39.7

€ million
%

149
2.3

125
2.0

2.0

223
3.3

139
2.0

-2.3

€ million
€ million

311
2 018

311
1 821

%
%

€ million

39.6
69.1

-34

- 4)

33.3
92.6

-126

310
4.6

197
2.9

-3.2

311
1 580

21.5
188.0

138
3.1

66
1.5

-6.9

311
2 641

30.5
116.2

266

-11
-0.2

65
1.3

-2.8

311
1 739

39.3
97.1

338

1) Personnel reported as headcount. Year 2013 reported for continuing operations.
2) Year 2012 average personnel does not include Inoxum personnel. Years 2014 and 2013 reported for continuing operations.
3) Cash flow for 2014 and 2013 presented for continuing operations.
4) The Board of Directors' proposal to the Annual General Meeting.

Outokumpu Annual report 2015
Key financial figures of the group

Share-related key figures

Earnings per share 1), 2)
Earnings per share, continuing operations 2), 3)

Cash flow per share 1), 2)

Equity per share 2), 4)

Dividend per share
Dividend payout ratio
Dividend yield

Price/earnings ratio

Development of share price 6)

Average trading price
Lowest trading price

Highest trading price
Trading price at the end of the period
Change during the period 7)

Change in the OMXH index during the period

€
€

€

€
%
%

€
€

€
€
%

2015
0.23
-

-0.08

5.60

- 5)
0.0
0.0

11.85

4.49
2.06

7.76
2.73
-42.7

10.8

2014
-1.24
-1.27

-0.36

5.13

-
neg.
0.0

neg.

5.16
3.37

7.50
4.77
34.2

5.7

Market capitalization at the end of the period

€ million

1 138

1 987

2013
-7.52
-6.23

0.26

2012
-0.46
-

0.23

2011
-0.62
-

1.20

14.23

22.07

11.19

-
neg.
0.0

neg.

4.64
3.03

7.39
3.55
-48.8

26.5

845

-
neg.
0.0

neg.

0.97
0.64

2.10
0.79
-40.3

8.3

1 650

-
neg.
0.0

neg.

2.25
1.21

3.78
1.33
-63.4

-30.1

930

Development in trading volume

Trading volume 8)
In relation to weighted average number of shares 1)

1 000 shares
%

1 345 515
323.9

695 235
198.9

178 989
135.0

1 297 738
112.5

337 942
120.5

Adjusted average number of shares 9)
Number of shares at the end of the period 8), 9), 10)

415 473 976
415 489 308

349 558 854
132 579 577 1 156 005 029
415 426 724 2 077 105 460 2 077 065 460

280 526 501
181 977 861

1) 2014 and 2013 calculated based on the rights-issue-adjusted weighted average number of shares. 2012 ja 2011 have not been restated.
2) 2013 adjusted to reflect the reverse split in June 2014.
3) 2013 calculated based on rights-issue-adjusted weighted average number of shares.
4) 2013 and 2012 calculated based on the rights-issue-adjusted number of shares. 2011 has not been restated.
5) The Board of Directors' proposal to the Annual General Meeting.
6) 2013 share prices adjusted according to the effect of the rights issue and the reverse split. 2012 and 2011 have not been adjusted.
7) 2014 calculated based on the adjusted comparable share prices. 2013 and 2011 calculated based on the unadjusted comparable share prices.
8) Includes only Nasdaq Helsinki trading.
9) Excluding treasury shares.
10) 2013–2011 not adjusted according to the effect of the rights-issue-adjusted and the reverse split.

Outokumpu Annual report 2015
Key financial figures of the group

Definitions of key financial figures

Capital employed =

Total equity + net 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 statement of income
(including expenses covered by grants received)

Underlying EBIT =

EBIT excluding non-recurring items, raw material-related inventory
gains/losses and metal derivative gains/losses.

EBITDA = EBIT 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) =

EBIT
Capital employed (average for the period)

EBIT
Operating capital (average for the period)

Net debt = Non-current 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 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

× 100

Outokumpu Annual report 2015
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

EBIT
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

2015

649
-580
69
10
-32
-84
-
-118
-156
311
156
156

0
-0
155

2014

647
-632
16
-9
-32
-77
-
-44
-146
-30
-175
-175

0
-1
-176

According to the Finnish accounting standards the parent company financial statements are to be presented in addition to Group financial statements. The
parent company's financial statements have been prepared in accordance with Finnish accounting standards (FAS). The parent company Outokumpu Oyj's income
statement and balance sheet items are mainly internal and are eliminated on the group level. The parent company's complete financial statements (available only
in Finnish) can be read on the company's internet pages www.outokumpu.com.

Outokumpu Annual report 2015
Parent company financial statements, FAS

Balance sheet of the parent company

€ 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

2015

2014

3 798
740
31
36
2
4 607

4 637

2 260
225
2 485

139

2 624

7 260

4 735
989
24
21
5
5 773

5 809

1 718
238
1 956

121

2 077

7 886

€ 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

Current liabilities
Interest-bearing
Non interest-bearing

Total liabilities

TOTAL EQUITY AND LIABILITIES

Outokumpu Annual report 2015
Parent company financial statements, FAS

2015

2014

311
720
2 123
-130
155
3 181

311
720
2 123
46
-176
3 025

1 096
1 096

2 725
259
2 984

4 080

7 260

1 347
1 347

3 146
368
3 514

4 861

7 886

Outokumpu Annual report 2015
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, and property, plant and equipment
Interest income
Dividend income
Interest expense
Change in provisions
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
Investments in subsidiaries and other shares and holdings
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from disposal of subsidiaries and other disposals
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 non-current debt
Repayments of non-current debt
Change in current debt
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

2015

2014

155

0
6
117
-5
-137
-272
88
1
-13
-
-
-215

-64
-51
-116

272
133
-86
0
319

143

-222
-0
-31
1 020
16
22
261

1 067
1 210

-
-
326
-589
-409
-520

-1 192

-176

1
9
4
0
-118
0
78
0
4
23
-28
-29

-80
62
-19

0
131
-106
-1
24

-199

-2 032
-0
-18
8
0
13
432

-1 597
-1 797

665
-23
991
-2 771
1 685
897

1 444

-352

Outokumpu Annual report 2015
Parent company financial statements, FAS

Statement of changes in equity of the parent company

€ million
Equity on Jan 1, 2014
Result for the financial year
Rights issue 1)
Equity on Dec 31, 2014
Result for the financial year
Equity on Dec 31, 2015

Distributable funds on Dec 31
€ million
Retained earnings
Result for the financial year
Invested unrestricted equity reserve
Distributable funds on Dec 31

1) Shares issued in the Outokumpu rights issue in March 2014.

Share
capital
311
-
-
311
-
311

Premium
fund
720
-
-
720
-
720

Invested
unrestricted
equity reserve
1 459
-
665
2 123
-
2 123

Retained
earnings
46
-176
-
-130
155
26

2015
-130
155
2 123
2 149

Total
equity
2 536
-176
665
3 025
155
3 181

2014
46
-176
2 123
1 994

Commitments and contingent
liabilities of the parent company

A major part of Outokumpu's borrowings are secured partly by share
pledges over the shares in selected Group companies and partly by
security to the real property of selected subsidiaries.

€ million
Mortgages and pledges on Dec 31

Pledges

Guarantees on Dec 31
On behalf of subsidiaries

For financing
For commercial and other commitments

On behalf of associated companies

For financing

On behalf of sold companies

For financing
For commercial and other commitments

Other commitments

2015

2014

Guarantees on behalf of sold companies included guarantees issued by
Outokumpu on behalf of the companies sold to ThyssenKrupp in 2014
that have not yet been transferred to ThyssenKrupp as of December 31,
2015.

261
33

1
1

276
33

1
1

Outokumpu Oyj will guarantee until January 2017 certain subsidiaries'
ability to satisfy their financial liabilities when due.

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 year-end 2015
amounted to approximately EUR 22 million (2014: EUR 43 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 year-end 2015
amounted to approximately EUR 21 million (2014: EUR 25 million), out
of which Outokumpu is liable for under one fifth. These liabilities are
reported under other commitments above.

Outokumpu Annual report 2015
Corporate Governance

Corporate Governance
in 2015

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 approved by the company’s Board of Directors.

Outokumpu Oyj has followed the Finnish Corporate Governance
Code (available at http://cgfinland.fi/en/), effective as of October 1,
2010 until December 31, 2015, and the updated Finnish Corporate
Governance Code as of the effective date, January 1, 2016. The
Finnish Corporate Governance Code is issued by the Securities Market
Association and adopted by Nasdaq Helsinki Oy. Outokumpu Oyj
complies with all regulations and recommendations issued by Nasdaq
Helsinki Oy.

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 the Group management and Group operations. The
Outokumpu Leadership Team reports to the CEO and supports and
assists the CEO in 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.

Outokumpu is organized into the following five business areas with
responsibility for sales, profitability, production and supply chain
management: (i) Coil EMEA, (ii) Coil Americas, (iii) APAC, (iv) Quarto
Plate and (v) Long Products. In addition to these five business areas,
Outokumpu has strong group functions to drive Group-wide efficiency
and alignment in key business processes.

General Meeting of Shareholders

The General Meeting of Shareholders convenes at least 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 the General Meetings of Shareholders.
The Board of Directors can decide to convene an extraordinary General
Meeting on its own initiative, but is obliged to convene an extraordinary
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 an Annual General Meeting any matter
that falls within the domain of the General Meeting, provided that a
written request to do so has been delivered to the Board of Directors
by the date announced on the company’s website. The company
shall announce the date no later than at the end of the financial year
preceding the Annual 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 Offi ce

CTO’s Offi ce

Communications
and Marketing

Human Resources, IT,
Health and Safety

Coil EMEA

Coil Americas

APAC

Quarto Plate

Long Products

Outokumpu Annual report 2015
Corporate Governance

Board of Directors

The general objective of the Board of Directors is to direct Outokumpu’s
business with the objective of achieving a significant and sustained
increase in the value of the company for its shareholders.

The 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, regulations and guidelines. 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 and oversee 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 in the Charter of the Board of
Directors. 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 long-term targets and

monitor their implementation.

· To decide on annual business plans.
· To decide on annual limits for the Group’s capital expenditure, monitor
related implementation, review performance 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 monitor his performance and

to decide on his terms of service, including incentive schemes, on the
basis of a proposal made by the Board’s Remuneration Committee.

· To nominate and dismiss members of the Outokumpu Leadership

Team and to define their areas of responsibility. The Board of Directors
has authorized the Remuneration Committee to determine the terms
of service, including incentive schemes for the Outokumpu Leadership
Team members other than the company’s CEO.

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.

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.

· To monitor financial position, liquidity and debt maturity structure.

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 that
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 2015 Annual General Meeting.
The Board of Directors meets at least five times each year. In 2015, the
Board of Directors had 16 meetings, and the average attendance rate
was 97%.

Breakdown of individual attendance at Board meetings

· To monitor the adequacy and allocation of the Group’s top

16 meetings in 2015

management resources.

· To decide on any significant changes to the Group’s business

organization.

· To decide on the Group’s ethical values and modes of activity.
· 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

that the Board deems necessary and that fall within the scope of the
Board’s duties and authority.

Jorma Ollila
Olli Vaartimo
Markus Akermann
Roberto Gualdoni
Stig Gustavson
Saila Miettinen-Lähde (March 26–December 31)
Heikki Malinen
Elisabeth Nilsson

Siv Schalin (January 1–March 26)

See the Members of the Board of Directors on p. 14.

16
15
15
16
15
13
16
15

The review by the Board of Directors is found in the Annual Report
on p. 16.

100

Outokumpu Annual report 2015
Corporate Governance

Shares and options of the members of the
Board of Directors on December 31, 2015

Member
Jorma Ollila
Olli Vaartimo
Markus Akermann
Roberto Gualdoni
Stig Gustavson
Heikki Malinen
Elisabeth Nilsson
Saila Miettinen-Lähde

Board committees

Shares
39 108
20 551
16 760
26 448
8 448
19 448
11 057
4 430
146 250

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 seven times during 2015, and
the average attendance rate was 93%.

Breakdown of individual attendance at
Remuneration Committee meetings

7 meetings in 2015

Jorma Ollila
Roberto Gualdoni
Stig Gustavson
Elisabeth Nilsson

7
6
6
7

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.

Temporary Working groups

Audit Committee

The Audit Committee comprises four Board members. The rules of
procedure for and responsibilities of the Audit Committee have been
established in the Charter of the Audit Committee approved by the
Board of Directors. The task of the Audit Committee is to deal with
matters relating to financial statements, the company’s financial
position, auditing work, internal controls and compliance matters, 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 five
times during 2015, and the average attendance rate was 100%.

Breakdown of individual attendance
at Audit Committee meetings

5 meetings in 2015

Olli Vaartimo
Markus Akermann
Saila Miettinen-Lähde (March 26–December 31)
Heikki Malinen

Siv Schalin (January 1–March 26)

Remuneration Committee

5
5
4
5

The Remuneration Committee comprises the Chairman of the Board
and three other Board members. The rules of procedure for and
responsibilities of the Remuneration Committee have been established
in the Remuneration Committee Charter approved by the Board of
Directors. 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

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
was set up in 2015 to oversee and review the strategic planning and
implementation of strategic actions. The working group comprised
the Chairman and Vice Chairman of the Board and one additional
Board member. The working group met 4 times during 2015, and the
average attendance rate was 100%. The temporary working group was
discontinued in June 2015.

Breakdown of individual attendance at the
Temporary Working group meetings

4 meetings in 2015

Jorma Ollila
Olli Vaartimo
Heikki Malinen

4
4
4

Shareholders’ Nomination Board

Outokumpu’s Annual General Meeting in 2012 resolved to establish a
Shareholders’ Nomination Board to annually prepare proposals to the
Annual General Meeting for the election, composition and remuneration
of the members of the Board of Directors.

In addition, the Annual General Meeting adopted a Charter of the
Shareholders’ Nomination Board, which regulates the nomination
and composition, and defines the tasks and duties of the Nomination
Board. According to the Charter, 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 the Chairman of the Board should act as an expert
member of the Nomination Board.

Holdings by a shareholder who, under the Finnish Securities Markets
Act, has an obligation to disclose changes in shareholdings (flagging
obligation) that are divided into several funds or registers will be

Outokumpu Annual report 2015
Corporate Governance

101

summed up when calculating the share of all the voting rights, provided
that the shareholder presents a written request to that effect to the
Chairman of the Company’s Board of Directors no later than September
30 preceding the Annual General Meeting. Should a shareholder not
wish to use its nomination right, the right transfers to the next largest
shareholder who would otherwise not have a nomination right.

Shareholders with the right to appoint representatives to the Nomination
Board in 2015 were Solidium Oy, Varma Mutual Pension Insurance
Company, the Social Insurance Institution of Finland and Ilmarinen
Mutual Pension Insurance Company. These shareholders chose the
following individuals as their representatives on the Nomination Board:
Kari Järvinen, Managing Director of Solidium Oy; Pekka Pajamo, CFO of
Varma Mutual Pension Insurance Company; Tuula Korhonen, Investment
Director of the Finnish Social Insurance Institution; and Timo Ritakallio,
President and CEO of Ilmarinen Mutual Pension Insurance Company.
Kari Järvinen was elected Chairman of the Nomination Board, and Jorma
Ollila, Chairman of the Outokumpu Board of Directors, served as an
expert member. The Nomination Board convened 3 times in total, and
the attendance rate was 100%. The Nomination Board has submitted its
proposals regarding the Board composition and director remuneration
to Outokumpu’s Board of Directors, and the Board has incorporated
these proposals into the notice convening the Outokumpu 2016 Annual
General Meeting of Shareholders.

CEO and deputy to the CEO

The President and 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 decisions and other matters for the meetings of 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.

Mika Seitovirta left his position as President and CEO on October 26,
2015, when the Outokumpu Board of Directors appointed Roeland
Baan as President and Chief Executive Officer of Outokumpu and
the Chairman of the Leadership Team as of January 1, 2016. CFO
and Deputy to the CEO Reinhard Florey acted as the Interim CEO of
Outokumpu from October 26 to December 31, 2015.

Leadership Team

The Outokumpu Leadership Team assists the CEO in the overall
management of Outokumpu’s business. The 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 2015, the members of
the Outokumpu Leadership Team held the following positions:

· President and Chief Executive Officer
· Executive Vice President – Chief Financial Officer
· President – Coil EMEA
· President – Coil Americas
· President – APAC
· President – Quarto Plate
· President – Long Products
· Executive Vice President – Chief Technology Officer
· Executive Vice President – Communications and Marketing
· Executive Vice President – Human Resources, IT, Health and Safety

The Leadership Team typically meets at least once a month.

See the members of the Leadership Team on p. 12.

Shares and share-based plans of the Leadership Team members on December 31, 2015

Member
Reinhard Florey
Liam Bates
Pekka Erkkilä
Jan Hofmann
Olli-Matti Saksi
Johann Steiner
Saara Tahvanainen
Kari Tuutti
Michael Williams
Total
Board and Leadership Team

Shares
8 190
1 039
20 000
-
-
-
160
5 042
-
34 431
180 681

Performance Share Plan

2013–20151)
38 880
7 020
32 400
14 940
14 940
38 880
7 020
38 880
-

2014–20161)
55 200
10 500
55 200
22 104
45 000
55 200
10 500
55 200
-

2015–20171)
75 000
20 250
49 500
20 250
75 000
49 500
30 000
49 500
99 000

Restricted
Share Pool
2013–20152)
-
-
-
-
7 500
-
-
-
-

Restricted
Share Pool
2015–20172)
-
-
-
5 400
-
-
-
-
-

1) The maximum number of gross shares (taxes included) payable if the set performance targets are achieved in full.
2) The gross number of shares (taxes included) payable if the employment has continued until the delivery date of the shares and no notice of termination has

been given prior to the delivery date.

102

Outokumpu Annual report 2015
Corporate Governance

Group management

Outokumpu’s corporate management consists of the Chief Executive
Officer (CEO), the members of the Outokumpu Leadership Team, as well
as managers and experts from the corporate functions who assist the
CEO and members of the Leadership Team.

The task of the corporate management is to manage the Group as
a whole. Duties include the coordination and execution of strategy
and corporate planning, financial control, tax, internal audit, human
resources, environment, energy, health and safety, IT, marketing,
communications and corporate responsibility, R&D, legal affairs,
corporate affairs, compliance, IPR, investor relations as well as treasury
and risk management. Certain support functions have 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.

Outokumpu’s organization is based on five business areas with sales,
profit, production and supply chain management responsibility, with
the focus on responding rapidly to customer needs, while Group-level
functions with global processes ensure efficiency.

The business areas are:
· Coil EMEA
· Coil Americas
· APAC
· Quarto Plate
· Long Products

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 the key areas. The business areas are geared to
achieve the Group’s business and financial targets while maintaining the
focus on responding to customer needs.

Insider management

Outokumpu’s insider rules are based on the Finnish Securities Act and
comply with the Guidelines for Insiders issued by Nasdaq Helsinki Oy.
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 “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.

Up-to-date information on holdings by Outokumpu’s permanent insiders
who have a duty to declare is available on Outokumpu’s website.

See the year-end 2015 shareholding of the Board of Directors and
Leadership Team on p. 100 and 101.

Compliance

Outokumpu is strongly committed to the highest ethical standards and
observes the laws and other regulations of the countries it operates
in, and it complies with agreements and commitments it has made.
Outokumpu’s Code of Conduct sets out these ethical standards and
provides guidelines for a common way of working with the aim of
ensuring that all Outokumpu employees live up to Outokumpu’s ethical
standards. Outokumpu’s Corporate Affairs and Compliance function is
responsible for managing and continuously developing Outokumpu’s
compliance program. The objective of the program is to ensure that
Outokumpu and its employees comply with laws, regulations as well
as Outokumpu’s internal policies and instructions. The program also
aims to globally mitigate compliance risks for the corporation as well
as for each individual employee by a set of preventive and supervisory
measures. Raising awareness of and training on the Code of Conduct
and its topics are central elements of the program. As part of these
efforts, Outokumpu issued in 2015 a new Anti-Corruption Instruction
and launched a subsequent Anti-Corruption e-learning course,
compulsory for all white collar employees. The e-learning covered some
3,700 people and achieved a completion rate of 99%. The Corporate
Affairs and Compliance function reports to the Chief Financial Officer
and also reports to the Outokumpu Leadership Team and directly to the
Board Audit Committee on compliance-related matters.

Financial reporting

According to the Finnish Limited Liability Companies Act and the Finnish
Corporate Governance Code, the Board of Directors is responsible for
ensuring that the company's internal controls are properly organized.
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 them throughout the company’s organization.

Control environment

The foundation of 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
include, 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
is described in the Compliance section. The Outokumpu performance

Outokumpu Annual report 2015
Corporate Governance

103

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, and the Audit Committee
regularly monitors the Group’s risk map. The 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. 107.

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 and the CFO. 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 policies and instructions
included in the Outokumpu Controller’s Manual is to ensure that uniform
financial processes and reporting practices are used throughout the
Group. Policies and instructions for financial reporting are reviewed on
a regular basis and revised when necessary. During the 2015 financial
year, Outokumpu reviewed the useful lives of its property, plant and
equipment and concluded that when maintenance and operating
practices are followed, the useful lives of heavy machinery and
equipment are longer than previously estimated. Therefore, their useful
lives were changed to 15–30 years, compared to the previous 15–20
years, for calculating depreciation. Otherwise, only minor adjustments
were made to the instructions. In 2016, Outokumpu will continue to
follow the changes in IFRS standards closely. No major impact on the
financial reporting due to the implementation of new standards is
expected in 2016.

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 Helsinki.

Identification and assessment of risks
related to financial reporting

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 Group functions. Deliverables include risk maps,
risk identification plans, and a financial assessment of the Group’s
ability to bear risk.

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 kinds 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, on a regular basis.

Information technology and solutions play an important role in
guaranteeing that the Group’s internal controls have a solid foundation.
A new consolidation system has been implemented to ensure timely and
uniform financial and management reporting from the Group entities
and an effective closing process within the whole Group. Outokumpu has
also started a business transformation program to develop and improve
business capabilities. This will be achieved mainly by harmonizing and
improving the Group’s core business processes.

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.

104

Outokumpu Annual report 2015
Corporate Governance

Follow-up

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 public accountants authorized by the Central Chamber of Commerce
of Finland and independent of the company.

The Annual General Meeting elects the auditors for a term of office
ending at the close of the next Annual General Meeting. A proposal to
the Annual General Meeting on the election of auditors that has been
made known to the Board of Directors prior to the Annual General
Meeting will be made public 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.
Additionally, the Audit Committee of the Board has the duty to consider
and make a proposal to the Annual General Meeting as to the election
and fees of the auditor.

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. An audit tendering
process was held in 2005, and KPMG has been the Group Auditor since
fiscal year 2006. Virpi Halonen has been the Auditor in Charge since
2012.

Both Outokumpu and KPMG Oy Ab emphasize the requirement that
the 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
2015, auditors were paid fees totaling EUR 2.1 million, of which non-
auditing services accounted for EUR 0.2 million.

Both management in all Outokumpu companies and personnel in the
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.

Internal Audit

Internal Audit is an independent and objective assurance, control, and
consulting function designated to add value, to improve operations,
and to monitor and support the organization in the achievement of its
objectives. Through a systematic, disciplined approach, Internal Audit
determines whether governance processes, the internal control system,
and the risk management system, as designed and represented by the
Board of Directors and the Leadership Team, are effective and efficient.

With commitment to integrity and accountability, Internal Audit provides
value to governing bodies and senior management as an objective and
direct source of correct, reliable information and independent advice.
Internal Audit also monitors adherence to Group principles, policies and
procedures, and investigates fraudulent and non-compliant behaviors
and activities. Internal Audit performs its function on behalf of and
directly reports to the Audit Committee and to the Leadership Team,
but is functionally assigned to the CEO. The annual internal audit plan is
approved by the Audit Committee.

In 2015, Internal Audit performed 14 extended operational audits,
including an appraisal of the performance and control of Corporate
Programs, one on-site follow-up, and an audit of a sales branch in
Mexico. The results of all the performed audits, including their risk
appraisals, have been reported and distributed in writing. In view of the
Outokumpu Code of Conduct and the Corporate Responsibility Policy,
a potential risk has been identified in the context of sales intermediary
agreements.

The confidential whistleblowing hotline (“Helpline”) available on the
company intranet and via the internet is set up to anonymously inform
Internal Audit and the Audit Committee of suspicions of financial
misconduct or unethical behavior. However, no cases were reported via
the Helpline in 2015. Of 12 unscheduled investigations of allegations
brought forward through other channels, no incidents of discrimination
or human rights violations were noted. However, Internal Audit observed
unfair behavior in multiple instances and various cases of incurred
or alleged theft, among them one case of financial damage from
a fraudulent phishing incident; however none of these cases were
financially material. One instance of alleged misconduct observed in
2014 has been resolved via a special compliance audit and clean-up
operation at the Eastern European entity concerned.

Outokumpu Annual report 2015
Corporate Governance

105

Remuneration

Board of Directors

As confirmed by the 2015 Outokumpu Annual General Meeting, the
annual remuneration for the members of Outokumpu’s Board of
Directors is 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.

Compensation and other
benefits of the CEO

In 2015, the President and CEO’s compensation consisted of a basic
salary and a yearly short-term incentive determined by the Board on the
basis of the Company’s key targets. The annual short-term incentive
could not exceed 50% of the CEO’s annual salary, and it was based
on an EBIT target (earnings before interest and taxes) and operational
targets with an emphasis on cash flow, occupational safety, gearing and
delivery reliability. The compensation paid in 2015 to Mika Seitovirta
(CEO until October 26, 2015) and Reinhard Florey (interim CEO from
October 27 to December 31, 2015) is shown in the table on p. 106. The
remuneration details of President and CEO Roeland Baan (CEO as of
January 1, 2016) are presented on the Company’s website.

Compensation and other benefits of
the other Leadership Team members

The service contract of CFO Florey, who is also deputy to the CEO,
could have been terminated by both parties with six months’ notice.
To the extent that the Service Contract would have been terminated
by the Company, other than for a cause without notice or with ordinary
notice due to misconduct, the CFO would have received additional
compensation equivalent to 18 months’ salary. For the 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 a reason other than one caused by the employee. The termination
benefits of the other Leadership Team members employed outside
of Finland vary in line with local market practices and amount to 18
months’ base salary at the maximum, including salary for notice period
and severance compensation.

In the 2015 financial year, the performance-based short-term incentive
payable to the members of the Leadership Team, in addition to their base
salary and employee benefits, was based on an EBIT target (earnings
before interest and taxes) and operational targets with an emphasis
on cash flow, occupational safety, gearing and delivery reliability. The
maximum short-term incentive payment for 2015 varied based on local
market practices between 50% and 100% of the members’ annual base
salaries. The Leadership Team members are also included in the share-
based incentive plans for Outokumpu management, the details of which
are presented in the tables on p. 101 and 114. In 2015, the total amount
of short-term and long-term incentives could not exceed 200% of an
individual’s annual salary. Should this limit have been exceeded, the
share-based reward would have been reduced accordingly.

No separate remuneration is paid to the Group CEO or members of the
Leadership Team for membership of this Team 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 employed in Germany are entitled to pension benefits in
accordance with the rules of the German Essener Verband. The members
employed in Finland participate in the Finnish TyEL pension system, in
addition to which they are entitled to a defined contribution pension plan,
for which 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,
excluding share rewards. The pension benefits of the other Leadership
Team members vary in line with the local market practices.

Outokumpu did not provide any guarantees or other similar
commitments on behalf of members of its Board of Directors in 2015.
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.

106

Outokumpu Annual report 2015
Corporate Governance

Fees, salaries and employee benefits paid

2015
€
Board of Directors

Chairman of the Board, Ollila
Vice Chairman of the Board, Vaartimo
Board member, Akermann
Board member, Gualdoni
Board member, Gustavson
Board member, Malinen
Board member, Miettinen-Lähde
Board member, Nilsson
Board member, Schalin 1)

CEO, Seitovirta 2)
Deputy to the CEO
Other Leadership Team Members 3)

Salaries and fees
with employee
benefits

Performance/
project-related
incentives

Annual
remuneration

Share-based
incentives 4)

13 800
12 000
24 000
27 600
12 000
12 600
9 000
26 400
3 600
634 888
512 072
3 039 955

-
-
-
-
-
-
-
-
-
303 912
250 000
1 015 241

140 000
80 000
60 000
60 000
60 000
60 000
60 000
60 000
-
-
-
-

-
-
-
-
-
-
-
-
-
110 408
100 675
48 035

1) January 1–March 31, 2015
2) January 1–October 26, 2015
3) Lu January 1–March 31, 2015, Hofmann April 1–December 31, 2015, Wallis January 1–April 30, 2015, Salas May 1–June 30, 2015,

Williams July 1–December 31, 2015, Parvento January 1–November 5, 2015, Bates November 5–December 31, 2015

4) Gross, including the value of the shares on the day of delivery and taxes

2014
€
Board of Directors

Chairman of the Board, Ollila
Vice Chairman of the Board, Vaartimo
Board member, Akermann
Board member, Gualdoni
Board member, Gustavson
Board member, Kerminen 1)
Board member, Malinen
Board member, Nilsson
Board member, Schalin

CEO, Seitovirta
Deputy to the CEO
Other Leadership Team Members 2)

Salaries and fees
with employee
benefits

Performance/
project-related
incentives

Annual
remuneration

Share-based
incentives

12 000
12 600
22 200
10 800
5 400
5 400
11 400
21 600
11 400
749 040
511 864
2 546 667

-
-
-
-
-
-
-
-
-
123 039
112 500
202 458

140 000
80 000
60 000
60 000
60 000
-
60 000
60 000
60 000
-
-
-

-
-
-
-
-
-
-
-
-
-
-
-

Total

153 800
92 000
84 000
87 600
72 000
72 600
69 000
86 400
3 600
1 049 207
862 748
4 103 231

Total

152 000
92 600
82 200
70 800
65 400
5 400
71 400
81 600
71 400
872 079
624 364
2 749 125

1) January 1–March 31, 2014
2) Tonteri January 1–August 31, 2014, Saksi July 1–December 31, 2014, Wallis September 1–December 31, 2014, Tahvanainen September 1–December 31, 2014

Risk management

Outokumpu Annual report 2015
Risk management

107

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 to identify, evaluate and mitigate risks
from the perspective of shareholders, customers, suppliers, personnel,
creditors and other stakeholders.

Risk management organization

The Board of Directors carries ultimate responsibility for risk
management within Outokumpu. The 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.

Outokumpu’s Risk Management Steering Group was established to take
responsibility as governing body for risk management in Outokumpu in
2015. 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 Risk Management
Steering Group, the Board’s Audit Committee and the Board of Directors
review key risks as well as 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 activities, and prepares quarterly risk
reports for management, the Board’s Audit Committee and Auditors.

Risk management process

Outokumpu has defined a 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, evaluation and prioritization, mitigation and reporting.

Within Outokumpu, the risk management process is monitored and
controlled at different organizational levels in a systematic manner.
Regular risk updates are done to ensure 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 2015

The focus areas in risk management were characterized by Outokumpu’s
efforts to improve its profitability towards sustainable levels, the key
topics being: increased focus on financial risk management, improved
prevention of business interruptions within loss prevention audits,
systematic operational risk management through a Group-wide reporting
tool, and detailed analysis of cyber-risk exposures. In addition, the
recently established Risk Management Steering Group had quarterly
meetings during 2015 to monitor the Group’s key risks and approve the
operational risk assessments. Outokumpu continued its systematic
fire safety and loss prevention audit programs, which also focused on
machinery breakdown loss prevention. In total, more than twenty fire
safety and machinery breakdown loss prevention audits were carried out
in 2015 using in-house expertise in co-operation with external advisors.
There were two serious accidents in 2015, one of them causing a fatality
at the Mexinox mill. No other major operational risks occurred in 2015.

In late 2015, Outokumpu divested its 50% stake in Fischer Mexicana
and 60% of the shares in SKS, with significant positive impacts on
Outokumpu’s financial stability, including a reduction in net debt and
financing costs. Outokumpu’s refinancing risk was further reduced by the
extension of key loan facilities from 2017 to 2019 by a total amount of
EUR 775 million.

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
Identifi cation,
evaluation, mitigation
and reporting.

Risk
reporting
(external/
internal)

Regular risk
updates

Identifi cation

Evaluation and
prioritization

Risk monitoring
and control

Mitigation

Leadership Team

Business areas and
Group functions

Operations

108

Outokumpu Annual report 2015
Risk management

Strategic and business risks

Risks related to Outokumpu’s
business priorities and targets

Outokumpu’s future development will depend on the successful
implementation of the measures aimed at returning Outokumpu to
sustainable profitability with the objective of creating shareholder
value as a leading stainless steel producer. Outokumpu’s ability to
successfully implement this turnaround is subject to a number of
factors, including, but not limited to, its ability to:
· make progress in the Calvert mill ramp-up in the US into full

commercial capability over the coming years, with 2018 being the first
year of steady-state operations;

· make progress in Coil EMEA by finalizing the ongoing restructuring plan

to gain cost savings of EUR 100 million by 2017;

· deliver additional commercial and operational improvements in all the

business areas;

· continue measures to improve net working capital efficiency across the
company to significantly reduce the amount of capital tied up in the
business and to improve cash flows;

· continue to reduce the company’s debt levels and to reduce financing

costs.

Outokumpu’s current expectations regarding the impact and timing of
the above-mentioned targets are based on a number of assumptions
and expectations that are subject to various risks and uncertainties.

Stainless steel industry and markets

In recent years, stainless steel production capacity in Asia, particularly
in China, has grown significantly, and Asian producers have transitioned
from being net importers of stainless steel to being significant exporters
to Europe and North America. While the global trade flows within the
industry have started to stabilize, the problem of Asian overcapacity
remains and is being exacerbated by the slowdown in Chinese economic
growth. Following the introduction of antidumping measures in the
form of import duties in 2015 by the European Commission against
cold-rolled stainless steel products from China and Taiwan, the import
levels in Europe have decreased, particularly from China. While these
trade protective measures in Europe seem to be successful, imports
from other regions have partly replaced the imports from China and
Taiwan. While market shares of European producers have stabilized,
the introduction of the antidumping measures has helped to keep base
prices in Europe quite stable. However, anticipated larger increases
in base prices have failed to materialize as the strongly declining
nickel price has curtailed demand, especially among distributors. The
overcapacity situation in China combined with continued low price levels
remain a risk to Outokumpu.

Supply and demand is more balanced in the Americas, but the
pressure to export Asian overcapacity to the NAFTA region has been
increasing over the past years. On February 12, 2016, Outokumpu
filed antidumping and countervailing duty petitions in the US together
with other stainless steel producers. The stainless steel producers
charge in the antidumping duty petitions that unfairly traded imports of
stainless steel sheet and strip from China are causing material injury
to the American stainless steel industry, as Chinese producers are
selling their products in the American markets at prices less than their
fair value, thereby significantly undercutting American market prices.

The countervailing duty petition alleges that Chinese government has
given significant subsidies to the Chinese stainless steel industry.
Following the filing, Commerce Department and U.S. International
Trade Commission have begun their preliminary investigations, which
are expected to be finalized during the first quarter of 2016. The entire
investigative process will take approximately one year, and it is expected
to be ready in the first quarter of 2017. Additionally, Outokumpu is
implementing full commercial capability at its Calvert mill in Alabama,
US by 2018, with increasing volumes and growing market shares. Such
a commercial ramp-up includes risks and uncertainties, which may, if
realized, impact Outokumpu’s profitability.

Overcapacities have resulted in fierce competition in the stainless steel
industry, which has led to a situation where many producers in various
countries have called for government protection and trade protective
measures to safeguard domestic industry. In addition, several countries
may grant substantial subsidies or other support 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 an adverse effect on Outokumpu’s profitability
to the extent that 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 market access.

Outokumpu believes that the overall long-term prospects for stainless
steel demand remain positive. Key global megatrends, such as
urbanization, modernization, and increased mobility, are expected to
support future growth of stainless steel demand. There are, however,
risks that such megatrends will be realized slower than expected,
and that the occurrence of natural catastrophes or other adverse
changes in the global political and economic environment, such as
the crisis situation in Ukraine and related trade sanctions on Russia,
or deteriorated growth of the Chinese economy as seen in 2015, can
impact the stainless steel industry and reduce growth prospects also
in Outokumpu’s core markets. Additionally, the growth rates of Asian
economies slowed down in 2015, which had significant overall impacts
on the oil price, global economy and stainless steel industry.

Outokumpu expects that the re-structuring actions, including the
restructuring plan in Europe and the full commercial ramp-up of the
Calvert mill in the US, will continue to make significant progress to return
Outokumpu to sustainable profitability and maintain its position in global
stainless steel markets.

Since global demand for stainless steel is forecasted to increase
in the coming years, Outokumpu expects that global demand for
ferrochrome, a key ingredient in stainless steel production, will increase
correspondingly. As part of its Coil EMEA Business Area, Outokumpu
produces ferrochrome at its Tornio ferrochrome production facility using
chromite extracted from its Kemi chromite mine. Outokumpu aims
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, the ferrochrome market remains oversupplied with new capacity
ramping up, especially in China. Outokumpu’s competitive position in the
ferrochrome business is affected by foreign exchange rates, particularly
the US dollar and e.g. the prices of power and coke.

Outokumpu Annual report 2015
Risk management

109

Raw materials, supplies and energy

Pricing systems applied in many markets may cause volatility in demand
for stainless steel. This typically leads to reduced demand when
metal prices decline, which may also lead to increases in producers’
inventories, causing the adverse impact on earnings to be even higher.
Another possible adverse consequence of volatility in demand is the
negative impact on capacity utilization ratios. In addition, the monetary
value of discounts in purchasing (e.g. in connection with purchases
of stainless steel scrap) depends on the level of alloy metal prices.
Therefore, the price levels of alloy metals are likely to have long-term
impacts on profitability.

Stainless steel production requires substantial amounts of certain
raw materials, primarily nickel, recycled stainless steel, ferrochrome,
molybdenum, recycled carbon steel, as well as energy and supplies.
Most of these 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 changes and developments in production technologies
related to the processing of alternative or substitute raw materials
used to produce stainless steel, such as NPI (nickel pig iron) and UG-2,
which is a by-product of the platinum production process used in South
Africa that has a chromium content comparable to chromium ore and
can be used to produce ferrochrome to a limited degree. Outokumpu
is also 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 hedged
part of its exposure to changing nickel prices and, on a case-by-case
basis, molybdenum prices. Although the alloy surcharge mechanism 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 material 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.

Financial risks related to raw materials and energy prices are described
in Note 19 to the financial statements.

Legal risks

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. Outokumpu is
also exposed to typical litigation risks in connection with mergers and
acquisitions. For the specific risks relating to existing litigation, please
see Note 30 to the financial statements, “Disputes and litigations”.
Outokumpu’s products are used in a wide range of applications. For
instance, certain products are used in safety-critical applications, such
as pipes used in the oil, gas, chemical and petrochemical industries.
In addition, a certain part of Outokumpu’s products are used in the
automotive industry, where key customers require extensive third-party
certification regarding the products purchased. Therefore, Outokumpu is
exposed to product liability claims arising e.g. from automotive industry
customers. Such claims may result in severe damages, impacting
Outokumpu’s profitability. Outokumpu manages and mitigates its

legal risks by running internal governance and compliance programs
and policies, some of them extending beyond local minimum legal
requirements.

Environmental business risks

The main environmental business risks for Outokumpu are related
to emission trading schemes and new environmental and consumer
protection demands. The European Union’s Emission Trading System
(ETS) forms a risk for Outokumpu, indirectly in electricity prices and
directly from the buying of emission allowances. Outokumpu has
secured part of its future electricity supply – and the associated prices –
through long-term contracts. Additionally, Outokumpu is participating in
some nuclear power projects in Finland.

Outokumpu operates in accordance with prevailing laws and regulations,
including environmental, chemical and product safety 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. Strict compliance
with all relevant environmental regulations causes increased costs and
impacts Outokumpu’s competitive position in some cases. Outokumpu
mitigates these impacts through the systematic identification and
management of environmental, chemical and product safety risks,
through emission 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. 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, failures in information technology, strikes or transportation
disruptions.

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 disruption may cause significant business
interruptions and have a negative impact on Outokumpu’s profitability.

Primarily because of the high temperatures required for production,
fire is a significant risk for Outokumpu. Most of the production facilities
are located in extensive industrial zones and a fire in 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 damage to property or the loss of
production through extremely low temperatures, flooding, hurricane,
tornado or drought. Outokumpu monitors such risks by continuously

110

Outokumpu Annual report 2015
Risk management

evaluating its production facilities and production processes from a
risk management perspective and also by arranging regular fire-safety
audits. Insurance covers a large proportion of the associated risks.
In 2015, Outokumpu also focused on machinery breakdowns loss
prevention by conducting separate surveys at the main sites.

Environmental accidents

The main environmental accident risks at production sites relate to
use of acids, production of hazardous waste and toxic gases, landfill
activities, long-term contamination of soil or groundwater, or long-term
effects of hazardous pollutants. Outokumpu also has environmental
liabilities and risks at closed mines and sites. Certified environmental
management systems are 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 has an internal environmental auditing
program to monitor and ensure local legal compliance and the level of
environmental risk management.

Project risks

In August 2015, Outokumpu made the decision to increase its
shareholding in Fennovoima Oy by 1.8 percent points. Outokumpu
has then committed to a 14% stake in Fennovoima Oy, which has
a parliamentary decision-in-principle to construct a new nuclear
power plant in Pyhäjoki, Finland. The company has selected Rosatom
Overseas CJSC as the plant supplier. Fennovoima Oy submitted a
construction license application to the government in June 2015,
and the construction permit is expected in 2017. According to the
plans, infrastructure work at the site began 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) and environmental
risks. When operational, shareholders will be able to procure electricity
against their pro rata share of operating expenses of the power plant
(the “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 Oy.

Additionally, Outokumpu is investing approximately EUR 30 million in
using liquefied natural gas (LNG) instead of propane at the Tornio mill.
The main part of the investment, phased over 2015–2018, is being
used to make the required equipment modifications at the Tornio mill.
This investment includes a number of risks inherent to investment
projects, including market price risks and contractual arrangements
between different business partners. Replacing the use of propane with
liquefied natural gas sourced directly from the global market will reduce
production costs through lower and more stable energy prices, and
thereby increase the competitiveness of our Tornio mill. As it is more
sustainable, LNG is replacing oil and other fuels worldwide.

IT dependency and cyber security risks

Outokumpu relies on various applications and other information
technologies that are used globally in all business areas and group
functions. Many of these applications and underlying infrastructure are
outdated, making them more vulnerable to failure, and could result in
business interruptions, for example, in the production and supply chain
processes. In addition, the enterprise architecture is complicated, and
the large number of different and unharmonized information systems
increases the risk of loss of critical applications.

Furthermore, cyber threats and other security threats could exploit
possible weaknesses in Outokumpu’s security controls, which in turn,
could cause leakage of sensitive information, theft of intellectual
property, production outages or damage to Outokumpu’s reputation.

Outokumpu is taking necessary steps to ensure that the IT systems
and solutions are reliable, and also aims to ensure secure information
management at all company locations to avoid data loss or situations in
which business-critical information becomes unavailable.

Additionally, Outokumpu is improving its cyber readiness in order to
prevent possible cyber-attacks, by running and initiating various security
development activities based on the detailed cyber threat and risk
exposure analyses, which were completed during 2015. Outokumpu has
also taken actions to mitigate its earlier dependence on certain people
in application support and has improved IT incident management with
a special focus on major incidents. Outokumpu has also launched a
business transformation program to develop and improve its business
capabilities and renew its IT systems in the coming years, with initial
systems going live at the end of 2015.

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 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, motivate, train and develop 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 other
key employees. However, Outokumpu has implemented HR processes
to attract and retain key employees in the Group. Implementation
of leadership development programs and succession planning for
key positions in the Group are also undertaken as part of the talent
review process to maintain development opportunities and to ensure
an adequate pipeline of talent to mitigate the potential loss of senior
managers.

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 initiatives globally in areas such as competition
law, anti-corruption and trade restrictions, including sanctions.
Outokumpu’s governance and compliance processes may not prevent

Outokumpu Annual report 2015
Risk management

111

(resource) efficiency, and accountable and transparent governance and
reporting. For our stakeholders, in addition to these, management of
toxics and chemicals and mitigation of environmental impacts were
also important. Additional information on the materiality analysis is
available in Outokumpu’s Sustainability report in the section Reporting
on sustainable development. These main topics from the materiality
analysis are also partially considered as Outokumpu’s key risks,
which are explained above within several risk scenarios, including:
environmental business risks; environmental accident risks; raw
materials, supplies and electricity; compliance; and reputational harm.
For instance, the management of workplace safety, toxics and chemicals
are core parts of Outokumpu’s health and safety management activities,
as described in the Sustainability report in the chapter Safe working
environment. Additionally, Outokumpu takes seriously all labor practice
violations and related threats as well as its full transparency and
compliance in human rights topics. Additional information on human
rights and about Outokumpu’s stakeholder relations is available in the
Sustainability report under sections Our people and Outokumpu and
society. In order to also improve the identification of sustainability risks,
the new Global Reporting Initiative G4 standard has been taken in to use
for the responsibility reporting.

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 by its sales intermediaries or
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, breaches of our
financing agreements 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 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. Outokumpu’s compliance program aims
to prevent and mitigate compliance risks from occurring and is further
developed annually. In 2015, compliance efforts included an e-learning
course in anti-corruption and an extended review and assessment of
Outokumpu’s compliance risks, including a subsequent compliance
action plan for 2016.

Financial risks

Key current financial risks for Outokumpu are:
· Changes in the prices of nickel, iron, molybdenum, electrical power

and fuels

· Currency developments affecting the euro, the US dollar, the Swedish

krona and the British pound

· Interest rate changes connected with the US dollar, the euro and the

Swedish krona

· Changes in levels of credit margins
· Counterparty risk related to customers and other business partners,

including financial institutions

· Risks related to liquidity and refinancing
· Breach of financial covenants or other terms and conditions leading to

default

· Risk related to prices of equities and fixed-income securities invested

under defined benefit pension plans

The financial risks listed above and related processes for risk
management are described in further detail in Note 19 to the Group’s
consolidated financial statements.

Corporate responsibility risks and
stakeholders’ materiality analysis

Outokumpu has also identified its exposures in sustainability and
corporate responsibility. These are mainly identified through dialogue
with stakeholders (customers, suppliers, investors, employees,
NGOs, authorities, communities, associations) in connection with the
materiality analysis related to Outokumpu’s sustainability program, but
also through Outokumpu’s risk management process as well.

In the materiality analysis, the most important sustainability topics
for business were a safe and healthy workplace, energy and material

112

Outokumpu Annual report 2015
Shares and shareholders

Shares and shareholders

Shares and share capital

Shareholders by group on December 31, 2015

Outokumpu’s shares are listed on the Nasdaq Helsinki Large Cap list
under the trading code OUT1V, and are incorporated into the Finnish
book-entry securities system. The total share capital was EUR 311
million at the end of the year.

As of December 31, 2015, the total number of Outokumpu shares was
416,374,448, and Outokumpu held 885,140 of its own shares, i.e.
treasury shares. All shares in Outokumpu carry equal voting and dividend
rights.

Outokumpu in the capital markets

Solidium Oy* 26.2%

Varma Mutual Pension Insurance
Company 2.4%

The Social Insurance Institution
of Finland 2.2%

State Pension Fund 1.2%

Other Finnish organizations
11.6%

Finnish households and private
persons 26.8%

International shareholders 29.6%

Outokumpu continued its regular and active dialogue with investors and
analysts in 2015.

* Solidium Oy is wholly-owned by The Finnish State.

Key topics discussed with investors were the actions to turn Coil
Americas profitable, development in Coil EMEA restructuring, actions to
strengthen the balance sheet, as well as market-related topics.

Outokumpu held its Annual General Meeting in Espoo, Finland in
March. The Capital Markets Day was held in Berlin, Germany in May.
Outokumpu arranged 19 roadshows in Europe and in the US during
the year. Outokumpu also met investors at an industry seminar in New
York. In addition, the company arranged two investor events for private
shareholders in Finland.

Outokumpu organized three site visits for analysts and institutional
investors in 2015: one to the chrome mine in Kemi and the stainless
steel plant in Tornio, Finland, and one to the stainless steel plant in
Calvert, US. In total, about 250 one-on-one meetings and over 60
conference calls were held with investors during the year.

Share price development and
market capitalization

During 2015, the price of the Outokumpu share peaked at EUR 7.76
and was EUR 2.06 at its lowest (2014 high/low: EUR 7.50/ EUR 3.37).
The Outokumpu share price closed at end of the year at EUR 2.73, 43%
below the closing price of 2014 (EUR 4.77 on December 30, 2014). At
the end of 2015, the company’s market capitalization was EUR 1,137
million, compared to EUR 1,987 million at the previous year’s end.

In 2015, the average daily trading volume in Outokumpu shares on
the Nasdaq Helsinki was 5.3 million shares. In total, 1,345 million
Outokumpu shares were traded on the Nasdaq Helsinki during 2015,
representing a value of EUR 6,013 million (2014: 695 million shares,
which corresponded to EUR 3,609 million).

Shareholders by group on December 31, 2015

Private corporations
Financial and insurance institutions
Public sector and public
organizations
Non-profit organizations
Households
Outside Finland
Nominee accounts held by custodian
banks

Total

128 779 521
12 586 081

37 517 434
2 785 140
111 535 670
2 022 173

121 148 429

416 374 448

30.9
3.0

9.0
0.7
26.8
0.5

29.1

100.0

Market capitalization and share price development

€ million
4 000

3 500

3 000

2 500

2 000

1 500

1 000

500

Month-end market capitalization
Share price
Source: Nasdaq

€/share
40

Outokumpu Annual report 2015
Shares and shareholders

113

Monthly trading volume
Million shares

180

150

120

Includes trading on Nasdaq Helsinki. The graph does not include trading
on February 28, 2014 because of an extraordinary peak as a result of
ThyssenKrupp selling its shares in Outokumpu.

Outokumpu share price development in 2015

%, Dec 31, 2014 = 100
175

150

125

100

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct Nov Dec

Outokumpu
Nasdaq Helsinki

Trading venue development 2012–2015

%
100

Nasdaq Helsinki, %

Others, including MTFs, OTC and Dark pool trading, %

Source: Fidessa.

In addition to the Nasdaq Helsinki, Outokumpu’s shares are traded on
various alternative trading platforms. The volume of Outokumpu’s shares
traded on the Nasdaq Helsinki represented 55% of the total volume of
Outokumpu’s shares traded in 2015 (source: Fidessa Fragmentation
Index, www.fragmentation.fidessa.com).

More information about shares is available at
www.outokumpu.com/en/Investors/Share-info

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 criteria set by the Board for each
earnings period are fulfilled.

Performance Share Plan 2012

The Board of Directors of Outokumpu approved on January 31, 2012
the establishment of a share-based incentive plan, the Performance
Share Plan 2012, which is part of the remuneration and commitment
program for the key management of Outokumpu Group. The plan offers
the 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. The Performance Share Plan consists of annually
commencing performance share plans. Each plan includes a three-year
earnings period, after which any share rewards earned will be delivered
to the participants.

The first plan of the Performance Share Plan, covering years 2012-
2014, ended on December 31, 2014. The criteria set for the plan were
relative TSR (total shareholder return) performance compared to a peer
group, with a 30% weighting of the maximum reward, as well as EBIT
(earnings before interest and taxes) excluding non-recurring items for
the year 2012, EBITDA (earnings before interest, taxes, depreciation
and amortization) for the year 2013 and EBIT improvement for the year
2014, with a combined 70% weighting of the maximum reward. Based on
the achievement of the targets, the participants received 23.3% of the
maximum number of shares as a reward. After deductions for applicable
taxes, altogether 48,234 shares were delivered to 69 persons in spring
2015. Of these 48,234 shares, 8,021 shares were delivered to Mika
Seitovirta (CEO until October 26, 2015) and 4,568 shares to other
Leadership Team members. Outokumpu used its treasury shares for the
reward payment, which meant that the total number of shares of the
company did not change due to the reward.

114

Outokumpu Annual report 2015
Shares and shareholders

December 31, 2015 status of the Performance Share Plans

Number of participants on Dec 31, 2015
Maximum number of gross shares to be paid 1)

Interim CEO Florey
Other Leadership Team members
Other participants

Total maximum number of gross shares to be paid 1)
Earning criteria

Share delivery year

PSP 2013–2015
104

PSP 2014–2016
119

PSP 2015–2017
133

38 880
154 080
716 850
909 810
EBITDA for the year 2013, EBIT
improvement for the year 2014,
EBIT excluding non-recurring items
for the year 2015, Outokumpu
share price adjusted by dividends
at the end of the three-year
period, and the achievement of
annual Inoxum transaction related
synergies.
2016

55 200
253 704
1 185 618
1 494 522
EBIT improvement for the year 2014,
EBIT excluding non-recurring items for
the year 2015 and underlying EBITDA
for the year 2016, annual business
cash flow for the years 2014, 2015
and 2016 and Outokumpu ROCE at the
end of 2016.

75 000
393 000
1 143 900
1 611 900
EBIT excluding non-recurring
items and business cash
flow for the year 2015, ROCE
ranking among peers at the
end of 2017 and Outokumpu
gearing in 2017.

2017

2018

1) The maximum number of gross shares (taxes included) payable if the set performance targets are achieved in full.

Restricted Share Pool 2012

The Board of Directors of Outokumpu approved on January 31, 2012
the establishment of a Restricted Share Pool program, which is 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, with the exception of any allocations to Leadership
Team members, which will be approved by the Board of Directors.

December 31, 2015 status of the Restricted Share Pool

The first plan of the Restricted Share Pool 2012, covering years 2012-
2014, ended on December 31, 2014. After deductions for applicable
taxes, in total 14,350 shares were delivered to three participants of
the 2012–2014 plan in spring 2015. Of these 14,350 shares, 8,190
shares were delivered to Leadership Team members. Outokumpu used
its treasury shares for the reward payment, which meant that the total
number of shares of the company did not change due to the reward.

Number of participants on Dec 31 2015
Maximum number of gross shares to be paid 1)

Interim CEO Florey
Other Leadership Team members
Other participants

Total maximum number of gross shares to be paid 1)
Share delivery year

RSP 2013–2015
2

RSP 2014–2016
6

RSP 2015–2017
6

-
7 500
4 200
11 700
2016

-
-
20 700
20 700
2017

-
5400
30 800
36 200
2018

1) The gross number of shares (taxes included) payable if the employment has continued until the delivery date of the shares and no notice of termination has

been given prior to the delivery date.

Outokumpu Annual report 2015
Shares and shareholders

115

Other terms

Management shareholding

The aggregate reward of an individual participant under the above
programs, together with other short-term and long-term incentives of
the participant, could not exceed 200% of the participant’s annual base
salary in 2015.

According to the share ownership plan of the Outokumpu Group, the
members of the Leadership Team are obliged to own Outokumpu shares
received under share-based incentive programs to the value of their
annual gross base salary. 50% 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.

On December 31, 2015, members of the Outokumpu Board of Directors
and the Leadership Team held a total of 180,681 Outokumpu shares,
corresponding to 0.04% 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 2013–2015, 2014–2016 and 2015–2017 periods of
the performance share and restricted share plans (a total of 962,514,
shares), their shareholding obtained via the programs would amount to
0.23% of the company’s shares and voting rights.

Details of Outokumpu’s management shareholdings can be found in the
section Corporate governance.

Principal shareholders on December 31, 2015

Solidium Oy
Varma Mutual Pension Insurance Company
The Social Insurance Institution of Finland
State Pension Fund
Elo Mutual Pension Insurance Company
Ilmarinen Mutual Pension Insurance Company
Etera Mutual Pension Insurance Company
Evli Finnish Small Cap Mutual Fund
SR Danske Invest Finnish Institutional Equity Fund
OP Life Assurance Company Ltd.
OP-Finland Small Firms Fund
OP-Finland Value Fund
Relander Harald Bertel

Nominee accounts held by custodian banks
Treasury shares
Other shareholders

109 069 264
10 016 567
9 298 652
5 000 000
4 820 000
3 685 673
3 050 449
1 377 300
1 266 789
1 032 442
924 653
911 524
850 000

151 303 313

121 148 429
885 140
143 037 566

26.19
2.41
2.23
1.20
1.16
0.89
0.73
0.33
0.30
0.25
0.22
0.22
0.20

36.33

29.10
0.21
34.36

Total

416 374 448

100.00

Distribution of shareholders on December 31, 2015

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

15 663
34 834
18 460
2 048
106
8
1
1
-

22.02
48.98
25.96
2.88
0.15
0.01
0.00
0.00
-

721 950
15 476 476
56 563 475
47 457 138
26 396 644
29 531 305
10 016 567
109 069 264
121 141 629
30

0.17
3.72
13.58
11.40
6.34
7.09
2.41
26.19
29.09

46
444
3 064
23 172
249 025
3 691 413
10 016 567
109 069 264
-

71 121

100.00

416 374 448

100.00

116

Outokumpu Annual report 2015
Shares and shareholders

Information for investors

Annual General Meeting 2016

Outokumpu Oyj’s Annual General Meeting 2016 will be held on
Wednesday April 6, 2016 at 2:00 pm EET at the Marina Congress
Center, Katajanokanlaituri 6, 00160 Helsinki.

To attend the Annual General Meeting, shareholders must be registered
on March 23, 2016 in the company’s shareholders’ 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 March 23, 2016 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 has been registered on the basis of such shares in
the temporary shareholders’ register held by Euroclear Finland Ltd. by
April 1, 2016 at 10:00 am EET at the latest. 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 by the
time stated above at the latest.

Shareholders who wish to attend the Annual General Meetings must
notify Outokumpu no later than 4:00 pm EET on March 29, 2016.
Notifications can be made on the website at www.outokumpu.com,
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 (from Monday to Friday at 12:00–4:00 pm EET,
March 7, 2016 onwards), or by regular mail to:

Outokumpu Oyj Share Register
P.O. Box 140
FI-02201 Espoo, Finland.

Shareholders may attend the AGM and vote 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.

The complete notice to the AGM and additional information concerning
the AGM is available on the Outokumpu website on the Annual General
Meeting webpage.

Outokumpu Oyj

Corporate Management
Riihitontuntie 7 B, P.O. Box 140
FI-02201 Espoo, Finland
Tel. +358 9 4211
Fax +358 9 421 3888