Outokumpu Oyj Annual Report 2019

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FY2019 Annual Report · Outokumpu Oyj

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Annual report
2019

Annual review

Sustainability
review

Review by the Board
of Directors and
Financial statements

Governance

In brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sustainability at Outokumpu . . . . . . . . . . . . . .

REVIEW BY THE BOARD OF DIRECTORS . .

Corporate Governance Statement . . . . . . . .

Key figures 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Sustainable performance in 2019 . . . . . . . .

Group key figures . . . . . . . . . . . . . . . . . . . . . . . . . .

Key risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CEO’s review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Safety is our highest priority . . . . . . . . . . . . . .

Alternative performance measures . . . . . . . .

Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Organizational health continues to
improve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sustainability in the supply chain . . . . . . . . .

Mitigating climate change with
stainless steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Focus on energy efficiency improvements 14

Operating at the heart of the
circular economy . . . . . . . . . . . . . . . . . . . . . . . . . .

Minimizing environmental impacts . . . . . . . .

Outokumpu and society . . . . . . . . . . . . . . . . . . .

Scope of the report . . . . . . . . . . . . . . . . . . . . . . . .

Independent assurance report . . . . . . . . . . . .

Vision and strategy . . . . . . . . . . . . . . . . . . . . . . . .

Stainless steel market . . . . . . . . . . . . . . . . . . . .

Customers and expertise . . . . . . . . . . . . . . . . . .

Contents

This Annual report combines
Outokumpu’s sustainability
and financial reporting
for 2019. Outokumpu’s
Sustainability review has
been assured and the
Financial statements have
been audited.

Share-related key figures . . . . . . . . . . . . . . . . . .

Shares and shareholders . . . . . . . . . . . . . . . . . .

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . .

Information for shareholders . . . . . . . . . . . . . .

Consolidated statement of income . . . . . . .

Consolidated statement of
comprehensive income . . . . . . . . . . . . . . . . . . . .

Consolidated statement of
financial position . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statement of cash flows . . . .

Consolidated statement of
changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to the
consolidated financial statements . . . . . . . .

Parent company financial statements . . . .

Income statement of the parent company 65

Balance sheet of the parent company . . . .

Cash flow statement of
the parent company . . . . . . . . . . . . . . . . . . . . . . .

Statement of changes in equity of
the parent company . . . . . . . . . . . . . . . . . . . . . . .

Commitments and contingent liabilities of
the parent company . . . . . . . . . . . . . . . . . . . . . . .

AUDITOR’S REPORT . . . . . . . . . . . . . . . . . . . . . . . .

Outokumpu Annual report 2019 | Annual review

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Annual
review 2019

Stainless steel is an amazing
material that makes modern society
possible by providing unmatched
durability, longevity and recyclability.
It is at the heart of moving society
from quick fixes towards a world
that lasts forever.

In brief

Working towards a world that lasts forever

Outokumpu is the global leader in stainless steel. We aim to be the
best value creator in stainless steel, through our competitive edge of
customer orientation and efficiency.

In 2019, Outokumpu’s sales amounted to 6.4 billion
euros and stainless steel deliveries to 2.2 million tonnes.
Outokumpu is the clear market leader in Europe and the
second largest in the Americas market. Outokumpu is listed
on Nasdaq Helsinki.

Outokumpu’s business is divided into four business areas:
Europe, Americas, Long Products and Ferrochrome. We
have production in Finland, Germany, Sweden, the UK, the
USA and Mexico, and we serve our customers through a
global sales and service center network. Outokumpu’s own
chromite mine in Kemi, Finland is the source of the key raw
material for stainless steel.

The foundation of our business is our ability to tailor stain-
less steel into any form and for almost any purpose. Our
customers use it to create society’s basic structures and its
most famous landmarks as well as products for households
and various industries. Our legacy as the inventor of
stainless steel compels us to drive the development of the
material further.

Stainless steel is sustainable, durable and long-lasting. At
the end of its life cycle, stainless steel is 100% recyclable.
We work together with our customers and partners to look
beyond the short term and create advanced materials that
help us to build a world that lasts forever. n

10,390
employees

Over 85%
of recycled
content

Operations in
over 30
countries

EUR
263
million
adjusted EBITDA

Net debt reduced
to EUR
1,155
million

CO2 emissions
–13.8%*

* Compared to the baseline of 2014–2016

Outokumpu Annual report 2019 | Annual review

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In brief

Key figures 2019

In 2019, we kept our focus on enhancing our operational efficiency and
securing our competitiveness. Our ongoing operational excellence efforts
delivered a 4% productivity improvement. Furthermore, we were able
to release almost EUR 220 million from net working capital, and most
importantly we reduced our net debt to EUR 1,155 million.

Net sales, € million
Stainless steel deliveries, 1,000 tonnes
Adjusted EBITDA, € million
Net result for the period, € million
Operating cash flow
Net debt, € million
Debt-to-equity at the year-end, %
Personnel at the year-end

2019
6,403
2,196
263
–75
371
1,155
45.1
10,390

2018

6,872
2,428
485
130
214
1,241
45.1
10,449

2017

6,356
2,448
631
392
328
1,091
40.1
10,141

2016

5,690
2,444
309
144
389
1,242
51.4
10,600

2015

6,384
2,381
165
86
–34
1,610
69.1
11,002

Adjusted EBITDA, € million

2015

2016

2017

2018

2019

Net debt, € million

Sales by business area, € 6,403 million

Stainless steel deliveries by business area, %

2015

2016

2017

2018

2019

(cid:31) Europe 63%
(cid:31) Americas 21%
(cid:31) Long Products 8%
(cid:31) Ferrochrome 2%
(cid:31) Other operations 6%

(cid:31) Europe 64%
(cid:31) Americas 26%
(cid:31) Long Products 10%

Operating cash flow, € million

2015

2016

2017

2018

2019

700

600

500

400

300

200

100

2,000

1,500

1,000

500

400

300

200

100

–100

Outokumpu Annual report 2019 | Annual review

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CEO’s review

Increasing protectionism around the world, in the wake of
invoking article 232 tariffs in the US, has led to a continuing
flood of imports into the European market. The safeguard
measures implemented by the European Commission have
not had the desired effect due to some fundamental flaws in
their design. In 2019, these effects were exacerbated by the
global slowdown in manufacturing, especially in the automo-
tive industry. The resulting weak demand and historically low
prices weighed heavily on Outokumpu’s results.

In a testament to the resilience that the company has gained
through four years of relentless execution of our must-win
battles, we have been able, in spite of this harsh environ-
ment, to celebrate important successes. Our sharp focus on
cost and cash has resulted in a more than 4% productivity
gain year on year, safeguarding our competitiveness and
market position. Recognizing that in such an environment
cash is even more important than ever, we drove working
capital down by almost 220 million euros resulting in a
significant reduction of net debt to just over 1.1 billion euros.

In line with our vision, to be the best value creator in the
industry through customer orientation and efficiency, we
again improved on customer satisfaction rate. According
to the latest customer satisfaction survey, 72% of our
customers are highly satisfied with our products and services
and consider Outokumpu as the partner of choice.

2019 was a challenging year for the
European steel industry. Weak demand
and historically low prices weighed
heavily on our results. In spite of the
harsh environment, we have been able
to secure our competitiveness and
market position.

Outokumpu Annual report 2019 | Annual review

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CEO’s review

“Outokumpu
has always
been a leader
in sustainability
but we will not
rest on our
laurels”

Equally, looking at internal accomplishments, we have for the
fourth year in a row improved our safety performance with a
reduction of recordable incidents by 20% over 2018. We are
now undisputedly best in class in our industry when it comes to
safety performance.

On the flipside of the coin, Outokumpu’s full-year adjusted
EBITDA amounted to a disappointing EUR 263 million, strongly
influenced by low prices and exceptionally low deliveries. This
was especially true for business area Europe where import
penetration reached an all-time high of over one third of all
consumption. In spite of that the business area delivered a
reasonable result demonstrating the resilience of our business
model.

Rapid and diligent implementation of the comprehensive
improvement plan introduced at the end of 2018 positively
contributed to the performance in business area Americas.
Distributor destocking had a negative impact on deliveries in
2019, but under the leadership of the revamped management
team the Americas’ underlying performance continued to
improve, supported by a strong operational performance and
greatly enhanced commercial capabilities. The investment in
ferritics production in Calvert, due to start production during the
fourth quarter of 2020, will further strengthen our position in
the US market.

Outokumpu Annual report 2019 | Annual review

Going forward, establishing a level playing field for the European
steel industry is crucial for the long-term health of our industry.
We are confident that we can compete with any other stainless
steel company as long as they play with the same rules. Unfair
state subsidies, preferential treatment and illegal tax breaks
are not part of that level playing field.

More importantly, with the environmental challenge the world is
facing, everyone must be held to the same environmental stan-
dards. To make sure that a level playing field is established, we
work closely with the European Commission, the US government
and other stakeholders. The available toolbox that will help
restore a fair market includes a variety of measures ranging
from tightening the European safeguards to trade investigations
into dumping and other market distorting practices. The
European Commission is also investigating hot-rolled stainless
steel imports originating from China, Indonesia and Taiwan.

Furthermore, the EU has lodged a complaint with the WTO
against market distortion of the Nickel market by Indonesia,
and the United States has joined the EU in the WTO
consultations. On the environmental front, the Commission
considers implementing a carbon border adjustment as part
of the EU’s Green Deal to make Europe climate-neutral. This
would address the concern around highly polluting Asian steel
imports displacing sustainably produced European steel and the
resulting carbon leakage.

In today’s world, more than ever before, all companies have
to assume their responsibility to provide sustainably produced
products. Outokumpu has always been a leader in sustainability
but we will not rest on our laurels. We strongly believe that we
are part of the solution due to the character of our products
and our best in class production processes.

Reduction of our carbon footprint and mitigation of climate
change are key targets for Outokumpu. We believe that
sustainability provides a license to operate and is a
precondition for competitiveness in the long run. As a leading
producer of sustainable stainless steel, we are committed to
mitigating climate change through reducing our green-house

gas emissions significantly during the coming decade. Approxi-
mately 90% of our raw material is recycled, and we continuously
develop our processes and energy efficiency to further lower our
environmental impacts.

Four years ago, we set ourselves ambitious targets linked to
a bold vision – to be the best value creator in stainless steel
by 2020. Looking back, it is clear the market environment
has been much more challenging than we predicted in 2016
making us fall short of some of our financial targets. However,
when judging our progress on everything from creating a highly
effective and high-performing organization to being one of the
most efficient operations in the industry, I am extremely proud
of all that has been achieved and we can look to the future with
the confidence that comes with a strong company.

Outokumpu’s success depends on people, and I want to thank
our employees for your hard work and commitment. I also want
to say a big thank you to our customers and shareholders for
your continued trust and support.

Roeland Baan
CEO

7 / 13

Vision and strategy

Creating value with sustainable stainless steel

The cornerstone of our business is enabling our customers’ growth and
innovation through sustainable stainless steel solutions to benefit modern
society for generations to come. With sustainability at our core, we
continuously work towards more environmentally efficient operations to
mitigate climate change.

Vision
2020
To be the best value
creator in stainless steel
by 2020 through customer
orientation and efficiency.

The best value in the industry for customers,
shareholders and employees through:

Safety

Sustainability

Operational
excellence

Commercial
excellence

Americas

Digital
transformation

High Performing Organization

Stainless steel is the solution to many challenges the world
is facing as it is fully recyclable, efficient, and long lasting.
We help our customers to build a world that lasts forever by
producing stainless steel that has the lowest carbon footprint
in the industry. Based on our vision of becoming the best
value creator in stainless steel through customer orientation
and efficiency, we are focusing our efforts on the areas where
we need to excel to be able to create the best value for our
customers, shareholders, and employees.

Outokumpu is the undisputed market leader in Europe and
strong number two in the Americas. Our world-class assets,
comprehensive product portfolio and proven expertise form a
sound foundation for our strategy execution and future success.

Megatrends drive the demand
for sustainable solutions
Global megatrends, such as urbanization, mobility, economic
and population growth, and climate change, are the main
growth drivers for the stainless steel industry. The need
to develop sustainable solutions that are durable and can
be reused at the end of their lifecycle is apparent, as the
megatrends drive the demand for economic, social, and
environmental sustainability.

Our sustainability strategy covers the economic, environmental
and social aspects of our operations. Mitigating climate change
by reducing our carbon footprint is a clear focus area, and we
aim to reduce our environmental impact for example through
energy efficient production and by using low-carbon electricity.

Our commitment and contribution to sustainability are
embedded throughout our value chain from procurement and
production to customer deliveries. We have the lowest carbon
footprint in our industry and we are the leader in the circular
economy as the recycled content in our stainless steel is
highest in the industry – over 85%. We are continuously looking
for ways to even further improve the sustainability of our
products and processes.

Outokumpu Annual report 2019 | Annual review

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Vision and strategy

Our strategy is based on
selected must-win battles
We believe that the rigorous execution of our must-win battles
coupled with sound and sustainable operations will lead us
towards our vision. Our aim is to capture a significant part
of the market growth and provide the best value to our key
stakeholders and society.

Outokumpu’s strategy builds on six strategic targets, or
must-win battles, through which we aim to strengthen our
competitiveness and further improve financial performance.
All six must-win battles – safety, sustainability, operational
excellence, commercial excellence, Americas and digital
transformation – are connected to customer orientation and
efficiency improvements.

• Disciplined safety practices correlate with improved quality

and operational efficiency.

• Securing Outokumpu’s position as the sustainability leader

in the stainless industry helps to fight climate change and to
create a competitive advantage versus competition.

• Operational excellence aims to deliver continuous

improvement and step change in quality, supply chain, and
manufacturing.

• Commercial excellence focuses on margin growth through a
superior product strategy that meets the stringent customer
requirements and matches market demand with an optimal
product mix. It lays the foundation for an industry leading
customer experience.

• The Americas holds the biggest profitability lever, with

significant improvement potential in both cost and market
position.

• Digital transformation drives for new digital business and
manufacturing platforms and a major step-change toward
data driven management.

As of 2020, sustainability was included as a new must-win
battle and high-performing organization has been discontinued
as a must-win battle as the set targets have already largely
been met. However, the Organizational Health Index (OHI)
remains a measure of success also in 2020.

Each must-win battle includes specific development programs
that guide our daily activities and form the basis for perfor-
mance management. A common denominator for all of our
strategic targets is striving for straightforward and standardized
processes and ways of working to increase the efficiency and
productivity throughout the organization. n

Next steps

• TRIFR target for 2020: <3.0

• Launch roadmap to carbon

neutrality

Must-win battles

Achievements in 2019

• Total recordable incident frequency (TRIFR) decreased to 3.2
• Company-wide Safety Awards program launched to highlight good practices

• New must-win battle as of 2020

Safety

Sustainability

Operational excellence

• Outokumpu Production Index (OPI) moved from a group average of 47% in 2018 to 61%

• All sites >70% in OPI

• Reliability acceleration initiatives have delivered stability

Commercial excellence

• Developed sales processes to deliver the best customer experience in the industry

• Customer satisfaction ratio of absolutely or very satisfied customers at 72% (63% in 2018)

Americas

• The Americas’ adjusted EBITDA amounted to EUR 10 million in Q4/2019
• Reorganization of the Commercial team resulted in stronger alingment across sales teams

Digital transformation

• New ERP system implemented without major business interruptions
• Digital Manufacturing program established the Outokumpu Digital Platform (ODP) in Tornio, Finland

• Customer satisfaction at 75%

in 2021

• Improving delivery

performance

• Expand ODP to other

production sites

Outokumpu Annual report 2019 | Annual review

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Market environment

Stainless
steel market

Global consumption of
stainless steel is growing
due to the increasing need of
long-lasting and sustainable
solutions for the world’s most
critical challenges.

The long-term prospects for the increasing use of stainless steel
are positive. Stainless steel consumption has been growing in
all geographical areas. Growth has been fastest in the APAC
region, while consumption in the Americas and EMEA regions
have grown slower.

Global market with few big players
Outokumpu operates in the global stainless steel market. The
market for cold-rolled products totaled approximately 30.5
million tonnes in 2019, of which Outokumpu’s market share
globally was approximately 5%. Our cold rolled market share
in Europe is approximately 28% and in the NAFTA region
approximately 21%. Outokumpu is the market leader in Europe

and the clear number two in the Americas with a market share
of approximately 20% in the US. (Source: EUROFER, SMR)

In addition to Outokumpu, the largest stainless steel producers
worldwide include Asian companies Tsingshan, TISCO and
POSCO as well as European-based Acerinox and Aperam.
Several Asian producers also manufacture carbon steel, while
European manufacturers focus on stainless steel. (Source: CRU)

With a growing demand, the longterm
market outlook is positive
The long-term outlook for stainless steel demand remains
positive. Global megatrends, such as urbanization, climate
change, and increased mobility combined with growing global

Major stainless steel producers

End-uses of stainless steel in 2019

Million tonnes

Tsingshan
TISCO
POSCO
Acerinox
Outokumpu
Aperam
Guanxi Chengde
YUSCO
Jindal

2020

2019

9.8
4.5
3.3
3.3
3.2
3.0
3.0
2.8
2.6

(cid:31) Consumer Goods & Medicals 49%
(cid:31) Chemical, Petrochemical & Energy 15%
(cid:31) Automotive & Heavy Transport 11%
(cid:31) ABC & Infrastructure 16%
(cid:31) Industrial & Heavy Industry 7%
(cid:31) Others 2%

Source: Stainless steel production capacity of slabs, CRU November 2019.

Source: SMR, stainless steel finished products (rolled and forged products excl.
13Cr tubes, profiles), January 2020.

Outokumpu Annual report 2019 | Annual review

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Market environment

demand for energy, food, and water, are expected to support
the future growth of stainless steel demand. In 2019, the global
steel production amounted to 1,870 million tonnes of which
approximately 3% was stainless steel. (Source: CRU, Worldsteel)

The demand for stainless steel products is impacted by global,
regional, and national economic conditions, levels of industrial
investment activity and industrial production.

In 2019, global apparent consumption increased by 2.7%
compared to the previous year. APAC contributed with a growth
of 5.3% while EMEA and Americas shrank by 3.6% and 5.7%
respectively. (Source: SMR)

Heavy Industries grew by 3% and 1%, respectively. Meanwhile
demand in the Chemical, Petrochemical and Energy segment
remained at the same levels as 2018, whereas demand in
Automotive & Heavy Transport segment shrank by 7%. (Source:
SMR)

Market environment remains difficult
In 2019, the European steel industry continued to suffer from
the surge of imports and unprecedented price pressure caused
by the US steel tariffs which continued to have a negative
impact on stainless steel base prices and deliveries in Europe
throughout the year.

Global real demand for stainless steel products reached 43.8
million tonnes in 2019, an increase of 1.5% from 43.2 million
tonnes in 2018. The annual demand growth was strongest in
the ABC & Infrastructure segment, increasing by 5% from 2018.
Demand in the Consumer Goods & Medical and Industrial &

The stainless steel industry has been burdened by overcapacity
in recent years, especially in Asia. The global stainless steel
production capacity of slabs increased in 2019 by roughly 4%
to 58.8 million tonnes. The global utilization rate was assessed
to have slightly decreased to the levels of 72% in 2019. As

the production of stainless steel is capital intensive, producers
generally seek to maintain high capacity utilization in order to
maintain and improve profitability. (Source: CRU)

The global stainless steel production of slabs grew by around
1% in 2019 from the previous year, reaching 42.6 million
tonnes. The output decreased in most of the regions including
Europe and Americas, while it only grew in China by 9% and in
Indonesia by 15% compared to 2018. (Source: CRU)

Stainless steel is sold either directly to end users or to stainless
steel distributors, tube makers, and processors, such as
steel service centers, who resell the products to end users. In
2019, 55% of Outokumpu’s stainless steel was sold directly to
end-user customers. The remaining approximately 45% of sales
were shipped to distributors and processors that stock and
process stainless steel to serve end users. n

More on our actions on climate change

TARGET 0 / RESULT 0

TARGET 2020 90% / STATUS 89.6%

TARGET 2023 20% / STATUS 13.8%

Outokumpu Annual report 2019 | Sustainability review

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Safety

Safety is our
highest priority

Safety is our highest priority.
Everyone who works or visits
Outokumpu’s premises
– employees, customers,
contractors, and other visitors
– has the right to a safe and
healthy working environment.

In addition to the safety awareness training and the regular task
and location specific safety education, a new e-learning course
about risk assessments was launched to increase awareness
and understanding of workplace hazards, risks and control
measures.

As a part of building a positive and preventive safety culture,
Outokumpu launched a global Safety Awards program in 2019.
The initiative aims to encourage and recognize both individual
employees and teams for their efforts to improve safety
performance and culture.

The annual Safety Week was held in April with a continued
focus on hand safety and preventing hand injuries as these
types of accidents have still represented a high percentage of
our accidents. In 2019, the theme was taken further by linking
it with known high-risk areas in our production sites, combining
hand safety with risk assessments – another safety priority.

Work-related injuries*

Total recordable injuries

2015

2016

2017

2018

2019

● Non-lost time injuries** ● Lost time injuries
● Fatalities ● Restricted work injuries
● Medically treated injuries ● First aid treated injuries

* Per 1 million working hours.

** Split between non-lost time injury types is not available before 2016.

Safety is one of the cornerstones in Outokumpu’s strategy. We
believe that strong safety performance correlates with improved
quality and operational efficiency. We aim to be among the
industry leaders in safety with the vision of zero accidents.

Our safety management system supports us in striving toward
this goal through various preventive activities. Safety audits
are performed regularly at our production sites according to
a standardized audit program. Our daily work is guided by
common safety principles, standards, guidelines, and our ten
Cardinal Safety Rules. Hazard observations and Safety Behav-
ioral Observations (SBOs) are utilized to flag potential risks and
unsafe behaviors before they lead to accidents. Lessons from
past incidents are shared with other sites in the monthly Safety
Call hosted by the CEO.

Preventive and positive safety culture
Strengthening our safety culture across the organization was
one of our focus areas for 2019. The company-wide behavioral
safety training program SafeStart has been executed at most of
our sites with approximately two thirds of the employees having
completed the training. The feedback questionnaire filled out
by participants at the end of the training has given a good
indication that the program has met expectations with positive
feedback for the trainers who held the trainings. One site has
received a Gold award from SafeStart organization as a result of
the follow-up process.

Outokumpu Annual report 2019 | Sustainability review

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Safety

Safety performance
Proactive safety actions and incidents were reported and
monitored on a monthly basis. The definitions of safety
performance indicators are based on international standards.
Incident rates and the rate of proactive safety actions (leading
indicators) were reported per million working hours.

Health and well-being
Good health and well-being of our personnel are essential values
on their own. In addition, we believe that a healthy and thriving
team of professionals is an asset to the company’s success. We
want all employees to return home healthy, safe and sound every
day.

Outokumpu uses total recordable injuries per million working
hours of employees and contractors (TRIFR) as the main safety
performance indicator. Group TRIFR declined from the previous
year and was 3.2 against the target of <3.5 (2018: 4.1). Group
LTIFR (lost time injuries per million working hours) was 1.4
against the target of <1.3 (2018: 1.7).

The rate of all work-related accidents (total recordable injuries
and first aid treated injuries per million working hours) was
15.3 (2018: 19.5). Lost-day rate (more than one calendar day
absence from the day after the accident per million working
hours) was 63.2 (2018: 84.2).

Proactive safety action frequency was 3,810 (2018: 3,330).
This includes reported near-misses, hazard observations, SBOs
and other preventive safety actions per million working hours.

Outokumpu encourages its employees to take care of their
physical health by offering various exercise benefits and discounts
to sports and well-being services. Different health support
programs are also run across our sites.

Regular health checks and other preventive medical care
activities such as influenza immunization were carried out in
many countries. Employees were offered screenings for common
diseases, for example, in Germany for skin cancer and in the US
for heart and vascular blockages.

In addition, occupational hygiene measurements are being carried
out at Outokumpu sites to ensure a healthy working environment.

The number of occupational diseases diagnosed in the Group was
0 (2018: 0). Total absentee rate was 4.2% (2018: 4.2%). n

Work-related injuries by region, accident and employee type

Group

Europe

Americas

Asia and rest
of the world

Female

Male

Employees

Contractors

TRIFR 1)

LTIFR 2)

Total recordable injuries 3)

Fatalities

Lost time injuries

Restricted work injuries

Medically treated injuries

3.2

1.4

3.8

1.7

1.8

0.6

0.0

0.2

0.1

3.0

1.3

3.1

1.6

Lost-day rate

63.2

68.4

50.5

0.0

0.9

62.3

53.6

1) Total recordable injury frequency includes fatalities, lost time injuries, restricted work injuries and medically treated injuries, per million working hours.
2) Lost time injuries including fatalities and lost time injuries, per million working hours.
3) Includes fatalities, lost time injuries, restricted work injuries and medically treated injuries.

3.6

0.9

37.6

Hands are not tools
– success at reducing
hand injuries

Since 2017, Outokumpu’s site in Mexico has had a
safety program aimed at reducing hand related injuries.
The program started with releasing a Hands Off Policy
that sets the rules and principles for hand safety at
the site.

The policy was followed by a safety campaign, Hands
are not tools, and several other initiatives. The
program has proven to be a success: in two years,
the number of hand injuries decreased from 21 to
2 in 2019. The key for achieving success with the
campaign has been in the safety commitment at all
levels as well as sharing best practices and empha-
sizing safe behaviors.

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Personnel

Organizational
health
continues
to improve

We aspire to develop a high
performing organization and
make Outokumpu an even
better place to work. We want
our people to feel motivated,
respected, and proud to be
part of the Outokumpu team.

Improving our workplace and organizational health continued
during 2019 with an emphasis on the selected focus areas:
empowerment, role clarity, and inspirational leadership.

We measure and manage our organizational health in a
consistent and comprehensive manner to succeed in the long-
term as a high performing organization. To assess our strengths
and improvement areas and to initiate the needed development
efforts, Outokumpu conducts annually an Organizational Health
Index, OHI survey.

Strategy and vision better
connected to daily operations
As a tool, OHI survey connects the day-to-day behaviors and
mindsets of employees to the company strategy. In 2019, our
target was to improve our overall OHI score toward the first
quartile of the evaluation. The Outokumpu team’s participation
in the OHI survey was once again outstanding and the overall
response rate reached 87% (2018: 86%), which is exceptionally
high for an industrial company. More than 17,000 individual
open comments, recommendations, and opinions were given
by employees at all levels of the organization. The engagement
of our personnel to Outokumpu and to improving the company
is shown in the active participation in our annual organizational
health survey and in shared development initiatives.

Above all, our organizational health continued to improve. In
three years, our OHI score has improved significantly, from
50 points in 2016 to 71 in 2019. The overall score for all of
Outokumpu improved by 4 points, only 2 points from reaching
the top quartile.

According to the OHI survey results, employees are now
much more involved in continuous improvement activities.
Outokumpu’s strategy and vision are better connected to daily
operations, and the sense of empowerment has increased
among our employees. By supporting, challenging, involving,
and inspiring employees, leadership is becoming more effective
and visible. The relentless work in our shared development
initiatives has resulted in this progress and the improvements
demonstrate that we have taken the right actions to develop
our organizational health, thereby making Outokumpu an even
better place to work. After thorough analysis, we will initiate
action planning and the necessary development activities.

Based on the survey results, we have identified that our key
development areas for 2020 will remain similar as the previous
year: leadership, role clarity, and empowerment.

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Personnel

Our people
During 2019, there were no significant changes to the total
number of employees. The number of employees decreased by
59 globally. We started actions including personnel negotiations
in Germany and business area Long Products to enhance the
productivity and efficiency of our European operations.

In Europe, continuous collaboration with the personnel takes
place in a joint consultative body, Personnel Forum, which is
an information channel between our personnel and corporate
management. Outokumpu is committed to informing and
consulting its employees and their representatives to ensure
a greater understanding of the company and the competitive
situation in which we operate. The Personnel Forum discusses
issues concerning transnational interests, such as financial
performance, employment issues, reorganization, health and
safety, and technology and research. In 2019, the Personnel
Forum meeting focused on two main topics, safety and
digital transformation. The forum has 33 representatives
from European countries, elected according to the national
legislation and local practices in each country. The forum
appoints the Group Working Committee, which is responsible for
the ongoing cooperation between management and employees.
Eight members represent employees and three represent the
management. In 2019, the Personnel Forum met once, and the
Working Committee convened four times.

Outokumpu’s working hours, minimum notice periods, vacation
times, wages, and other working conditions are consistent with
the applicable local laws. Outokumpu maintains a consistent
policy of freedom of association. All Outokumpu employees
are free to join trade unions according to the local rules
and regulations, and in 2019 altogether 79% of the Group’s
employees were covered by collective agreements (2018: 80%).
5,424 days in 2019 were lost due to strikes (2018: 1,607).

Outokumpu’s Code of Conduct sets the way of operating in the
Group, built on the equal treatment of all people: there is zero
tolerance for any kind of discrimination, whether it is based on

ethnic origin, nationality, religion, political views, gender, sexual
orientation, or age.

Our people by region

Germany
Finland
Sweden
The United Kingdom
Other Europe

Europe
The United States
Mexico
South America

Americas
Asia/Rest of the world
Group total

2019

2,555
2,502
1,975
560
727
8,319
1,064
859
87
2,010
61
10,390

2018

2,667
2,437
1,940
571
698
8,313
1,072
903
86
2,061
75
10,449

2017

2,744
2,377
1,619
538
624
7,902
1,077
1,000
85
2,162
77
10,141

Organizational Development
As a High Performing Organization, we aim for a lean,
simple, and flat organizational structure with clear roles and
responsibilities creating a high level of individual accountability.
Several actions and initiatives were ongoing during 2019 as we
continued enhancing personal ownership, empowerment, and
role clarity.

Enhancing the must-win battle High Performing Organization has
encompassed various group functions preparing organizational
process blueprints with the first implementation phase taking
place in the first half of 2019. Well-defined role clarity has been
in focus during the rollouts of the organizational blueprints and
the business transformation program Chorus.

Implementation of the new HR organization was launched
with the aim to create a shared employee experience across
the organization. The new HR organization and service model
emphasizes employee and manager empowerment and creates

consistent and standardized HR processes, common ways
of working as well as improved efficiency and effectiveness
through the better utilization of technology.

Capability building
In 2019, we had a strong focus on leadership as we improved
our talent management and leadership development. In addi-
tion to leadership development programs, we are continuously
improving day-to-day leadership skills, e.g. using calibration
sessions to discuss and align to the performance management
results.

During 2019, a specific emphasis was on supportive leadership
behavior, and to advocate the change, our Leadership
Excellence program was launched to the full extent in the first
two locations, where all levels of managers were trained. To
enhance the capabilities of our first line managers, the License
to Lead training continued in several locations. In 2020, the
program will be modified, as the Leadership Pipeline method-
ology will be implemented into the program.

To reinforce the implementation of the new HR organization
and service model, a training program for all new roles in HR
has been piloted and was being rolled-out. The role-based
customized training program, HR Academy, supports role clarity
and enables and empowers HR team members to perform their
future roles by leveraging capabilities and creating a common
mindset.

In addition, we revised our Sales Academy, piloting new
modules. Other specific programs include Reliability Engineering
Academy for operations and maintenance, and Digital
Manufacturing Academy for IT enablement to prepare for
digital manufacturing. Capability building has included multiple
activities and training programs in the Manufacturing Excellence
initiative. Several of our Black Belt level experts in Lean Six
Sigma methods have been certified to assist in coaching and
supporting our Green Belt community in delivering improvement
projects.

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Personnel

The implementation of the Chorus program also comprised
extensive learning and training: over 1,600 employees were
involved in the Chorus related training sessions. Furthermore,
the SafeStart behavioral safety awareness program continued
and spread to new locations. The global e-learning curriculum
included safety related Risk Assessment course, compliance
focused Knowing Your Business Partner course as well as
Welcome to Outokumpu onboarding course for newcomers.

In total, over 84% of Outokumpu employees participated in
training sessions and programs. Overall, the number of training
and development days amounted to 18,004 (2018: 17,860)
and 144,036 hours (2018: 142,845) during the year.

Developing global talent management
Our global talent management process is owned by the
Outokumpu Leadership Team. During 2019, succession
planning became more systematic, as better use of technology
and our common HR platform PeopleDrive enabled the change
and provided more efficiency.

Young talents and employees identified as potentials form the
foundation of our talent base. We have intensive programs to
develop these talent pools along with our graduate programs.
Form your Future is an international development program for
newly hired graduates that sets the basis for an international
career growth in Outokumpu. We have continued building our
development programs and Development Center events, where
the individual strengths and development areas of each talent
are identified. Young talents and high potentials are offered
individual development plans for target-oriented and systematic
development, and the aim is to assess the potential for
positions at a higher level.

As part of the talent review process, Outokumpu builds
succession plans for several levels of the organization, and the
Excellerate program presents leadership development reviews
and management audits. Moreover, our onboarding program
has been upgraded and taken into use across the company to
ensure a uniform onboarding experience.

Performance review process
Our aim for a high performing organization is enforced through
active performance management, processes and systems for
the whole organization.

Improving performance management has included access
to participation in the performance management process
to everyone, both production and administrative employees.
Regular performance review discussions enhance role clarity
in the organization and form an essential development tool. In
2019, 94% of production employees and 95% of administrative
employees in applicable countries had a regular performance
development discussion with their respective manager. In those
countries where local contracts or regulations do not make
it possible to have performance development discussions,
Outokumpu follows the local procedures.

To ensure high performance for the whole organization, we are
improving efficiency and effectivity through better utilization
of technology. We have a common HR platform, PeopleDrive,
which enables effective alignment of our HR processes. With
our vision to become the best value creator in our industry
for our employees, we aim to use this opportunity to create a
common employee experience across the whole organization.
In addition, development was ongoing in 2019 to enable the
mobile use of PeopleDrive. The mobile PeopleDrive will improve
user experience, transparency and on time delivery for both
managers and employees.

In 2019, Outokumpu continued its efforts to increase alignment
and transparency in remuneration topics by means of the wider
use of its global HR system as well as updated policies and
documentation in several remuneration areas and by providing
further training to all managers. Outokumpu’s remuneration
principles and framework are largely unchanged from the
previous year meaning incentive plans remained the same while
salary increases were on a moderate market-based levels. The
long-term incentive programs continue to focus on emphasizing
shareholder value creation and ownership culture and to
incentivize the achievement of the 2020 vision.

Establishing leadership
excellence

With the extensive Leadership Excellence program,
we are bringing leadership skills to a new level. The
program was piloted at our locations in Tornio and
Kemi and rolled out also in Avesta and Nyby, triggering
development and leveraging team performance. Topics
that leaders have started to practice during the
program include how to create value in leadership
roles and what the main responsibilities are in leading
people: is the manager leading other individuals
or other leaders. Empowerment is linked with the
leadership development activities, incorporating the
idea of helping others to succeed and gaining results
through others. The new mindset generates more role
clarity, well-being and tools to focus on adding value.

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Personnel

Focus areas for 2020
We strive to improve our organizational health further, as we
want to offer our employees the best work environment. We will
continue enhancing leadership, role clarity and empowerment.
In 2020, our target is to move to the first quartile among the
1,700 other companies using the Organizational Health Index
methodology.

Our professional training program will be aligned according to
the future needs and qualifications and, furthermore, educating
and increasing the competencies of employees continue as an
essential part of capability development. For example, profiling
the skillset of a future operator is linked with Digital Manufac-
turing program at our site in Tornio.

Our academy programs ensure that employees have the skills
and knowledge to perform value adding tasks, and for example
HR Academy and Sales Academy continue in 2020. To prepare
for Digital Manufacturing, a program focused on IT enablement

will continue in 2020. In addition, Finance Academy is in
preparation for 2020, and the QualityApplied program will be
launched for operations and sales to raise awareness of the
product quality requirements. In connection to creating the
step-change in leadership, we will proceed in rolling out the
Leadership Excellence program in 2020.

Our talent management will be developed further, e.g. by
ensuring high potentials have the capability to develop into
higher-level roles or more advanced work. Our talent pools
are continuously reviewed and updated, and they produce the
foundation for finding successors within the organization.

As planned, the transition toward the complete implementation
of our new HR service model will last until the end of 2020.
By that time, we will have implemented common processes,
supported by the required technology, and we will have
centralized, streamlined, and automated all of the process
steps in scope.

We will continue to standardize our processes and improve
PeopleDrive, which will allow managers and employees to
complete more tasks efficiently by using the self-service
options. For example, the execution of succession module in
our common HR platform PeopleDrive will underpin our talent
review process. In the coming 12 months, we will continue our
HR digitalization journey and focus on delivering efficiency,
transparency, standardization, and improved user experience.

To increase transparency and understanding, we have prepared
a new compensations and benefits guideline to all managers
and we will offer training on compensation and salary manage-
ment processes, consisting of salary policy and incentives, for
example. n

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Responsible supplier

Sustainability
in the supply
chain

Outokumpu is a part of
a global supply chain by
producing stainless steel for
leading brands in demanding
industries around the globe.
Our customers expect us to
provide a traceable supply
chain and, therefore, we
have in place stringent
requirements on our suppliers,
too.

Our customers require assurance that the materials for their
applications are produced and procured in an ethical and
responsible manner. We are one of the few companies in the
stainless steel industry with an integrated production – covering
the production from the mining of chromite and ferrochrome
production to the melting, hot rolling, cold rolling, and finishing
of stainless steel.

suppliers are requested to provide an improvement plan and
evidence of improvement. If the situation continues without
progress, Outokumpu will discontinue purchasing from the
supplier. There were no cases of restricting supply in 2019.
Outokumpu has declined business opportunities in cases where
it has been established that the business partner is not following
our Code of Conduct.

Our most important raw material is recycled steel, which
originates mainly from Europe and the US where our melt shops
are located. The main alloying element, chromium, originates
from our own chromium mine that differentiates us from our
competitors. Our mine in Kemi, Finland is the only chromium
mine in the EU and we produce ferrochrome for all our steel
melt shops.

We place stringent requirements on
ourselves and our suppliers
As our customers require a lot from us, we place the most
stringent requirements on ourselves, and require the same from
our suppliers. All suppliers and subcontractors are expected
to comply with our Code of Conduct or similar standards and
meet our supplier requirements, which require our suppliers to
act according to the applicable laws and regulations, maintain a
quality management system, sign general terms and conditions,
and be able to clearly define, document, and share their supply
and production control processes including material traceability.

Outokumpu monitors its suppliers through self-assessment,
screenings, and audits. Most of the suppliers are going through
a monthly compliance screening for sanctions. In 2019, 11
suppliers were invited for a self-assessment and 11 suppliers
were audited on site. The suppliers audited on-site were partially
the same suppliers who participated in the self-assessment. As
a result, improvement opportunities and improvement require-
ments were identified and communicated to the suppliers.
The supplier assessment is based on Outokumpu’s supplier
requirements and focused to evaluate suppliers’ social and
environmental responsibility, safety and quality management.

Global supply chain
In 2019, Outokumpu had over 9,000 suppliers. Vast majority
(93%) of the suppliers are located in Finland, Germany,
Sweden, the UK, the US, and Mexico, where Outokumpu has its
production units. In those locations where we have significant
production sites, the proportion of spending on local suppliers
was on level of 80%–90%*. There were no major changes in the

We assess our new and existing suppliers and if there is
evidence of any kind of violation of our requirements, the

* Figure not comparable with 2018 as definition of local supplier

has changed.

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Responsible supplier

supplier base during the year. Some purchase volumes between
the raw materials suppliers shifted, but no new major suppliers
were introduced.

We take into account the OECD Due Diligence Guidance
for Responsible Supply Chain. In 2019, we screened our
direct material suppliers on the environmental, social, and
governance (ESG) risks in countries of origin. The ESG country
risk assessment was based on the following seven criteria:

regulatory quality, rule of law and corruption from the World
Bank, Environmental Performance Index, conflict minerals, child
labor, and forced labor. The top 20 suppliers cover 80% of the
total direct material spending. Six suppliers out of this group
are located in countries with ESG risks. Those were requested
for a self-assessment and all of the requested companies
replied. Analysis of self-assessment showed that no ESG risk
was taken up in the answers. In 2020, we will start to audit the
top 20 suppliers also under ESG criteria.

Environmentally sustainable transportation
Outokumpu’s target is to transport as much of our products by
rail and ship as possible. Our mills have various programs and
targets to make transportation more environmentally friendly. In
2019, the total transport emissions decreased by about 17%
mainly due to production decrease. n

Material and service suppliers

● Outokumpu supplier countries, including the most important
supplier countries with purchases of more than 50,000 euros.

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Environment

Mitigating
climate
change with
stainless steel

Stainless steel helps to
mitigate climate change. It
is fully recyclable, efficient,
and long-lasting. In addition
to offering solutions for low
carbon society, we work
continuously to reduce our
carbon profile.

During 2019, we revised environmental product declarations
(EPDs) on our main products with life-cycle inventory data,
making it possible for our customers to calculate sustainability
performance over their products’ life cycle. EPDs are standard-
ized and verified externally.

Where do our emissions come from?
The greenhouse gas emissions from Outokumpu operations
are limited to CO2 emissions. These emissions come directly
from production (scope 1), indirectly from the use of electricity
(scope 2) and mainly from upstream emissions from the use of
materials (scope 3).

Direct emissions originate from the carbon content of our
raw materials and from the use of fuels. Indirect emissions
are caused by the use of electricity. These emissions are
followed by market-based emission factors from suppliers of
Outokumpu’s electricity mix. Electricity emissions are also
published as location-based emissions

Other indirect emissions for steel productions are mainly
upstream emissions of material use such as ferroalloys (except
ferrochrome which is included in direct and indirect emissions
of scope 1 and 2) as well as lime and dolomite, transportation
and to a lesser extent from some other scope 3 emissions. At
the moment, there are no estimation methods for the complex
downstream emissions of stainless steel available. Case studies
from consultants indicate CO2 eq. net savings of steel use from
life cycle assessment.

Towards lower company footprint
Our total company carbon footprint, including upstream
emissions, is the lowest in the industry according to internal
estimates. We continuously strive to make our operations
more energy efficient and to maximize the use of low carbon
electricity in our operations. Increasing the recycled content of
our products and improving resource efficiency are also factors
in reaching even lower CO2 eq. emissions and reducing upstream
emissions.

In 2019, the total specific CO2 eq. emissions were reduced by
13.8% compared to baseline 2014–2016. Scope 3 emissions
could be reduced by higher recycling. Ferrochrome production
increased and we sold more ferrochrome outside the company
compared to 2018. The emissions allocated to sold ferro-
chrome were not included in the target report for the stainless
steel.

In 2019, Outokumpu consumed overall 28,254 TJ of primary
fuels and electricity decreasing by 4% due to lower stainless
steel production. However, the intensity figure increased by
7% to 10.9 GJ per ton steel due to increased ferrochrome
production. See all data on CO2 emissions

Our climate targets are science-based
Outokumpu is committed to the Science Based Targets
initiative. The initiative considers companies’ greenhouse gas
reduction targets science-based if they are in line with the
level of decarbonization required to keep global temperature

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Environment

increase well below 2°C compared to the pre-industrial
temperature.

Our target is to reduce scope 1, 2, and 3 greenhouse gas
emissions by 20% per tonne of stainless steel by 2023 from a
2014–2016 base-period. The baseline of the three years was
chosen to get the most recent baseline after the restructuring
of the company and to avoid influence of yearly fluctuations.
Emission intensity refers to emissions per tonne of produced
steel.

Target for Science Based Target criteria

Outokumpu’s CO2 eq. emission intensity,
tonnes of CO2 eq. per tonne steel

Reduction target of 20% by 2023

2.0

1.5

1.0

0.5

0.0

14–16

2023

● Upstream CO2 emission intensity
● Transport & travel
● Indirect
● Direct

We also follow the 2°C scenario convergence criteria of steel
industry’s decarbonization approach: to reduce emission
intensity to 0.92 t CO2 per tonne of crude steel by 2050.
Specific electricity emissions follow the electricity decarboniza-
tion approach, where the specific emission reduction target is
95% by 2050.

In 2019, as a part of the new sustainability strategy, a new
working group was created to prepare steps for long-term
carbon reduction to achieve carbon neutrality in 2050. Electric
arc furnace is the best available technique for stainless steel
production. Emission reduction comes from further energy
efficiency strain, increasing recycling and transitioning to carbon
neutral electricity. For ferrochrome, Outokumpu is conducting
research on new low carbon technologies. Our processes are
already connected with the lowest CO2 eq. emissions as we have
an integrated site using ferrochrome in a liquid phase and using
process gas to replace primary fuels.

Opportunities of a low-carbon society
Climate change is one of the three megatrends driving our
business. The life cycle of a stainless steel solution can have
a lower climate impact compared to carbon steel, for example.
As stainless steel is corrosion resistant and a long-lasting
material, it stands out in many applications of renewable energy
production such as in high temperature power plants, solar
farms, and biofuel plants. This growing market in the transition
to a low-carbon society gives Outokumpu the opportunity to
increase the revenue.

Emissions trading and fair competition
80% of Outokumpu’s all direct emissions fall under the
European Union Emissions Trading Scheme (ETS). The total
phase allocation of 2012–2020 will be sufficient for the rest of
the trading period, although individual plants are in deficit. Total
free allocation for 2019 was below emissions.

The ETS is continuing by the third trading period 2013–2020
remaining to receive free emissions allocations according to
efficiency-based benchmarks and historical activity. The main
risk of the emissions trading system to Outokumpu involves
the pass-through costs of allowances to the electricity price,
reduction of electricity price compensations and of free
allocation. Outokumpu collaborates with industry associations
to mitigate the risks.

The next trading phase from 2020–2030 will continue with
the general rules. Outokumpu will need to buy allowances
and use some surplus allocations available from production
decrease in the past and fall in short position as the product
benchmark significantly reduces. Electricity and allowance
prices are expected to increase. Read about risks related
to emissions trading in Key risks section. The EU Emissions
Trading Scheme does not take into account the product life
span. This is misleading for metal and steel products because
they decrease CO2 eq. emissions during their life span more than
their production phase causes. n

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Environment

Focus on
energy
efficiency
improvements

Outokumpu’s operations
are energy intensive. For the
recycled steel to melt, it is
heated to over 1,400°C. The
process requires a high
amount of electricity as the
best available technique for
melting recycled steel is to
use electric arc furnaces.

Outokumpu is continuously striving to make its production
operations more energy efficient and minimize its environ-
mental impacts. Although the melting of recycled steel and the
production of stainless steel consume a lot of energy, stainless
steel enables energy efficient solutions from a life-cycle
perspective by saving energy during its use phase.

Our target is to improve the energy efficiency of our operations
by 1% each year until 2020. In 2019, our energy efficiency was
affected by low production volumes. Our improvement of energy

Origin of electricity, %

100

2015

2016

2017

2018

2019

● Renewable sources
● Nuclear
● Fossiles

1) Includes electricity mix of
Mexico for the first time.

efficiency calculated as a sum of different process steps was
6.0% compared to the baseline 2007–2009. This was below
our target, but it corresponds to a yearly saving of 0.55 million
MWh in 2019.

Yield optimization improves energy efficiency
The biggest energy-saving potential lies in the optimization of
yield. Yield refers to how much sellable product we can make
of the metal raw materials inserted in the process. Energy
reduction and efficiency plans are included in environmental
management systems at all our sites. Over the past years, we
have been able to improve our overall energy efficiency by
reorganizing production sites, optimizing our internal supply
chain and increasing our capacity utilization globally. During
2019, energy efficiency projects and improvements were
discussed and reported in an internal working group.

As energy sources, we use natural gas, propane, or some other
fuels, such as diesel. Fossil fuels cover about 80% of our total
fuel consumption. Outokumpu does not consume renewable
fuels in production processes but we utilize our own recovered
carbon monoxide process gas with 20% of our total fuel.
Process gases and waste heat are also used to heat buildings
on sites.

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Environment

Toward low-carbon electricity
Outokumpu has centralized energy procurement in order to
secure sufficient energy supply, to ensure predictable, compet-
itive, and stable energy prices, and to optimize the energy
portfolio also on low-carbon electricity.

Outokumpu participates in several programs that promote the
use of low-carbon electricity such as wind power, hydropower,
combined heat and power as well as nuclear power. For
example, the combined heat and power plant in Tornio
produces heat for the Tornio site out of recovered process
gases, and in Dahlerbrück, Germany, we have our own hydro
power plant to generate some 10% of the electricity needed
in the production. Outokumpu is a shareholder in a wind
power park in Tornio, in a hydro-power plant in Norway and in
a new nuclear power plant project in Finland. In 2019, 77%
of our electricity sources came from low-carbon (renewable
and nuclear) sources (2018: 64%). We succeeded to increase
the level of low-carbon electricity as we have allocated higher
nuclear power to the Finnish electricity supply. See more details
in the data tool.

In 2019, our site in Tornio fully transitioned to use LNG instead
of propane in production. During 2019, the use of LNG reduced
Tornio site’s CO2 eq. emissions by 4% compared to corresponding
propane emissions. Natural gas has already been in use at our
sites in Germany, Mexico, the US, and the UK. Compared to
propane, LNG has also lower and more stable prices improving
our cost-competitiveness. n

Energy used in operations

Terajoules, TJ

Electricity

Carbon monoxide gas

Natural gas

Propane

Diesel, light and heavy fuel oil

Energy

2019

16,167

2,412

6,983

2,024

688

2018

17,189

2,275

4,623

4,754

662

2017

16,325

2,003

4,241

5,016

580

28,254

29,502

28,164

Energy use in GJ per tonne crude steel

10.9

10.1

9.3

Data includes the acquired site in Fagersta, Sweden for July–December 2018.

New LNG terminal
inaugurated

The new LNG terminal in Tornio is operated by Manga
LNG, a joint venture by Outokumpu, EPV Energy, SSAB
Europe, and Skangas. The terminal is the largest
LNG terminal in the Nordic countries and the second
LNG terminal operating in Finland. Overall, liquefied
natural gas is an environmentally friendly fuel that
can replace petroleum-based fuels in industry, energy
production and heavy transport, and it can help reduce
shipping emissions as it meets the Sulphur Directive
regulations. Outokumpu’s Tornio site’s emissions can
be reduced by approximately 4% due to transition to
LNG.

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Environment

Operating at
the heart of
the circular
economy

We operate at the core of the
circular economy as we use
high amounts of recycled
materials and at the end of
its life-cycle stainless steel is
endlessly recyclable without
any loss of quality.

Total waste

Tonnes

2019

2018

2017

Total non-hazardous waste

281,646

356,230

289,502

Recycled

Recovery

Landfilled

49,227

17,138

52,736

19,256

215,281

284,239

Total hazardous waste

146,765

163,555

Recycled

Recovery

Landfilled

12,988

53,252

15,414

47,700

80,525

100,442

50,972

11,875

226,655

144,621

14,506

41,171

88,939

Tailing sands

1,006,590

991,391

784,585

In fact, our stainless steel mills are significant recycling facilities,
producing new products out of recycled steel, recovering and
recycling everything reasonable in our production, and finally
selling by-products from the manufacturing process to replace
natural resources.

High recycled content
Recycled steel from both stainless and carbon steel is our most
important raw material. The steel recycled content according
to ISO 14021 was 85%. This includes pre- and post-consumer
scrap. Including the use of recycled metal from our waste
streams, the recycled content of our products was 89.6% in
2019.

One key factor in reaching such a high level of recycled content
is the recovery and recycling of metals from the production
processes, e.g. from dust. Dust is either treated on site or by an
external facility for recycling in our melt shops.

In addition to metals, other raw materials, such as slag
formers, acids, and gases, are needed in the production
process although they do not become part of the stainless
steel products. Some of these input materials are needed
to minimize or prevent emissions to the environment. As far
as reasonable, these are also recovered and recycled in the
process. For instance, used acids are continuously regenerated
for reuse and hydrogen from bright annealing process are
recovered in the incineration of the process furnace.

Outokumpu Annual report 2019 | Sustainability review

16 / 24

Environment

Aim to reach zero waste to landfill
Our approach to reaching zero waste is twofold: we aim
to reduce the total volume of landfill waste from our own
operations and increase the proportion of materials sold as
by-products.

The biggest waste items at Outokumpu are slag that are not
used, tailing sand from the mining operation and sludges, dust
and scales from the stainless steel production. While waste
is recycled whenever possible in our own production, our
production still generates landfill waste. We strive further to
reduce this, and our long-term goal is to generate zero landfill
waste. In 2019, the total amount of waste from stainless steel
production was 0.43 million tonnes and the landfilled waste
decreased to 0.3 million tonnes (2018: 0.38) as production
decreased.

Total waste development, tonnes per tonne steel

0.6

0.5

0.4

0.3

0.2

0.1

0.0

d
n
a
s

g
n

i
l
i

a
T

d
n
a
s

g
n

i
l
i

a
T

d
n
a
s

g
n

i
l
i

a
T

d
n
a
s

g
n

i
l
i

a
T

d
n
a
s

g
n

i
l
i

a
T

2015

2016

2017

2018

2019

● Recycled
● Recovered
● Landfilled

The amount of tailing sands from the mining operation
increased in 2019 compared to the previous year, as the
production of chrome concentrate increased, and the ore
quality changed. 14.5% of waste from stainless steel production
was recycled and 16.4% recovered. Other recovered material
like lime, bricks, and some sludges were mostly used in our
melting shops to substitute virgin additive materials like slag
formers. Tailing sand is deposited in the pond of mining area
itself.

Total waste development

Turning slag into by-products
Outokumpu sold or used 1.4 million tonnes of slag as the main
by-product of operations. Slag is essential material in the steel
melting process, and it is made from limestone or other natural
minerals.

Outokumpu has developed slag-based mineral products for road
construction, refractory, and concrete production, and for water
treatment. The use of our slag by-products reduces the amount
of waste, saves virgin materials, and leads to lower CO2 eq.
emissions. For example, in road construction, slag use is an
environmentally and economically sustainable solution.

In 2019, the use rate (including use, recovery, and recycling)
of all slag was 90.6%. The remaining 300,000 tonnes of slag
were sent to landfill. The use rate depends on the local market
for construction materials and on the acceptance of secondary
material instead of virgin materials. n

New slag furnace in
Tornio could improve
resource efficiency

In September, Outokumpu announced it is assessing
options to build a new slag furnace in Tornio, Finland.
The planned unique production facility would produce
ferrochrome-nickel (FeCrNi) alloy from slag and side
streams primarily from production processes. The slag
furnace would enable efficient utilization of various
side streams, which would improve resource efficiency
of Outokumpu’s production significantly. The new slag
furnace would be the most energy-efficient ferro-
chrome-nickel alloy producer in the world, as energy
consumption in the new facility would be 30 percent
lower than in the current ferrochrome production
processes enabled by the new metallurgical process
invented by Outokumpu. Furthermore, the new facility
would strengthen Outokumpu’s competitiveness in the
global ferrochrome market.

Outokumpu Annual report 2019 | Sustainability review

17 / 24

Environment

Minimizing
environmental
impacts

We aim to reduce our impact
on the environment by
proactively developing our
production processes, energy
and material efficiency, and
solutions for the by-products
from our operations.

The biggest environmental impacts of stainless steel production
are dust emissions into the air, water discharges from produc-
tion, use of direct and indirect energy, and the waste created in
the production process.

Dust emissions at low levels
Steel melting and rolling processes generate dust and scales
that are collected, treated and, whenever possible, recycled
in our own production. For example, raw material metals
(chromium, nickel and molybdenum) are recovered from dust,
sludges and scales through specialist recovery plant.

Our dust filtering systems are extremely efficient and remove
99% of the particles. The measured particle emissions from
all of our production processes were 266 tonnes in 2019
(388 tonnes). The majority of particles were emitted from the
ferrochrome production process at 130 tonnes (313 tonnes).
However, emission measurement campaign results in this
process include high uncertainty causing remarkable fluctuation
in results year by year. The level of dust emissions from the
melt shops is well within the limits of environmental permits. No
significant further reduction is expected.

As our main raw material is recycled steel, we take all
possible precautionary measures to check the input material
for any unwanted content, such as mercury and radioactive
contaminated material. In 2019, there were four incidents
involving radioactivity. All incidents were dealt in accordance
with authority guidance and did not cause exposure. We
work together with our suppliers to decrease the amount of

unwanted materials in our production processes. All input
material, the liquid steel and waste gas of melting process, is
controlled regarding radioactive contamination.

Water is reused in production
Water is used in our production process in annealing, pickling,
and cooling. The withdrawal of water is metered and rainwater
is estimated by average rainfall and the surface of used
rainwater. It is treated and recycled as much as possible, and
only some is discharged to the municipal wastewater system.

All wastewater is treated in the company’s own treatment
plants or in municipal water treatment systems before it

Steel melt shop particle emissions, grams/t

2015

2016

2017

2018

2019

Outokumpu Annual report 2019 | Sustainability review

18 / 24

Environment

is discharged. The main discharges into water are metals
and nitrates. The discharge is measured and supervised by
authorities. Wastewater treatment depends on the contamina-
tion of the wastewater. The water is treated directly in the water
circle at the process step and/or before discharge. According
to the needs, treatments are oil skimming, neutralization,
flocculation, and sedimentation to extract metals and, when
necessary, a Cr(VI) reduction process. Nitrate is often treated
in the municipal water treatment to reduce discharge. In these
cases, the steel allocated discharge cannot be monitored.
Water impact is managed by the municipal treatment operators.

Water used in the production is mainly surface water. In 2019,
the withdrawal of water increased as a full year reporting of the

Water withdrawal and discharges

Million m3

Surface water

Municipal water

Groundwater

Rainwater

2019

45.4

1.2

2.4

1.8

2018

44.6

1.4

2.5

1.2

Water withdrawal by source

50.7

49.7

Water discharges by type and destination

Cooling water out

Wastewater out

Discharge to surface water

13.7

22.4

21.1

13.4

23.4

22.2

2017

38.2

1.2

1.21)

2.41)

43.1

12.5

20.5

19.2

Emissions to water

Metal discharges to water, tonnes

Nitrogen in nitrates, tonnes 2)

1,046

1,443

1,308

1) Refined reporting on mining water resulted in change from rainwater to
groundwater in 2018.

2) Data restated to give the discharged nitrate. Part of the nitrates are
treated in a municipal treatment plant.

Outokumpu Annual report 2019 | Sustainability review

Swedish site Fagersta is included. Impact of water withdrawal
is evaluated at sites where river water is used, and data of
the river water is available. The impact was screened by the
percentage of withdrawn water compared to the river flow on
a yearly base in 2017. All of the sites resulted in no impact
on the river and that means the withdrawal was below 5%. In
2019, the assessment was revised for one site and resulted in
no impact. In addition, our site in Avesta, Sweden conducted
a water impact study on the river. Analysis of results are still
ongoing.

Outokumpu operates a cold rolling mill in San Luis Potosí,
Mexico, in a dry, arid area, where groundwater is a scarce
resource for people. The water withdrawal of this site is 0.5%
of Outokumpu’s total water withdrawal. Water recycling and
treatment at this site are especially ambitious to minimize the
groundwater impact.

Impacts of the mining operation are limited
Outokumpu operates a chrome mine in Kemi, Finland. We are
a member of The Finnish Network for Sustainable Mining and
Kemi mine is committed to the Finnish sustainability standard
for mining.

The environmental impacts of the mine are very limited due
to the nature of the process. The minerals are in oxide form
and very stable with only minimal amount of sulfur compounds.
Chemicals are not used in the beneficiation process, which is
based on gravity separation. Kemi mine is almost self-sufficient
with water as it recycles water on site and collects rainwater.
Underground mine takes drilling water from old open pits (rain-
water) and drilling water is also recycled inside the underground
mining process. All dewatering from mine is pumped to the
closed circuit of the tailings site and concentrator plant on
surface level. Furthermore, a significant amount of rain and
snow melting waters are collected to the process. Kemi mine is
discharging 2,000,000 m3 waters from area whereas the water
intake from municipal supply is only 30,000 m3.

During 2018–2021, Kemi mine is carrying out a Deep Mine
project to increase the resource efficiency of the mine. The
project is about the depth extension and building underground
mine infrastructure from 500-level to 1,000-level below surface.
Due to the expansion, there has been more use of explosives
and quarrying in 2019 than on average. The area of the mine
site has not been expanded.

The biggest impact on environment from the mine is nitrates in
the discharge water which originate from explosives. However,
the amount of nitrates is reduced by natural processes in
the internal water recycling system of the mine site. Another
environmental aspect is chlorites from underground mine water
which originates from natural geological formations. Land use
of mining is limited to the existing mining area as mining is
underground. Tailing sand is deposited in tailing ponds of the
mine area which will be landscaped as forest when full.

Biodiversity
The production of stainless steel does not occupy or reserve
large areas of land or have a significant effect on the biodi-
versity of the surrounding natural environment. Outokumpu’s
production sites are not located in sensitive areas. However,
Outokumpu has identified areas of high biodiversity value that
are owned by the company or adjacent to our sites in Calvert,
Alabama in the US, Dahlerbrück, Germany and in Kemi and
Tornio, Finland. These sites count for 80% of total owned land.
There is no negative impact on the mentioned sensitive areas
according to impact studies.

Site

Calvert, US
Dahlerbrück, Germany
Kemi, Finland
Tornio, Finland
Total

Area in km²

Percentage

4.69
0.063
9.16
6

18.8%
0.3%
36.7%
24.0%
79.7%

Outokumpu regularly monitors the environment of its production
sites. Areas once utilized by production are remediated for
further use. More information on biodiversity on our website.

19 / 24

Outokumpu and society

Outokumpu
and society

Our operations have impacts
on the local, national, and
global communities in which
we operate. We contribute
to the well-being of the
communities we operate in
through the economic impact
and other ways of community
involvement.

Direct economic
value generated

Economic value distributed

Operating costs
EUR 5,330 million
(2018: 5,676)

Direct economic value
generated and distributed

Revenues
EUR 6,535 million
(2018: 6,977)

Economic values retained in business
EUR 295 million (2018: EUR 446)

Economic impact on local communities
Outokumpu operates in a global market but our production
sites are often located in relatively small cities or towns. This
means that we are significant to many of the communities we
operate in, and often one of very few private-sector employers
in the area. We recognize that our decisions might have a major
impact on communities, our personnel as well as local suppliers
and service providers.

Our main areas of direct economic impact are our financial
interactions with customers, suppliers, employees, the public
sector, investors, and shareholders. See taxes by country in our
sustainability data tool.

We maintain continuous cooperation with community officials
and representatives, other companies, schools, and universities.
Every year, there are numerous local engagement projects at
our production sites. Typically, sites have yearly discussions
with local community representatives on relevant topics such
as employment, the environment, energy, or sponsoring of local
events.

Outokumpu also organizes open-door events at its production
sites for neighbors and families of our employees. In 2019,
we organized Family Day events at several sites gathering
thousands of attendees.

Employee benefit expenses
EUR 774 million (2018: 676)

Payments to providers of capital
EUR 130 million (2018: 172)

Taxes paid to government
EUR 5 million (2018: 6)

Community investments
EUR 0 million (2018: 0)

As part of their community engagement, some Outokumpu
sites also continued their dialogue with environmental NGOs
related to ongoing permit processes or other environmental
issues. In 2019, Outokumpu initiated an Environmental Impact
Assessment in Tornio, Finland, regarding a possible investment
in a new slag furnace.

Public sector and sponsoring
In sponsorships, Outokumpu prioritizes connections to stainless
steel, sustainability, talent, and education. Locally Outokumpu
has sponsored, for example, artworks by donating stainless
steel, significant local projects, and sports associations.

During 2019, Outokumpu sponsored over 100 local projects as
a part of a social responsibility campaign set up to celebrate
the remarkable response rate of 86% in our organizational
health survey. Employees were invited to nominate local
projects for sponsorships.

Outokumpu Annual report 2019 | Sustainability review

20 / 24

Outokumpu and society

We support research related to our field of industry and
maintain close cooperation with educational institutes.
Apprenticeships have been offered to local colleges and student
placements have been made available in the form of one-year
programs.

Associations and public affairs
Outokumpu is a signatory to the International Chamber of
Commerce (ICC) charter and the United Nations Global
Compact. Outokumpu has signed the World Steel Association’s
Sustainable Development Charter and the ISSF’s Sustainable
Stainless Charter. In 2019, Outokumpu joined ResponsibleSteel
which is a global standard and certification initiative for the
steel industry. Our total spending on association memberships
is around EUR 2 million.

Outokumpu is a member of several international organizations
and provides relevant information to decision-makers and
experts relating to the development of the business environ-
ment and legislation. The Group also participates in the work of
trade organizations. Our public affairs approach is to commu-
nicate via industrial associations like Eurofer toward governing
bodies and regulators. See the list of our membeships on our
website.

Compliance
Outokumpu is strongly committed to legal compliance and
an ethical way of conducting business. Outokumpu’s Code
of Conduct sets out these ethical standards and provides
guidelines for a common way of working. The objective of
Outokumpu’s compliance 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 mitigate compliance risks 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. Anti-corruption
and competition law compliance are important parts of this.
Outokumpu’s Code of Conduct sets zero tolerance for corrupt

Outokumpu Annual report 2019 | Sustainability review

practices and requires compliance with applicable competition
laws. Outokumpu has also an Anti-Corruption Instruction
providing more detailed guidance on responsible business
practices. In 2019, Outokumpu issued a Know Your Business
Partner Instruction detailing the principles and rules related to
establishing and monitoring relationships with business partners
and managing related risks.

Outokumpu regularly communicates on compliance related
topics internally and trains employees both through e-learnings
and face-to-face trainings. E-learning courses in 2019 included
a Knowing Your Business Partner e-learning, a re-issue of the
Competition law compliance e-learning and an e-learning on
competition law compliance in trade associations. The Knowing
Your Business Partner e-learning, mandatory for all administrative
employees, achieved a completion rate of 96%. The Competition
law compliance e-learning achieved a completion rate of 97%
and the e-learning on competition law compliance in trade
associations achieved a completion rate of 96%. Furthermore,
The Code of Conduct e-learning issued in 2018 for blue-collar
employees was trained site by site in 2019 with last sites to be
completed in 2020. Compliance efforts in 2019 also included
continuous targeted trainings on selected compliance topics.

In 2019, compliance communication was implemented through
different channels on various topics, including data protection
(EU GDPR), fair competition practices and compliance with
internal policies and instructions. In 2019, within the area of
trade compliance, Outokumpu developed further its business
partner onboarding, screening and monitoring processes,
including the risk-based approach to control and mitigate third
party risks to ensure compliance with sanctions regulations,
anti-money laundering laws and other relevant regulations.

Compliance risks, including risks related to corruption, are
assessed and reviewed annually and described in the Corporate
Governance statement 2019 and Key risks section in our Annual
report. More information regarding our misconduct reporting
in our BoD review, Corporate Governance statement and
website. n

Supporting employees in
their community activities

As part of our social responsibility, Outokumpu
designed a global project to support our employees in
their community activities in 2019. To celebrate the
remarkable response rate in the previous Organiza-
tional Health Index (OHI) survey, Outokumpu sponsored
altogether 140 projects, which our employees were
actively involved in. The diverse voluntary projects
in our neighboring communities included charitable
organization projects, community projects, and local
voluntary initiatives, e.g. replacing batteries in fire
alarms in Torshälla, Sweden, supporting group of
volunteers knitting woolen socks for the elderly in
Tornio, Finland and partnering with the community to
support public art in Mobile, Alabama.

21 / 24

Scope of the report

Outokumpu has published its sustainability review as part of the
Annual Report 2019. Sustainability information is also available at
www.outokumpu.com/sustainability.

Outokumpu reports on the material developments of continuing
sites and changes in 2019 as part of the Annual Report.
The reportted data includes all continuing sites. Additional
information is published on the company’s website. The Annual
Report 2019, including Sustainability Review, was published in
February 2020.

Outokumpu’s report has been prepared in accordance with the
GRI Standards: Core option according to the GRI Standards
reporting requirements. The materiality assessment from
2018 and continuous communication with stakeholders were
the basis for the decision on material topics and relevant
disclosures.

Full GRI disclosure

The independent practitioner’s assurance report on the
limited assurance conclusion is available on page 24 in the
Sustainability review. The Financial Statements 2019 have
been audited, and the auditor’s report is available on page xx in
the Review by the Board of Directors and Financial statements
section.

Measurement and
estimation methods
Economic responsibility
Most figures relating to economic responsibility presented in
this report are based on the consolidated financial statements
issued by the Outokumpu Group and collected through
Outokumpu’s internal consolidation system. Financial data
has been prepared in accordance with International Financial

Reporting Standards (IFRS). Outokumpu’s accounting principles
for the Group’s consolidated financial statements are available
in note 2 to the consolidated financial statements.

All financial 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. Using the GRI guidelines as a basis,
economic responsibility figures have been calculated as follows:

Direct economic value generated

Direct economic value generated includes all revenues received
by Outokumpu during the financial year. The sources of revenue
include sales invoiced to customers, net of discounts and
indirect taxes, revenues reported as other operating income
(including gains from the disposal of Group assets), and
revenues reported as financial income, mainly dividend and
interest income.

Economic value distributed

Operating costs include the cost of goods and services
purchased by Outokumpu during the financial year. Employee
benefit expenses include wages and salaries, termination
benefits, social security expenses, pension and other post-
employment and long-term employee benefits, expenses from
share-based payments and other personnel expenses. Taxes
paid to the government include income taxes. Deferred taxes
are excluded from the figure. Payments to providers of capital
include interest costs on debt and other financial expenses
during the financial year. Capitalized interest is deducted from
this figure. The dividend payout is included in the payments to
providers of capital according to the proposal by Outokumpu’s
Board of Directors.

Community investments consist of donations to and invest-
ments in beneficiaries external to the company.

Local suppliers

In this report, vendors are defined as local if they are located
in the same country as the Outokumpu location. Significant
locations for suppliers are production units that have a melt
shop, ie. Avesta, Sweden; Calvert, the US; Sheffield, the UK and
Tornio, Finland.

Environmental responsibility
Outokumpu’s climate change target is based on science and
approved by the Science Based Target initiative. The target
includes CO2 eq. intensity of direct and indirect emissions of
electricity and upstream emissions. Emissions are consolidated
on production control.

CO2 eq. emissions of electricity are calculated and monitored
by the emissions factor of Outokumpu’s electricity mix of 167
kg CO2 eq./MWh (2018: 239 kg CO2 eq./MWh), given by the
electricity supplier for the used electricity and calculated as
weighted average. In addition, the location-based electricity
emissions are disclosed. They are calculated by the published
country- specific emissions factors of the electricity generation
of 2017 or 2018 if available.

CO2 eq. emissions outside the company (scope 3), except
electricity, are covered by more than 96%. They are calculated
as follows:

• For alloys: by emissions factors of the life-cycle assessment

of relevant association.

• For used gases, lime and dolomite, electrodes and coke: by

emissions factors of ISO 14404.

• For upstream emissions of coke and oil: by emissions factors

of World Steel Association.

• For internal and product transport: by typical distances and
type of transport with the corresponding emissions factors.
The coverage of reporting includes all modes of transport.

Outokumpu Annual report 2019 | Sustainability review

22 / 24

Scope of the report

• For business travel: by estimated driven kilometers with

emissions factors for the car, and for flights by CO2 eq. reports
of the flight companies. Rental car emissions are included by
the rental car company report.

Upstream transport was assessed on data of environmental
product declaration of 2019 but excluded from scope 3
emissions.

The recycled content is calculated as the sum of pre and post
consumer scrap related to crude steel production. Additionally,
we report on the recycled content including all recycled metals
from own treated waste streams entering the melt shop.

Energy efficiency is defined as the sum of specific fuel and
electricity energy of all processes calculated as energy
consumption compared to the product output of that process.
It covers all company productions: ferrochrome, melt shop, hot
rolling and cold rolling processes. Used heat values and the
consumption of energy are taken from supplier's invoices.

Water withdrawal is measured for surface water, taken from
municipal suppliers and estimated for rainwater amount.

Waste is separately reported for mining and stainless
production. In mining, amount of non-hazardous tailing sands is
reported. For stainless production hazardous and non-hazardous
wastes are reported as recycled, recovered and landfilled.
Waste treated is counted as landfilled waste.

Social responsibility

Health and safety figures

Health and safety figures reflect the scope of Outokumpu’s
operations as they were in 2019.

Safety indicators (accidents and preventive safety actions)
are expressed per million hours worked (frequency). Safety
indicators include Outokumpu employees, persons employed
by a third party (contractor) or visitor accidents and preventive
safety actions. A workplace accident is the direct result of a

work-related activity and it has taken place during working hours
at the workplace.

Accident types

• Lost time injury (LTI) is an accident that caused at least one
day of sick leave (excluding the day of the injury or accident),
as the World Steel Association defines it. One day of sick
leave means that the injured person has not been able to
return to work on their next scheduled period of working
or any future working day if caused by an outcome of the
original accident. Lost-day rate is defined as more than one
calendar day absence from the day after the accident per
million working hours.

• Restricted work injury (RWI) does not cause the individual to
be absent, but results in that person being restricted in their
capabilities so that they are unable to undertake their normal
duties.

• Medically treated injury (MTI) has to be treated by a medical

to illness, injury and occupational diseases on a monthly basis.
The absentee rate (%) includes the actual absentee hours lost
expressed as a percentage of total hours scheduled.

Total personnel costs

This figure includes wages, salaries, bonuses, social costs or
other personnel expenses, as well as fringe benefits paid and/
or accrued during the reporting period.

Training costs

Training costs include external training-related expenses such
as participation fees. Wages, salaries and daily allowances
for participants in training activities are not included, but the
salaries of internal trainers are included.

Training days per employee

The number of days spent by an employee in training when
each training day is counted as lasting eight hours.

professional (doctor or nurse).

Bonuses

• First aid treated injury (FTI), where the injury did not require

medical care and was treated by a person himself/herself or
by first aid trained colleague.

• Total recordable injury (TRI) includes fatalities, LTIs, RWIs and

MTIs, but FTIs are excluded.

• All workplace accidents include total recordable injuries (TRI)

and first aid treated injuries (FTI)

Proactive safety actions

Hazards refer to events, situations or actions that could
have led to an accident, but where no injury occurred. Safety
behavior observations (SBOs) are safety-based discussions
between an observer and the person being observed. Other
preventive safety action includes proactive measures.

Sick-leave hours and absentee rate

Sick-leave hours reported are total sick leave hours during a
reporting period. Reporting units provide data on absence due

A bonus is an additional payment for good performance. These
figures are reported without social costs or fringe benefits.

Personnel figures

Rates are calculated using the total employee numbers at
the end of the reporting period. The calculations follow the
requirements of GRI Standards. The following calculation has
been applied e.g.

Hiring rate = New Hires / total number of permanent employees
by year-end

Average turnover rate = (Turnover + New Hires) / (total number
of permanent employees by year-end × 2)

Days lost due to strikes

The number of days lost due to strikes is calculated by
multiplying the number of Outokumpu employees who have
been on strike by the number of scheduled working days lost.
The day on which a strike starts is included. n

Outokumpu Annual report 2019 | Sustainability review

23 / 24

Independent assurance report

Independent Practitioner’s Assurance Report

To the Management of Outokumpu Oyj
We have been engaged by the Management of Outokumpu Oyj
(hereinafter also the Company) to perform a limited assurance
engagement on selected sustainability disclosures for the
reporting period 1 January to 31 December 2019, disclosed in
Outokumpu Oyj’s Sustainability Review 2019 and in Outokumpu
Oyj’s online sustainability tool. In terms of the Company’s
GRI Standards reporting and GRI Standards Content Index,
the scope of the assurance has covered economic, social
and environmental sustainability disclosures listed within the
Topic-Specific Disclosures as well as General Disclosures 102-8
and 102-41 (hereinafter Sustainability Information).

Management’s responsibility
The Management of Outokumpu Oyj is responsible for preparing
the Sustainability Information in accordance with the Reporting
criteria as set out in the Company’s reporting instructions
and the GRI Sustainability Reporting Standards of the Global
Reporting Initiative. The Management of Outokumpu Oyj is
also responsible for such internal control as the management
determines is necessary to enable the preparation of the
Sustainability Information that is free from material misstate-
ment, whether due to fraud or error.

Practitioner’s independence and quality control
We have complied with the independence and other ethical
requirements of the Code of Ethics for Professional Accoun-
tants issued by the International Ethics Standards Board for
Accountants, which is founded on fundamental principles of
integrity, objectivity, professional competence and due care,
confidentiality and professional behaviour.

PricewaterhouseCoopers Oy applies International Standard on
Quality Control 1 and accordingly maintains a comprehensive
system of quality control including documented policies and
procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory
requirements.

Practitioner’s responsibility
Our responsibility is to express a limited assurance conclusion
on the Sustainability Information based on the procedures we
have performed and the evidence we have obtained. Our assur-
ance report has been prepared in accordance with the terms
of our engagement. We do not accept, or assume responsibility
to anyone else, except to Outokumpu Oyj for our work, for this
report, or for the conclusions that we have reached.

We conducted our limited assurance engagement in accor-
dance with the International Standard on Assurance Engage-
ments (ISAE) 3000 “Assurance Engagements Other than Audits
or Reviews of Historical Financial Information”. That standard
requires that we plan and perform the engagement to obtain
limited assurance about whether the Sustainability Information
is free from material misstatement.

In a limited assurance engagement the evidence-gathering
procedures are more limited than for a reasonable assurance
engagement, and therefore less assurance is obtained than in a
reasonable assurance engagement. An assurance engagement
involves performing procedures to obtain evidence about the
amounts and other disclosures in the Sustainability Information.
The procedures selected depend on the practitioner’s
judgement, including an assessment of the risks of material
misstatement of the Sustainability Information.

Our work consisted of, amongst others, the following
procedures:

• Interviewing senior management of the Company.

• Visiting the Company’s Head Office as well as one site in

Finland.

• Conducting two video interviews with sites in the United

Kingdom and in the United States of America.

• Interviewing employees responsible for collecting and

reporting the Sustainability Information at the Group level and
at the site level where our site visits and video interview were
conducted.

• Assessing how Group employees apply the Company’s

reporting instructions and procedures.

• Testing the accuracy and completeness of the information
from original documents and systems on a sample basis.

• Testing the consolidation of information and performing

recalculations on a sample basis.

Limited assurance conclusion
Based on the procedures we have performed and the evidence
we have obtained, nothing has come to our attention that
causes us to believe that Outokumpu Oyj’s Sustainability
Information for the reporting period ended 31 December 2019
is not properly prepared, in all material respects, in accordance
with the Reporting criteria.

When reading our assurance report, the inherent limitations to
the accuracy and completeness of sustainability information
should be taken into consideration.

Helsinki, 24 February 2020

PricewaterhouseCoopers Oy

Sirpa Juutinen

Partner
Sustainability &
Climate Change

Jussi Nokkala

Director
Sustainability &
Climate Change

Outokumpu Annual report 2019 | Sustainability review

24 / 24

Review by
the Board of
Directors and
Financial
statements

REVIEW BY THE BOARD OF DIRECTORS . . . . . . . . . . . . 2

Group key figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Alternative performance measures . . . . . . . . . . . . . . . . 12

Share-related key figures . . . . . . . . . . . . . . . . . . . . . . . . 15

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 17

Consolidated statement of income . . . . . . . . . . . . . . . . 18

Consolidated statement of comprehensive income . . . . 18

Consolidated statement of financial position . . . . . . . . . 19

Consolidated statement of cash flows . . . . . . . . . . . . . . 20

Consolidated statement of changes in equity . . . . . . . . 21

Notes to the consolidated financial statements . . . . . . 22

Parent company financial statements . . . . . . . . . . . . . 65

Income statement of the parent company . . . . . . . . . . . 65

Balance sheet of the parent company . . . . . . . . . . . . . . 66

Cash flow statement of the parent company . . . . . . . . . 67

Statement of changes in equity of the parent company . 68

Commitments and contingent liabilities of
the parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

AUDITOR’S REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Review by the Board of Directors

In 2019, the European steel industry continued to suffer from
surging imports from Asia and strong price pressure caused
by the US steel tariffs. In this challenging market environment,
Outokumpu continued to focus on the execution of its strategic
targets which led to a 4% productivity improvement, enhanced
safety performance and organizational health as well as the
significant reduction of net debt. These results demonstrate
the strength of Outokumpu’s strategy and ability to adapt to
changing market conditions. In 2019, Outokumpu’s adjusted
EBITDA was strongly affected by low deliveries in all business
areas. Despite hard price pressure, business area Europe’s
result was on a reasonable level, but Long Products’ and
business area Americas’ results were in the red mainly due to
low deliveries. Ferrochrome production was on a record-high
level, but the lower benchmark price burdened profitability. In
2020, Outokumpu continues to pursue its must-win battles with
a highlighted focus on sustainability, customer orientation and
efficiency to further strengthen the company’s leading position
in the stainless steel market globally.

Market development
In 2019, global apparent consumption increased by 2.7%
compared to the previous year. APAC contributed with a growth
of 5.3% while EMEA and Americas shrank by 3.6% and 5.7%.
Global real demand for stainless steel products amounted to
43.8 million tonnes in 2019, which is an increase of 1.5% from
43.2 million tonnes in 2018. The annual demand growth was
strongest in the ABC & Infrastructure segment, increasing by
5% from prior year. Demand in Consumer Goods & Medical and
Industrial & Heavy Industries grew by 3% and 1%, respectively.
Meanwhile demand in Chemical, Petrochemical and Energy
segment remained at same levels with 2018, whereas demand
in Automotive & Heavy Transport shrank by 7% (Source: SMR,
January 2020).

Financial performance

Sales, € 6,403 million

In 2019, Outokumpu’s sales decreased to EUR 6,403 million
compared to EUR 6,872 million in 2018. Stainless steel
deliveries were 2,196,000 tonnes (2,428,000 tonnes), a
decrease of 10% compared to 2018.

Sales

€ million

Europe
Americas
Long Products
Ferrochrome
Other operations
Intra-group sales
The Group

2019

4,089
1,346
642
461
653
–788
6,403

2018

4,267
1,715
740
542
587
–980
6,872

2017

4,156
1,546
591
610
503
–1,050
6,356

Adjusted EBITDA decreased to EUR 263 million in 2019
compared to EUR 485 million in 2018. The impact from
lower stainless steel deliveries was partly offset by product
mix which was significantly better in 2019 compared to 2018
for both business areas Europe and Americas. Business area
Ferrochrome’s profitability in 2019 was suffering from lower
ferrochrome benchmark price compared to 2018, but produc-
tion was above the 2018 level. Raw material-related inventory
and metal derivative losses were EUR 64 million in 2019, and
thus significantly higher than the losses of EUR 16 million in
2018.

Adjustments to EBITDA in 2019 included a gain of EUR
70 million on the sale of real estate in Benrath, Germany,
restructuring costs of EUR 53 million in Germany resulting
from agreed measures to improve competitiveness through
cost reductions, and an expense of EUR 14 million resulting
from a settlement between Outokumpu and ThyssenKrupp over
tax consolidation in Italy and other earlier claims relating to
Outokumpu’s acquisition of Inoxum (2018: EUR 10 million gain
on sale of PPE and release of provisions related to an earlier

(cid:31) Europe 63%
(cid:31) Americas 21%
(cid:31) Long Products 8%
(cid:31) Ferrochrome 2%
(cid:31) Other operations 6%

Adjusted EBITDA, € million

2015

2016

2017

2018

2019

EBIT, € million

2015

2016

2017

2018

2019

700

600

500

400

300

200

100

500

400

300

200

100

Outokumpu Annual report 2019 | Review by the Board of Directors

2 / 74

site closure). EBITDA amounted to EUR 266 million in 2019
(EUR 496 million), EBIT amounted to EUR 33 million (EUR 280
million) and the net result to EUR –75 million (EUR 130 million).
The net result in 2019 did not include any material previously
unrecognized deferred tax assets (EUR 34 million). Earnings per
share was EUR –0.18 in 2019 compared to EUR 0.32 in 2018.

Operating cash flow amounted to EUR 371 million in 2019
(EUR 214 million). Net working capital decreased by EUR 218
million compared to an increase of EUR 112 million in 2018.
Net debt amounted to EUR 1,155 million at the end of 2019, a
decrease from EUR 1,241 million at the end of 2018. Gearing
remained at 45.1%, at the same level as the end of 2018.

Earnings per share, €

Net financial expenses were EUR 80 million in 2019 (EUR 107
million) and interest expenses were EUR 76 million (EUR 70
million). Cash and cash equivalents were at EUR 325 million
at the end of 2019 (EUR 68 million) and the total liquidity
reserves were EUR 1.0 billion (EUR 0.7 billion). In addition to
these reserves, EUR 78 million of the EUR 120 million Kemi
mine financing was unutilized.

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, %
Interest expenses

2019

2018

2017

1,053
427
325
1,155

2,562
–2.8
45.1
42.5
76

798
511
68
1,241

2,750
4.8
45.1
45.9
70

698
505
112
1,091

2,721
15.4
40.1
46.3
92

Capital expenditure amounted to EUR 221 million in 2019
(EUR 260 million). The ongoing investments include the Kemi
mine expansion and the digital transformation project Chorus,
including the ERP renewal.

Profitability

€ million

Adjusted EBITDA

Europe
Americas
Long Products
Ferrochrome
Other operations and
intra-group items
Group adjusted EBITDA

Adjustments

EBITDA

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

Adjusted EBITDA margin, %
EBIT margin, %
Return on capital employed, %
Earnings per share, €
Diluted earnings per share, €
Net cash generated from operating
activities

2019

2018

2017

216
–27
–7
96

–15
263
3
266

6
–80
–41
–33
–75

4.1
0.5
0.8
–0.18
–0.18

248
–5
25
210

7
485
10
496

404
21
16
217

–27
631
31
663

280

445

3
–107
175
–45
130

7.1
4.1
7.0
0.32
0.32

9
–127
327
65
392

9.9
7.0
11.3
0.95
0.90

371

214

328

Outokumpu has adopted IFRS 16 – Leases on January 1, 2019 using
the modified retrospective approach. Comparative information has not
been restated, but transition impacts of EUR 131 million have been
recognized into January 1, 2019 property, plant and equipment, and
non-current and current debt, respectively. More information on the
changes to Outokumpu’s accounting principles and transition impacts
is presented in the notes 2 and 13 to the consolidated financial
statements.

Outokumpu Annual report 2019 | Review by the Board of Directors

2015

2016

2017

2018

2019

Net debt, € million

2015

2016

2017

2018

2019

Debt-to-equity ratio, %

2015

2016

2017

2018

2019

1.0

0.8

0.6

0.4

0.2

0.0

–0.2

2,000

1,500

1,000

500

100

3 / 74

Review by the Board of DirectorsCapital expenditure

€ million

Europe
Americas
Long Products
Ferrochrome
Other operations
The Group

Depreciation and amortization

2019

2018

2017

44
20
18
103
35
221

230

76
18
30
79
57
260

70
18
8
34
44
174

204

216

Business areas
Europe’s sales decreased to EUR 4,089 million in 2019
compared to EUR 4,267 million in 2018 and adjusted EBITDA
decreased to EUR 216 million (EUR 248 million). Stainless
steel deliveries decreased by 6% in 2019 compared to
previous year and amounted to 1,459,000 tonnes (1,547,000
tonnes). Realized base prices were lower in 2019 compared
to 2018 due to high import pressure, but the negative impact
was partly offset by significantly improved product mix and
better raw material mix. The positive impact from lower costs
in 2019 was partly offset by negative currency impacts. Raw
material-related inventory and metal derivative losses were EUR
19 million in 2019 (losses of EUR 26 million). In 2019, the real
demand in EMEA decreased by 4.3% compared to 2018. EU
cold-rolled imports were at 29.2% in 2019, slightly down from
29.7% in 2018 (source: EUROFER, January 2020). Distributor
inventories were above the long-term average levels at the end
of November 2019.

Americas’ sales amounted to EUR 1,346 million in 2019
compared to EUR 1,715 million in 2018. Adjusted EBITDA
amounted to EUR –27 million (EUR –5 million). Stainless steel
deliveries decreased by 21% in 2019 to 601,000 tonnes
(762,000). Input costs were higher in 2019 compared to 2018,
but the impact was partly offset by the significantly improved
product mix and lower freight costs. Raw material-related
inventory and metal derivative losses were EUR 40 million
in 2019 compared to gains of EUR 20 million in 2018. Real
demand decreased by 10% in 2019 compared to 2018.
Cold-rolled imports into the US decreased to 14% in 2019 from

18% in 2018 (source: American Iron & Steel Institute, January
2020). Distributor inventories were above the average level in
2019 with a decreasing tendency over the last three months
of the year (source: Metals Service Center Institute, January
2020).

Long Products’ sales amounted to EUR 642 million in 2019
compared to EUR 740 million in 2018 and adjusted EBITDA
amounted to EUR –7 million (EUR 25 million). Stainless steel
deliveries decreased by 20% in 2019 compared to 2018 due
to lower external and internal deliveries. Realized base prices
were lower, as well. Raw material-related inventory and metal
derivative losses were EUR 9 million in 2019 compared to EUR
0 million in 2018. Long products market was subdued in 2019,
but demand in the US remained stable.

Ferrochrome’s sales amounted to EUR 461 million in 2019
compared to EUR 542 million in 2018. Adjusted EBITDA
amounted to EUR 96 million (EUR 210 million). Ferrochrome
operations were stable with a record-high production of
505,000 tonnes in 2019 (497,000 tonnes), and deliveries
were also higher, but profitability was negatively impacted by
higher costs, mainly related to the mine. 2018 adjusted EBITDA
included a EUR 32 million insurance compensation. Average
ferrochrome benchmark price for 2019 was USD 0.21/lb. lower
compared to 2018 having a negative impact on sales price.

Non-financial development at Outokumpu
Outokumpu is a leading global producer of stainless steel with
world-class production assets in its key markets in Europe and
the Americas, and a global sales and service network close
to its international customers. Stainless steel is a significant
contributor to building a sustainable world. Stainless steel is
used in building and construction, infrastructure, appliances,
transportation, and heavy industries. It is a strong, corrosion-
resistant, hygienic, and aesthetic material with a high strength-
to-weight ratio and no need for maintenance.

Climate change is one of the three megatrends driving
Outokumpu’s business, together with economic and population
growth and urbanization. The properties and the low carbon
profile of Outokumpu’s stainless steel can help customers
to reduce their carbon footprint and to design solutions that
enable low carbon society. Markets for solutions enabling the

400

300

200

100

Equity-to-assets ratio, %

2015

2016

2017

2018

2019

Capital expenditure and depreciation, € million

2015

2016

2017

2018

2019

● Capital expenditure ● Depreciation

Capital expenditure, % of sales

Outokumpu Annual report 2019 | Review by the Board of Directors

4 / 74

Review by the Board of Directorstransition to low carbon society will increase on the way to 2
degree or 1.5 degree scenarios for 2050.

Outokumpu acknowledges the recommendations from the Task
Force on Climate-related Financial Disclosures (TCFD) and the
underlying framework and acknowledges that there are financial
impacts in a 2°C or lower transitions scenario as well as a 4°C
physical scenario. Outokumpu has not yet performed a scenario
analysis to the extent where the resilience of its strategies
could be assessed in financial terms considering the transition
and physical scenarios.

Outokumpu’s business is based on a circular economy. Over
85% of the material used in Outokumpu’s stainless steel
production is recycled steel. By converting scrap and metal
waste into new products the company also protects virgin
resources. Throughout the process, Outokumpu aims to
minimize the environmental impact of its production. At the
end of its long life-cycle, stainless steel is fully recyclable,
without any loss of quality. Outokumpu’s production sites are
often located in relatively small cities or towns. This means
that Outokumpu is significant for the economies of small local
communities and it is often one of the very few private-sector
employers in the area.

Outokumpu has an integrated production process, including the
company’s own chrome mine for one of the main raw materials
of stainless steel, ferrochrome operations, melting, hot rolling
and cold rolling, and the finishing and services.

Policies and principles of sustainability management

On group level sustainability is managed by the Group’s
sustainability and environment team which reports to President,
Business Area Long Products & Group Sustainability. The
Group’s sustainability strategy was renewed in 2019. It
concentrates on three pillars: climate, environment and society.

The business areas and functions are responsible for ensuring
that operations within their own organizations are conducted
in a responsible manner and that monitoring, data collection
and reporting are duly carried out. The established incentive
systems support the achievement of strategic targets, such as
safety which is the highest priority.

The most important policies guiding Outokumpu’s Sustainability
Management are the Group’s Code of Conduct, Corporate
Responsibility Policy and the Policy on Environment, Health,
Safety and Quality (EHSQ), all available on Outokumpu’s
website. Outokumpu’s Code of Conduct defines the common
way of operating in the Group and sets principles for legal
compliance and ethical conduct, including zero tolerance for
corrupt practices and requiring compliance with competition
laws.

The Corporate Responsibility Policy describes the main
principles of the sustainable development of economic,
environmental, and social aspects in the Group. Outokumpu’s
EHSQ policy describes the company’s commitment to contin-
uous improvement in these fields, compliance with legislation
in all areas the company operates in, and the fulfilment of
stakeholder requirements to which the company subscribes.

Outokumpu has also an Anti-Corruption Instruction providing
detailed guidance on responsible business practices. In 2019,
Outokumpu issued a Know Your Business Partner instruction
detailing the principles and rules related to establishing and
monitoring relationships with business partners and managing
related risks.

In addition to the EHSQ policy, Outokumpu has strict guidelines
for safety through the Outokumpu Safety Principles and Health
and Safety Standard. Additionally, Outokumpu has ten Cardinal
Safety Rules that are a part of the company’s operating
principles. Safety is one of the company’s six must-win battles
and is therefore a top priority across the company. The health
and safety of the personnel is a precondition for successful
day-to-day operations as well as for long-term competitiveness.
Outokumpu works towards a goal of zero accidents.

Corporate statements, policies and instructions are the basis
of the Outokumpu operating model in governance, risk, and
compliance. Policies and instructions are implemented through
internal communication, mandatory training and internal control
mechanisms. Outokumpu has an on-going governance, risk and
compliance project to further enhance and develop internal
control processes. Outokumpu has currently five Key Corporate
Policies, which need to be well known by everyone working for
Outokumpu:

• Code of Conduct

• Cardinal Safety Rules

• Approval Policy

• Competition Law Compliance Policy

• Acceptable Use of IT Policy

The internal audit function flanked by external audits consis-
tently monitors and tests adherence to corporate guidance and
standards, while the sustainability organization follows-up on
environmental performance and legality on a quarterly basis. In
2019, Outokumpu carried out self-assessments of raw material
suppliers with production in countries who have high Envi-
ronment, Social and Governance risks. Annual environmental
audits are performed based on an internal risk assessment.
In addition, majority of suppliers are going through a regular
sanction screening.

Outokumpu has an approved Science Based Target following
the below 2-degree scenario of the sectoral decarbonization
approach for steel industry. Outokumpu contributes to the
UN Sustainable Development Goals by developing production
processes and the properties of its products.

Outokumpu complies with international, national, and local
laws and regulations, and respects international agreements
concerning human and labor rights, such as the United Nations’
Universal Declaration of Human Rights and condemns the use
of forced and child labor. All Outokumpu employees are free
to join trade unions according to local rules and regulations.
There is zero tolerance of any form of discrimination, whether
it is based on ethnic origin, nationality, religion, political views,
gender, sexual orientation, age or any other factor.

Outokumpu expects its suppliers and contractors to comply
with applicable laws and regulations as well as Outokumpu’s
Code of Conduct or similar standards and principles, and to
meet the company’s supplier requirements. Outokumpu aims to
ensure that modern slavery or human trafficking plays no part in
our supply chain or in any part of our business.

Outokumpu Annual report 2019 | Review by the Board of Directors

5 / 74

Review by the Board of DirectorsSustainability targets

The Group’s targets are:

• Recycled content (all metallic input from waste streams, such
as scrap, scales or metals from slag and dust treatment per
tonne stainless steel) of 90% by 2020.

• Improvement of energy efficiency by 1% yearly until 2020
reported as improvement compared to base-period of
2007–2009.

• Reducing scope 1, 2 and 3 greenhouse gas emissions 20%

per ton of stainless steel by 2023 from a 2014–2016
base-period.

• Top decile position in safety in the industry by 2020 and

long-term target of zero incidents.

Outokumpu’s emissions intensity trajectory includes the
upstream emissions from raw material supply chain. Outo-
kumpu aims to improve the Group’s resource efficiency by
minimizing the use of virgin materials and primary energy and
by contributing to climate protection.

Environmental performance

The main environmental impacts from stainless steel produc-
tion are the use of virgin materials, direct and indirect energy,
dust emissions into the air, waste created in the production
process and water discharges from production plants. The water
withdrawal of Outokumpu’s site in Mexico which is located in
a dry, arid area, where groundwater is a scarce resource for
people, is 0.5% of Outokumpu’s total water withdrawal.

Outokumpu uses efficient dust-filtering systems that remove
99% of particles, and water is reused in production as much
as possible and treated on production sites. In addition to
material efficiency through using as much recycled material as
possible, Outokumpu aims to reduce landfill waste and reuses
waste from its production processes in its own production.
Outokumpu also aims to increase the use of its by-product slag
from its production outside the company for example in road
construction, concrete production and water treatment.

In 2019, all used slag compared to the used and landfilled slag
(use rate) slightly increased to 91%. On top of production waste,

tailing sand from mining is the most significant waste item to
be deposited in the mine site.

In 2019, Outokumpu could further increase the level of
recycled content (all metallic input from waste streams, as
scrap, scales or metals from slag and dust treatment per tonne
stainless steel) to 89.6% (88.6%), close to the 2020 target of
90%. The change of the energy efficiency calculated as a sum
of different process steps was 6.1% (2018: 8.9%) compared
to the baseline of 2007–2009. Energy use from increased
production and sold ferrochrome is also counted. There were no
significant environmental incidents.

In 2019, CO2 intensity reduced by about 13.8% from baseline
period 2014–2016 and reached 72% of the targeted reduction
by 2023. Landfilled waste decreased as production also
decreased.

All Outokumpu sites have environmental permits that set the
basic framework for production operations. In 2019, emissions
and effluents remained within permitted limits, and the minor
breaches that occurred were temporary, identified, and had only
a minimal impact on the environment.

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.
In 2019, free allocation for the group was slightly below the
emissions.

Outokumpu is not a party to any significant legal or adminis-
trative proceedings concerning environmental issues, nor is
it aware of any realized environmental risks that could have a
material adverse effect on its financial position.

Personnel on December 31

12,000

10,000

8,000

6,000

4,000

2,000

2015

2016

2017

2018

2019

Social performance

Outokumpu’s main indicator for safety performance is the total
recordable incident frequency rate (TRIFR), which includes
fatal accidents, lost time injuries, restricted work injuries, and
medically treated injuries per million working hours. Group
TRIFR improved from the previous year and was 3.2 against the
target of <3.5 (4.1).

Outokumpu’s headcount decreased by 59 during the year and
totaled 10,390 at the end of December 2019 (2018: 10,449,
2017: 10,141). Total wages and salaries amounted to EUR
568 million in 2019 (2018: EUR 541 million, 2017: EUR
549 million). Indirect employee benefit expenses totaled EUR
206 million in 2019 (2018: EUR 135 million, 2017: EUR 135
million).

Environmental indicators

Scope 1, 2 and 3 (direct and indirect) CO2 emission intensity, kg per tonne stainless steel
Energy intensity, GJ per tonne stainless steel
Use rate of slag, including slag from ferrochrome production, %
Total landfill waste intensity per tonne stainless steel

2019

1,606
10.9
90.8
0.500

2018

1,719
10.1
89.9 2)

0.472

1) 2014–2016 baseline 1,863 kg

2) Restated

Outokumpu Annual report 2019 | Review by the Board of Directors

2017

1,839 1)
9.3
91.1
0.361

6 / 74

Review by the Board of DirectorsKey social indicators

Diversity
Employees
male, %
female, %

Board of Directors

male, %
female, %

2019

2018

2017

85
15

57
43

85
15

67
33

86
14

71
29

Safety
Total recordable injury frequency
rate, per million working hours

3.2

4.1

4.4

To further strengthen its compliance culture Outokumpu imple-
mented in 2019 SpeakUp, an externally operated communica-
tion channel, that offers the option to report serious misconduct
confidentially and, if desired, anonymously. SpeakUp system
is available both internally and for external stakeholders. The
system is available as a communication channel in Outokum-
pu’s reporting process if other reporting channels do not feel
suitable. All the available reporting channels are detailed in the
Code of Conduct. In 2019, Outokumpu recorded 16 alleged
incidents of potential misconduct through the various reporting
channels. All of these incidents were investigated in detail and
proper corrective action has been taken as a consequence.

Raising awareness of and training on the Code of Conduct and
its topics are central elements of Outokumpu’s compliance
program. As a part of these efforts, Outokumpu issued in 2019
several compliance-related e-learning courses. The Knowing
Your Business Partner e-learning was mandatory for white-collar
employees and achieved a completion rate of 96%. In the area
of competition law, the mandatory Competition law compliance
e-learning was re-issued for all white-collar employees and
achieved a completion rate of 97%. Further, an e-learning on
competition law compliance in trade associations was issued
to Outokumpu representatives, achieving a completion rate
of 96%. The Code of Conduct e-learning issued in 2018 for
blue-collar employees was trained site by site in 2019 with last
sites to be completed in 2020.

Research and development
Outokumpu’s research and development (R&D) works closely
together with sales, operations and customers to support the
business and align R&D activities with customers’ current
and future needs. Outokumpu has three R&D centers located
in Avesta in Sweden, in Krefeld in Germany and in Tornio in
Finland. In 2019, Outokumpu’s R&D expenditure totaled EUR
17 million, 0.3% of net sales (2018: EUR 15 million and 0.2%,
2017: EUR 13 million and 0.2%).

To further strengthen the R&D organization and to create a
better foundation for future projects and market demands, R&D
started working in a more functional Process and Product R&D
teams in 2019. During 2019 the process R&D projects were
focused on optimization of product quality, yield and production
cost efficiency. Reduction of CO2 footprint of our operations has
also been further emphasized as an R&D topic. The product
R&D projects focused on developing new steel grades, char-
acterization and optimization of existing grades, as well as on
use of stainless steels in new application areas. In 2019, the
cooperation between Outokumpu’s market development and
R&D teams was further deepened to better align R&D activities
with market needs and trends.

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

Outokumpu has defined risk as anything that could have an
adverse impact on achieving the Group’s objectives. Risks
can therefore be threats, uncertainties or lost opportunities
connected with current or future operations.

The risk management process is an integral part of the overall
management processes and is divided into four stages: 1) risk
identification; 2) evaluation and prioritization; 3) mitigation and
controls and 4) reporting. Key risks are assessed and updated

on a regular basis. Risk mitigation actions are defined according
to the risk identification and the impact/likelihood assessments.

Outokumpu’s risk governance model includes quarterly reporting
of the risks to the Audit Committee, as well as semi-annual
updates on key risks and risk management, including strategic
and business risks, operational risks and financial risks.

The focus in risk management in 2019 was on implementing
the mitigation actions of the identified risks, supporting debt
reduction mission in Outokumpu e.g. by focused working
capital management and by improving the overall efficiency of
the risk management process. Furthermore, the harsh market
environment, especially in Europe, required several mitigating
actions to protect Group’s earnings and cash flows.

Outokumpu continued its systematic fire safety and loss
prevention audit program, where focus was in execution of
the mitigating actions. In total, some twenty fire safety loss
prevention audits were carried out in 2019 using in-house
expertise in cooperation with external advisors.

The main realized risks in 2019 were related to distortion of
the stainless steel markets, originally caused by the US steel
tariffs, which continued to have a negative impact on stainless
steel base prices and deliveries in Europe throughout the year.
Additionally, the fluctuation of the nickel price during the year
lead to significant volatility (positive and negative impacts) on
quarterly financials. Furthermore, inadequate profitability of
business area Americas, mainly due to low deliveries, remained
to be a realized risk in 2019. During 2019, the fair value of the
investment in Fennovoima declined significantly, which has an
adverse impact on Group’s equity.

Strategic and business risks

Outokumpu’s key strategic and business risks currently
include: risks and uncertainties relating to the development of
overcapacity of global stainless steel production and volatility
of raw material and end product prices, risks and uncertainties
in implementing the announced vision, including measures to
implement new IT systems and processes, improve operational
reliability, drive competitiveness and further improve financial
performance; the risk of permanent safeguard measures
initiated by EU not being effective; risks and uncertainties
related to developments in the stainless steel and ferrochrome

Outokumpu Annual report 2019 | Review by the Board of Directors

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Review by the Board of Directorsmarkets and competitor actions; changes in the prices of
electrical power, fuels, nickel, iron and molybdenum impacting
cash flow; fluctuations in exchange rates affecting the global
competitive environment in stainless; and the risk of litigation or
adverse political action affecting trade.

Operational risks

Key operational risks for Outokumpu are: a major fire or
machinery breakdown and consequent business interruptions; IT
dependency and cyber security risks; risks due to a fragmented
system environment; risks related to supply chain and certain
critical supplier dependencies; and investment and project
implementation risks, especially related to implementation of
new ERP systems. Operational risks also include inadequate or
failed internal processes, employee actions, systems, or events
such as natural catastrophes and misconduct or crime. These
risks 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. To minimize the 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 safety audit programs in place.

Environmental and climate change related risks
The main environmental accident risks at production sites
relate to the use of acids, the production of hazardous waste
and toxic gases, landfill activities, long-term contamination of
soil or groundwater, and the long-term effects of hazardous
pollutants. Outokumpu also has some potential environmental
liabilities and risks at closed mines and production sites.

The main environmental business risks for Outokumpu are
related to emissions trading schemes; new environmental and
consumer protection demands, including changes in environ-
mental legislation and their impact on Outokumpu’s competitive
position; as well as the risk of increased electricity prices
and emissions costs due to the European Union’s unilateral
Emissions Trading System (ETS).

Outokumpu also evaluates annually its climate change related
risks, including main production locations’ exposures on

several threats and risks driven by the climate change. These
climate change threats and risks include e.g. flood, sea water
level changes, exposures to hurricanes, tornadoes and severe
storms, extreme weather conditions like lightning, rain or hail.
The main climate change related risks to Outokumpu are driven
by changes to climate policies, e.g. “low carbon” Climate
agreement and Emission Trading Scheme (ETS), which can have
adverse impact to Outokumpu’s operating environment and
financial position.

Safety and personnel-related risks
The main risks related to safety and personnel are the risk of
fatalities and serious injuries to own employees and contractors,
which would also have a significant impact on Outokumpu’s
safety culture and the company’s reputation as an employer;
the loss of key individuals or other employees who have specific
knowledge of, or relationships with, trade customers in markets
in which Outokumpu operates; and the risk of being unable to
attract, retain, motivate, train, and develop qualified employees
at all levels, which could have a material adverse effect on
Outokumpu’s business, financial condition, and operational
results.

Risks related to 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 globally in areas such as compe-
tition law, anti-corruption and bribery, anti-money laundering,
data protection (including EU GDPR compliance) and trade
restrictions, including sanctions. Outokumpu also faces the risk
of fraud by its employees, external theft and crime, losses of
critical research and development data, misconduct, as well as
violations by its sales intermediaries or at its joint ventures and
other companies.

Social responsibility related risks and uncertainties
Outokumpu aims to actively identify risks and uncertainties
related to its exposures in social responsibility, including human
rights related topics. This applies to Outokumpu’s own opera-
tions globally as well into its supply chain and other business
partners. Outokumpu takes seriously all labor practice violations
and related threats as well as its full transparency and compli-
ance on human rights topics. However, Outokumpu operates

mainly in regions, where the risk related to social responsibility
and human rights are not considered to be high.

Financial risks

Key financial risks for Outokumpu include: changes in the prices
of nickel, iron, molybdenum, power, fuels and carbon emissions;
currency developments affecting the euro, the US dollar, the
Swedish krona, and the British pound; interest rate changes
connected to the euro, the Swedish krona and the US dollar;
interest margin changes applied for Outokumpu; constrained
access to new financing; counterparty risks related to
customers and other business partners, including suppliers and
financial institutions; risks related to liquidity and refinancing;
risks related to the fair value of shareholdings, e.g. investment
in the Fennovoima project; the risk of breaching financial
covenants or other terms and conditions of debt, leading to an
event of default; and risks related to the prices of equities and
fixed-income securities invested under defined benefit pension
plans and risks related to valuation parameters, especially
long-term interest rates, of defined benefit pension plans.

Short-term risks and uncertainties

Outokumpu is exposed to the following risks and uncertainties
in the short term: risks and uncertainties in implementing the
announced vision, including measures to implement new IT
systems and processes, especially related to implementation
of new ERP systems, improve operational reliability, drive
competitiveness and further improve financial performance; the
risk of permanent safeguard measures initiated by EU not being
effective; risks and uncertainties related to global overcapacity
in stainless steel, as well as to market development in stainless
steel, ferrochrome and competitor actions; dependencies on
certain critical suppliers; changes in the prices of ferrochrome,
nickel, electrical power and carbon emissions; currency
developments affecting the euro, US dollar, Swedish krona,
and British pound; changes in interest margins applied for
Outokumpu; risks related to the fair value of shareholdings, e.g.
investment in the Fennovoima project; project and investment
implementation risks, including the ongoing project in the Kemi
mine; IT dependency and cyber security risks; refinancing risks;
counterparty risks related to customers and other business
partners, including suppliers and financial institutions.

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Review by the Board of DirectorsPossible adverse changes in the global political and economic
environment, including a severe global economic downturn,
may have a significant negative impact on Outokumpu’s
overall business and access to financial markets. Outokumpu
also considers recent events in its risk assessments, such
as: slowing economic growth in our main market Europe,
particularly in Germany; the UK’s decision to leave the EU and
possible risks related to trade relations; the possible effect of
the rapidly evolving coronavirus situation on global trade flows
and capital markets.

Significant legal proceedings

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 estate 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 court
of first instance in Spain accepted the claim of EUR 20 million
brought against Outokumpu and the two other companies.
Outokumpu and the two other companies appealed the court’s
decision and in March 2018 the Court of Appeal ruled in
favor of Outokumpu. In May 2018, the administrator of the
bankruptcy estate filed an appeal before the Spanish Supreme
Court, where the case is pending without progress during 2019.

Claim in Italy related to former tax consolidation group

In December 2015, Outokumpu Holding Italia and Acciai
Speciali Terni (AST) entered into a dispute relating to the tax
consolidation of the former ThyssenKrupp Tax Group in Italy.
AST claimed 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. In July 2019, a final
and conclusive settlement was reached between Outokumpu
and ThyssenKrupp regarding the case and including also
several other earlier claims from Outokumpu’s acquisition of
Inoxum. The financial impact of the settlement was reported in
connection with the first quarter 2019 results.

Shares
On December 31, 2019, Outokumpu’s share capital was EUR
311 million, and the total number of shares was 416,374,448.
At the end of the year, Outokumpu held 4,599,733 treasury
shares. The average number of shares outstanding in 2019 was
411,198,002.

Management shareholdings and share
based incentive programs

On December 31, 2019, the members of the Board of Directors
and the members of the Outokumpu Leadership Team (OLT)
altogether held 2,554,134 shares, or 0.6% of the total number
of shares.

Outokumpu has established share-based incentive programs
for the OLT members, selected managers and key employees.
Outokumpu’s share-based incentive programs include Perfor-
mance Share Plan, Restricted Share Pool, Matching Share Plans
for the CEO and other key employees, and a Performance Share
Plan for the CEO. In 2019, after deductions for applicable taxes,
a total of 1,129,287 shares were delivered to the participants
of the programs based on the achievements of the agreed
targets and conditions of the programs. Outokumpu used its
treasury shares for the reward payments.

The Performance Share Plan and the Restricted Share Pool
Program are currently ongoing for the periods 2018–2020,
2019–2021, and their continuation for the period 2020–2022
was already approved by the Board of Directors in December
2019. The Performance Share Plan for the periods 2018–2020
and 2019–2021 focuses on earnings criteria that measures
Outokumpu’s profitability and the efficiency with which its
capital is employed compared to a peer group.

More details on the share-based incentive programs can be
found in the note 18 in the consolidated financial statements.

Corporate governance
Outokumpu’s Corporate Governance Statement can be found
on the Outokumpu website:
https://www.outokumpu.com/en/investors/governance

Annual General Meeting

The Annual General Meeting of Outokumpu Oyj was held
on March 27, 2019. The Meeting approved the financial
statements and discharged the management of the company
from liability for the financial year 2018. The Meeting decided
that a dividend of 0.15 euros per share be paid for 2018 and
authorized the Board of Directors to repurchase the company’s
own shares and to decide on the issuance of shares as well as
special rights entitling to shares. The Meeting also approved
the proposals of the Shareholders’ Nomination Board regarding
the members of the Board of Directors and their remuneration
and the revised Charter of the Shareholders’ Nomination Board.

The Annual General Meeting decided in accordance with the
proposal by the Nomination Board that the Board of Directors
would consist of seven members. Kati ter Horst, Kari Jordan,
Heikki Malinen, Eeva Sipilä and Pierre Vareille were re-elected,
and Julia Woodhouse and Vesa-Pekka Takala were elected as
new members for the term of office ending at the end of the
next Annual General Meeting. Kari Jordan was re-elected as the
Chairman and Heikki Malinen elected as the new Vice Chairman
of the Board of Directors.

Changes in the Outokumpu Leadership Team

Olli-Matti Saksi was appointed President of business area
Americas as of May 23, 2019.

Nomination Board

Outokumpu’s Shareholders’ Nomination Board consists of the
representatives of the four largest shareholders registered
in the shareholder register of the company following Nasdaq
Helsinki’s last trading day in August. In addition, Kari Jordan,
Outokumpu’s Chairman of the Board of Directors, acts as an
expert member in the Nomination Board. The Nomination Board
has been established to annually prepare proposals on the
composition of the Board of Directors and director remunera-
tion for the Annual General Meeting.

On September 2, 2019 the four largest shareholders of
Outokumpu were Solidium Oy, Varma Mutual Pension Insurance
Company, Ilmarinen Mutual Pension Insurance Company and
The Social Insurance Institution of Finland, and they have

Outokumpu Annual report 2019 | Review by the Board of Directors

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Review by the Board of Directorsappointed the following representatives to the Nomination
Board:

• Antti Mäkinen, Managing Director at Solidium Oy

• Pekka Pajamo, CFO at Varma Mutual Pension Insurance

Company

• Jouko Pölönen, President and CEO, at Ilmarinen Mutual

Pension Insurance Company

• Tuula Korhonen, Investment Manager at The Social Insurance

Institution of Finland

The Nomination Board submitted its proposals to Outokumpu’s
Board of Directors on December 2, 2019.

Board of Directors’ proposal
for profit distribution
According to Outokumpu’s dividend policy, the dividend pay-out
ratio throughout a business cycle shall be in a range of 30–50
per cent of net income. According to the parent company’s
financial statements on December 31, 2019 distributable
funds totaled EUR 2,287 million, of which retained earnings
were EUR 164 million.

The Board of Directors is proposing to the Annual General
Meeting to be held on March 31, 2020 that a dividend of EUR
0.10 per share is paid for 2019.

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Review by the Board of DirectorsGroup key figures

2019 1)

2018

2017 2)

2016

2015

2019 1)

2018

2017 2)

2016

2015

Scope of activity
Sales
– change in sales
– exports from and sales outside

Finland, of total sales *

€ million
%

6,403
–6.8

6,872
8.1

6,356
11.7

5,690
–10.9

6,384
–6.7

95.9

96.7

96.5

96.4

96.6

Capital employed on Dec 31 3) *

€ million

3,904

4,086

3,929

3,816

4,133

Capital expenditure *
– in relation to sales

€ million
%

Depreciation and amortization
Impairments

€ million
€ million

Research and development
costs
– in relation to sales

€ million
%

221
3.4

230
3

17
0.3

260
3.8

204
12

15
0.2

174
2.7

216
1

13
0.2

164
2.9

226
26

20
0.4

154
2.4

302
1

23
0.4

Financing and financial position
Net debt *
– in relation to sales

€ million
%

Net financial expenses *
– in relation to sales

Interest expenses *
– in relation to sales

Net debt to adjusted EBITDA *

Share capital
Total equity

Equity-to-assets ratio *
Debt-to-equity ratio *

€ million
%

€ million
€ million

%
%

1,155
18.0

1,241
18.1

1,091
17.2

1,242
21.8

1,610
25.2

80
1.3

76
1.2

4.4

311
2,562

42.5
45.1

107
1.6

70
1.0

2.6

311
2,750

45.9
45.1

127
2.0

92
1.5

1.7

311
2,721

46.3
40.1

121
2.1

105
1.9

4.0

311
2,416

40.4
51.4

149
2.3

130
2.0

9.8

311
2,329

39.6
69.1

Personnel on 31 Dec 4)
– average for the year

Profitability
Adjusted EBITDA *
– in relation to sales
EBITDA *

EBIT *
– in relation to sales

Result before taxes
– in relation to sales

€ million
%
€ million

€ million
%

Net result for the financial year
– in relation to sales

€ million
%

Return on equity 3) *
Return on capital employed 3) *

%
%

10,390
10,645

10,449
10,468

10,141
10,485

10,600
10,977

11,002
11,833

Net cash generated from
operating activities

€ million

371

214

328

389

–34

Alternative performance measures are marked with *. For more information, please see Alternative Performance
Measures section.

1) IFRS 16 – Leases has been adopted on January 1, 2019 using the modified retrospective approach.

Comparative information has not been restated.

2) Figures for 2017 have been restated due to IFRS 15 adoption in 2018. Figures for 2016 and 2015 have not

been restated.

3) Key figure definition changed in 2016. Figures for 2015 have been restated.

4) Personnel reported as headcount.

263
4.1
266

33
0.5

–41
–0.6

–75
–1.2

–2.8
0.8

485
7.1
496

280
4.1

175
2.5

130
1.9

4.8
7.0

631
9.9
663

445
7.0

327
5.1

392
6.2

15.4
11.3

309
5.4
355

103
1.8

–13
–0.2

144
2.5

6.4
2.6

165
2.6
531

228
3.6

127
2.0

86
1.4

3.9
5.3

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Review by the Board of DirectorsAlternative performance measures

Certain financial key figures and ratios presented in Outokumpu’s Annual Report are not measures
of financial performance, financial position or cash flows under IFRS and are therefore considered
as alternative performance measures. These measures are not defined by IFRS and therefore
may not be directly comparable with financial measures and ratios used by other companies,
including those in the same industry. The reason for presenting these measures is that either
they are statutory requirements applicable to the Annual Report of the Group or the management
believes that these measures provide meaningful supplemental information on the underlying
business performance or financial position of the Group. These financial measures should not be
considered in isolation from, or as a substitute for, financial information presented in compliance
with IFRS. Alternative performance measures are marked with * in the Group key figures table.

Key figure

Definition of the key figure or
source in the consolidated financial
statements

2019

2018

Exports from and sales outside Finland
Exports from and sales outside Finland is an indicator of the international nature of the Group’s business.

Sales
Sales by destination to Finland
Exports from and sales outside
Finland
– exports from and sales outside

Finland, of total sales

Consolidated statement of income
Note 4. Geographical information
Sales – Sales by destination to
Finland
Comparison to sales

€ million
€ million

6,403
264

6,872
230

€ million

6,139

6,642

95.9

96.7

Capital employed
Capital employed is a measure for the amount of capital invested in Group’s operations.

Capital employed is the sum of:
Total equity

Net debt
Defined benefit and other long-term
employee benefit obligations
Net interest rate derivative
liabilities
Net accrued interest expenses
Less:
Defined benefit plan assets

Financial assets at fair value
through other comprehensive
income
Investments at fair value through
profit or loss
Investments in associate
companies and joint ventures
Capital employed on Dec 31

Consolidated statement of financial
position
Defined later in this section
Consolidated statement of financial
position
Note 20. Fair values and nominal
amounts of derivative instruments
Note 28. Trade and other payables

Consolidated statement of financial
position
Consolidated statement of financial
position

€ million
€ million

2,562
1,155

2,750
1,241

€ million

335

318

€ million
€ million

€ million

€ million
€ million

–5
9

–2
5

38
3,904

53
4,086

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Review by the Board of DirectorsKey figure

Definition of the key figure or
source in the consolidated financial
statements

2019

2018

Key figure

Definition of the key figure or
source in the consolidated financial
statements

2019

2018

Capital expenditure
Capital expenditure indicates the investment in assets to generate future cash flows for the Group.

Return on equity
Return on equity is an indicator of the value the Group generates to the capital the shareholders have
invested in the Group.

Capital expenditure

– in relation to sales

Additions in property, plant and
equipment and intangible assets,
other than right-of-use assets, asset
retirement obligations and emission
allowances; and investments
in financial assets at fair value
through OCI, associated companies
and joint ventures, and business
combinations
Comparison to sales

€ million
%

221
3.4

260
3.8

Adjusted EBITDA, EBITDA, and EBIT
Adjusted EBITDA is Outokumpu’s main performance indicator in financial reporting. The adjustments to
EBITDA relate to material income and expense items of unusual nature, and the purpose of these is to
improve comparability of financial performance between reporting periods. EBITDA and EBIT are also
measures of financial performance of the Group.

EBIT
– in relation to sales

Consolidated statement of income
Comparison to sales

€ million
%

Depreciation and amortization
Impairments

Note 6. Income and expenses
Note 6. Income and expenses

EBITDA

Adjustments to EBITDA
Adjusted EBITDA
– in relation to sales

EBIT before depreciation,
amortization and impairments
Note 6. Income and expenses
EBITDA – Adjustments to EBITDA
Comparison to sales

€ million
€ million

€ million
€ million
€ million
%

33
0.5

230
3

266
3
263
4.1

280
4.1

204
12

496
10
485
7.1

Total equity on Dec 31 of previous
year
Total equity on March 31
Total equity on June 30
Total equity on Sept 30
Total equity on Dec 31

Total equity (4-quarter average)

Consolidated statement of financial
position

€ million
€ million
€ million
€ million

2,750
2,656
2,624
2,602

2,721
2,655
2,686
2,710

Consolidated statement of financial
position
Average of the opening and 4
quarter-end values

€ million

2,562

2,750

€ million

2,639

2,704

Net result for the financial year
Return on equity

Consolidated statement of income
Net result for the financial year /
Total equity (4-quarter average)

€ million

–75

–2.8

130

4.8

Return on capital employed
Return on capital employed is a measure for the value the Group generates to the capital invested in its
operations.

Capital employed on Dec 31 of
previous year
Capital employed on March 31
Capital employed on June 30
Capital employed on Sept 30
Capital employed on Dec 31
Capital employed (4-quarter
average)

Defined earlier in this section

Defined earlier in this section
Average of the opening and 4
quarter-end values

€ million
€ million
€ million
€ million
€ million

4,086
4,135
4,048
4,096
3,904

3,929
3,854
4,023
4,037
4,086

€ million

4,054

3,986

EBIT
Return on capital employed

Consolidated statement of income
EBIT / Capital Employed (4-quarter
average)

€ million

0.8

280

7.0

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Review by the Board of DirectorsKey figure

Definition of the key figure or
source in the consolidated financial
statements

2019

2018

Key figure

Definition of the key figure or
source in the consolidated financial
statements

2019

2018

Net debt
Net debt is a measure for the level of debt financing in the Group. The reduction of net debt is a key priority
for the Group.

Equity-to-assets ratio
Equity-to-assets ratio shows the proportion the Group’s assets financed with equity. The equity-to-assets
ratio indicates the financial risk level of the Group.

Total equity

Total assets

Advances received
Equity-to-assets ratio

Consolidated statement of financial
position
Consolidated statement of financial
position
Note 28. Trade and other payables
Total equity / (Total assets –
advances received)

€ million

2,562

2,750

€ million
€ million

6,038
11

5,998
10

42.5

45.9

Debt-to-equity ratio
Debt-to-equity ratio or gearing is an indicator of the financial risk level and the indebtedness of the Group.

Net debt
Total equity

Debt-to-equity ratio

Defined above
Consolidated statement of financial
position
Net debt / Total equity

€ million

1,155

1,241

€ million
%

2,562
45.1

2,750
45.1

Non-current debt

Current debt

Cash and cash equivalents

Net debt

– in relation to sales

Consolidated statement of financial
position
Consolidated statement of financial
position
Consolidated statement of financial
position
Non-current + current debt
– cash and cash equivalents
Comparison to sales

€ million

1,053

€ million

€ million
%

427

325

1,155
18.0

798

511

1,241
18.1

Net financial expenses and interest expenses
Net financial expenses and interest expenses are measures for the cost of Group’s financing.

Net financial expenses

– in relation to sales

Interest expenses
– in relation to sales

Total financial income and expenses
in the Consolidated statement of
income
Comparison to sales

€ million
%

Consolidated statement of income
Comparison to sales

€ million
%

80
1.3

76
1.2

107
1.6

70
1.0

Net debt to Adjusted EBITDA
Net debt to Adjusted EBITDA is an indicator of the Group’s indebtedness.

Net debt
Adjusted EBITDA
Net debt to Adjusted EBITDA

Defined earlier in this section
Defined earlier in this section
Net debt / Adjusted EBITDA

€ million
€ million

1,155
263
4.4

1,241
485
2.6

Outokumpu Annual report 2019 | Review by the Board of Directors

14 / 74

Review by the Board of DirectorsShare-related key figures

Earnings per share 1) 2)
Diluted earnings per share 1) 2)

Cash flow per share
Equity per share 1) 2)

Dividend per share
Dividend payout ratio 1) 2)
Dividend yield

Price/earnings ratio 1) 2)

Development of share price
Average trading price

Lowest trading price
Highest trading price
Trading price at the end of the period
Change during the period

Change in the OMX Helsinki index during the period

€
€

€
%
%

€
€
€
€
%

2018

2017

2016

2019

–0.18
–0.18

0.90
6.22

0.10 3)
neg.
3.6

0.32
0.32

0.52
6.70

0.15
47.4
4.7

neg.

10.00

3.01
2.23
4.04
2.81
–12.2

13.4

5.39
3.18
8.26
3.20
–58.7

–8.0

2015

0.23
0.23

–0.08
5.60

–
–
–

0.35
0.35

0.94
5.84

0.10
28.8
1.2

24.31

11.85

4.51
2.08
8.51
8.51
211.3

3.6

4.49
2.06
7.76
2.73
–42.7

10.8

0.95
0.90

0.79
6.59

0.25
26.3
3.2

8.15

8.11
6.61
10.05
7.74
–9.0

6.4

Market capitalization at the end of the period

€ million

1,155

1,312

3,223

3,541

1,138

Development in trading volume
Trading volume 4)

In relation to weighted average number of shares

1,000 shares
%

884,254
215.0

826,636
201.1

1,021,607
247.7

955,682
230.6

1,345,515
323.9

Adjusted average number of shares 5)
Diluted average number of shares 5)
Number of shares at the end of the period 5)

411,198,002
446,209,235
411,774,715

411,065,622
447,181,306
410,563,719

412,363,204
450,247,639
412,671,549

414,411,287
414,411,287
413,860,600

415,473,976
415,473,976
415,489,308

1) IFRS 16 – Leases has been adopted on January 1, 2019 using the modified retrospective approach. Comparative information has not been restated.

2) Figures for 2017 have been restated due to IFRS 15 adoption in 2018. Figures for 2015 or 2016 have not been restated.

3) The Board of Directors’ proposal to the Annual General Meeting.

4) Includes only Nasdaq Helsinki trading.

5) Excluding treasury shares.

Outokumpu Annual report 2019 | Review by the Board of Directors

15 / 74

Review by the Board of DirectorsDefinitions of share-related key figures

Earnings per share

Cash flow per share

Equity per share

Dividend per share

Dividend payout ratio

Dividend yield

Price/earnings ratio (P/E)

Average trading price

Net result for the financial year attributable to the equity holders
Adjusted average number of shares during the period

Net cash generated from operating activities
Adjusted average number of shares during the period

Equity attributable to the equity holders
Adjusted number of shares at the end of the period

Dividend for the financial year
Adjusted number of shares at the end of the period

Dividend for the financial year
Net result for the financial year attributable to the equity holders

× 100

Dividend per share
Adjusted trading price at the end of the period

× 100

Adjusted trading price at the end of the period
Earnings per share

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

Outokumpu Annual report 2019 | Review by the Board of Directors

16 / 74

Review by the Board of DirectorsConsolidated financial statements, IFRS

Parent company
financial statements

Income statement of the parent company . . . . . . . . . . . . . . . . . . .

Balance sheet of the parent company . . . . . . . . . . . . . . . . . . . . . . .

Cash flow statement of the parent company . . . . . . . . . . . . . . . .

Statement of changes in equity of the parent company . . . .

Commitments and contingent liabilities of
the parent company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statement of income . . . . . . . . . . . . . . . . . . . . . . . . . .

15. Investments in associated companies and

Consolidated statement of comprehensive income . . . . . . . . .

Consolidated statement of financial position . . . . . . . . . . . . . . . .

Consolidated statement of cash flows . . . . . . . . . . . . . . . . . . . . . . .

Consolidated statement of changes in equity . . . . . . . . . . . . . . .

joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16. Carrying values and fair values of financial assets

and liabilities by measurement category . . . . . . . . . . 44

17. Financial assets at fair value through other

comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to the consolidated financial statements . . . . . . . . . . . . .

18. Share-based payment plans . . . . . . . . . . . . . . . . . . . . . . .

1. Corporate information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Accounting principles for the

consolidated financial statements . . . . . . . . . . . . . . . . . .

3. Operating segment information . . . . . . . . . . . . . . . . . . . . .

4. Geographical information . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Acquisitions and divestments . . . . . . . . . . . . . . . . . . . . . . .

6. Income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Employee benefit expenses . . . . . . . . . . . . . . . . . . . . . . . . .

8. Financial income and expenses . . . . . . . . . . . . . . . . . . . .

9. Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12. Property, plant and equipment . . . . . . . . . . . . . . . . . . . .

13. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14. Impairment of intangible assets and property,
plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19. Financial risk management, capital management
and insurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20. Fair values and nominal amounts of

derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22. Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . .

23. Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .

24. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25. Employee benefit obligations . . . . . . . . . . . . . . . . . . . . . .

26. Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27. Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28. Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . 61

29. Commitments and contingent liabilities . . . . . . . . . .

30. Disputes and litigations . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31. Related party transactions . . . . . . . . . . . . . . . . . . . . . . . .

32. Subsidiaries on December 31, 2019 . . . . . . . . . . . . .

17 / 74

Outokumpu Annual report 2019 | Financial statementsConsolidated statement of income

Consolidated statement of
comprehensive income

€ million

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 expenses

Total financial income and expenses

Result before taxes

Income taxes

Net result for the financial year

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

Earnings per share, EUR
Diluted earnings per share, EUR

Note

2019

2018

€ million

Note

2019

2018

3, 4, 6

6,403

6,872

Net result for the financial year

–75

130

–6,108

–6,398

Other comprehensive income

295

107
–77
–198
–17
–77

4
–76
4
–13
–80

–41

–33

–75

–0.18
–0.18

474

Items that may be reclassified subsequently to profit or loss:

99
–71
–188
–15
–19

280

3
–70
–15
–26
–107

175

–45

130

0.32
0.32

Exchange differences on translating foreign operations

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

Cash flow hedges

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

Items that will not be reclassified to profit or loss:

Remeasurements of defined benefit plans
Changes during the financial year
Income tax relating to remeasurements

Financial assets at fair value through other comprehensive income

Fair value changes during the financial year
Income tax relating to financial assets at fair value through other
comprehensive income

Share of other comprehensive income in associated companies and
joint ventures

Other comprehensive income for the financial year, net of tax

–1

–2
–1

–43
10

–55

–0

–49

–

–4

–
–0

–7
–1

–1

–0

Net result for the financial year is fully attributable to the equity holders of the company.

IFRS 16 – Leases has been adopted on January 1, 2019 using the modified retrospective approach.
Comparative information has not been restated. For further information, see notes 2 and 13 to the consolidated
financial statements.

Total comprehensive income for the financial year

–124

148

Total comprehensive income for the financial year is fully attributable to the equity holders of the company.

18 / 74

Outokumpu Annual report 2019 | Financial statementsConsolidated financial statementsConsolidated statement of financial position

€ million

ASSETS

Non-current assets
Intangible assets
Property, plant and equipment
Investments in associated companies and joint ventures
Financial assets at fair value through other comprehensive income
Derivative financial instruments
Deferred tax assets
Defined benefit plan assets
Trade and other receivables

11, 14
12, 13, 14
15
17
20
9
25
22

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

20
22
23

607
2,767
38
31
5
229
68
2
3,747

1,424
13
15
514
325
2,291

585
2,659
53
86
2
247
72
2
3,706

1,555
13
15
640
68
2,292

TOTAL ASSETS

6,038

5,998

Note

2019

2018

€ million

Note

2019

2018

EQUITY AND LIABILITIES

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

311
714
2,103
–40
–525

311
714
2,103
5
–382

Total equity

2,562

2,750

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

27
20
9
25
26
28

27
20
26

1,053
–
12
335
85
29
1,514

427
17
25
17
1,475
1,962

798
1
12
318
65
35
1,229

511
20
5
12
1,471
2,019

TOTAL EQUITY AND LIABILITIES

6,038

5,998

19 / 74

Outokumpu Annual report 2019 | Financial statementsConsolidated financial statementsConsolidated statement of cash flows

€ million

Note

2019

2018

€ million

Note

2019

2018

Cash flow from operating activities

Net result for the financial year

–75

130

Adjustments for

Depreciation and amortization
Impairments
Net expenses on provisions, and defined benefit and other
long-term employee benefit obligations
Gain/loss on sale of intangible assets and property, plant
and equipment
Gain/loss on disposal of subsidiaries
Gain/loss on sale of financial assets
Interest income
Interest expense
Taxes
Share of results in associated companies and joint
ventures
Exchange rate differences
Other non-cash adjustments

6, 11, 12
6, 11, 12, 14

5
8
8
8
9

Change in working capital

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

Provisions, and defined benefit and other
long-term employee benefit obligations paid

Interest and dividends received
Interest paid
Income taxes paid

Net cash from operating activities

230
3

–81
–1
0
–2
65
33

–6
2
11
330

100
129
–10
218

–53

12
–56
–5

371

204
12

–14
–
1
–1
62
45

–3
1
–2
313

60
–145
–27
–112

–60

2
–54
–5

214

Cash flow from investing activities
Acquired businesses, net of cash
Investments in financial assets at fair value through other
comprehensive income
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from the disposal of subsidiaries, net of cash
Proceeds from sale of property, plant and equipment
Proceeds from sale of intangible assets
Other investing cash flow

Net cash from investing activities

Cash flow before financing activities

Cash flow from financing activities
Dividends paid
Treasury share purchase
Borrowings of non-current debt
Repayments of non-current debt
Change in current debt
Repayments of lease liabilities
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
Net change in cash and cash equivalents
Foreign exchange rate effect on cash and cash equivalents
Cash and cash equivalents at the end of the financial year

17
12
11
5
12
11

24
24

–3

–
–161
–28
9
99
10
10

–65

306

–62
–
515
–76
–396
–34
–
3

–49

256

68
256
0
325

–10

–16
–154
–76
–
3
19
4

–229

–14

–103
–17
329
–240
7
–
–5
1

–29

–43

112
–43
–1
68

20 / 74

Outokumpu Annual report 2019 | Financial statementsConsolidated financial statementsConsolidated statement of changes in equity

€ million

Equity on Jan 1, 2018

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

Dividends paid
Share-based payments
Treasury share purchase

Equity on Dec 31, 2018

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

Dividends paid
Share-based payments

Other

Equity on Dec 31, 2019

Invested
unrestricted
equity
reserve

Premium
fund

Fair value
reserve from
financial
assets at FV
through OCI

Other
reserves

Fair value
reserve from
derivatives

Cumulative
translation
differences

Remeasure-
ments of
defined
benefit plans

Treasury
shares

Other
retained
earnings

Total equity

Note Share capital

311
–
–
–

–
–
–
311
–
–
–

–
–
–
311

714
–
–
–

–
–
–
714
–
–
–

–
–
–
714

2,103
–
–
–

–
–
–
2,103
–
–
–

–
–
–
2,103

24
18
24

24
18

3
–
–
–

–
–
–
3
–
–
–

–
–
–
3

3
–
2
2

–
–
–
5
–
–54
–54

–
–
–
–49

–3
–
0
0

–
–
–
–3
–
9
9

–
–
–
6

–81
–
24
24

–
–
–
–56
–
29
29

–
–
–
–27

–72
–
–8
–8

–
–
–
–80
–
–33
–33

–
–
–3
–116

–26
–
–
–

–
3
–17
–40
–
–
–

–
7
–
–33

–225
130
–0
130

–103
–8
–
–207
–75
–0
–75

–62
–9
3
–350

2,728
130
18
148

–103
–5
–17
2,750
–75
–49
–124

–62
–3
–
2,562

Total equity is fully attributable to the equity holders of the company.

21 / 74

Outokumpu Annual report 2019 | Financial statementsConsolidated financial statementsNotes 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 Helsinki,
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 Communica-
tions, P.O. Box 245, 00181 Helsinki, Finland or via e-mail at
corporate.comms@outokumpu.com.

Outokumpu is the global leader in stainless steel. We aim to
be the best value creator in stainless steel through customer
orientation and efficiency. The foundation of our business is our
ability to tailor stainless steel into any form and for almost any
purpose. Stainless steel is sustainable, durable and designed to
last forever. Our customers use it to create civilization’s basic
structures and its most famous landmarks as well as products
for households and various industries. Outokumpu employs
10,000 professionals in more than 30 countries.

In its meeting on February 5, 2020 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 decide to amend the
financial statements.

2. Accounting principles for the

consolidated financial statements

Basis of preparation
These consolidated financial statements of Outokumpu have
been prepared on going concern basis for the financial year
2019 covering the period from January 1 to December 31,
2019.

The consolidated financial statements 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 inter-
pretations in force on December 31, 2019. 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.

As of January 1, 2019, Outokumpu has applied the following
new and amended standards.

• IFRS 16 Leases (effective for financial years beginning on
or after January 1, 2019): The new standard replaced IAS
17 standard and related interpretations. IFRS 16 requires
the lessees to recognize nearly all lease agreements as
right-of-use assets and lease liabilities in the statement of
financial position. The exceptions to this requirement are
short-term contracts with a lease term of 12 months or less
and leases of low value items.

Outokumpu has adopted the IFRS 16 as of January 1, 2019
using the modified retrospective approach, where compara-
tive financial information is not restated, but the transition
impact is recognized to the balances of January 1, 2019. The
accounting principles related to leases are described later
in this note, and the transition impacts in note 13 of these
financial statements.

• IFRIC 23 Uncertainty over Income Tax Treatments

(effective for financial years beginning on or after January 1,
2019). IFRIC 23 adds to the requirements in IAS 12 Income
Taxes by specifying how to reflect the effects of uncertainty
in accounting for income taxes when it is unclear how tax law
applies to a particular transaction or circumstance, or it is

unclear whether a taxation authority will accept an entity’s tax
treatment. The interpretation did not have material impact on
Outokumpu’s consolidated financial statements.

• Annual Improvements to IFRSs (2015–2017 Cycle):

The changes did not have material impact on Outokumpu’s
consolidated financial statements.

Other new or amended standards and interpretations had no
impact on Outokumpu’s 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 adopts
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.

• Amendments to IAS 1 Presentation of financial

statements and IAS 8 Accounting policies, changes
in accounting estimates and errors (effective for
financial years beginning on or after January 1, 2020): The
amendments clarify the definition of materiality and use it
consistently throughout IFRSs and the Conceptual Framework
of Financial Reporting. The amendments are not expected to
have material impact on Outokumpu’s consolidated financial
statements.

• Revised Conceptual Framework of Financial Reporting

(effective for financial years beginning on or after January 1,
2020): The International Accounting Standards Board has
issued a revised Conceptual Framework which has been
taken into use in decisions on standard setting. The current
accounting standards will not be changed, but Framework is
to be applied in determining accounting policies in situations
that are not otherwise dealt with under the accounting
standards. Key changes in the framework include: increasing
the prominence of stewardship in the objective of financial
reporting, reinstating prudence as a component of neutrality,
revising the definitions of an asset and a liability, removing

22 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsthe probability threshold for recognition, adding guidance on
derecognition and different measurement bases, and stating
that profit or loss is the primary performance indicator. The
amendments are not expected to have material impact on
Outokumpu’s consolidated financial statements.

part of the future price for each product to be sold is estimated
according to management’s best knowledge in NRV calculations.
Due to fluctuations in nickel and other alloy prices, the realized
prices can deviate significantly from what has been used in NRV
calculations on the closing date. See note 21.

Other new or amended standards and interpretations that are
not yet effective are not expected to have a material impact on
Outokumpu’s consolidated financial statements.

Management judgements and use of estimates
The preparation of the financial statements in accordance with
IFRSs requires management to make judgements, 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 the 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.

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.
Significant part 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 the near future is known. That is why a significant

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 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. The estimation of
future cash flows and definition of the discount rates for the
impairment testing require 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 14.

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 management 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.

Fair values of non-derivative financial instruments

The fair value of financial instruments which cannot be
determined based on quoted market prices and rates are based
on different valuation techniques. The Group uses its 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.

Relating to the valuation of Outokumpu’s investment in
Voimaosakeyhtiö SF, key management judgements relate to
long-term market price for electricity, Fennovoima’s capacity
utilization rate, discount rates for cash flows and terminal value,
and inflation rates for costs and electricity market price. See
note 17.

Employee benefits

The present value of pension obligations is subject to actuarial
assumptions which actuaries use in calculating these obliga-
tions. 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

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Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsmainly 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. The Group controls an entity
when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has ability to affect those
returns through its power over the entity. The financial state-
ments 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 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 except 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-con-
trolling 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 unreal-
ized margins, as well as distribution of profits within the Group,
are eliminated in the preparation of consolidated financial
statements.

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 recog-
nized 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
Non-current assets or disposal groups 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.

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’s business is divided into four business
areas, which are responsible for sales, profitability, production
and supply chain management, and they are Outokumpu’s
operating segments under IFRS. The performance of the
segments is reviewed based on segments’ adjusted EBITDA,
which is defined in these accounting principles. The review is
done by the CEO who is Outokumpu’s chief operating decision
maker, on basis of regular internal management reporting
based on IFRS.

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Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsForeign 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 trans-
actions 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 consolidated 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 adjust-
ments 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 from contracts with customers
Outokumpu generates revenue mainly from sales of stainless
steel and ferrochrome. Outokumpu ships these goods to
customers under a variety of Incoterms, and considers the
transfers of physical possession and risks and rewards related
to the ownership of the goods accordingly. Consequently, the
performance obligations related to sales of stainless steel and
ferrochrome are satisfied at a point of time.

With customer deliveries following the “C” Incoterms, whereby
the control of the goods transfers to the customer before the
delivery, Outokumpu remains responsible for organizing the
transportation of the goods to the customer. In these cases,
the transportation service is a separate performance obligation,
which is satisfied over time of the transportation. Outokumpu
has concluded that it acts as a principal with regards to the
transportation service performance obligation.

Most of Outokumpu’s revenue from contracts with customer is
recognized at a point of time. Only revenue from transportation
service is recognized over a period of time, and the period
under which the revenue is recognized, is relatively short.
Moreover, the sales of goods and transportation service are
invoiced together from the customer. Consequently, the
uncertainty associated with the cash flows does not differ with
respect to the timing of revenue recognition.

Stainless steel and ferrochrome sales prices are mainly fixed
before delivery, and volume discounts estimated and accrued
in the revenue recognition are the only variable component
in pricing. In individual cases, the sales price of ferrochrome
is based on the period of time when the customer uses the
purchased ferrochrome. The payment terms vary from advance
payment to 90 days payment term, and they do not include any
significant financing component.

Outokumpu also sells nickel and nickel warrants that relate
to nickel sourced as part of a nickel supply agreement but
is not needed for production of stainless steel. These sales
are recognized to revenue when the title to the material is
transferred to 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 consolidated 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 USA) Outokumpu companies are included in income tax
consolidation groups / group taxation systems. The share of
results in associated companies is reported in the statement of
income based on the net result and thus including the income
tax effect.

Deferred income taxes are stated using the balance sheet
liability method to reflect the net tax effects of temporary differ-
ences 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.

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Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsResearch 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 costs
relate to the development of new or substantially improved
products or production processes and to transformation
projects with the target of developing and improving business
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. Goodwill is measured at cost less accumulated
impairment losses.

Intangible assets other than goodwill include 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 accumulated amortizations and
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.

Borrowing costs (mainly interest costs) directly attributable to
the acquisition of an intangible asset are capitalized in the
statement of financial position as part of the carrying amount of
the asset, when it takes a substantial period of time to get the
asset ready for its intended use.

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 if the emission
allowances held by the Group do not cover the actual emis-
sions. The purchased emission allowance quotas recognized in
intangible rights are derecognized against the actual emissions
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 compa-
nies 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 an asset are capitalized in the
statement of financial position as part of the carrying amount of
the asset, when it takes a substantial period of time to get the
asset ready for its intended use or sale.

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 depre-
ciated 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
include preparatory work to utilize an ore body or part of it,
such as shafts, ramps and ventilation and are depreciated
using the units-of-production method based on the depletion
of ore reserves over their estimated useful lives. Recognition
of depreciation on an item of property, plant and equipment
is discontinued when the item is classified as held for sale.
Expected useful lives and residual values are reviewed at least
at the end of each financial year and, if they differ significantly
from previous estimates, the useful lives are revised accordingly.

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

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Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsGains and losses on sales 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 sales and disposals are presented in other
operating income or expenses.

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 or amortization
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 recover-
able amount is estimated. Goodwill is tested at least annually,
irrespective of whether there is any evidence of impairment.

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

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

loss had been recognized in prior years. Impairment losses
recognized for goodwill are not reversed.

Leases

Group as a lessee

Outokumpu leases land, buildings, machinery and equipment
for its operations. Outokumpu has also entered into service and
supply contracts that contain lease elements. Contracts are
typically with a fixed term and a fixed rental amount. Rents for
contracts on land and buildings are typically linked to an index
or a rate. For some contracts, the rental payments are variable
based on the use of the asset.

According to IFRS 16, Outokumpu recognizes lease liabilities
measured at the present value of future lease payments to
its statement of financial position. In determining the present
value of the lease liabilities, the fixed and index/rate-based
lease payments are discounted with the interest rate implicit
to the lease when available, or with the incremental borrowing
rate of the company. Incremental borrowing rates for Group
companies are defined as part of the process to determine
interest rates for intra-group lending, in which Outokumpu
defines a synthetic rating for subsidiaries. The incremental
borrowing rate takes into account the currency, the maturity
of the lease liability, and the credit risk of the lessee, which is
based on the synthetic rating, and country risk.

Lease payments are divided into interest expense and repay-
ment of the lease liability. Lease contracts may include options
to extend the contract term or purchase the leased asset
at the end of the lease term. An option is considered when
determining the lease liability when it is highly probably that the
option will be used.

Right-of-use assets recognized to the statement of financial
position are measured at the amount of lease liability and lease
payments made in advance, less accumulated depreciation and
impairments. Right-of-use assets are depreciated on a straight-
line basis over the lease term, or over the expected useful life
of the asset in case the asset will transfer to Outokumpu at the
end of the lease term or it is highly probable that a purchase
option will be used.

Lease liabilities are presented in non-current and current debt
and right-of-use assets are presented in property, plant and
equipment in consolidated statement of financial position.

Outokumpu does not apply the accounting practice of recog-
nizing lease liabilities or right-of-use assets to short-term leases,
leases of low value items, or intangible assets. Instead, related
payments, as well as variable lease payments are recognized as
expense to the profit or loss.

Outokumpu transitioned to IFRS 16 using the modified
retrospective approach where comparative information is not
restated, but transition impacts are recognized to the consol-
idated statement of financial position of January 1, 2019. In
transition, Outokumpu used the following practical expedients
allowed by the standard: (1) leases with remaining lease term
of 12 months or less on January 1, 2019 have been accounted
as short-term leases, and thus excluded from the lease liability
and right-of-use asset amounts recognized to the statement of
financial position, and (2) initial direct costs of lease contracts
already in place on December 31, 2018 have been excluded
from the right-of-use asset value. Transition impacts are
presented in note 13.

In 2018, leases were accounted in accordance with IAS 17 and
related interpretations. According to those guidelines, lease
contracts of property plant and equipment, in which the Group
had substantially all the rewards and risks of ownership, were
classified as finance leases. Related assets were recognized
as property, plant and equipment in the statement of financial
position at the commencement of the lease term at the lower
of fair value or the present value of minimum lease payments.
The present value of lease payments was included in non-cur-
rent and current debt. Lease payments were divided to interest
expense and the repayment of the outstanding liability. Assets
acquired under finance lease were depreciated over the shorter
of the useful life of the asset or the lease term. If a sale and
leaseback transaction resulted in a finance lease, any excess of
sales proceeds over the sold asset’s carrying amount was not
to be immediately recognized but deferred and amortized over
the lease term.

At inception of significant other arrangements, the Group deter-
mined whether these arrangements were or contained a lease
component. At inception of an arrangement that contained a

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Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementslease the Group separated payments and other consideration
required by the arrangement into those for the lease and those
for other elements. Lease accounting principles were applied to
lease payments.

The accounting treatment of contracts classified as finance
leases under IAS 17 did not change in transition to IFRS 16.

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

Group as a lessor

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. Rental income is
presented under other operating income.

Financial instruments

Financial assets

The Group’s financial assets are classified as financial assets
at fair value through profit or loss, financial assets at fair value
through other comprehensive income and financial assets at
amortized cost. The classification is based on Group’s business
model for financial assets and their contractual cash flow
characteristics.

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 derecog-
nized 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.

Financial assets at fair value through profit or loss

The category of financial assets at fair value through profit or
loss includes derivatives, to which hedge accounting is not
applied, as well as other financial items at fair value through
profit or loss held for trading purposes. A financial asset, such
as an investment in debt instrument or money market fund 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.

are not quoted in active markets. This category includes trade
and other receivables and cash and cash equivalents.

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. The changes in fair value
of other financial items measured at fair value are recognized
in market price gains and losses under financial income and
expenses. Accounting of derivatives is described in more detail
in section Derivatives and hedge accounting.

Financial assets at fair value through
other comprehensive income

Financial assets at fair value through other comprehensive
income includes share investments in listed and unlisted
companies. The purchases and sales of these items are
recognized at the trade date. These investments are included
in non-current assets, unless the Group has the intention to
dispose of the investment within 12 months from the reporting
date.

Investments in shares are measured at fair value. 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 use
observable market data when it is available but rely also on
entity-specific estimates made by the Group. 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. Dividends are recognized in profit or
loss. When the shares are disposed, the accumulated changes
in fair value are reclassified from fair value reserve to retained
earnings.

Financial assets measured at amortized cost

Financial assets measured at amortized cost include non-deriv-
ative financial assets with fixed or determinable payments and

Financial assets measured at amortized cost are measured
initially at fair value. After initial recognition, they are measured
at amortized cost by using the effective interest rate method
less accumulated impairments.

Outokumpu uses factoring for working capital management.
Factored trade receivables have been derecognized from the
statement of financial position when the related risks and
rewards of ownership have materially been transferred.

Outokumpu has adopted simplified model in assessing and
recognizing expected credit losses on trade receivables.
The calculation model is based on overdue statistics and
counterparty-specific credit rating linked with loss probabilities
for each rating. Impairment losses are recognized in selling and
marketing expenses.

Cash and cash equivalents

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

Financial liabilities

Financial liabilities at fair value through profit or loss

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.

Financial liabilities at amortized cost

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. Transaction costs are included
in the original carrying amount. A financial liability (or part of

28 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsthe 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.

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

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 or expiry.

Derivative instruments and hedge accounting

Derivatives

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 values of currency,

interest rate and metal options are determined by utilising
commonly applied option valuation models, such as Black-
Scholes-Merton model. Fair values of derivatives can in certain
cases be based on valuations of external counterparties.

Hedge accounting

Outokumpu applies cash flow hedge accounting to certain
currency and nickel derivatives which fulfil the IFRS 9 hedge
accounting requirements. 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. Effectiveness of the hedge relationship is
documented and assessed when hedging is started and at least
in the end of each reporting period. Hedge effectiveness is
calculated and assessed between the 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. Hedge accounting is discontinued
when the requirements of hedge accounting are no longer met.

Fair value changes of derivatives designated to hedge
forecasted 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. In the certain hedge accounted transaction, the realized
part of the nickel derivatives is first reclassified from other
comprehensive income to inventory for certain period and finally
reclassified in profit and loss. The fair value changes related to
the ineffective portion of the hedging instrument are recognized
immediately in profit or loss.

The Group has in earlier years hedged equities of the
subsidiaries located outside the euro area against changes in
exchange rates with the aim to reduce the effects of changes
in exchange rates on the Group’s equity. Accumulated fair
value changes of qualifying financial instruments designated
as hedges are reported in equity. They will be reclassified
to profit or loss as part of the gain or loss on disposal if the
corresponding foreign operation is sold or otherwise disposed of,
partly or in full.

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

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

29 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsProvisions 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-em-
ployment 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 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 payments are settled net of tax withholdings,
and they are accounted as fully equity-settled. The expense of
the programs recognized over vesting periods is based on the
grant date fair value.

Applicable statistical models are used in valuation. The impact
of non-market-based vesting conditions is assessed at the end
of each reporting period. The programs include maximum limits
for the pay-outs and the limits have been taken into account in
the valuation of the benefits.

EBIT and EBITDA
Outokumpu’s 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 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. EBITDA is formed by adding the deducted
depreciation, amortization and impairments back into EBIT.

Adjusted EBITDA
Adjusted EBITDA is Outokumpu’s main performance indicator
in financial reporting, including segment reporting. Adjusted
EBITDA presented in the notes to the consolidated financial
statements excludes such material income and expense items
which affect the comparability between periods because of
their unusual nature, size or incidence resulting for example
from group-wide restructuring programs or disposals of assets
or businesses.

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

30 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsweighted 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. 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. In addition, the shares estimated to be delivered
based on the share-based incentive programs are taken into
account. However, potential ordinary shares are only dilutive if
the adjustments decrease the earnings per share ratio.

31 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsLong
Products

Ferro-
chrome

3. Operating segment information
Outokumpu’s business is divided into four business areas which
are Europe, Americas, Long Products and Ferrochrome. In addi-
tion to the business area structure, Business Support Functions
cover Finance and Business Services, Communications and IR,
Business Transformation and IT, Legal, Corporate Affairs and
Compliance, Safety, Health and Environment, Internal Audit, and
HR and Organization Development.

Business areas have responsibility for sales, profitability,
production and supply chain management and they are
Outokumpu’s operating segments under IFRS. The performance
of the segments is reviewed based on segment’s adjusted
EBITDA, 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. Below is a description of the activities of the
four operating segments:

Europe consists of both coil and plate operations 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 production facilities are located in Finland,
Germany and Sweden. The business area has extensive service
center and sales network across Europe, Middle East, Africa
and APAC region.

Americas produces 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.

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.

Ferrochrome produces charge grade of ferrochrome. The
business area has a chrome mine in Kemi, Finland and
ferrochrome smelters in Tornio, Finland.

2019
€ million

External sales
Inter-segment sales
Sales

Adjusted EBITDA
Adjustments to EBITDA

Gain on the sale of real estate in
Benrath, Germany
Restucturing costs in Germany
Settlement with ThyssenKrupp

EBITDA
Depreciation and amortization
Impairments
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

Assets in operating capital
Other assets
Deferred tax assets
Total assets

Liabilities in operating capital
Other liabilities
Deferred tax liabilities
Total liabilities

Operating capital
Net deferred tax asset
Capital employed

Europe

Americas

4,023
66
4,089

1,343
3
1,346

216

–27

70
–53
–
233
–134
–1
99

–
–
–
–
–
–

2,876
–
–
–

975
–
–
–

1,901
–
–

–
–
–
–27
–56
–1
–84

–
–
–
–
–
–

1,209
–
–
–

295
–
–
–

914
–
–

505
137
642

–7

–
–
–
–7
–8
–
–16

–
–
–
–
–
–

296
–
–
–

139
–
–
–

157
–
–

Operating
segments
total

6,040
498
6,538

168
293
461

278

–
–
–
96
–29
–0
67

–
–
–
–
–
–

854
–
–
–

163
–
–
–

692
–
–

70
–53
–
295
–226
–2
66

–
–
–
–
–
–

5,235
–
–
–

1,571
–
–
–

3,664
–
–

Reconciliation

Other

operations Eliminations

363
290
653

–21

–
–
–14
–35
–4
–0
–39

–
–
–
–
–
–

292
–
–
–

262
–
–
–

30
–
–

–
–788
–788

–
–
–
6
–
–
6

–
–
–
–
–
–

–201
–
–
–

–194
–
–
–

–7
–
–

Group

6,403
–
6,403

263

70
–53
–14
266
–230
–3
33

6
8
–89
–41
–33
–75

5,327
483
229
6,038

1,640
1,824
12
3,476

3,687
217
3,904

32 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsOther operations consist of activities outside the four
operating segments described above, as well as industrial
holdings. Such business development and Corporate Manage-
ment expenses that are not allocated to the business areas are
also reported under Other operations. Sales of Other operations
consist of sales of electricity to Group’s production facilities in
Finland and in Sweden, nickel procured under Group’s sourcing
contract that exceed the production needs, and internal
commissions and services.

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

2018
€ million

External sales
Inter-segment sales
Sales

Adjusted EBITDA
Adjustments to EBITDA

Gain on the sale of PPE and release of
provisions related to EMEA restructuring

Assets in operating capital
Other assets
Deferred tax assets
Total assets

Liabilities in operating capital
Other liabilities
Deferred tax liabilities
Total liabilities

Operating capital
Net deferred tax asset
Capital employed

Europe

Americas

4,169
97
4,267

1,670
45
1,715

248

–5

10
259
–114
–0
144

–
–
–
–
–
–

2,922
–
–
–

988
–
–
–

1,934
–
–

–
–5
–51
–
–56

–
–
–
–
–
–

1,357
–
–
–

273
–
–
–

1,084
–
–

Long
Products

Ferro-
chrome

Operating
segments
total

Other

operations Eliminations

Reconciliation

521
220
740

–
25
–6
–
18

–
–
–
–
–
–

331
–
–
–

152
–
–
–

179
–
–

197
345
542

210

–
210
–30
–1
179

–
–
–
–
–
–

772
–
–
–

132
–
–
–

640
–
–

6,557
707
7,264

478

10
489
–201
–2
286

–
–
–
–
–
–

5,383
–
–
–

1,546
–
–
–

3,837
–
–

314
273
587

–4

–
–4
–3
–10
–17

–
–
–
–
–
–

275
–
–
–

245
–
–
–

29
–
–

–
–980
–980

–
11
–
–
11

–
–
–
–
–
–

–202
–
–
–

–188
–
–
–

–15
–
–

Group

6,872
–
6,872

485

10
496
–204
–12
280

3
3
–110
175
–45
130

5,455
296
247
5,998

1,604
1,632
12
3,248

3,851
235
4,086

33 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements4. Geographical information

External sales by destination

€ million

2019
Business area
Europe
Americas
Long Products
Ferrochrome
Other operations

2018
Business area
Europe
Americas
Long Products
Ferrochrome
Other operations

Non-current assets
€ million

2019
2018

Finland

Other Europe

North America

APAC region

Other countries

Group

254
–
1
8
–
264

219
0
0
10
–
230

3,277
0
265
56
–
3,598

3,477
40
283
150
–
3,951

96
1,277
200
–
–
1,573

74
1,551
195
–
–
1,820

349
13
39
104
–
506

349
12
42
37
–
440

47
52
0
1
363
462

50
67
–
–
314
431

Finland

Other Europe

North America

APAC region

Other countries

1,762
1,623

764
754

834
851

11
14

2
2

4,023
1,343
505
168
363
6,403

4,169
1,670
521
197
314
6,872

Group

3,374
3,244

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.

5. Acquisitions and divestments

Acquisitions in 2019
Outokumpu did not have any acquisitions in 2019.

However, in 2019 Outokumpu paid a EUR 3 million final
consideration relating to the 2018 acquisition of 50% of
shares in Fagersta Stainless AB to increase Outokumpu’s
ownership in the company to 100%. The cash consideration of
the trans action was EUR 18 million, of which EUR 14 million,
representing 80% of the total, was paid at closing in 2018 and
the remaining EUR 3 million, representing 20% of the total, was
paid in 2019. Outokumpu did not present any non-controlling
interest related to Fagersta Stainless AB in its statement of
financial position as the terms regarding the acquisition had
already been agreed upon, and the final consideration had been
reported in current trade and other payables.

Divestments in 2019
In May 2019, Outokumpu signed an agreement regarding the
sale of its real estate in Benrath, Germany for EUR 90 million.
The property had been unused since 2016 when Outokumpu
closed its cold rolling operations there. The sale was completed
in the fourth quarter and resulted in a gain of EUR 70 million,
which was excluded from Group adjusted EBITDA for the year.

In December 2019, Outokumpu divested its coil service center
Outokumpu Pty Ltd in Australia. The service center was part of
the Europe segment. The divestment did not have any material
impact on the consolidated statement of income or the
consolidated statement of financial position.

34 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsIn 2018, Outokumpu sold property, plant and equipment in
Sweden relating to a site that had been closed earlier under the
EMEA restructuring plan. Outokumpu also released provisions
related to the site closures under the restructuring plan. These
items amounted to a gain of EUR 10 million.

In 2018, Outokumpu adjusted the scope of its digital transfor-
mation program, which resulted in an impairment loss of EUR
10 million.

Auditor fees

PricewaterhouseCoopers
€ million

Audit
Audit-related services
Tax advisory
Other services

2019

2018

–2.4
–0.0
–0.3
–0.4
–3.1

–2.2
–0.1
–
–0.1
–2.4

PricewaterhouseCoopers Oy has provided non-audit services
to Outokumpu in total of EUR 0.7 million during 2019. These
services comprised of tax services and consultation in business
transformation projects and sustainability reporting.

6. Income and expenses

Timing of revenue recognition related
contracts with customers

Outokumpu recognizes revenue from sales of stainless steel
and ferrochrome at a point of time. The revenue recognized
over time relates to the performance obligation of organizing
the transport of sold goods to the customer, which is a minor
source of revenue compared to the material sales, and the
period of transport, over which it is recognized, is relatively
short. Moreover, the sales of goods and transportation service
are invoiced together from the customer. Consequently, the
uncertainty associated with the cash flows do not differ with
respect to the timing of revenue recognition.

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
Gains from disposal of subsidiaries
Gains on sale of intangible assets and property,
plant and equipment
Insurance compensation
Other income items

2019

–217
–2
–11
–1
–230

2018

–194
–0
–9
–1
–204

2019

2018

–

–
1

82
4
20
107

25
–

15
32
28
99

In 2018, Outokumpu received an insurance compensation
regarding the property damage and business interruption at
Tornio ferrochrome production in Finland in 2017.

Other operating expenses

€ million

2019

2018

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

–18

–35

–52
–3

–1
–21
–77

–

–
–12

–0
–6
–19

Adjustments to EBITDA and EBIT

€ million

2019

2018

Gain on the sale of real estate in Benrath
Restructuring costs in Germany
Settlement with ThyssenKrupp
Gain on the sale of PPE and release of
provisions related to EMEA restructuring
Adjustments to EBITDA
Impairment related to Group’s digital
transformation project
Adjustments to EBIT

70
–53
–14

–
3

–
–
–

10
10

–10
0

In 2019, Outokumpu sold real estate in Benrath, Germany. The
sold property had been unused since 2016 when Outokumpu
closed its cold rolling operations in Benrath. The gain on the
sale amounted to EUR 70 million.

In 2019, Outokumpu carried out restructuring negotiations in
Germany targeting to improve competitiveness through cost
reductions. The agreed measures resulted in restructuring costs
of EUR 53 million.

In 2019, Outokumpu and ThyssenKrupp settled a claim relating
to tax consolidation in Italy, as well as other earlier claims
relating to Outokumpu’s acquisition of Inoxum. The settlement
resulted in a EUR 14 million expense in Outokumpu.

35 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements7. Employee benefit expenses

8. Financial income and 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

2019

–568
–61
–84

–7
–40
–9
–0
–6
–774

2018

–541
–6
–81

–2
–39
–1
1
–6
–676

€ million

Interest income

Interest expenses

Debt at amortized cost
Factoring expenses
Lease liabilities
Finance lease arrangements
Interest expense on defined benefit and
other long-term employee benefit obligations

Interest expenses

Profit-sharing bonuses based on the Finnish Personnel Funds
Act were not paid in 2019 (2018: EUR 2 million).

More information on employee benefits for key management
can be found in note 31 and in Corporate Governance State-
ment’s chapter Remuneration.

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

Exchange gains and losses

Derivatives
Cash, loans and receivables
Other market price gains and losses

Derivatives
Other

Market price gains and losses

2019

2018

–48
–10
–13
–

–6
–76

5
–0
–14
–4
–13

–0
–4

3
5
4

–45
–10
–
–9

–5
–70

3
–1
–11
–17
–26

–21
8

2
–4
–15

Total financial income and expenses

–80

–107

In 2018, the other fees consisted of expenses related to the
redemption of the notes due 2021.

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)

2019

2018

9
–16
–18
–4
–29

15
–29
1
–13
–26

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

transactions.

Exchange gains and losses include EUR 18 million of net
exchange loss on derivative financial instruments (2018: EUR
20 million net exchange loss) of which a loss of EUR 18 million
has been recognized in other operating expenses and a loss of
EUR 0 million in financial items.

9. Income taxes

Income taxes in the consolidated statement of income

€ million

Current taxes
Deferred taxes

2019

2018

–5
–28
–33

–4
–41
–45

Reconciliation of income taxes at statutory tax
rate in Finland and income taxes recognized
in the consolidated income statement

€ million

Result before taxes
Hypothetical income taxes at Finnish tax rate of
20% on consolidated result before tax
Difference between Finnish and foreign tax rates
Tax effect of non-deductible expenses and tax
exempt income
Current year losses for which no deferred tax
asset recognized
Recognition of previously unrecognized deferred
tax assets
Taxes for prior years 1)
Tax effect of tax rate changes and other changes
in tax laws
Income taxes in the consolidated statement of
income

2019

–41

2018

175

8
4

–8

–29

1
–9

–35
–2

–11

–29

34
–2

–1

–33

–45

1) Prior year taxes consist of expected changes in deferred tax assets

due to ongoing tax audits.

36 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsDeferred tax assets and liabilities

€ million

Intangible assets
Property, plant and equipment
Inventories
Net derivate financial assets
Other financial assets
Defined benefit and other long-term employee benefit obligations
Other financial liabilities
Provisions
Tax losses and tax credits

Offset
Deferred taxes in the statement of financial position

€ million

Offset
Deferred taxes in the statement of financial position

Jan 1, 2019

Movements

Dec 31, 2019

Deferred tax
assets

Deferred tax
liabilities

Recognized in
profit or loss

Recognized
in other
comprehensive
income

Translation
differences

Deferred tax
assets

Deferred tax
liabilities

7
29
20
4
–16
75
88
22
326
555
–308
247

–4
–214
–12
–13
–10
–33
–14
–20
–
–320
308
–12

3
–27
–17
5
40
–11
32
–10
–43
–28

–
–
–
1
–1
10
–
–
–
11

–
0
0
–0
–0
–1
0
0
0
0

8
16
10
1
19
51
112
5
283
505
–277
229

–3
–228
–18
–4
–6
–11
–6
–13
–
–288
277
–12

Jan 1, 2018

Movements

Dec 31, 2018

Deferred tax
assets

Deferred tax
liabilities

Recognized in
profit or loss

Recognized
in other
comprehensive
income

Translation
differences

Acquired
subsidiaries

Deferred tax
assets

Deferred tax
liabilities

6
28
19
5
4
53
78
27
352
572
–280
292

–4
–195
–10
–17
–7
–33
–3
–22
–
–290
280
–10

–0
–16
–0
3
–22
23
–2
–3
–23
–41

–
–
–
–0
–1
–1
–
–
–
–1

0
–1
–0
–0
–0
0
0
–0
–3
–4

–
–1
–
–
–
–
–0
1
–
–1

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.

7
29
20
4
–16
75
88
22
326
555
–308
247

–4
–214
–12
–13
–10
–33
–14
–20
–
–320
308
–12

37 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements

Aggregate deferred taxes recognized in equity
through other comprehensive income

10. Earnings per share

11. Intangible assets

€ million

2019

2018

2019

2018

Fair value reserve from financial assets at FV
through OCI
Fair value reserve from derivatives
Net investment hedging
Remeasurements of the net defined benefit
liability

Tax losses carried forward

€ million

Expire in 5 years
Expire later than in 5 years
Never expire

–
–
–4

58
54

–1
–0
–4

52
47

2019

358
1,759
1,344
3,461

2018

186
1,941
1,272
3,400

As of December 31, 2019 tax loss carry forwards amount to
EUR 3,461 million (Dec 31, 2018: EUR 3,400 million), of which
EUR 447 million (Dec 31, 2018: EUR 487 million) in Finland,
EUR 314 million (Dec 31, 2018: EUR 320 million) in Sweden,
EUR 2,077 million (Dec 31, 2018: EUR 1,864 million) in the
US and EUR 354 million (Dec 31, 2018: EUR 476 million)
in Germany. Deferred tax assets are recognized only to the
extent that the utilization of related tax benefits is considered
probable. In the determination of whether the utilization is
probable, all positive and negative factors, including prospective
results, are taken into consideration in order to estimate
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, 2019 tax
attributes of the Outokumpu Group for which no deferred tax
asset has been recognized amount to EUR 2,079 million (Dec
31, 2018: EUR 1,940 million). In 2019, no material previously
unrecognized deferred tax assets were recognized (2018: EUR
34 million). The recognition decision in 2018 was impacted by
positive earnings before taxes and positive taxable results. No
deferred tax liabilities were recorded on undistributed profits on
foreign subsidiaries, as such profits are not to be distributed in
the foreseeable future.

Good-
will

Other
intangible
assets 1)

Result attributable to the equity holders of the
Company, € million

–75

130

€ million

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

411,198
446,209

411,066
447,181

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

Earnings per share, €
Diluted earnings per share, €

–0.18
–0.18

0.32
0.32

Historical cost on Jan 1, 2019
Translation differences
Additions
Disposals
Reclassifications
Historical cost on Dec 31, 2019

Accumulated amortization and
impairment on Jan 1, 2019
Translation differences
Amortization
Disposals
Accumulated amortization and
impairment on Dec 31, 2019

Carrying value on Dec 31, 2019
Carrying value on Jan 1, 2019

Historical cost on Jan 1, 2018
Translation differences
Additions
Disposals
Reclassifications
Historical cost on Dec 31, 2018

Accumulated amortization and
impairment on Jan 1, 2018
Translation differences
Disposals
Impairments
Amortization
Accumulated amortization and
impairment on Dec 31, 2018

Carrying value on Dec 31, 2018
Carrying value on Jan 1, 2018

489
–2
–
–
–
487

–22
2
–
–

–21

466
467

491
–2
–
–
–
489

–24
2
–
–
–

–22

467
467

332
–0
36
–7
1
361

–214
1
–7
1

–220

141
118

276
–2
77
–20
1
332

–207
2
10
–10
–8

–214

118
68

Total

821
–2
36
–7
1
848

–236
2
–7
1

–241

607
585

767
–3
77
–20
1
821

–232
4
10
–10
–8

–236

585
535

1) Other intangible assets include land-use rights, emission allowances,

capitalized development costs, patents, licenses and software.

38 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsDuring 2019, borrowing costs amounting to EUR 4 million were
capitalized on investment projects (2018: EUR 2 million). Total
interest capitalized on December 31, 2019 was EUR 6 million
(Dec 31, 2018: EUR 3 million). Outokumpu determinates
separate capitalization rates for each quarter. The average rate
used during 2019 was 3.9%.

Intangible assets mainly comprise acquired assets.

Emission allowances

Outokumpu had seven active sites operating under EU’s
Emissions Trading Scheme (ETS) in 2019. These include the
production plants in Tornio, Finland; Avesta, Degerfors, Fagersta
and Nyby in Sweden; Sheffield in the UK; as well as Krefeld
together with Dillenburg in Germany.

The pre-verified carbon dioxide emissions under ETS were
approximately 1.0 million tonnes in 2019 (2018: 1.0 million
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 year 2020 is estimated to be some
1.0 million tonnes. Considering the Group’s operations and the
Group’s current emission allowance position, the overall amount
of allowances is foreseen to be sufficient for compliance.
Position is regularly 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.

12. Property, plant and equipment

€ million

Historical cost on Jan 1, 2019 before
IFRS 16 transition
IFRS 16 transition impact
Translation differences
Additions
Disposals
Disposed subsidiaries
Reclassifications
Other
Historical cost on Dec 31, 2019

Accumulated depreciation and
impairment on Jan 1, 2019
Translation differences
Disposals
Disposed subsidiaries
Depreciation
Impairments
Accumulated depreciation and
impairment on Dec 31, 2019

Own property, plant and equipment
Right-of-use assets
Carrying value on Dec 31, 2019
Carrying value on Jan 1, 2019

Land

Mine
properties

Buildings

Machinery and
equipment

Advances
paid and
construction
work in
progress

Other
tangible
assets

136
13
1
–
–20
–
–
–
128

–14
–0
–
–
–1
–0

–15

74
38
112
121

71
–
–
1
–
–
–
–
72

–33
–
–
–
–6
–

–39

33
–
33
37

1,243
40
3
3
–6
–1
5
–
1,286

–676
0
5
1
–48
–1

–719

532
35
567
567

4,511
77
7
58
–43
–4
76
7
4,691

–2,868
5
42
3
–164
–2

–2,983

1,581
126
1,708
1,644

137
0
–0
1
–3
–0
1
–
135

–80
0
3
0
–4
–0

–82

53
0
53
56

235
–
1
142
–1
–
–79
–2
294

–2
0
–
–
–
–

–2

293
–
293
233

More information on leases and the IFRS 16 transition impact in note 13.

Total

6,332
131
10
205
–73
–6
3
5
6,606

–3,673
5
49
4
–223
–2

–3,840

2,566
200
2,767
2,659

39 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements€ million

Historical cost on Jan 1, 2018
Translation differences
Additions
Acquired subsidiaries
Disposals
Reclassifications
Historical cost on Dec 31, 2018

Accumulated depreciation and
impairment on Jan 1, 2018
Translation differences
Disposals
Reclassifications
Depreciation
Impairments
Accumulated depreciation and
impairment on Dec 31, 2018

Carrying value on Dec 31, 2018
Carrying value on Jan 1, 2018

Land

135
1
0
0
–0
–
136

–14
0
–
–
–0
–

–14

121
121

Mine
properties

Buildings

Machinery and
equipment

Advances
paid and
construction
work in
progress

Other
tangible
assets

66
–
2
–
–
2
71

–27
–
–
–
–7
–

–33

37
40

1,233
2
2
1
–
6
1,243

–639
4
3
–
–43
–

–676

567
594

4,440
–4
34
4
–22
59
4,511

–2,768
25
19
–1
–140
–2

–2,868

1,644
1,672

128
–1
4
1
–0
4
137

–77
0
0
–
–4
–

–80

56
52

158
1
146
3
–0
–73
235

–3
0
0
1
–0
–

–2

233
155

Total

6,160
–2
189
9
–23
–2
6,332

–3,527
30
22
0
–195
–2

–3,673

2,659
2,633

During 2019, EUR 2 million of borrowing costs were capitalized on investment projects (2018: EUR 1 million). Total interest capital-
ized on December 31, 2019 was EUR 24 million (Dec 31, 2018: EUR 25 million). Outokumpu determines separate capitalization
rates for each quarter. The average rate used during 2019 was 1.2%.

40 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements13. Leases

Reconciliation of lease liabilities

Lease liabilities

€ million

Operating lease commitments on Dec 31, 2018
Contracts not classified as lease under IAS 17
Short-term and low value leases not recognized as a
liability
IFRS 16 transition impact before discounting
Discount impact using incremental borrowing rate
IFRS 16 transition impact on Jan 1, 2019
Finance lease liabilities under IAS 17
Lease liability on Jan 1, 2019
Non-current lease liabilities
Current lease liabilities

90
80

–2
168
–37
131
85
216
184
32

€ million

Non-current
Current

Maturity analysis of lease liabilities is presented in note 19.

Right-of-use assets

€ million

Historical cost on Jan 1, 2019 before IFRS 16 transition
IFRS 16 transition impact
Additions
Other changes
Historical cost on Dec 31, 2019

Accumulated depreciation on Jan 1, 2019
Depreciation
Accumulated depreciation on Dec 31, 2019

Carrying value on Dec 31, 2019

Land

Buildings

equipment Advances paid

Machinery and

28
13
–
–
41

–1
–1
–2

1
40
0
–
42

–0
–6
–6

100
77
19
7
204

–52
–26
–77

126

2
–
1
–2
–

–
–
–

–

Outokumpu leases land, buildings, and machinery and
equipment used in Group’s operations. Contracts include
typically fixed rental amounts, and for land and buildings, rents
are linked to an index. The terms of new vehicle leases are
typically 3 to 5 years, and lease terms for other machinery and
equipment range up to 15 years. Lease terms for land and
buildings can be significantly longer with remaining terms for
individual contracts on land of appr. 45–90 years.

Leases for machinery and equipment include also contracts
with variable lease payments based on usage of the equipment.
Machinery and equipment is also hired with daily rates for
temporary use and thus reported as short-term leases. Outo-
kumpu applies the recognition exemption for short-term leases
and leases of low-value assets. Leases of low value assets
typically include office equipment.

Transition impacts

Outokumpu has adopted the IFRS 16 using the modified
retrospective approach, where comparative financial information
is not restated, but the transition impact is recognized to the
consolidated statement of financial position of January 1, 2019.
In transition to IFRS 16 on January 1, 2019, Outokumpu has
recognized right-of-use assets of EUR 131 million to property,
plant and equipment, and lease liabilities of EUR 101 million
to non-current debt and EUR 29 million to current debt. The
reconciliation between the operating lease payments of EUR
90 million reported on Dec 31, 2018 financial statements and
the recognized IFRS 16 transition impact of EUR 131 million is
presented in the following table. The contracts not recognized
as leases earlier under IAS 17 relate mainly to industrial gas
supply contracts in Group’s facilities in Finland and Sweden
and marine transportation contracts between Finland and the
Netherlands. The weighted average discount rate applied to
lease liabilities recognized to the statement of the financial
position is 3.1%.

2019

176
30
206

Total

131
131
19
5
286

–53
–33
–85

200

41 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsAmounts recognized in the statement of income

Assets leased by finance lease agreements in 2018

€ million

Depreciation of right-of-use assets
Interest expenses on lease liabilities
Expenses related to short-term leases
Expenses related to leases of low-value items

€ million

Historical cost
Accumulated depreciation
Carrying value on Dec 31, 2018

2019

–33
–13
–13
–1
–59

Amounts recognized in the statement of cash flows

Finance lease liabilities in 2018

Land

Buildings

Machinery and
equipment

28
–1
27

1
–0
1

100
–52
49

Total

129
–53
76

€ million

Repayments of lease liabilities
Interest paid on lease liabilities

2019

Minimum lease payments

–34
–13
–46

Comparability between financial
information of 2019 and 2018

The transition to IFRS 16 affected the presentation of
Outokumpu’s consolidated statement of income and
consolidated statement of cash flows, which in turn impacts
the comparability of financial information between years 2019
and 2018. The following paragraph describes these differences
and related comparability impacts. The figures differ from the
ones in the above tables as the following paragraph includes
only impacts from those contracts that were recognized to the
consolidated statement of financial position in transition, and
exclude contracts classified earlier as finance leases according
to IAS 17 as the accounting treatment of those contracts is
comparable between 2019 and 2018.

In the statement of income, the cost of leasing in 2019 is
presented as depreciation of EUR 29 million in EBIT and as
interest expense of EUR 4 million in finance expenses instead
of rental and lease expenses of EUR 35 million in EBITDA. In
the statement of cash flows, the repayments of lease liabilities
of EUR 31 million in 2019 are presented in the cash flow from
financing activities whereas interest payments of EUR 4 million
remain in the cash flow from operating activities.

€ million

Not later than 1 year
Between 1 and 5 years
Later than 5 years
Future finance charges
Present value of minimum lease payments

Present value of minimum lease payments

€ million

Not later than 1 year
Between 1 and 5 years
Later than 5 years
Present value of minimum lease payments

2018

12
74
147
–147
85

2018

3
54
28
85

Minimum lease payments on operating leases in 2018

€ million

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

2018

13
32
44
90

42 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements14. Impairment of intangible assets and property, plant and equipment

Intangible assets and property, plant and equipment by operating segment

€ million

Europe
Americas
Long Products
Ferrochrome
Other operations

Goodwill

Other intangible assets

Property, plant and equipment

2019

2018

2019

2018

343
–
9
114
–
466

343
–
9
114
–
467

4
1
3
0
133
141

5
2
3
0
109
118

2019

1,220
811
98
615
24
2,767

2018

1,197
829
79
537
17
2,659

Impairment testing

Impairment testing is carried out on operating segment level,
which are the Group’s cash-generating units. Europe represents
74% of the total goodwill and 44% of the total property, plant
and equipment of the Group, Americas represents 29% of
the total property, plant and equipment of the Group, and
Ferrochrome represents 24% of the total goodwill and 22% of
the total property, plant and equipment of the Group. During
the year 2019, impairment needs were assessed 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 conservative, and cash
flow projections are based on the plans approved by the
management for 2020–2022 after which cash flows are further
projected for a period of 3 years before calculating the terminal
value.

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 the Group target capital structure.
The pre-tax WACC used for both Europe and Ferrochrome was
7.6% (2018: 7.2%), and for Americas 10.7% (2018: 9.8%).

In the terminal value, growth rate assumptions of 0.5% (2018:
0.5%) for Europe and Ferrochrome, and 1.0% (2018: 1.0%) for
Americas are used. Management believes these 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. In addition, committed
investments and expected cost savings have been included in
the cash flow projections.

The estimated recoverable amount of Europe exceeds its
carrying amount by approximately EUR 1,930 million. Increase
of 5.9 percentage points in after-tax WACC would cause the
recoverable amount to equal the carrying amount. Also, 34%
decrease in EBITDA would cause the recoverable amount to
equal the carrying amount. Terminal growth rate of 0% would
not lead to impairment.

The estimated recoverable amount of Americas exceeds its
carrying amount by approximately EUR 51 million. Increase
of 0.5 percentage points in after-tax WACC would cause the
recoverable amount to equal the carrying amount. Also, 3%
decrease in EBITDA would cause the recoverable amount to
equal the carrying amount. Terminal growth rate of 0% would
lead to an impairment loss of EUR 21 million.

The estimated recoverable amount of Ferrochrome exceeds its
carrying amount by approximately EUR 894 million. Increase
of 6.8 percentage points in after-tax WACC would cause the
recoverable amount to equal the carrying amount. Also, 42%
decrease in EBITDA 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 2019 or 2018. However, impairment losses of EUR 3
million related to asset obsolence in Europe and Americas
were recognized in 2019. (2018: impairment losses of EUR
10 million related to Group’s digital transformation project and
EUR 2 million related to asset obsolence in Ferrochrome and
Europe).

43 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements15. Investments in associated

companies and joint ventures

16. Carrying values and fair values of financial assets

and liabilities by measurement category

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.

2019
€ million

Measured at

Fair value
through other
comprehensive
income

Fair value
through
profit or loss

Amortized cost

Carrying
amount

Fair value

Fair value
hierarchy level

Associated companies

OSTP Holding Oy
Rapid Power Oy
Manga LNG Oy

Domicile Ownership, %

Finland
Finland
Finland

49
33
45

Summarized financial information
on associated companies

€ million

2019

2018

Carrying value of investments in
associated companies
Group’s share of total comprehensive
income

Joint ventures
In 2019, Outokumpu did not have any joint ventures. In June
2018, Outokumpu acquired full ownership of Fagersta Stainless
AB, previously a joint venture of Outokumpu in Sweden. Group’s
share of total comprehensive income of EUR –2 million
included in Outokumpu’s 2018 consolidated financial state-
ments comprised of the net result and the other comprehensive
income of Fagersta Stainless AB from January 1, 2018 to June
30, 2018, and the fair valuation impact related to the valuation
of Outokumpu’s original 50% share prior the acquisition.

Non-current financial assets
Investments in equity
Trade and other receivables
Hedge accounted derivatives
Derivatives held for trading

Current financial assets
Other investments
Trade and other receivables
Hedge accounted derivatives
Derivatives held for trading
Cash and cash equivalents

Non-current financial liabilities
Non-current debt

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

–
2
–
–

–
359
–
–
325
686

1,053

427
1,291
–
–
2,771

31
–
0
–

–
–
7
–
–
38

–

–
–
1
–
1

–
–
–
5

13
–
–
8
–
26

–

–
–
–
16
16

31
2
0
5

13
359
7
8
325
750

31
2
0
5

13
359
7
8
325
750

1,053

1,068

427
1,291
1
16
2,788

431
1,291
1
16
2,807

3
–
2
2

1
–
2
2
–

2
–
2
2

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 the convertible bonds, which are reported as current debt, is EUR 251 million
(carrying amount EUR 248 million) and it includes the value of the conversion rights. For other financial instruments the carrying
amount is a reasonable approximation of fair value.

44 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements
Measured at

Fair value
through other
comprehensive
income

Fair value
through
profit or loss

Amortized cost

Carrying
amount

Fair value

Fair value
hierarchy level

17. Financial assets at fair value through

other comprehensive income

2018
€ million

Non-current financial assets
Investments in equity
Trade and other receivables
Derivatives held for trading

Current financial assets
Other investments
Trade and other receivables
Hedge accounted derivatives
Derivatives held for trading
Cash and cash equivalents

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

–
2
–

–
482
–
–
68
552

798
–

511
1,256
–
–
2,565

86
–
–

–
–
0
–
–
86

–
–

–
–
0
–
0

–
–
2

13
–
–
15
–
30

–
1

–
–
–
19
21

86
2
2

13
482
0
15
68
668

798
1

511
1,256
0
19
2,586

86
2
2

13
482
0
15
68
668

814
1

511
1,256
0
19
2,602

3
–
2

1
–
2
2
–

2
2

2
–
2
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, 2 and 3 during the years. A major part of financial assets at fair value through other comprehensive
income at hierarchy level 3 relate to investments in unlisted energy producing companies. The movement in the carrying amounts of
financial assets at fair value through other comprehensive income presented in note 17 represents also the reconciliation of level 3
changes.

€ million

Carrying value on Jan 1
Additions
Fair value changes
Carrying value on Dec 31

Fair value reserve in equity

€ million

Fair value on Dec 31
Fair value at initial recognition
Fair value reserve before tax
Deferred tax liability
Fair value reserve

2019

2018

86
–
–55
31

68
16
2
86

2019

2018

31
80
–49
–
–49

86
80
6
–1
5

Financial assets at fair value through other comprehensive
income consists of equity securities which are not held for
trading, and which the Group has irrevocably elected at initial
recognition to recognize in this category. These are mainly stra-
tegic investments and the Group considers this classification
to be relevant. All equity securities at fair value through other
comprehensive income are unlisted. Investments include EUR
12 million holding in Voimaosakeyhtiö SF providing ownership to
Fennovoima Oy and EUR 18 million of holdings in other energy
companies in which Outokumpu does not have control, joint
control or significant influence. By the end of 2019 Outokumpu
has invested EUR 79 million in the shares of Voimaosakeyhtiö
SF. The reduction in fair value of Voimaosakeyhtiö SF is
caused mainly due to decline in estimated long-term prices of
electricity.

Valuation model of energy producing companies is based on
discounted cash flow model, which takes into account the
market and forecasted long-term prices of electricity, discount
rate, inflation rate, the estimated amount of electricity to be
received and estimated production costs.

Additional parameters for Voimaosakeyhtiö SF valuation include
e.g. the expected purchase price of electricity under the
Mankala principle, expected project completion date and cost

45 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements
of debt in Fennovoima Oy. The fair value of Voimaosakeyhtiö
SF shares is highly sensitive to the valuation parameters
and especially to long-term price of electricity, Fennovoima’s
capacity utilization rate, discount rates for cash flows and the
terminal value, inflation rate and project completion date.

Long-term prices for electricity have been estimated by the
management, and the estimate assumes an increase compared
to the current price level. The long time period to complete
the Fennovoima project and to operate the plant affect the
reliability of such estimate, and reasonable changes in the
electricity price estimate or in other valuation parameters can
significantly impact the fair value of the investment. In general,
the project risk is considered high with the estimated comple-
tion of the project in the early part of 2029, and the range of
potential fair values is wide.

18. Share-based payment plans
During 2019, Outokumpu’s share based payment programs
included Performance Share Plan 2012 (Plans 2017–2019,
2018–2020 and 2019–2021), Restricted Share Pool Program
2012 (Plans 2017–2019, 2018–2020 and 2019–2021),
Matching Share Plans for the CEO and the key management
and Performance Share Plan 2019–2020 for the CEO. Share-
based programs are part of the Group’s incentive and commit-
ment-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 2016–2018 ended and after
deductions for applicable taxes, altogether 645,783 shares
were delivered to 94 persons. Regarding the Restricted Share
Pool Program plan 2016–2018, after deductions for applicable
taxes, in total 16,513 shares were delivered to 14 participants
based on the conditions of the plan.

In December 2018, the Board of Directors approved the
commencement of the new plan (plan 2019–2021) of the
Performance Share Plan as of the beginning of 2019. At the
end of the reporting period 134 persons participated in the
plan and they had been allocated in total 2,461,890 gross
shares (payout at maximum performance level).The plan’s

earnings criterion is Outokumpu’s return on operating capital
compared to a peer group.

In February 2019, the Board of Directors approved the
commencement of the new plan (plan 2019–2021) of
Restricted Share Pool Program as of the beginning of 2019.
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.
At the end of the reporting period 68 persons participated in
the plan and they have been allocated in total 207,900 gross
shares.

In February 2019, the Board of Directors approved new share
incentive schemes for the CEO. The Matching Share Plan
2019–2020 matches CEO’s own investment of 56,296 shares
with three matching shares. The total number of matching
shares will be 168,888 from which applicable taxes will be
deducted, and the delivery will take place in December 2020
subject to a restruction that the CEO keeps his own investment
in Outokumpu shares unchanged until the end of 2020. The
Performance Share Plan has two years vesting 2019–2020
and the maximum number of gross shares is 120,000. The net
amount after deduction of applicable taxes will be delivered in
March 2021, if the performance criteria set by the Board of
Directors are met.

In December 2015, the Board of Directors approved the
commencement of Matching Share Plan for the CEO at the
beginning of 2016, according to which the CEO was entitled
to receive in total 1,157,156 gross shares including taxes on
the condition that he personally invested EUR 1 million into
Outokumpu shares by February 20, 2016. The matching shares
were delivered in four equal installments at the end of 2016,
2017, 2018 and 2019, respectively. The CEO is required to
keep at least all the shares he acquired and the first vesting
portion, i.e. 25% of the net amount of the received matching
shares throughout his service with Outokumpu. In December
2019, the Board of Directors approved the delivery of the last
reward share tranche to the CEO from the Matching Share Plan.
After deduction for applicable taxes, the net number of shares
delivered to the CEO was 185,077.

In April 2016, the Board of Directors approved the commence-
ment of Matching Share Plan for the management for the years
2016–2020. According to the plan, the participants invested
30–120% of their annual gross base salary into Outokumpu
shares by December 31, 2016. Outokumpu will match each
share acquired by the participant with two gross shares from
which applicable taxes will be deducted and the remaining net
number of shares will be delivered in four equal installments at
the end of 2017, 2018, 2019 and 2020, respectively. In order
to receive the matching shares, the participants are required
to keep all the shares they have acquired until the vesting of
each matching share tranche. In 2019, the Board of Directors
approved the delivery of the third reward tranches from the plan.
After deduction of applicable taxes, the net number of shares
delivered was 199,851. At the end of the reporting period 25
persons participated in the plan.

In addition, after deduction of applicable taxes, 82,063 shares
were delivered as rewards in 2019. Outokumpu used its
treasury shares for all share reward payments.

In December 2019, the Board of Directors approved the
commencement of plan 2020–2022 of the Performance Share
Plan 2012 and the Restricted Share Pool Program 2012 as of
the beginning of 2020.

For the financial year 2019, the share-based payment expenses
included in the employee benefit expenses were EUR 0 million
(2018: income of EUR 1 million). The total estimated value of
the share-based payment plans is EUR 4 million on December
31, 2019. This value is recognized as an expense in the
statement of income during the vesting periods.

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

46 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsThe general terms and conditions of the share-based incentive programs

Grant date
Vesting period
Share price at grant date
Exercised
Vesting conditions
Non-market
Other relevant conditions

Grant date
Vesting period
Share price at grant date
Exercised
Vesting conditions

Performance Share Plan

Feb 10, 2017
Jan 1, 2017–Dec 31, 2019
9.80
In shares and cash

Feb 2, 2018
Jan 1, 2018–Dec 31, 2020
6.61
In shares and cash

Feb 20, 2019
Jan 1, 2019–Dec 31, 2021
3.55
In shares and cash

Outokumpu’s return on operating capital compared to a peer group
A salary-based limit for the maximum benefits

Restricted Share Pool Program

April 26, 2017
Jan 1, 2017–Dec 31, 2019
9.80
In shares and cash
Continuation of employment until the shares are delivered, a salary-based limit for the maximum benefits

June 1, 2018
Jan 1, 2018–Dec 31, 2020
5.76
In shares and cash

April 18, 2019
Jan 1, 2019–Dec 31, 2021
3.72
In shares and cash

Matching Share Plan for the CEO

Dec 17, 2015
Jan 1, 2016–Dec 31, 2019
2.50
In shares and cash
Personal investment of EUR 1 million into Outokumpu shares; requirement to keep at least the personal investment
and the first vesting portion, i.e. 25% of the net amount of the received matching shares throughout service with
Outokumpu.

Feb 7, 2019
Jan 1, 2019–Dec 31, 2020
3.50
In shares and cash
Personal investment of 56,296 shares; requirement to keep
own investment in Outokumpu shares unchanged until the
end of 2020.

Matching Share Plan for the management

April 27, 2016
Jan 1, 2017–Dec 31, 2020
5.35 1)
In shares and cash
Personal investment of 30–120% of annual gross base salary into Outokumpu shares; requirement to keep the
personal investment until the vesting of each matching share tranch; continuation of employment until the matching
shares are delivered.

Performance Share Plan for the CEO

Feb 7, 2019
Jan 1, 2019–Dec 31, 2020
3.50
In shares and cash
Outokumpu’s return on operating capital compared to a
peer group

1) Incentive fair value at the grant date reported as the average fair value based on the share purchase dates.

47 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements19. Financial risk management, capital

management and insurances

The main objectives of financial risk management are to reduce
earnings volatility and to secure acceptable liquidity to avoid
financial distress. Other objectives include reduction of cash
flow volatility and maintaining debt-to-equity ratio as well as
leverage according to set targets. The objective of capital
management is to secure the ability to continue as a going
concern and to optimize 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.

The Board of Directors has approved the risk management
policy, which defines responsibilities, process and other main
principles of risk management. The Board of Directors oversees
risk management on a regular basis and the Chief Financial
Officer is responsible for implementation and development
of financial risk management. Financial risk management is
regularly monitored and reviewed by the Risk Management
Steering Group, led by the CFO.

Financial risks consist of market, country, credit, liquidity and
refinancing risks. Subsidiary companies hedge their currency
and commodity price risk with Outokumpu Oyj, which does
most of the Group’s foreign exchange and commodity derivative
contracts with banks and other financial institutions. Treasury
and Risk Management function (“Treasury”) is responsible
for managing foreign exchange, metal, interest rate, liquidity
and refinancing risk as well as emission allowance price risk.
Credit risk management has been mostly centralized to Global
Business Services, and Treasury coordinates credit control.
The Supply Chain functions of the relevant Business Areas are
responsible for managing electricity and fuel price risks.

Treasury sources all global insurances. The most important
insurance lines are property damage and business interruption
(PDBI), liability, marine cargo and credit risk. The captive
insurance company Visenta Försäkringsaktiebolag is used in
insurance management.

Exposure to financial risk is identified in connection with the risk
management process. This approach aims to secure that any
emerging risk is identified early and that each significant risk

is described, quantified, managed and communicated properly.
Eventually, the impacts of key financial risks are quantified in
terms of changes to income, free cash flow, net debt and equity.

Market risk

Market risk categories include foreign exchange, interest rates,
interest margins as well as metal, energy, emission and security
price risk. These price changes may have a significant impact
on Group’s earnings, cash flow and capital structure.

The strategy for market risk management is based on
identifying, assessing and mitigating relevant risk in committed
business transactions and balance sheet items for each
of the market risk categories. In interest rate, energy price,
emission price risk the forecasted items are included in the
underlying exposure. Outokumpu uses matching strategies and
derivative contracts to partially mitigate impacts of market price
changes. The use of derivatives may cause timing differences
between derivative gains/losses and the earnings impact of
the underlying exposure. In order to reduce earnings variations,
hedge accounting is applied selectively as part of the nickel
hedging activities. Most of the derivatives are short-term,
however interest rate hedges typically have a maturity in excess
of one year.

Stainless steel business is cyclical, which may result in
significant changes in the underlying exposures to different
market risk factors, especially US dollar and nickel price.
Consequently, the cyclicality may lead to significant changes in
the amounts of 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 table.

Foreign exchange rate risk

A major part of the Group’s sales is in euros and US dollars. In
this context, the local currency denominated production costs
in the UK and Sweden cause foreign exchange risk. Foreign
exchange cash flow risk related to firm commitments, e.g. price
fixed sales and purchase orders, is usually hedged whereas
forecasted and probable cash flows are not typically hedged
but can be hedged selectively. As from the second quarter of
2019, the main operating entity in Sweden significantly reduced
hedging of fixed price sales orders, and discontinued hedging of
purchase orders based on approved exception to hedging policy.

The main dollar cash flow risk origins from ferrochrome
operations as a consequence of chromium being priced in US
dollars. Another significant dollar cash flow risk is embedded
in sales margins due to dollar-linked stainless scrap purchase

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
+/–1% parallel shift in interest rates

Dec 31, 2019

Dec 31, 2018

In profit or loss

In other
comprehensive
income

+5/–6
–9/+11
–3/+3
–6/+7

–
–
+0/–0
–

In profit or loss

+7/–8
–14/+17
–2/+4
–10/+10

In other
comprehensive
income

–
–3/+3
–
–

The sensitivity analyses apply to financial assets and liabilities only. Other assets and liabilities, including defined benefit pension
plan assets and liabilities, as well as 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 price has been in the range of 20–32%. With
+/–30% change in dollar denominated price, the effect in profit or loss is about EUR –5/+10 million and in other comprehensive
income EUR +1/–1 million for nickel derivatives.

48 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsdiscounts, which continued to increase towards the end of the
year.

Fair value risk consists of currency denominated accounts
receivable, accounts payable, debt, cash, loan receivables and
commodity derivatives. Outokumpu aims to hedge most of
the identified fair value risk with derivative contracts. Internal
Swedish krona denominated financing causes significant
fair value exchange rate risk, which is hedged with forward
contracts and, if possible, with matching of external debt. The
Group’s fair value foreign exchange position is presented in a
more detailed level in the table.

Outokumpu’s net income and net investment translation risk is
mainly in US dollars, Swedish kronas and British pounds. Based
on the policy this risk can be hedged selectively and in 2019
there were no hedges related to net income or net investment
exposures. The effective portion of gains (EUR 17 million, net
of tax) on earlier financial years’ net investment hedges is
recognized in other comprehensive income.

Changes in currency rates cause translation differences in
debt and have therefore impact on Group’s capital structure.
The largest debt translation risk relates to Swedish krona
denominated internal loans. In the second quarter 2019, the
translation risk related to internal dollar financing was signifi-
cantly reduced by increasing equity of business area Americas.

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, significant
part of debt has effectively 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 interest rates. In 2019
these conditions existed, which have positive impact on
financial income and expenses.

Swedish krona, euro and US dollar have substantial contribution
to the overall interest rate risk. Approximately 64% (2018:
40%) of the Group’s debt has an interest period of less than

Foreign exchange positions of EUR-based companies

Dec 31, 2019

Dec 31, 2018

€ million

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

SEK

0
525
–525
0

USD

–248
59
183
–7

GBP

12
–7
–14
–9

Foreign exchange positions of SEK-based companies

€ million

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

Dec 31, 2019

EUR

69
26
–217
–121

USD

–17
8
–49
–58

GBP

4
0
–11
–7

Other

11
17
–29
–1

Other

18
1
–29
–9

SEK

15
545
–515
46

EUR

67
29
–284
–188

USD

–246
270
–1
22

GBP

16
–7
–21
–12

Other

11
–29
16
–3

Dec 31, 2018

USD

–27
14
–116
–129

GBP

Other

–9
2
–1
–8

18
3
–63
–42

1) Includes cash and cash equivalents, loan receivables and debt.

Currency distribution and re-pricing of outstanding net debt

Dec 31, 2019

€ million
Currency

EUR
SEK
USD
Others

€ million
Currency

EUR
SEK
USD
Others

Net debt 1)

Derivatives 2)

Average rate, % 1)

Duration. year 3)

Rate sensitivity 4)

1,292
–9
–77
–50
1,155

–587
581
6
5
5

5.6
–0.1
1.0
0.8

2.8
0.2
0.0
0.0

3.5
5.7
–0.7
–0.5
8.0

Dec 31, 2018

Net debt 1)

Derivatives 2)

Average rate, % 1)

Duration year 3)

Rate sensitivity 4)

1,264
21
–19
–25
1,241

–737
549
241
–44
9

4.1
2.2
1.7
1.8

3.1
0.0
0.1
0.0

–0.6
5.7
2.2
–0.7
6.6

1) Includes cash and cash equivalents and debt.

2) Net derivative liabilities include nominal value of interest rate and currency forwards earmarked to net debt. Currency forwards are not included in

average rate calculation.

3) Duration calculation includes both net debt and derivatives.

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

49 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements
one year and the average interest rate of non-current debt on
December 31, 2019 was 4.5% (Dec 31, 2018: 5.8%). Interest
rate position is presented on a more detailed level in the table.
Outokumpu is also exposed to variation of credit margins,
mainly in regards of any new financing, e.g. in connection with
issue of commercial papers and new long-term debt. Further-
more, interest expenses and other financing expenses are
somewhat affected by development of the leverage ratio due to
margin grid definition in some of the loan agreements.

Changes in interest rates impact pension plan asset and
liability values. The net liability of defined benefit plans and
other long-term employee benefits was EUR 249 million at year
end and an increase in long-term interest rates would typically
be expected to decrease the net liability of the plans.

Metal and energy 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 (“LME”) and Nasdaq Commod-
ities. Timing differences between alloy metal purchases and
pricing of stainless steel; changes in inventory levels; and
the capability to pass on price changes in raw materials to
end-product prices affect metal risk. Furthermore, the volumes
and discounts related to stainless scrap purchases have major
impact on alloy metal price risk. Since there is no established
financial derivative market for chromium, this risk is categorized
as business risk.

Apart from chromium, changes in nickel price is the most
important metal price risk for Outokumpu. Significant part of
stainless steel sales contracts includes an alloy surcharge
clause, with the aim of reducing the risk arising from the timing
difference between alloy metal purchase and stainless steel
delivery. Outokumpu’s nickel position consists of price fixed
purchase orders, inventories of nickel-containing materials
and price fixed sales orders. Based on financial risk policy the
identified nickel price risk, excluding the risk related to the base
stock, must be hedged. Nickel forwards and options are used to
manage impacts of nickel price changes on earnings, whereas
efficient working capital management helps to reduce cash flow
variations caused by metal prices.

In the early part of 2019 a new definition of the base stock was
adopted, which resulted to higher amount of alloy metals being
classified as part of the base stock. In 2019 the hedging ratio
has been between zero and one third of the base stock. During
the reporting year an increasing share of the sales contracts
in Europe were fixed price based rather than alloy surcharge
based. Furthermore, the changes in LME nickel price were not
perfectly passed to the new stainless steel prices applied in the
fixed price sales contracts. The correlation between the LME
nickel price and the price of metal as part of the stainless steel
had been compromised and this was taken into account in the
application of the hedging policy during the year.

Hedge accounting was adopted in 2019 in connection with
hedging of some 700 to 2,000 tons of the alloy surcharge
based sales of business area Americas and in connection with
hedging purchases of some 2,000 to 4,000 tons linked to fixed
priced sales of business area Europe. The hedge accounting
has covered meaningful part of group sales contracts and has
reduced volatility of the underlying nickel linked earnings. For
further details on hedge accounting please see Note 20.

Outokumpu’s exposure to iron price is much similar to that of
nickel, except for the value of the exposure being lower and
secondly, Outokumpu produces some iron in connection with
the Kemi chromite mining.

Outokumpu’s main production 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 at Group level. Emission
allowance price risk is managed with the aim of securing and
optimizing the cost of compliance for the current trading period.
In certain situations, the market price of power can be partially
based on price of carbon emissions. This indirect exposure
to emission prices can be significant for Outokumpu due to
energy intensive processes using power and fuels. At year end,
Outokumpu had adequate amount of emission allowances to
cover all forecasted needs of the current (phase III) emission
trading period, ending in 2020.

Outokumpu manages energy price risk centrally. The electricity
price risk is reduced with fixed price supply contracts and
partial ownerships in power utilities.

Security price risk

Outokumpu has investments in equity and fixed income
securities. On December 31, 2019, the biggest investments
were in OSTP Holding Oy (investment in associated company of
EUR 23 million) and Voimaosakeyhtiö SF.

The investment in Voimaosakeyhtiö SF provides Outokumpu with
appr. 14% indirect stake in the Fennovoima Oy nuclear power
plant project. This stake gives Outokumpu access to estimated
170 MW power capacity once the project has been completed.
Information on the valuation of the investment is presented in
note 17.

The captive insurance company Visenta Försäkringsaktiebolag
has investments totaling EUR 13 million in highly rated and
liquid fixed income securities as well as fixed income and equity
funds in order to optimize return for assets and to manage the
risk prudently.

Outokumpu has a defined benefit pension plan in the UK. This
plan has assets approximately EUR 0.5 billion, most of which
have been invested in fixed income securities and almost one
third to return seeking assets. Changes in security prices would
therefore impact the net asset reported on this plan. Based
on the locally applied technical provisions the plan assets
cover nearly in full the plan liabilities at year end. For more
information please see note 25.

Country and credit risk

Outokumpu’s sales have been covered by approved credit
limits or secured payment terms. Most of the outstanding trade
receivables have been secured by trade credit insurances,
which typically cover some 95% of the insured amount. Part
of the credit risk related to trade receivables is managed with
letters of credit, advance payments and guarantees.

On December 31, 2019, the maximum exposure to credit
risk of trade receivables was EUR 359 million (2018: EUR
482 million). The portion of unsecured receivables has varied
between 3–12% of all trade receivables. For significant part of
trade receivables Outokumpu uses factoring, which transfers
most risks and rewards to the buyer of the receivables. At
the end of the year, most of the receivables were generated
by a large number of customers and there were only a few

50 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsrisk concentrations. Age analysis of accounts receivables is
presented in note 22.

Treasury monitors credit risk related to financial institutions.
Outokumpu seeks to reduce these risks by limiting the counter-
parties to banks and other financial institutions with good credit
standing. For the derivative transactions, Outokumpu prefers
to have ISDA framework agreements in place. Exposure to
country risk is monitored and at year-end such risk included e.g.
Argentina due to Outokumpu’s local and cross-border business
activities there. In 2019, the country risk profile of Argentina
continued very weak.

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 long-term committed credit lines available,
by having balanced maturity profile of debt and by diversifying
sources of funding. Daily liquidity is optimized by issuance of
commercial papers and by doing currency swaps. Efficient cash
and liquidity management is also reducing liquidity risk. Finance
plans are prepared and reviewed regularly with a focus on
forecasted cash flow, projected funding requirements, planned
funding transactions during the forecast period and financial
covenant headroom. The adequacy of liquidity reserves, the
amounts of scheduled annual repayments of non-current debt
compared to EBITDA as well as forecasted debt-to-equity and
leverage ratios are key measurements in the planning.

In 2019, weakened profitability shifted the focus to improve
the weighted average maturity (WAM) of debt, which had some
negative implication for financing costs during the second
half of the year Debt structure improvement efforts included a
maturity extension for EUR 574 million of the Revolving Facility
amount, arrangement for a new EUR 400 million secured
sustainability linked term loan due 2023 and a significant
reduction in the amount of commercial papers issued.
Furthermore, the use of the EUR 120 million Kemi mine facility
started by drawing some EUR 42 million new long-term capital
expenditure funding for the project.

Net debt development

€ million

Net cash flow from operating activities
Net cash flow from investing activities
Cash flow before financing activities
Dividends paid
Treasury shares purchased
Other financing cash flow
Cash flow impact on net debt

Opening net debt
IFRS 16 transition impact
Cash flow impact on net debt
Change in net debt, non-cash
Closing net debt

2019

371
–65
306
–62
–
3
248

1,241
131
–248
32
1,155

2018

214
–229
–14
–103
–17
1
–134

1,091
–
134
16
1,241

In 2019 the Moody’s corporate family rating for Outokumpu
decreased from B1 to B2 and the rating for secured notes
decreased from Ba3 to B1. Both ratings have stable outlook at
the end of the year.

The main funding programs and credit facilities are: a
committed revolving credit facility of EUR 650 maturing in May
2021 (EUR 76 million) and May 2022 (EUR 574 million); a
committed Kemi mine investment facility of EUR 78 million
remaining undrawn and having the final maturity of drawn
loans of EUR 42 million in 2030; and an uncommitted Finnish
commercial paper program totalling EUR 800 million. The
revolving credit facility, the sustainability linked term loan, a
bilateral bank loan and the notes due in 2024 are secured by
a comprehensive security package, which includes pledges on
real estate in Tornio and Calvert, pledges of shares of certain
material subsidiary companies and guarantees issued by
many of the material subsidiary companies. Outokumpu and
its secured lenders have signed an intercreditor agreement
in February 2014, when the security package was originally
created. More information on liquidity and refinancing risk is
presented in the following table.

51 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsContractual cash flows

2019
€ million

Bonds
Convertible bonds
Loans from financial institutions
Pension loans
Lease liabilities
Commercial papers
Trade payables
Interest payments and facility charges
Currency derivatives

Outflows
Inflows

Interest derivatives

2020

–
250
8
40
30
101
1,180
66

1,816
–1,813
–1
1,678

2021

2022

2023

2024

2025–

–
–
4
48
64
–
–
55

–
–
–1
171

–
–
4
62
11
–
–
42

–
–
–1
118

–
–
405
28
9
–
–
27

–
–
–1
467

250
–
5
22
8
–
–
12

–
–
–1
296

–
–
30
24
84
–
–
148

–
–
–
285

On December 31, 2019, the Group had cash and cash equivalent amounting to EUR 325 million and committed available long-term
credit facilities totaling EUR 650 million. In addition, the EUR 78 million long-term facility is available for financing the Kemi mine
investment.

2018
€ million

Bonds
Convertible bonds
Loans from financial institutions
Pension loans
Finance lease liabilities
Commercial papers
Trade payables
Interest payments and facility charges
Currency derivatives

Outflow
Inflow

Interest derivatives
Metal derivatives

2019

–
–
45
3
3
460
1,200
47

2,292
–2,287
–1
4
1,766

2020

2021

2022

2023

2024–

–
250
6
47
3
–
–
40

–
–
–1
1
346

–
–
4
55
51
–
–
29

–
–
–1
–
138

–
–
1
59
0
–
–
22

–
–
–1
–
82

–
–
–
16
0
–
–
14

–
–
–1
–
29

250
–
–
40
28
–
–
126

–
–
–1
–
443

On December 31, 2018, the Group had cash and cash equivalent amounting to EUR 68 million and committed available long-term
credit facilities totaling EUR 650 million. In addition, the EUR 120 million long-term facility will become available for financing the
Kemi mine investment.

Capital management

The objectives of capital management are to secure ability to
continue as a going concern and to optimize cost of capital
in order to enhance value to shareholders. As part of these
objectives, Outokumpu 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 struc-
ture and debt capacity are taken into account when deciding
e.g. on investments and dividends. Tools to manage equity
capital include dividend policy, share buybacks and issues
of equity or equity-linked securities. Debt capital is managed
taking into account the requirement to maintain good liquidity
and the capability to refinance maturing debt. These topics are
considered in connection with cost of capital optimization.

Tools to manage debt capital include issue of new debt,
prepayment of loans and liability management measures, such
as the use of call options of issued notes. In 2019 several
measures targeting to increase average maturity of debt were
implemented. The revolving credit facility, the sustainability
linked term loan and the Kemi mine financing facility include
financial covenants, which are based on debt-to-equity ratios.
The notes maturing in 2024 include an incurrence based finan-
cial covenant on debt-to-equity ratio and the defined covenant
level is 100 percent. In 2019 Outokumpu was in compliance
with the financial covenants of its financing agreements.

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. In 2019, significant
amount of equity capital was distributed from Germany and
equity increases were done to Mexico and to business area
Ferrochrome. Net investment and debt in foreign subsidiaries
are monitored and Outokumpu has capability to hedge net
investment translation risk.

Visenta Försäkringsaktiebolag 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, which are based e.g. on Solvency II framework.

52 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsThe management monitors Group’s capital structure based on
debt-to-equity ratio, which is calculated as net debt divided
by total equity, and on a basis of leverage ratio, which is
calculated as net debt divided by adjusted EBITDA. Outokumpu
targets are to have debt-to-equity ratio below 35% and leverage
below 1.0. Outokumpu also targets to improve its current credit
ratings.

Capital structure

€ million

Total equity

Non-current debt
Current debt
Total debt

2019

2,562

1,053
427
1,480

2018

2,750

798
511
1,309

Total capitalization

4,042

4,059

Total debt
Cash and cash equivalents
Net debt

Debt-to-equity ratio, %
Net debt to adjusted EBITDA

1,480
–325
1,155

2019

45.1
4.4

1,309
–68
1,241

2018

45.1
2.6

The debt-to-equity ratio remained stable despite of low
profitability and IFRS 16 transition impact on net debt.
Successful working capital management maintained to support
the ratio stable.

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
insurance, covering e.g. fires, machinery breakdowns and
natural catastrophes, is the most important insurance line and
significant portion of insurance premiums paid relate to this
PDBI cover. Business operations may cause significant liability
risks related e.g. to people, environment or Outokumpu’s
products. Outokumpu aims to mitigate liability risk by relevant
risk management measures and by having reasonable
insurances in place. Other significant insurance lines include
marine cargo and credit. Visenta Försäkringsaktiebolag can
act as direct insurer and as reinsurer. Visenta is registered
in Sweden and it has assets totalling EUR 19 million (2018:
EUR 19 million). In 2019 Visenta continued its participation
to Outokumpu’s property and business interruption insurance.
Visenta also engaged in issuing surety to cover certain potential
environmental liabilities in connection with the operations in
Kemi and Tornio.

During the reporting year there were no events leading to
significant insurance claims. Fire safety and loss prevention
surveys were carried out mainly as planned and the process of
addressing capital expenditure to reduce identified hazard risk
was improved.

53 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements20. Fair values and nominal amounts of derivative instruments

are excluded from the cash flow hedging relationship and are recognized in other operating profit
and loss. All currency derivatives designated to cash flow hedge accounting and the purchases of
electricity matured in 2019.

2019

2018

2019

2018

Positive
fair value

Negative
fair value

Net
fair value

Nominal
amounts

Cash flow hedges (EUR/SEK)

€ million
Currency and interest rate
derivatives

Currency forwards
Currency options,
bought
Interest rate swaps

Metal derivatives
Forward nickel
contracts, hedge
accounted
Forward nickel
contracts
Forward molybdenum
contracts
Nickel options, bought
Nickel options, sold

Propane derivatives

0
5

–
0
–

–

–
–

0
–
–

–

Total derivatives

Less long-term derivatives
Interest rate swaps
Forward nickel
contracts, hedge
accounted
Forward nickel
contracts
Forward molybdenum
contracts

Short-term derivatives

–

–
15

–

–
17

–3

0
5

–6

–0
0
–

–

–
–2

–4

–
2

–

–5

–0
3
–0

–4

–

–1

–0
–4

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

Hedge accounted cash flow hedges

Outokumpu has hedged with EUR/SEK currency forwards the spot price risk related to SEK
denominated electricity supply agreement for the Finnish production sites. The forward points

1,815

2,289

6
200

–
200

Tonnes

Fair value of hedges, € million
Nominal amount of hedges, € million
Nominal amount of hedged item, € million
Hedge ratio
Weighted average hedge rate
Fair value reserve in other comprehensive income, € million
Reclassified from other comprehensive income to profit or loss, € million 1)

2019

–
–
–
1:1
9.41
–
–4

2018

0
37
38
1:1
9.41
–3
–4

8,048

–

9,772

12,266

18
5,500
–

34
8,000
3,000

–

18,000

1) Included in cost of sales

In 2019 Outokumpu started cash flow hedge accounting for two selected nickel hedging
programs. The hedging is allocated to the future cash flows of sales and purchases. The fair
value of the nickel contracts included in hedge accounting is deferred in other comprehensive
income and realized derivative result is recognized in sales or cost of sales depending on the
nature of underlying hedged item during the same reporting period as the underlying item is
recognized. In the purchase cash flow hedge program the realized part of the nickel derivatives
are first reclassified from other comprehensive income to inventory for certain period of time
before allocating to cost of sales. Only the spot component related to nickel derivatives is under
hedge accounting, the forward element is recognized in profit and loss. The used nickel derivative
instruments are forwards. The selected derivative instruments correspond to the price model used
in the underlying. The ineffectiveness is tested regularly. The management has estimated that
possible ineffectiveness relates to credit risk or timing of transactions, but these are estimated to
be insignificant.

Cash flow hedges (nickel derivatives)

Fair value of nickel contracts, € million
Nominal amount of nickel contracts, tons
Hedge ratio
Fair value reserve in other comprehensive income, € million
Reclassified from other comprehensive income to profit or loss, € million 1)
Reclassified from other comprehensive income to profit or loss, € million 2)
Reclassified from other comprehensive income to inventory, € million

2019

6
8,048
1:1
6
–10
7
2

2018

–
–
–
–
–
–
–

1) Included in sales
2) Included in cost of sales

54 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements
Master netting agreements and similar arrangements

21. Inventories

22. Trade and other receivables

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 of 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

2019

2018

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

11
9

11
6

12
5

12
9

€ million

Raw materials and consumables
Work in progress
Finished goods and merchandise

2019

440
460
523
1,424

2018

485
584
486
1,555

The most important commodity price risk for Outokumpu
is caused by fluctuation in nickel and other alloy prices.
Significant part 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 1 million were recognized in
income statement during the financial year (2018: write-downs
of EUR 13 million). In 2019, Outokumpu started to apply cash
flow hedge accounting for two selected nickel hedging cases.
More details on commodity price risk are presented in note 19
and on hedge accounting in note 20.

€ million

Non-current

2019

2018

Other accruals and receivables

Current

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

Impairment of trade receivables

On Jan 1, 2018 before IFRS 9 transition
IFRS 9 transition impact
On Jan 1 according to IFRS 9
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

359
55
29
9
28
34
514

–
–
7
7

312
40
3
4
359

482
26
24
11
28
70
640

6
1
7
7

416
54
6
6
482

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 cover some 95% of an
insured credit loss. Credit risks related to trade receivables are
presented in more detail in note 19. Expected credit losses
are calculated as defined in the accounting principles of these
financial statements (see note 2).

As of December 31, 2019 Outokumpu has derecognized
trade receivables totaling EUR 321 million (2018: EUR 392
million), which represents fair value of the assets. Net proceeds
received totaled EUR 312 million (2018: EUR 373 million).
Underlying assets have maturity of less than one year. The
maximum amount of loss related to derecognized assets is

55 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements

estimated to be EUR 11 million (2018: EUR 18 million). This
estimate is based on insurance policies and contractual
arrangements of factoring companies and Outokumpu. The
analysis does not include impact of any operational risk related
to Outokumpu’s contractual responsibilities.

23. Cash and cash equivalents

€ million

2019

2018

Cash at bank and in hand
Short-term bank deposits and cash equivalents

Bank overdrafts 1)

323
2
325
–
325

67
1
68
–36
32

1) Presented in current debt in the consolidated 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 2019 was 0.2%
(Dec 31, 2018: 1.3%).

24. Equity

Share capital, premium fund and invested unrestricted equity reserve

€ million

On Jan 1, 2018
Shares delivered from the share-based payment programs 1)
Treasury share purchase
On Dec 31, 2018
Shares delivered from the share-based payment programs 1)
On Dec 31, 2019
Treasury shares 1)
Total number of shares on Dec 31, 2019

Number
of shares,
1,000

412,672
892
–3,000
410,564
1,211
411,775
4,600
416,374

Share
capital

Premium
fund

Invested
unrestricted
equity reserve

311
–
–
311
–
311

714
–
–
714
–
714

2,103
–
–
2,103
–
2,103

Total

3,127
–
–
3,127
–
3,127

1) Shares granted from treasury shares without effect to share capital. The movement in the cost of treasury shares is presented in the statement of

changes in the equity.

Distributable funds

On December 31, 2019, the distributable funds of the parent
company totaled EUR 2,287 million of which retained earnings
were EUR 164 million. The Board of Directors proposes to the
Annual General Meeting in 2020 that a dividend of EUR 0.10
per share is paid for 2019 (dividend of EUR 0.15 per share
paid for 2018).

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

Premium fund includes proceeds from share subscription and
other contribution based on the old Finnish Limited Liability
Companies Act for the part the contributions exceed the
account equivalent value allocated to share capital. Invested
unrestricted equity reserve includes net proceeds from the
rights issues in 2014 and 2012. Fair value reserve from finan-
cial assets at fair value through other comprehensive income
includes movements in the fair values of equity securities and
fair value reserve from derivatives includes movements in the
fair values of derivative instruments used for cash flow hedging.
See note 17 for more information on the equity securities and
note 20 for more information on derivative instruments. Other
reserves include 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.

56 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements25. 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 representing 40% and
in the UK representing 57% of Group’s total defined benefit
liability.

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 2018, the lump sum payment
option was introduced to more plans, and the assumption
related to the usage of this option was revised. These were
considered as plan amendments leading to a positive settle-
ment impact of EUR 11 million.

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, and the plans have
been unfunded. However, in 2019 a CTA model (Contractual
Trust Arrangement) was introduced under which the plans are
funded.

The UK

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 trustees are responsible for the operation and
governance of the scheme, including making decisions
regarding the scheme’s funding and investment strategy. In
2018, the interpretation related to guaranteed minimum
pension equalization was changed, which resulted in recognition
of past service cost of EUR 9 million in 2018.

Risks associated with defined benefit plans

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 propor-
tion of equities, which are expected to outperform corporate
bonds in the long-term, it might face higher volatility and risk in
the short-term. The investment portfolio might also be subject
to a range of other risks typical of the assets held, in particular
credit risk on bonds and exposure to the property market.

Change in bond yields: A decrease in corporate bond yields
will increase plan liabilities, although this will be partially offset
by an increase in the value of the plans’ bond holdings (if any).
In a situation where the return on plan assets is lower than the
corporate bond yields, a plan may face a shortfall which might
lead to increased contributions.

Inflation risk: Inflation rate is linked to both future pension and
salary increase, and higher inflation will lead to higher liabilities.

Longevity: The majority of Outokumpu’s defined benefit
obligations are to provide benefits for the life of the member,
so increases in life expectancy will result in an increase in the
plans’ liabilities.

Funding

Funding requirements are generally based on pension fund’s
actuarial measurement framework set out in the funding
policies. In the UK preliminary pension fund’s latest actuarial
valuation started in January 1, 2017 and was completed in
2018 with a deficit of GBP 36 million. The valuation was not
based on the same assumptions as the IFRS valuation, which
shows a surplus. Since the valuation, Outokumpu has made
contributions to cover the deficit. In 2019, these contributions
were GBP 6 million, and the remaining GBP 9 million will
be paid during 2020–2021. The next preliminary actuarial
valuation of the UK pension fund started on January 1, 2020.

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

€ million

2019

2018

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

–7
–3

–10
–43
–53

–2
–3

–5
–7
–12

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

2019

2018

783

415

3
–537
249

287
–471
231

In 2019, a CTA model was introduced in Germany and the previously
unfunded plans are now reported as funded.

€ million

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

2019

2018

318
18
–68
267

304
14
–72
245

57 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsMovement 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
Benefits paid
Curtailments
Settlements
Other change
On Dec 31

2019

2018

Present value of
obligation

Fair value of
plan assets

Net defined
benefit liability

Present value of
obligation

Fair value of
plan assets

Net defined
benefit liability

702
6
16

–
–7
88
–0
21
–
–40
–0
1
–
786

–471
–
–13

–38
–
–
–
–24
–31
40
–
–
–
–537

231
6
3

–38
–7
88
–0
–3
–31
0
–0
1
–
249

752
7
15

–
1
–26
8
–3
–
–48
–1
–5
1
702

–503
–
–12

24
–
–
–
4
–31
48
–
0
–
–471

249
7
3

24
1
–26
8
1
–31
0
–1
–4
1
231

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, 2019
was EUR 316 million (Dec 31, 2018: EUR 294 million), and the
fair value of plan assets was EUR 11 million (Dec 31, 2018:
EUR 2 million) on December 31, 2019. For the UK, the present
value of obligation was EUR 444 million (Dec 31, 2018: EUR
382 million), and the fair value of plan assets was EUR 512
million (Dec 31, 2018: EUR 454 million) on December 31,
2019.

The expected contributions to be paid to the defined benefit
plans in 2020 are EUR 29 million.

Allocation of plan assets covers 99.6% of total defined benefit
plan assets. The plan assets are mainly invested in quoted
instruments. Debt instruments include mostly investment grade
government and corporate bonds.

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.

Allocation of plan assets

€ million

Equity instruments
Debt instruments
Other assets
Total plan assets

2019

2018

49
282
203
534

48
251
166
465

58 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsSignificant actuarial assumptions

Germany

The UK

Other countries

Discount rate, %

Future salary
increase, %
Inflation rate, %

Future benefit
increase, %
Medical cost trend
rate, %
Life expectancy

2019 0.90
2018 1.75
2019 –
2018 –
2019 –
2018 –
2019 1.70
2018 1.70
2019 –
2018 –
2019 RT 2018 G

2018 Modified from RT 2018
G / RT 2005 G

2.00
2.75
–
–
3.00
3.20
2.85
2.95
–
–
96% SAPS All Pensioner
Amounts tables with CMI
Core Projection Model
–2016
96% SAPS All Pensioner
Amounts tables with CMI
Core Projection Model
–2016

2.72
3.12
1.57
1.26
–
–
–
–
4.70–5.20
5.20–5.60
Standard mortality tables

Standard mortality tables

The significant actuarial assumptions are presented separately for the significant countries, and
for other countries a weighted average of the assumptions is presented.

The weighted average duration of the overall defined benefit obligation is 17.0 years. In Germany
and in the UK the weighted average durations are 13.6 and 20.0 years, respectively.

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
2019
Discount rate
Future benefit increase
Life expectancy

2018
Discount rate
Future benefit increase
Life expectancy

Change in assumption

Increase in assumption

Decrease in assumption

0.5%
0.5%
1 year

Decrease by 6%
Increase by 3%
Increase by 3%

Increase by 7%
Decrease by 3%

The UK
2019
Discount rate
Future benefit increase
Life expectancy

2018
Discount rate
Future benefit increase
Life expectancy

Other countries
2019
Discount rate
Medical cost trend rate
Future salary increase
Life expectancy

2018
Discount rate
Medical cost trend rate
Future salary increase
Life expectancy

Change in assumption

Increase in assumption

Decrease in assumption

0.5%
0.5%
1 year

Decrease by 9%
Increase by 7%
Increase by 3%

Increase by 11%
Decrease by 6%

Change in assumption

Increase in assumption

Decrease in assumption

0.5%
0.5%
0.5%
1 year

Decrease by 4%
Increase by 1%
Increase by 3%
Increase by 7%

Decrease by 4%
Increase by 0%
Increase by 1%
Increase by 7%

Increase by 4%
Decrease by 1%
Decrease by 4%

Increase by 4%
Decrease by 0%
Decrease by 1%

Other long-term employee benefits

Other long-term employee benefits mainly relate to early retirement provisions in Germany and
long-service remunerations in Finland. Under the German 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, 2019 were EUR 18 million (Dec 31, 2018: EUR 14 million).

Multi-employer defined benefit plans

ITP pension plans operated by Alecta in Sweden and plans operated by Stichting Bedrijfspensioen-
fonds 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.

59 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements26. Provisions

€ million

Provisions on Jan 1, 2019
Increases in provisions
Utilized during the financial year
Unused amounts reversed
Provisions on Dec 31, 2019

€ million

Non-current provisions
Current provisions

Restructuring
provisions

Environmental
provisions

Other
provisions

13
56
–10
–2
56

53
4
–4
–4
48

4
3
–2
0
5

2019

85
25
110

Total

70
62
–16
–7
110

2018

65
5
70

Restructuring provisions

Other provisions

Restructuring provisions relate mainly to the measures agreed
upon in the negotiations carried out in Germany in 2019
targeting to improve competitiveness through cost reductions.
The cash outflows related to these provisions are expected to
take place between years 2020–2021.

Other provisions comprise for example provisions for product
and other claims and are mainly current in nature.

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, the
UK, and 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.

27. Debt

€ million

Non-current
Bonds
Convertible bonds
Loans from financial institutions
Pension loans
Lease liabilities
Finance lease liabilities

Current

Convertible bonds
Loans from financial institutions
Pension loans
Lease liabilities
Finance lease liabilities
Commercial paper

2019

2018

249
–
445
183
176
–
1,053

248
8
40
30
–
101
427

249
238
12
217
–
82
798

–
45
3
–
3
460
511

Net debt

Non-current and current debt
Cash and cash equivalents
Net debt

1,480
–325
1,155

1,309
–68
1,241

The bond maturing in 2024 as well as credit facilities and
long-term loans from financial institutions include financial
covenants, which are described in note 19.

60 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsChanges in non-current and current debt

2019
€ million

On Jan 1, before IFRS 16 transition
IFRS 16 transition impact
Financing cash flows
Transfer to current debt
Other non-cash movements
On Dec 31

Non-current debt

Current portion
of non-current
debt

Non-current
lease liabilities

Current portion
of lease
liabilities

Current debt

715
–
452
–290
–1
877

10
–
–13
290
9
295

82
101
–
–32
24
176

3
29
–34
32
–
30

499
–
–396
–
–
103

2018
€ million

On Jan 1
Financing cash flows
Transfer to current debt
Other non-cash movements
On Dec 31

Non-current debt

Current portion
of non-current
debt

Non-current
finance lease
liabilities

Current portion
of finance lease
liabilities

Current debt

613
101
–10
11
715

13
–13
10
–
10

85
–
–3
–
82

5
–5
3
–
3

487
7
–
4
499

Total

1,309
131
9
–
32
1,480

Total

1,203
90
–
16
1,309

Regarding cash and cash equivalents, the reconciliation of cash effective and non-cash movements is presented in the consolidated
statement of cash flows.

More information on leases and the IFRS 16 transition impact in note 13.

Bonds

€ million

2018 fixed rate bond maturing on June 18, 2024

Convertible bonds

€ million

2015 fixed rate bond maturing on Feb 26, 2020

Interest rate, %

4.125

Interest rate, %

3.250

Outstanding amount

2019

250

Outstanding amount

2019

250

2018

250

2018

250

The convertible bond is convertible into ordinary shares of Outokumpu. The current conversion price is set at EUR 6.75. The
conversion price is subject to adjustments for any dividend in cash or in kind as well as customary anti-dilution adjustments,
pursuant to the terms and conditions of the notes. Outokumpu has had the right to redeem all outstanding bonds on or after March
13, 2018, if the volume-weighted average price of the Outokumpu share calculated for a specified period of time exceeds 130% of
the then prevailing conversion price.

28. Trade and other payables

€ million

Non-current
Accruals

Current

Trade payables
Accrued employee-related expenses
Accrued interest expenses
VAT payable
Withholding tax and social security liabilities
Payables related to factoring programs
Advance payments received
Other accruals
Other payables

2019

2018

1,265
65
9
23
20
11
11
47
24
1,475

1,200
63
5
24
21
46
10
49
52
1,471

Customer contract liabilities related to unperformed transporta-
tion service amounted to EUR 1 million on December 31, 2019
(Dec 31, 2018: EUR 1 million). These liabilities and advances
received are expected to be recognized as revenue during the
first quarter of 2020.

On December 31, 2019, accrued volume discounts related to
contracts with customers amounted to EUR 37 million (Dec 31,
2018: EUR 28 million).

61 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statementsOutokumpu 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. Outokumpu’s liability for the net debt of Tornion Voima Oy
in year-end 2019 amounted to EUR 1 million (Dec 31, 2018:
EUR 2 million). These liabilities are reported under other
commitments.

Investment commitments

Outokumpu’s share of the Fennovoima investment is about
EUR 250 million of which EUR 79 million has been paid by
the end of the reporting period. Annual capital expenditure
related to the project is expected to be on average around EUR
15–20 million in the coming years, and approximately half of
the investment is expected to be paid only at the end of the
construction phase.

Group’s other off-balance sheet investment commitments
totaled EUR 68 million on December 31, 2019 (Dec 31, 2018:
EUR 106 million).

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

Other commitments on Dec 31

2019

2018

3,192
13

3,055
28

Mortgages relate mainly to securing the Group’s financing. A
major part of Outokumpu’s borrowings are secured by mortgage
over the real property of the Group’s main production plants.
Mortgages include also the business mortgage note to secure a
loan for DeepMine project.

Outokumpu has provided a security, including a pledge of
shares of a subsidiary company, related to AvestaPolarit
pension scheme in the UK.

Other pledges include Outokumpu’s shares in Manga LNG Oy to
secure certain liabilities of Manga LNG Oy. Outokumpu’s total
liability at the end of 2019 amounted to EUR 29 million (Dec
31, 2018: EUR 33 million), and the part exceeding the share
pledge and guarantee is presented under other commitments.

30. Disputes and litigations

Claim in Spain related to the
divested copper companies

Claim in Italy related to former tax consolidation group

62 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements31. Related party transactions
Outokumpu’s related parties include the key management
of the company and their close family members, associated
companies and joint ventures, and Solidium Oy. The transac-
tions 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 15 and
subsidiaries are presented in note 32.

Solidium Oy, a limited company fully owned by the State of
Finland, owned 21.7% of Outokumpu on December 31, 2019.
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 related companies

Employee benefits for CEO and Deputy CEO

€ thousand

2019

CEO
Deputy to the CEO 1)

2018

CEO
Deputy to the CEO

Salaries and
other short-term
benefits

Bonuses

Termination
benefits

Post-employment
benefits

Share-based
payments

1,074
79

1,076
469

276
–

348
163

–
–

–
519

444
37

503
101

372
–

–166
159

Total

2,167
117

1,761
1,411

1) Christoph de la Camp until February 28, 2019. As of March 1, 2019, Outokumpu has not had specifically appointed Deputy to the CEO.

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 with an annual insurance premium of 25% of his annual earnings, excluding share
rewards. The CEO has the right to retire at the age of 63.

€ million

Sales and other operating income
Purchases
Dividend income

Trade and other receivables
Trade and other payables

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.

2019

5,320
–
1,574
235
706
7,834

2019

2018

89
–7
10

29
3

100
–16
1

24
3

2018

6,381
519
1,247
55
576
8,777

Remuneration to Board of Directors

€ thousand

2019

2018

Chairman Kari Jordan, as of March 22, 2018
Chairman Jorma Ollila, until March 22, 2018
Vice Chairman Heikki Malinen
Vice Chairman Olli Vaartimo, until March 27, 2019
Member Kati ter Horst
Member Eeva Sipilä
Member Vesa-Pekka Takala, as of March 27, 2019
Member Pierre Vareille, as of March 22, 2018
Member Julia Woodhouse, as of March 27, 2019
Member Markus Akermann, until March 22, 2018
Member Roberto Gualdoni, until March 22, 2018

173
–
103
3
80
99
77
90
81
–
–
706

164
2
77
97
77
75
–
77
–
5
2
576

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

63 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements32. Subsidiaries on December 31, 2019

Country

Group
holding, %

Europe
Outokumpu AS
Outokumpu B.V.
Outokumpu Distribution France S.A.S.
Outokumpu Distribution Hungary Kft.
Outokumpu Distribution Polska Sp. z o.o.
Outokumpu Distribution UK Ltd.
Outokumpu Europe Oy
Outokumpu Ges.m.b.H.
Outokumpu India Private Limited
Outokumpu K.K.
Outokumpu Management (Shanghai) Co., Ltd.
Outokumpu Middle East FZCO
Outokumpu Nirosta GmbH
Outokumpu N.V.
Outokumpu Prefab AB
Outokumpu Press Plate AB
Outokumpu PSC Benelux B.V.
Outokumpu PSC Finland Oy
Outokumpu PSC Germany GmbH
Outokumpu (Pty) Ltd
Outokumpu S.A.
Outokumpu (S.E.A.) Pte. Ltd.
Outokumpu Service Center GmbH
Outokumpu Shipping Oy
Outokumpu S.p.A.
Outokumpu Stainless AB
Outokumpu Stainless B.V.
Outokumpu Stainless Oy
Outokumpu Stainless Pty. Ltd.
Outokumpu Stainless Steel (China) Co. Ltd.
Outokumpu Tornio Infrastructure Oy

Norway
The Netherlands
France
Hungary
Poland
The UK
Finland
Austria
India
Japan
China
United Arab Emirates
Germany
Belgium
Sweden
Sweden
The Netherlands
Finland
Germany
South Africa
Spain
Singapore
Germany
Finland
Italy
Sweden
The Netherlands
Finland
Australia
China
Finland

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

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.

Long Products
Fagersta Stainless AB
Outokumpu Stainless Bar, LLC
Outokumpu Stainless Ltd

Ferrochrome
Outokumpu Chrome Oy

Other operations
Outokumpu Americas, Inc.
Outokumpu Distribution Benelux B.V.
Outokumpu Holding Germany GmbH
Outokumpu Holding Italia S.p.A.
Outokumpu Holding Nederland B.V.
Outokumpu Mining Oy
Outokumpu Stainless Holding GmbH
Outokumpu Stainless Holdings Ltd
Outokumpu Stainless UAB
Québec Inc.
Viscaria AB
Visenta Försäkrings AB

Country

Brazil
Argentina
Mexico
Mexico
The US
Mexico

Sweden
The US
The UK

Finland

The US
The Netherlands
Germany
Italy
The Netherlands
Finland
Germany
The UK
Lithuania
Canada
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

In addition Outokumpu has branch offices in South Korea, Switzerland, Taiwan, Thailand, The UK
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.

*) Shares and stock held by the parent company

1) Name changed

64 / 74

Outokumpu Annual report 2019 | Financial statementsNotes to the consolidated financial statements

Parent company
financial statements

Income statement of the parent company

€ million

Sales

Cost of sales

Gross margin

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

EBIT

Financial income and expenses

Result before appropriations and taxes

Appropriations

Group contribution
Change in depreciation difference

Income taxes

Result for the financial year

2019

2018

652

–555

17
–17
–115
–0

–19

–3

53
–0

–0

587

–482

105

87
–17
–110
–431

–367

187

–180

185
1

–0

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 elimi-
nated 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.

65 / 74

Outokumpu Annual report 2019 | Financial statementsBalance 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
Loans receivable
Trade receivables
Prepaid expenses and accrued income
Other receivables

Cash and cash equivalents

Total current assets

TOTAL ASSETS

2019

2018

€ million

2019

2018

120

3,821
254
17
80
5
4,176

100

3,776
1,022
27
80
2
4,906

4,305

5,016

843
53
39
91
1,026

272

1,298

617
54
40
213
924

947

5,603

5,962

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

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

Current liabilities

Convertible bonds
Loans from financial institutions
Pension loans
Group bank account liabilities
Other current loans
Trade payables
Accrued expenses and prepaid income
Other current liabilities

Total liabilities

TOTAL EQUITY AND LIABILITIES

311
720
2,123
113
51
3,319

311
720
2,123
169
6
3,330

250
–
405
103
0
758

250
6
40
722
244
208
13
42
1,525

250
250
12
137
1
650

–-
36
3
1,275
464
163
10
30
1,982

2,283

2,632

5,603

5,962

66 / 74

Outokumpu Annual report 2019 | Financial statementsParent company financial statementsCash flow statement of the parent company

€ million

2019

2018

€ million

2019

2018

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
Group contributions
Other non-cash 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 financial assets
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
Dividends paid
Treasury shares purchase
Borrowings of non-current debt
Repayments of non-current debt
Change in current debt
Cash flow from group contribution
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

0
5
0
–5
–68
–0
36
0
3
–53
–1
–83

–6
47
41

0
75
–34
–0
41

0
7
431
–78
–94
–171
35
–1
15
–185
1
–40

–10
2
–8

171
89
–36
–0
224

183

–274
–0
–30
239
1
11
361

308

358

–62
–
473
–76
–806
185
176

–109
249
249

–398
–0
–78
255
–10
27
–125

–330

–147

–103
–17
250
–221
–540
97
643

108
–39
–39

67 / 74

Outokumpu Annual report 2019 | Financial statementsParent company financial statementsStatement of changes in equity of the parent company

€ million

Equity on Jan 1, 2018
Result for the financial year
Dividends paid
Treasury shares repurchase
Equity on Dec 31, 2018
Result for the financial year
Dividends paid
Equity on Dec 31, 2019

Share capital

Premium fund

Invested
unrestricted equity
reserve

Retained earnings

Total equity

€ million

Distributable funds on Dec 31

311
–
–
–
311
–
–
311

720
–
–
–
720
–
–
720

2,123
–
–
–
2,123
–
–
2,123

289
6
–103
–17
175
51
–62
164

3,444
6
–103
–17
3,330
51
–62
3,319

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

2019

113
51
2,123
2,287

2018

169
6
2,123
2,298

Commitments and contingent liabilities of the parent company

€ million

Other pledges on Dec 31

2019

2018

A major part of Outokumpu’s borrowings are secured by security
to the real property of selected subsidiaries.

Guarantees on Dec 31
On behalf of subsidiaries

For financing
For commercial guarantees
For other commitments

On behalf of associated companies

For financing

Other commitments on Dec 31

350
3
26

378
2
28

Other pledges include Outokumpu’s shares in Manga LNG Oy to
secure certain liabilities of Manga LNG Oy. Outokumpu’s total
liability at the end of 2019 amounts to EUR 29 million (Dec
31, 2018: EUR 33 million), and the part exceeding the share
pledge and guarantee is presented under other commitments.

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. Outokumpu Oyj’s liability for the net debt of Tornion Voima
Oy at the year-end 2019 amounted to EUR 1 million (Dec 31,
2018: EUR 2 million). These liabilities are reported under other
commitments.

68 / 74

Outokumpu Annual report 2019 | Financial statementsParent company financial statementsAuditor’s Report (Translation of the Finnish Original)

To the Annual General Meeting of Outokumpu Oyj
Report on the Audit of the Financial Statements
Opinion
In our opinion

• the consolidated financial statements give a true and fair view of the group’s financial position
and financial performance and cash flows in accordance with International Financial Reporting
Standards (IFRS) as adopted by the EU

• the financial statements give a true and fair view of the parent company’s financial performance
and financial position in accordance with the laws and regulations governing the preparation of
the financial statements in Finland and comply with statutory requirements.

Our opinion is consistent with the additional report to the Audit Committee.

What we have audited

To the best of our knowledge and belief, the non-audit services that we have provided to the
parent company and to the group companies are in accordance with the applicable law and
regulations in Finland and we have not provided non-audit services that are prohibited under
Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are
disclosed in note 6 to the Financial Statements.

Our Audit Approach

Overview

• Overall group materiality: € 38 million

Materiality

• The audit scope includes all significant companies, covering the vast

majority of revenues, assets and liabilities.

We have audited the financial statements of Outokumpu Oyj (business identity code 0215254-2)
for the year ended 31 December 2019. The financial statements comprise:

Group scoping

• Valuation of goodwill

• the consolidated statement of income, consolidated statement of comprehensive income,
consolidated statement of financial position, consolidated statement of cash flows, consol-
idated statement of changes in equity and notes to the consolidated financial statements,
including the accounting principles for the consolidated financial statements

• the parent company’s income statement, balance sheet, cash flow statement and notes to the

parent company financial statements.

Key audit
matters

• Valuation of Property, Plant and Equipment

• Valuation of inventories

• System environment and internal controls

• Valuation of subsidiary shares in the parent company’s financial

statements

Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities
under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of
the Financial Statements section of our report.

As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements. In particular, we considered where management made
subjective judgements; for example, in respect of significant accounting estimates that involved
making assumptions and considering future events that are inherently uncertain.

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

Independence

We are independent of the parent company and of the group companies in accordance with the
ethical requirements that are applicable in Finland and are relevant to our audit, and we have
fulfilled our other ethical responsibilities in accordance with these requirements.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed
to obtain reasonable assurance whether the financial statements are free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material
if individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materi-
ality, including the overall group materiality for the consolidated financial statements as set out in

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Outokumpu Annual report 2019 | Auditor’s ReportAuditor’s reportthe table below. These, together with qualitative considerations, helped us to determine the scope
of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect
of misstatements on the financial statements as a whole.

Overall group materiality

€ 38 million

How we determined it

0.6% of net sales 2019

Rationale for the materiality
benchmark applied

We chose net sales as the benchmark because, in our view,
it is a stable and an important benchmark in the group’s
current situation, against which the performance of the
group is measured by users of the financial statements. As
the group’s profitability has not been stable, net sales is
also a generally accepted benchmark. We chose 0.6% which
is within the range of acceptable quantitative materiality
thresholds in auditing standards.

How we tailored our group audit scope

We tailored the scope of our audit, taking into account the structure of the Outokumpu group, the
accounting processes and controls, and the industry in which the group operates. The group audit
scope was focused on the manufacturing companies in Finland, Sweden, Germany, USA, Mexico,
the UK and Italy. We obtained, through our audit procedures at the aforementioned companies,
combined with additional procedures at the group level, sufficient and appropriate evidence
regarding the financial information of the group as a whole to provide a basis for our opinion on
the consolidated financial statements.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the financial statements of the current period. These matters were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.

As in all of our audits, we also addressed the risk of management override of internal controls,
including among other matters consideration of whether there was evidence of bias that repre-
sented a risk of material misstatement due to fraud.

Key audit matter in the
audit of the group

How our audit addressed
the key audit matter

Valuation of goodwill

Refer to notes 2, 11 and 14 in the
consolidated financial statements.

As at 31 December 2019 the group’s goodwill
balance amounted to € 466 million.

Goodwill is tested at least annually, irrespective
of whether there is any indication of
impairment. 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. Key assumptions used in the
value-in-use calculations are discount rate,
growth rate of terminal value, average global
growth in consumption of stainless steel and
base price development.

Valuation of goodwill is a key audit matter due
to the size of the goodwill balance and the high
level of management judgement involved the
estimation process.

Our audit of goodwill valuation focused on
management’s judgement and estimates used.
We assessed the appropriateness of these
through the following procedures:

• We tested the methodology applied in the

value in use calculation by comparing it to the
requirements of IAS 36, Impairment of Assets,
and we tested the mathematical accuracy of
the calculations.

• We evaluated the process by which the future
cash flow forecasts were drawn up, including
comparing them to medium term strategic
plans and forecasts approved by the Board
and testing the key underlying assumptions.

• We considered whether the sensitivity analysis
performed by management around key drivers
of the cash flow forecast was appropriate by
considering the likelihood of the movements of
these key assumptions.

• We compared the current year actual results
to those included as estimates in the prior
year impairment model to corroborate the
reliability of management’s estimates.

• The discount rates applied within the model
were assessed by PwC business valuation
specialist, including comparison to economic
and industry forecasts as appropriate.

We also considered the appropriateness of the
related disclosures provided in note 14 in the
group financial statements.

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Outokumpu Annual report 2019 | Auditor’s ReportAuditor’s reportKey audit matter in the
audit of the group

Valuation of Property, Plant
and Equipment

Refer to notes 2 and 12 in the consolidated
financial statements.

As at 31 December 2019 the Group’s Property,
Plant and Equipment (PPE) amounted to €
2,767 million, which is 46% of the total assets
and 108% of the total equity.

The group’s business is very capital intensive
and there is a risk that the carrying value of the
Property, Plant and Equipment is overstated.
The carrying value of Property, Plant and
Equipment is tested as part of the group
impairment testing based on the discounted
cash flow model.

Valuation of Property, Plant and Equipment is a
key audit matter due to the size of the balance
and the high level of management judgement
involved the estimation process.

How our audit addressed
the key audit matter

We assessed the appropriateness of the group’s
method and management’s judgement and
estimates in the impairment calculations for
Property, Plant and Equipment.

Our audit work also included testing the
operating effectiveness of key controls in
place to ensure the existence and appropriate
valuation of Property, Plant and Equipment. Such
controls include the authorization of additions,
disposals and scrapings, the evaluation of the
useful economic lives and the reconciliation of
fixed assets registers to the accounting records.

In addition we performed substantive audit
procedures including testing of assets acquired
in the year and depreciation of the fixed assets
mainly through analytical audit procedures.

Key audit matter in the
audit of the group

Valuation of Inventories

Refer to notes 2 and 21 in the consolidated
financial statements.

How our audit addressed
the key audit matter

Our audit work included testing management’s
key controls in place to ensure proper valuation
and existence of inventories.

Net inventories amount to € 1,424 million as
at 31 December 2019.

In addition, our audit procedures included,
among other things, the following:

• We performed tests over the prices of raw
materials and verified items in the product
costing of work in progress.

• We performed tests over the NRV calculations

and the assumptions used.

• We assessed the adequacy of the obso-

lescence provision and the management
judgement used.

• We participated in the physical inventory
counting and performed independent test
counts to validate the existence of assets and
accuracy of the counting performed.

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.
A large part 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. The risk is significant
because the delivery cycle in production is
longer than the alloy surcharge mechanism
provides for. Thus, only the price for the
products to be sold in near future is known.
That is why a significant part of the future
price for each product to be sold is estimated
according to management’s best knowledge in
NRV calculations. Due to fluctuations in nickel
and other alloy prices, the realized prices can
deviate significantly from what has been used
in NRV calculations on the closing date.

Due to the high level of management judgment
and the significant carrying amounts and risks
relating to valuation, this is one of the key
audit matters.

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Outokumpu Annual report 2019 | Auditor’s ReportAuditor’s reportHow our audit addressed
the key audit matter

Key audit matter in the audit
of the parent company

How our audit addressed
the key audit matter

Key audit matter in the
audit of the group

System environment and
internal controls

The group has a fragmented system environ-
ment. The fragmented system environment
introduces risks related to system access,
change management and data transfer
between the different systems, and we have
accordingly designated this as a key audit
matter.

The group is also implementing a new global
ERP, which was taken into use in two countries
in October 2019. This introduces risks related
to temporarily increased complexity as well as
processes and data in the new system.

Our response to the risks related to the
fragmented system environment included both
testing of IT controls and tests of details.

We tested the group’s controls around access
and change management related to key IT
systems. We also tested the group’s controls
around system interfaces, and the transfer of
data between systems.

We noted certain weaknesses related to access
controls to certain key systems. We reported
these control weaknesses to management and
performed tests of detail to reduce the related
risks of material misstatement to an acceptably
low level.

We tested the group’s controls related to the
new ERP implementation and the IT controls for
the new system. We also tested the complete-
ness and accuracy of data migrations relevant
for financial reporting.

Valuation of subsidiary shares in the
parent company’s financial statements

As at 31 December 2019, the value of
Outokumpu Oyj’s subsidiary shares amounted
to € 3,819 million in the parent company’s
financial statements prepared in accordance
with Finnish GAAP.

The valuation of subsidiary shares is tested as
part of the group impairment testing based on
the discounted cash flow model.

The valuation of subsidiary shares is a key audit
matter due to the significant carrying amounts
involved and the high level of management
judgement involved.

This matter is a significant risk of material
misstatement referred to in Article 10(2c) of
Regulation (EU) No 537/2014.

There are no significant risks of material misstatement referred to in Article 10(2c) of Regulation
(EU) No 537/2014 with respect to the consolidated financial statements.

We assessed the appropriateness of the method
and management’s judgement and estimates
in the calculations through the following
procedures:

• We compared the current year actual results
included in the prior year impairment model
to corroborate the reliability of management’s
estimates.

• The discount rates applied within the model
were assessed by PwC business valuation
specialist, including comparison to economic
and industry forecasts as appropriate.

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Outokumpu Annual report 2019 | Auditor’s ReportAuditor’s reportResponsibilities of the Board of Directors and the
Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation of consoli-
dated financial statements that give a true and fair view in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true
and fair view in accordance with the laws and regulations governing the preparation of financial
statements in Finland and comply with statutory requirements. The Board of Directors and the
Managing Director are also responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.

In preparing the financial statements, the Board of Directors and the Managing Director are
responsible for assessing the parent company’s and the group’s ability to continue as a going
concern, disclosing, as applicable, matters relating to going concern and using the going concern
basis of accounting. The financial statements are prepared using the going concern basis of
accounting unless there is an intention to liquidate the parent company or the group or to cease
operations, or there is no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with good auditing practice will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.

• Obtain an understanding of internal control relevant to the audit 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 parent company’s or the group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use
of the going concern basis of accounting and based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast significant doubt on
the parent company’s or the group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the parent company or the
group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including

the disclosures, and whether the financial statements represent the underlying transactions and
events so that the financial statements give a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the group to express an opinion on the consolidated financial state-
ments. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.

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Outokumpu Annual report 2019 | Auditor’s ReportAuditor’s reportOther Reporting Requirements
Appointment
We were first appointed as auditors by the annual general meeting on 21 March 2017. Our
appointment represents a total period of uninterrupted engagement of 3 years.

Other statements based on the decision by the Annual General Meeting
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 5 February 2020

PricewaterhouseCoopers Oy
Authorised Public Accountants

Janne Rajalahti
Authorised Public Accountant (KHT)

Other Information
The Board of Directors and the Managing Director are responsible for the other information. The
other information comprises the report of the Board of Directors and the information included in
the Annual Report, but does not include the financial statements and our auditor’s report thereon.
We have obtained the report of the Board of Directors prior to the date of this auditor’s report and
the Annual Report is expected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. With respect to the report of the Board of Directors, our
responsibility also includes considering whether the report of the Board of Directors has been
prepared in accordance with the applicable laws and regulations.

In our opinion

• the information in the report of the Board of Directors is consistent with the information in the

financial statements

• the report of the Board of Directors has been prepared in accordance with the applicable laws

and regulations.

If, based on the work we have performed on the other information that we obtained prior to the
date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

74 / 74

Outokumpu Annual report 2019 | Auditor’s ReportAuditor’s reportGovernance
2019

Outokumpu’s Corporate Governance
statement includes information on
the Group’s governance principles
as well as remuneration and risks.

Corporate Governance Statement 2019

Regulatory and structural framework

Outokumpu Oyj, the Group’s parent company, is a public limited
liability company, listed on Nasdaq Helsinki and incorporated
and domiciled in Finland. In its corporate governance and
management, Outokumpu Oyj complies with the laws and regu-
lations applicable to Finnish public companies, the company’s
Articles of Association and the Corporate Governance Policy
approved by the company’s Board of Directors.

ultimate responsibility for the management and operations of
the Outokumpu Group (“the Group”). The Outokumpu Leader-
ship Team members report to the CEO and support and assist
the CEO in the efficient management of the Group’s operations.
The latest Corporate Governance Statement and other updated
corporate governance information can be found on the Group’s
Corporate Governance website.

Outokumpu Oyj follows the Finnish Corporate Governance
Code, effective as of January 1, 2020. The Finnish Corporate
Governance Code is issued by the Finnish Securities Market
Association and adopted by Nasdaq Helsinki.

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

The General Meeting of Shareholders convenes at least once
a year. Under the Finnish Companies Act, certain important
decisions such as the amendments to the Articles of Associa-
tion, approval of financial statements, increases or decreases of
share capital, decisions on dividends, and election of the Board
of Directors and auditors, fall within the exclusive domain of the
General Meeting of Shareholders.

Organization structure

President and CEO
Roeland Baan

Human Resources &
Organization Development

Finance

Business Transformation & IT

Communications & IR

Europe

Americas

Long Products

Ferrochrome

Outokumpu Annual report 2019 | Governance

2 / 2

Composition and operations of the Board of Directors December 31, 2019
Chairman of the Board of Directors

Vice Chairman of the Board 2019

Kari Jordan

Chairman of the
Remuneration
Committee

Heikki Malinen

Member of the
Remuneration
Committee

Kati ter Horst

Member of the
Audit Committee

b. 1956, Finnish citizen
M.Sc. (Econ.), Vuorineuvos (Finnish honorary title)
Outokumpu Board member 2018–
Chairman of the Board 2018–
Chairman of the Remuneration Committee

Work experience
CEO: Metsäliitto Cooperative 2004–2017
President and CEO: Metsä Group 2006–2018
Chairman, Metsä Board Corporation 2005–2018
Chairman, Metsä Fibre Oy 2006–2017
Chairman, Metsä Tissue Corporation 2004–2017

Positions of trust
Vice Chairman of the Board of Directors: Nordea Bank Abp 2019–
Vice Chairman of the Board: Nokian Tyres Plc 2018–
Chairman of the Supervisory Board: Varma Mutual Pension
Insurance Company 2015–2019
Chairman of the Board: Finland Chamber of Commerce
2012–2016
Member of the Board (2005–2017), Vice Chairman of the
Board (2005–2008, 2014–2017) and Chairman of the Board
(2009–2011): Finnish Forest Industries Federation
Member of the Board (2005–2016) and Vice Chairman of the
Board (2009–2011, 2013–2014): Confederation of Finnish
Industries (EK)

Independent of the company and its significant shareholders.

Outokumpu Annual report 2019 | Governance

b. 1962, Finnish citizen
M.Sc. (Econ.), MBA (Harvard)
Outokumpu Board member 2012–
Vice Chairman of the Board 2019–
Member of the Remuneration Committee

Work experience
President and CEO: Posti Group Corporation (formerly Itella
Corporation) 2012–2019
President and CEO: Pöyry PLC 2008–2012
Executive Vice President, Strategy, member of the UPM
Executive Team:
UPM-Kymmene Corporation, 2006–2008

Positions of trust
Chairman: Realia Group 2017–
Vice Chairman 2016–2018 and Board member: Service Sector
Employers PALTA 2013–2019
Board member: East Office of Finnish Industries 2012–2019

b. 1968, Finnish citizen
M.Sc. (Marketing), MBA (International Business)
Outokumpu Board member 2016–
Member of the Audit Committee

Work experience
Executive Vice President, Head of Stora Enso Paper, member of
the Group Leadership team 2014–
Senior Vice President, Paper Sales, Printing and Living: Stora
Enso 2013–2014
Senior Vice President, Office Paper Sales, Printing and Reading:
Stora Enso 2012–2013

Positions of trust
Board member: Climate Leadership Coalition 2019–
Vice Chairman (2019–) and board member: EURO-GRAPH asbl
2017–
Board member: Finnish Forest Industries Federation 2015–

Independent of the company and its significant shareholders.

3 / 28

Corporate Governance statementEeva Sipilä

Chairman of the
Audit Committee

Vesa-Pekka
Takala

Member of the
Audit Committee

Pierre Vareille

Member of the
Remuneration
Committee

b. 1973, Finnish citizen
M.Sc. (Econ.), CEFA
Outokumpu Board member 2017–
Chairman of the Audit Committee

b. 1966, Finnish citizen
M.Sc. (Econ.)
Outokumpu Board member 2019–
Member of the Audit Committee

Work experience
Chief Financial Officer and Deputy to the CEO: Metso
Corporation 2016–
Executive Vice President and Chief Financial Officer: Cargotec
Corporation 2008–2016
Senior Vice President, Investor Relations and Communications:
Cargotec Corporation 2005–2008

Independent of the company and its significant shareholders.

Work experience
Deputy Managing Director: Metsäliitto Cooperative 2017–
Chief Financial Officer (CFO): Metsä Group 2010–
Chief Financial Officer (CFO) and Substitute to CEO, Member of
the Group Executive Committee:
Outotec Oyj 2009–2010

Positions of trust
Board member: Metsä Tissue Oy 2018–
Board member: Metsä Spring Oy 2018–
Chairman of the Board: Metsä Group Treasury Oy 2013–
Board member, the Economy and Tax Committee: Finnish
Forest Industries 2017–
Member of the Delegation: the Helsinki School of Economics
Foundation 2014–

Independent of the company and its significant shareholders.

b. 1957, French citizen
Knight of the Legion of Honour in July 2003
M.Sc. (Ecole Centrale Paris), BA (Econ.) (Sorbonne University),
Degree in Controlling and Finance (Institut de Contrôle de
Gestion)
Outokumpu Board member 2018–
Member of the Remuneration Committee

Work experience
Chairman and CEO 2012–2013 and CEO 2013–2016:
Constellium
Chairman of the Board and CEO: FCI SA 2008–2012
Chief Operating Officer: FCI SA 2007–2008

Positions of trust
Chairman of the Board: Société Bic SA 2018–
Board member 2015– and member of the Audit Committee
(2018–2019) and the Nomination and Compensation
Committee 2019-: Verallia
Founder and Co-President: The Vareille Foundation 2014–
Member of the Strategic Committee: CentraleSupelec
2008–2019

Independent of the company and its significant shareholders.

Outokumpu Annual report 2019 | Governance

4 / 28

Corporate Governance statementThe Board assesses the independence of the Board members
and records the outcome in the Board minutes. All members of
the Board of Directors on December 31, 2019 were indepen-
dent of the company and its significant shareholders.

The Board of Directors has established the rules of procedure
that 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:

Julia Woodhouse

Member of the
Audit Committee

Outokumpu shares and share-based rights (parent
and subsidiaries) owned by each director and their
controlled corporations on December 31, 2019.

Board member

Kari Jordan
Heikki Malinen
Kati ter Horst
Eeva Sipilä
Vesa-Pekka Takala
Pierre Vareille
Julia Woodhouse
Total

Number of
shares

122,474
45,459
23,375
24,823
9,225
34,206
9,225
268,787

Operations and appointment of
the Board of Directors
The general objective of the Board of Directors is to direct
Outokumpu’s business and strategies in a manner that
secures a significant and sustained increase in the value of
the company for its shareholders. To this end, the members of
the Board are expected to act as a resource and to offer their
expertise and experience for the benefit of the company. The
tasks and responsibilities of the company’s Board of Directors
are determined on the basis of the Finnish Companies Act as
well as other applicable legislation.

The Board of Directors has general authority to decide and
act in all matters not reserved for other corporate governance
bodies by law or under the provisions of the company’s Articles
of Association. The general task of the Board of Directors is
to organize and oversee the company’s management and
operations and it has the duty at all times to act in the best
interest of the company.

b. 1958, British citizen
BA (hons) History
Outokumpu Board member 2019–
Member of the Audit Committee

Work experience
Director, Global Chassis Purchasing, Ford Motor Company
2016–2018
Director, Global Power Train Components Purchasing, Ford
Motor Company 2012–2016
Director, Ford of Europe Program Purchasing, Ford Motor
Company 2005–2011

Positions of trust
Member of the Advisory Board: Nexcel, a BP/Castrol automotive
technology start-up company 2019–

Independent of the company and its significant shareholders.

Additional information on work experience and positions of trust
to be found on the Company’s website

Outokumpu Annual report 2019 | Governance

With respect to directing the company’s
business and strategies:

• Decide on Outokumpu’s strategy and the long-term targets
of the Outokumpu Group (the “Group”) and monitor their
implementation;

• Decide on annual business plans and monitor their

implementation;

• Decide on annual limits for the Group’s capital expenditure,
monitor related implementation, review performance and
decide on changes;

• Decide on any major and strategically significant investments

and monitor their implementation;

• Decide on any major and strategically important

business acquisitions and divestments and monitor their
implementation;

• Decide on any significant financing arrangements;

• Decide on any other commitments by any of the Group

companies that are out of the ordinary either in terms of
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:

• Nominate and dismiss the CEO and his/her deputy, if any,
monitor his/her performance and to decide on the CEO’s
terms of service, including incentive schemes, on the basis of
a proposal made by the Board’s Remuneration Committee;

• Nominate and dismiss the members of the Outokumpu Lead-
ership Team and to define their areas of responsibility based
on a proposal by the Board’s Remuneration Committee;

5 / 28

Corporate Governance statement• Monitor the adequacy and allocation of the Group’s top

management resources;

• Decide on any significant changes to the Group’s business

organization;

• Decide on the Group’s ethical values and modes of activity;

• Ensure that policies outlining the principles of corporate

governance are in place;

• Ensure that policies outlining the principles of managing the

company’s insider issues are being observed;

• 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.

With respect to the preparation of matters to be
resolved by the General Meetings of Shareholders:

• Establish a dividend policy and issue a proposal on dividend

distribution;

• Make a proposal to the Annual General Meeting concerning the

election of an external auditor and auditing fees;

• Make other proposals to General Meetings of Shareholders.

With respect to financial control and risk management:

• Discuss and approve interim reports, statements, and annual

accounts;

• Monitor significant risks related to the Group’s operations and

the management of such risks;

• Ensure that adequate policies for risk management are in

place;

• Monitor financial position, liquidity, and debt maturity structure;

• Monitor and assess how agreements and other legal acts
between the company and its related parties meet the
requirements of the ordinary course of business and arm’s
length terms;

• Monitor the Group’s control environment;

• Reassess its activities on a regular basis.

Outokumpu Annual report 2019 | Governance

The Board of Directors shall have a quorum when more than
half of its elected 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 7 members was elected at the 2019
Annual General Meeting. The Board of Directors meets at least
five times each year. In 2019, the Board of Directors had 10
meetings, and the average attendance rate was 100%.

Breakdown of individual attendance
at Board meetings

10 meetings in 2019

Attendance

Kari Jordan
Heikki Malinen
Olli Vaartimo until March 27, 2019
Kati ter Horst
Eeva Sipilä
Vesa-Pekka Takala, from March 27, 2019
Pierre Vareille
Julia Woodhouse, from March 27, 2019

10/10
10/10
1/1
10/10
10/10
9/9
10/10
9/9

Diversity principles of the Board of Directors
Diversity of the Board of Directors supports the vision and
long-term objectives of the Group. Outokumpu recognizes the
importance of a diverse Board, taking age, educational and
international background, professional expertise, experience
from relevant industrial sectors as well as a well-balanced
gender representation into account. The Shareholders’ Nomina-
tion Board shall take the Diversity Principles into consideration
when preparing its proposals to the Annual General Meeting
and the progress in achieving set objectives shall be disclosed
annually. The objective of a well-balanced Board structure in
terms of gender representation was achieved in 2019.

The review by the Board of Directors is found on p. 2 in
the section Review by the Board of Directors and Financial
statements.

Composition and operations of
the Board committees
The Board of Directors has set up two permanent committees
consisting of Board members and has confirmed the rules of
procedure for these committees. Both committees report to the
Board of Directors.

Audit Committee
The Audit Committee consists of a minimum of three Board
members. At least one of the Committee members shall have
an appropriate education and special expertise in corporate
finance, accounting or auditing. 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, in greater
detail than is possible for the Board as a whole, to deal with
matters relating to financial reports and statements, the
company’s financial position, auditing work, fees paid to the
auditors, internal controls and compliance matters, the scope
of internal and external audits, the Group’s tax position, the
Group’s financial policies and other procedures for managing
Group risks. In addition, the Audit Committee prepares a

6 / 28

Corporate Governance statementTemporary Working groups
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. No temporary
working groups were set up in 2019.

recommendation to the Board of Directors concerning the
election of an external auditor and auditing fees at a General
Meeting. The Audit Committee met five times during 2019, and
the average attendance rate was 100%.

Breakdown of individual attendance
at Audit Committee meetings

5 meetings in 2019

Attendance

Olli Vaartimo, until March 27, 2019
Eeva Sipilä
Kati ter Horst
Vesa-Pekka Takala, from March 27, 2019
Julia Woodhouse, from March 27, 2019

1/1
5/5
5/5
4/4
4/4

Remuneration Committee
The Remuneration Committee consists of the Chairman of the
Board and a minimum of two additional 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
tasks of the Remuneration Committee are to discuss and
prepare recommendations to the Board regarding new nomina-
tions in and compensation principles applicable to the Group’s
executive and senior management. 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 prepares the remuneration policy and
the remuneration report for the company’s governing bodies.
The Remuneration Committee met 8 times during 2019, and
the average attendance rate was 100%.

Breakdown of individual attendance at
Remuneration Committee meetings

8 meetings in 2019

Kari Jordan
Heikki Malinen
Pierre Vareille

Attendance

8/8
8/8
8/8

Outokumpu Annual report 2019 | Governance

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Corporate Governance statementincorporated these proposals into the notice convening the
Outokumpu 2020 Annual General Meeting of Shareholders.

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 compensation of the members of the Board
of Directors.

The Annual General Meeting has adopted a Charter of the
Shareholders’ Nomination Board, last revised in 2019, which
regulates the nomination and composition, and defines the
tasks and duties of the Nomination Board.

The Nomination Board consists of five members. Four of the
members represent the Company’s four largest shareholders
and the Chairman of the Company’s Board of Directors, in his
capacity as an expert member, acts as the fifth member of the
Nomination Board.

The representatives of the four largest shareholders of the
Company are annually appointed to the Nomination Board. The
largest shareholders of the Company are determined on the
basis of the shareholders’ register of the Company and the
ownership situation at the closing of Nasdaq Helsinki’s last
trading day in August. The Company’s shareholders’ register
only consists of shareholders who are directly registered in
the Finnish book-entry system. Accordingly, to be eligible for
membership in the Nomination Board, a nominee-registered
shareholder needs to register the respective shareholding
directly in the Finnish book-entry system for at least the said
date.

In case a shareholder, who under the Finnish Securities
Markets Act has an obligation to announce changes in its
shareholdings and to sum up its holdings together with the
holdings of certain other parties when doing so (flagging
obligation), presents no later than on August 31 a written
request to that effect to the Chairman of the Company’s Board
of Directors, then the holdings of such shareholder and other
parties shall be summed up for the purposes of determining the
holdings of the largest shareholders.

In case two or more shareholders own an equal number of
shares and, as a consequence, the four largest shareholders
cannot be determined, the status of these shareholders among
the four largest shareholders shall be resolved by drawing lots.

The Chairman of the Board of Directors shall request the four
largest shareholders of the Company each to nominate one
member to the Nomination Board. Should a shareholder wish
not to use its nomination right, the right transfers to the next
largest shareholder who would otherwise not have a nomination
right.

The term of office of the members of the Nomination Board
expires annually when a new Nomination Board has been
appointed. A shareholder may change its representative in the
Nomination Board mid-term, should there be a weighty cause
for such a change.

Decisions of the Nomination Board shall be unanimous. If
unanimity cannot be reached, members of the Nomination
Board shall present their own proposals to the Annual General
Meeting individually or jointly with other members of the
Nomination Board.

Shareholders with the right to appoint representatives to the
Nomination Board in 2019 were Solidium Oy, Varma Mutual
Pension Insurance Company, the Social Insurance Institution
of Finland and Ilmarinen Mutual Pension Insurance Company.
These shareholders nominated the following individuals as
their representatives in the Nomination Board: Antti Mäkinen,
Managing Director of Solidium Oy; Pekka Pajamo, CFO of Varma
Mutual Pension Insurance Company; Jouko Pölönen, President
and CEO of Ilmarinen Mutual Pension Insurance Company and
Tuula Korhonen, Investment Manager of the Finnish Social
Insurance Institution. Antti Mäkinen was elected Chairman
of the Nomination Board, and Kari Jordan, Chairman of the
Outokumpu Board of Directors, served as an expert member.
The Nomination Board convened twice, and the attendance rate
was 100%. The Nomination Board has submitted its proposals
regarding the Board composition and director compensation
to Outokumpu’s Board of Directors, and the Board has

Outokumpu Annual report 2019 | Governance

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Corporate Governance statementExecutive Management
Biographical details of the CEO and the Leadership Team on December 31, 2019

Roeland Baan

President and Chief
Executive Officer

Pia
Aaltonen-Forsell

Chief Financial Officer

Maciej Gwozdz

President – Business
area Europe

b. 1957, Dutch citizen
M.Sc. (Econ.)
President and Chief Executive Officer 2016–
Chairman of the Outokumpu Leadership Team 2016–
Responsibility: Group management; Business area Ferrochrome;
legal, corporate affairs and compliance; safety; health; and
internal audit
Employed by Outokumpu Group since 2016

b. 1974, Finnish citizen
M.Soc.Sc. (Econ.)
Chief Financial Officer 2019–
Member of the Outokumpu Leadership Team 2019–
Responsibility: Financial and business controlling and analysis;
taxation; treasury; metal and risk management; global business
services
Employed by Outokumpu Group since 2019

Work experience
Executive Vice President & CFO: Ahlström-Munksjö 2018
Chief Financial Officer: Munksjö 2015–2017
Chief Financial Officer: Vacon 2013–2015

Positions of trust
Board member (2017–) and Audit Committee Chair (2018–):
Uponor

Work experience
President – Business area Europe: Outokumpu Oyj 2016–2017
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

Positions of trust
Board member: Norsk Hydro ASA 2019–2020
Supervisory Board member: SBM Offshore N.V. 2018–
Board member 2016– and Vice Chairman 2017–: International
Stainless Steel Forum
Board member: World Steel Association 2016–
Board member 2015– and member of the Executive Committee
2018–: Eurofer

b. 1975, Polish citizen
Executive MBA, M.Sc. (Econ.)
President – Business area Europe 2018–
Member of the Outokumpu Leadership Team 2016–
Responsibility: Business area Europe; Global R&D and
Operational Excellence
Employed by Outokumpu Group since 2016

Work experience
Executive Vice President – Operations, Europe: Outokumpu Oyj
2016–2017
Senior Vice President, Steering Europe: ZF Friedrichshafen AG
2016
Vice President, Steering Europe: TRW Automotive/ZF Group
2013–2016

Positions of trust
Board member: Oras Group 2019–

Outokumpu Annual report 2019 | Governance

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Corporate Governance statementOlli-Matti Saksi

President – Americas

Kari Tuutti

President – Business
area Long Products &
Group Sustainability

Liam Bates

Executive Vice
President – Supply Chain
Management, Business
area Europe

b. 1967, Finnish citizen
M.Sc. (Eng.)
President – Americas 2019–
Member of the Outokumpu Leadership Team 2014–
Responsibility: Business area Americas
Employed by Outokumpu Group since 2013

Work experience
Chief Commercial Officer, Outokumpu Oyj 2018–2019
Executive Vice President – Sales, Europe, Outokumpu Oyj
2016–2019
President – EMEA: Outokumpu Oyj 2014–2016

b. 1970, Finnish citizen
M.Sc. (Econ.)
President – Business area Long Products 2014– & Group
Sustainability 2019–
Member of the Outokumpu Leadership Team 2012–
Responsibility: Business area Long Products; Group
Sustainability
Employed by Outokumpu Group since 2011

b. 1971, British citizen
B.Sc. hons Economics, MBA
Executive Vice President – Supply Chain Management, Business
area Europe 2016–
Member of the Outokumpu Leadership Team 2015–
Responsibility: Supply chain management in Business area
Europe
Employed by Outokumpu Group since 1993

Work experience
Executive Vice President – Marketing, Communications and
Sustainability: Outokumpu Oyj 2012–2014
Senior Vice President – Marketing, Communications and IR:
Outokumpu Oyj 2011–2012
Director, Marketing Creation: Nokia 2009–2011

Work experience
President – Quarto Plate: Outokumpu Oyj 2015–2016
Senior Vice President – Quarto Plate Europe: Outokumpu
Stainless AB 2014–2015
Vice President – Mergers & Acquisitions: Outokumpu Oyj
2012–2014

Positions of trust
Board member: Technology Industries of Finland 2019–
Board member: Association of Finnish Steel and Metal
Producers 2019–

Outokumpu Annual report 2019 | Governance

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Corporate Governance statementJan Hofmann

Executive Vice
President – Business
Transformation & IT

Reeta
Kaukiainen

Executive Vice President
– Communications and
Investor Relations

Johann Steiner

Executive Vice President
– Human Resources
and Organization
Development

b. 1979, German citizen
M.Sc. (Econ.)
Executive Vice President – Business Transformation & IT 2016–
Member of the Outokumpu Leadership Team 2015–
Responsibility: Business transformation and IT
Employed by Outokumpu Group since 2012

Work experience
President – APAC: Outokumpu Oyj 2015–2016
Chief Financial Officer – APAC: Outokumpu Oyj 2015
Senior Vice President – Group Strategy and Business
Excellence: Outokumpu Oyj 2012–2014

b. 1964, Finnish citizen
M.Sc. (Soc.)
Executive Vice President – Communications and Investor
Relations 2017–
Member of the Outokumpu Leadership Team 2017–
Responsibility: Communications, investor relations and
marketing
Employed by Outokumpu Group since 2017

Work experience
Marketing & Communications Country Lead: Accenture Oy
2016–2017
Senior Vice President, Communications: Metsä Group
2012–2015
Vice President, Communications and Investor Relations: Tieto
Corporation 2007–2012

b. 1966, German citizen
M.Sc. (Econ.)
Executive Vice President – Human Resources and Organization
Development 2016–
Member of the Outokumpu Leadership Team 2013–
Responsibility: Human resources and organization development
Employed by Outokumpu Group since 2013

Work experience
Executive Vice President – Human Resources, IT, Health and
Safety: Outokumpu 2013–2016
Executive Vice President – Human Resources and Health,
Safety and Sustainability: Outokumpu Oyj 2013
Group HR Director: SAG Group GmbH 2012

Outokumpu Annual report 2019 | Governance

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Additional information on work experience and positions of trust
to be found on the Company’s website

Corporate Governance statementOutokumpu shares and share-based rights
(parent or subsidiaries) owned by the CEO
and Leadership Team members and his/her
controlled corporations on December 31, 2019

Member of the Leadership Team

Roeland Baan
Pia Aaltonen-Forsell
Liam Bates
Maciej Gwozdz
Jan Hofmann
Reeta Kaukiainen
Olli-Matti Saksi
Johann Steiner
Kari Tuutti
Total

Number of
shares

1,237,567
0
130,295
189,313
132,262
0
285,856
143,475
166,579
2,285,347

More information on compensation can be found on p. 22 in
this Governance section and in the separate Remuneration
statement.

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 the 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. Until February 28, 2019, the Group’s Chief Financial Officer
acted as deputy to the CEO. Currently, no deputy to the CEO
has been appointed.

Leadership Team
The Outokumpu Leadership Team assists the CEO in the overall
management of Outokumpu’s business. The members of the
team have extensive authorities in their individual areas of
responsibility, and their duty is to develop the Group’s opera-
tions in line with the targets set by the Board of Directors and
the CEO. At the end of 2019, the members of the Outokumpu
Leadership Team held the following positions:

• President and Chief Executive Officer (group management,
business area ferrochrome, legal, corporate affairs and
compliance, safety, health and; internal audit)

• Executive Vice President – Chief Financial Officer (financial
and business controlling and analysis; taxation; treasury;
metal and risk management; global business services)

• President – Europe (business area Europe; global R&D and

operational excellence)

• President – Americas (business area Americas)

• President – Long Products (business area Long Products;

group sustainability)

• Executive Vice President – Supply Chain Management, Europe

(supply chain management in business area Europe)

• Executive Vice President – Business Transformation and IT

(business transformation and IT)

• Executive Vice President – Communications and Investor

Relations (communications, investor relations and marketing)

• Executive Vice President – Human Resources and Organi-
zation Development (human resources and organization
development)

The Leadership Team typically meets at least once a month.

Outokumpu Annual report 2019 | Governance

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Corporate Governance statementInternal control procedures and the main features of risk management systems

Internal control and risk management
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 appropriately 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
deployed 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.

The Outokumpu performance management process is a key
management activity and an important factor in enabling an
efficient control environment. In all sections of the Group’s
operations, planning activities and the setting of both opera-
tional and financial targets are executed in accordance with
Outokumpu’s overall business targets. Management follow-up
of related achievements is carried out through regular manage-
ment reporting routines and in performance review meetings.

In 2019, Outokumpu has taken specific measures to
improve controls in financial reporting and initiated a control
environment enhancement program to further develop and
improve internal controls, financial reporting, compliance and
operational processes in the Group.

Risk management
process in Outokumpu

Enterprise-wide risks

s
k
s
i
r

r
o
f

y
t
i
l
i

b
s
n
o
p
s
e
R

Top-down
Policies, guidelines
and requirements

Bottom-up
Identification,
evaluation, mitigation
and reporting

Risk
reporting
(external/
internal)

Regular risk
updates

Risk monitoring
and control

Identification

Evaluation and
prioritization

Mitigation

Leadership Team

Business areas and
Group functions

Operations

Risk management
Outokumpu operates in accordance with the risk management
policy approved by the company’s Board of Directors. The policy
defines the objectives, approaches, and areas of responsibility
in the Group’s risk management activities. In addition to
supporting Outokumpu’s strategy, the aim of risk management
is identifying, evaluating, and mitigating risks from the perspec-
tive 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, led by the
CFO, is the governing body for risk management in Outokumpu.
The Business areas and Group functions are responsible for
managing risks connected with their own operations. The Risk
Management Steering Group and the Board of Directors review
both key risks and actions taken to manage these risks on
a regular basis. The Treasury and Risk Management function
supports the implementation of Outokumpu’s risk management

policy, facilitates and coordinates risk management activities,
and prepares quarterly risk reports for management, the Board
Audit Committee and Auditors.

Risk management process

Outokumpu has defined risk as anything that could have an
adverse impact on achieving the Group’s objectives. Risks
can, therefore, be threats, uncertainties, or lost opportunities
connected with current or future operations. Outokumpu’s
appetite for risk and risk tolerance are defined regularly in
relation to earnings, cash flows and capital structure. The
risk management process is an integral part of the overall
management processes and is divided into four stages: 1) risk
identification; 2) evaluation and prioritization; 3) mitigation
and controls and 4) reporting. The Risk management process
in Outokumpu is two-fold: a top-down approach to manage the
Group’s key risks and a bottom-up approach focusing on the
operational level.

Within Outokumpu, the risk management process is monitored
and controlled at different organizational levels. Regular risk
updates are carried out to capture relevant information. The
monitoring 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 relevant parties such as shareholders

Outokumpu Annual report 2019 | Governance

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Corporate Governance statement

and other stakeholders. Risk mitigation actions are defined
according to the risk identification and the impact/likelihood
assessments.

Focus areas

Internal controls for financial reporting
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 and
principles.

Accounting Principles (OAP) are Outokumpu’s application
guidance on IFRS. The aim of the OAP and other financial
reporting policies and instructions 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. In
2019, Outokumpu implemented the new IFRS 16 Leases stan-
dard from the beginning of the financial year. The implemen-
tation included an introduction of an IT supported solution to
collect, value and report IFRS 16 relevant financial information
on Group’s lease contracts. In 2018, Outokumpu implemented
the IFRS 15 and IFRS 9 standards, as well as changes to the
IFRS 2 standard. In 2020, Outokumpu will implement a solution
to enable the reporting of financial statements in European
Single Electronic Format (ESEF).

Financial statements of 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 the regulations regarding the financial reporting
published by the Financial Supervisory Authority (FIN-FSA)
Nasdaq Helsinki and ESMA.

Identification and assessment of risks
related to financial reporting

Risks related to the Group’s financial reporting are managed
according to Outokumpu’s risk management process and
classified as operational risks which can arise as consequences
of inadequate or failed internal processes, employee actions,
systems, or other events such as misconduct or crime. The
risks related to financial reporting are identified and typically
assessed in risk workshops, which are arranged on a regular
basis. All major risks are reported to and evaluated by the Audit
Committee on a regular basis.

Control activities

Financial reporting is prepared in accordance with International
Financial Reporting Standards (IFRS). The Outokumpu

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 in 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 such
a way that conflicting divisions of work would 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 organiza-
tion. The most important accounting items in Outokumpu are
the valuation and reporting of inventories and other items of
working capital as well as other items requiring management
judgement. Moreover, in difficult market situations, asset
impairment calculations and related sensitivity analyses are
equally important. These items are carefully monitored and
controlled, both within business areas and at the Group level,
on a regular basis.

Information technology and solutions play an important role
in ensuring appropriate structures for the Group’s internal
controls. The Group’s consolidation system provides timely and
uniform financial and management reporting from the Group
entities and an effective closing process within the whole
Group. Outokumpu is also running a business transformation
program to develop and improve business capabilities and to
renew parts of its fragmented system environment. This will be
achieved mainly by harmonizing and improving the Group’s core
business processes and implementing supporting IT systems
(e.g. ERP). First rollouts of the new ERP together with other
related IT systems took place during 2019. As part of the roll-
outs, internal controls in the affected business processes were
implemented, as well, with emphasis on system-based controls.

Outokumpu Annual report 2019 | Governance

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Corporate Governance statementOutokumpu has centralized majority of its accounting and
financial reporting in its global business service centers, which
allows further development and harmonization opportunities
for internal control activities. The on-going project addressing
the quality and consistency of the controls around the financial
closing process will be implemented in 2020.

Information and communication

Group-wide policies and principles are available to all Outo-
kumpu employees. Instructions relating to financial reporting
are communicated to all the parties involved. The main
communication channels employed are Outokumpu’s intranet,
other easily accessible databases, and email. Face-to-face
controller meetings are also organized. Finance and Business
Services leadership team meetings are organized regularly to
share information and discuss issues of topical interest to the
Group.

Furthermore, Outokumpu has established steering groups (e.g.
for risk management and compliance topics) in which financial
reporting and internal control issues can be discussed and
reviewed. These groups typically consist of senior members of
management and substance experts. The aim of these bodies
is to ensure that common financial processes and reporting
practices are followed throughout the Group and that effective
internal controls relating to financial reporting are established.

Follow-up

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. Through its activities, the Internal Audit func-
tion monitors that an appropriate control environment exists
across the Group. Risk management, compliance function, and
external auditors are also engaged in the follow-up of 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. As a basic principle, large units are visited at
least once per year, medium size units once every 2 to 3 years,
smaller units once every 3 to 4 years and sales offices once
every 5 years.

With a strong commitment to integrity and accountability,
Internal Audit provides value to governing bodies and senior
management as an objective and direct source of information,
and independent advice. Internal Audit also monitors adherence
to Group principles, policies, and instructions, and investigates
fraudulent and noncompliant 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 2019, Internal Audit performed 15 scheduled operational
audits including the Outokumpu Global Business Services
Americas located in Mexico, the global Business Support
Function Raw Material Procurement, and audits of the
Outokumpu subsidiaries in India and Australia. The results
of all the audits carried out including their risk appraisals are
reported and distributed in writing. In view of the Outokumpu
Code of Conduct and the Corporate Responsibility Policy, we
did not identify any issues of material risk for the Outokumpu
Group. The 2020 internal audit plan covers all major production
units, selected Coil Service Centers and Sales Offices and some
Corporate and Business Support Functions.

To further strengthen its compliance culture, Outokumpu
implemented at the end of year 2019 SpeakUp, an externally

operated communication channel, that offers the option to
report serious misconduct confidentially and if desired anony-
mously. SpeakUp replaced the previously used whistleblowing
Helpline. SpeakUp is available both internally on company
intranet and for external stakeholders via the company
web-page. Sixteen unscheduled investigations of potential
misconduct were performed in 2019, thereof six cases reported
via the Helpline and ten recognized through other channels.
Internal Audit observed a small number of cases involving
inappropriate behavior, but none of these cases was financially
material. Various attempts of fraud through faked e-mails
received from external sources resulted in no harm to the
company.

Compliance
Outokumpu is strongly committed to the highest ethical
standards and observes the laws and other regulations of the
countries in which it operates, 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 Outo-
kumpu employees live up to Outokumpu’s ethical standards.
Outokumpu’s Legal, Corporate Affairs and Compliance function
is responsible for managing and continuously developing
Outokumpu’s compliance program. Outokumpu’s compliance
program is described in more detail as part of Outokumpu &
society at www.outokumpu.com. The Legal, Corporate Affairs,
and Compliance function reports to the CEO and also reports
to the Outokumpu Leadership Team and directly to the Board
Audit Committee on compliance-related matters. Compliance-re-
lated matters are also regularly handled in the Compliance
Steering Group, consisting of the CEO, CFO, Head of HR and
Organization Development, Corporate General Counsel and
Group Compliance Officer. The Compliance Steering Group met
four times in 2019.

Insider management
The company’s Insider Rules and the insider laws and
regulations, including the EU Market Abuse Regulation, Finnish

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Corporate Governance statementSecurities Act and the Guidelines for Insiders issued by Nasdaq
Helsinki, constitute the primary legal framework for the insider
issues relevant to the Group and its employees.

the applicable insider regulations. The publication of inside
information shall be made in accordance with the company’s
Disclosure Policy.

Furthermore, the Regulation on EU Energy Market Integrity and
Transparency sets forth similar requirements as the Market
Abuse Regulation on dealing with inside information relating to
wholesale energy products. As the company is a participant in
the wholesale energy market, the company’s Insider Rules apply
to such energy-related inside information, as applicable.

The persons discharging managerial responsibilities in
Outokumpu, in the meaning of the Market Abuse Regulation,
include members of the company’s Board of Directors, the CEO
and other members of the Outokumpu Leadership Team (“the
Management”). The Management together with the persons or
companies closely associated with a member of the Manage-
ment constitutes the so-called “Notifying Persons”. Outokumpu
maintains a non-public list of the Notifying Persons.

Outokumpu applies a restricted period of thirty (30) calendar
days before the announcement, as well the day of the
announcement, of an interim financial report, interim financial
statement and a year-end report (the “Closed Window”). During
this period, the Management, the persons subject to trading
restrictions and any legally incompetent persons under their
custody shall not conduct any transactions, on his/her own
account or for the account of a third party, directly or indirectly,
relating to the company’s shares or debt instruments, or deriv-
atives or other financial instruments linked thereto. 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 inside 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.

The company has the obligation to inform the public as soon
as possible of inside information that directly concerns the
company, unless the company has decided that the publication
of the inside information shall be delayed, in accordance with

Outokumpu Annual report 2019 | Governance

Outokumpu’s Head of Legal, Corporate Affairs and Compliance
function is responsible for the coordination and supervision of
insider topics.

Related Party Transactions
The Second Shareholders’ Rights Directive (EU), the
International Accounting Standards IAS 24, the Companies Act
and the Securities Markets Act as well as the Finnish Corporate
Governance Code constitute the primary legal framework in the
Related Party Transaction principles relevant to the Outokumpu
Group and its related parties.

Definition of related parties and maintenance
of the list of related parties

Outokumpu Oyj’s related parties are determined in accordance
with the International Accounting Standards (IAS 24) and they
include, i.a, the Group subsidiaries, members of the Parent
Company’s Board of Directors and the Leadership Team as well
as their related persons and companies. The Company’s Legal,
Corporate Affairs and Compliance function maintains a list of
Outokumpu Oyj’s related parties, which is updated on a regular
basis.

Evaluating Related Party Transactions

A related party transaction is any transaction which is
conducted between the Outokumpu Group and a related party
of Outokumpu Oyj. Transactions between a company and its
related parties are allowed, provided that they promote the
purpose and interests of the company and are commercially
justified.

Any transactions that are not conducted in Outokumpu Group’s
ordinary course of business or are not implemented under arms-
length terms require specific approval according to Outokumpu
Group’s Approval Policy. Any such transactions are escalated
for review on Group executive level and cross-checked against

the list of related parties. Any related party transactions that
are not conducted in Outokumpu Group’s ordinary course of
business will require a decision by Outokumpu Oyj’s Board of
Directors and a transaction which would be deemed material
for Outokumpu Oyj’s shareholders will also have to be publicly
disclosed. The decision making of the Board of Directors also
takes provisions on conflicts of interest into account as board
members cannot participate in deciding a matter concerning
themselves. Board members also have a conflict of interest and
cannot participate in decisions concerning a transaction with
one of their related parties if that transaction is not part of the
company’s ordinary course of business or is not implemented
under arms-length terms.

Monitoring and Reporting Related Party Transactions

Outokumpu Oyj’s Audit Committee monitors the evaluation
process. Related party transactions are reported to the Audit
Committee on a regular basis. Outokumpu Oyj’s finance and
control functions monitor related party transactions regularly
in arrears as a part of the Company’s reporting and control
procedures. Information on transactions concluded between
the Company and its related parties is disclosed annually in the
Company’s consolidated financial statement.

Auditors
Under its Articles of Association, the company shall have a
minimum of one and a maximum of two auditors. The auditors
must be Authorized Public Accountants (KHT) or accounting
firms whose mainly responsible auditors are Authorized Public
Accountants (KHT). The auditors shall be independent of the
company.

The Board of Directors has the duty to make a proposal to
the Annual General Meeting as to the election and fees of
the auditor. 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

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Corporate Governance statementbe 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.

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 PricewaterhouseCoopers Oy, and
the responsible auditor is Janne Rajalahti, Authorized Public
Accountant. PricewaterhouseCoopers Oy is also responsible for
overseeing and coordinating the auditing of all Group compa-
nies. PricewaterhouseCoopers Oy was elected as the Group
Auditor in the Annual General Meeting held on March 27, 2019
and has been the Auditor of Outokumpu for three consecutive
terms. Both Outokumpu and PricewaterhouseCoopers Oy
emphasize the requirement that the auditor be independent of
the company being audited. The PwC Network Independence
policy is based on the International Ethics Standards Board
for Accountants’ (IESBA) Code of Ethics for Professional
Accountants.

Outokumpu’s Board Audit Committee continuously monitored
non-audit services purchased by the Group from Pricewater-
houseCoopers Oy at a global level. In 2019, auditors were paid
fees totaling EUR 3.1 million, of which non-auditing services
accounted for EUR 0.7 million. n

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Corporate Governance statementKey risks

Strategic and
business risks
Risks related to Outokumpu’s
business priorities and targets
Outokumpu’s vision remains the same; to be the best value
creator in stainless steel by 2020 through customer orientation
and efficiency. Outokumpu’s strategy defines six must-win
battles in order to reach the vision. These must win battles
have a direct link to customer orientation and efficiency. As of
January 2020, our must-win battles are:

• Safety – A fully implemented, standardized and disciplined

approach to safety that correlates with improved quality and
operational efficiency, leading to a top decile position in the
industry.

• Sustainability – Secure Outokumpu’s position as the sustain-
ability leader in the stainless industry to fight climate change
and to create a competitive advantage.

• Operational excellence – Implementation of Outokumpu

Production System delivering continuous improvement and
step change in Quality, Supply Chain and Manufacturing.

• Commercial excellence – Clear segment-driven commercial
strategy to drive margin growth. Profitability driven product
strategy to match market demand and optimal mix. Lay the
foundation for future growth and customer loyalty by creating
an industry leading customer experience.

• Americas – The single biggest profitability lever for Outo-

kumpu, with significant improvement potential in both cost
and market position.

• Digital transformation – New digital business and manufac-

turing platforms established and a major step-change towards
data driven management.

Outokumpu’s current expectations regarding the outcome of
the abovementioned must-win battles are based on number

of assumptions that are are subject to various risks and
uncertainties.

Stainless steel industry and markets
Outokumpu believes that the long-term prospects for stainless
steel demand remain firmly positive. Global megatrends
including population growth, urbanization, increasing mobility
and climate change will drive the need for sustainable materials.
There is a possibility that such megatrends will realize more
slowly than expected and that the occurrence of natural
catastrophes or other adverse changes in the global political
and economic environment can impact the stainless steel
industry, thereby reducing growth prospects in Outokumpu’s
core markets. Nonetheless, demand in Outokumpu’s main
regions and customer segments is expected to be robust and
will continue to support long-term growth.

The risk of global overcapacity in stainless steel has the
potential to further disrupt industry economics. The commis-
sioning of new export-driven capacity in Asia, particularly in
China and Indonesia, has created a regional demand imbalance.
This results in a risk of adverse trade flows to Outokumpu’s core
markets, which when further coupled with trade protectionist
measures, can distort the stainless steel market. Given the
global nature of its operations Outokumpu has significant
exposure to the effects of trade actions and barriers which
create a risk to market access, continued growth and stable
profitability.

The implementation of additional tariffs on imports of
aluminium and steel under Section 232 of the 1962 Trade
Expansion Act by the United States of America originally in
2018 has disrupted both the US and the European stainless
steel markets. The European Commission’s imposition of
provisional safeguard measures on steel imports, consisting
of a tariff-rate quota system, first in July, 2018 has only been
partially successful in mitigating the risks. Definitive measures
became effective in February 2019, which were expected to
support the restoration of traditional market supply levels
and reduce the profitability risk. These measures were further

enforced in October as European market continued to suffer
of Asian imports. While the markets remained unbalanced and
difficult in end of 2019, Outokumpu expects that the market
should get more balanced as import quotas get filled and earlier
announced anti-dumping and countervailing duties investiga-
tions against China, Indonesia and Taiwan by the European
Commission should ease the market pressure. Outokumpu’s
current expectations regarding the market trends are based on
a number of assumptions and expectations that are subject to
various risks and uncertainties.

With increasing global demand for stainless steel, Outokumpu
expects global demand for ferrochrome, a key ingredient in
stainless steel production, to increase correspondingly. From
its cost competitive chromite mine in Kemi and ferrochrome
production facilities in Tornio, Outokumpu supplies a significant
amount of ferrochrome to its own stainless steel operations. As
a result, Outokumpu is well placed to maintain high utilization
rates and support the group’s growth and profitability. Risks
resulting from its production of ferrochrome are typical
operational risks and uncertainties that may cause significant
financial impacts due to the costs for power and coke, produc-
tion downtimes and business interruptions. Risks associated
with its external sales of chromite and ferrochrome relate to
those from market price of chromium and foreign exchange
rates, particularly the US dollar.

Raw materials, supplies, and energy
Outokumpu is exposed to price changes of alloy metals in
multiple ways. The underlying exposure consists of price fixed
purchase contracts; price fixed sales contracts and physical
stocks of priced inventories of nickel, molybdenum, carbon
steel and stainless steel scrap as well as various grades and
forms of stainless steel. Price changes of alloy metals lead to
impacts on earnings, cash flows, and balance sheet structure.
Pricing systems are applied in many markets and may cause
volatility in demand of stainless steel. A possible adverse
consequence of volatility in demand is the negative impact
on capacity utilization ratios. In addition, the monetary value

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Corporate Governance statementof environmental, chemical, and product safety risks, through
emission trading, and by maintaining a proactive dialog
with stakeholders involved in the framing of environmental
legislation.

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 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.

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. 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. In 2019, the proportion of fixed price sales increased
in Europe compared to alloy surcharge based sales, also
impacting Outokumpu’s ability to pass on costs of raw materials
to customers. This can have negative impacts on Outokumpu’s
profitability. Financial risks related to raw materials and energy
prices are described in note 19 to the consolidated financial
statements.

In addition, the production of stainless steel products and
ferrochrome requires significant amounts of energy, particularly
electricity, natural gas, and to a lesser extent, propane, and fuel
oil. Energy costs represent a substantial portion of Outokum-
pu’s total cost of sales and energy prices have historically
varied, and may continue to vary significantly, as a result of
political and economic factors beyond Outokumpu’s control.

Legal risks
In connection with its business activities Outokumpu may
become subject to various legal claims and litigations. In

addition to legal claims resulting from Outokumpu’s daily
business, Outokumpu is also exposed to typical litigation
risks in connection with mergers and acquisitions. For further
information on existing major litigations, please see note 30 to
the financial statements.

Outokumpu’s products are used in a wide range of applications.
For instance, certain products are used in safety-critical
applications in the oil, gas, chemical, and petrochemical
industries. In addition, a part of Outokumpu’s products are used
in the automotive and aviation industries, where key customers
require extensive third-party certification regarding the products
purchased. Therefore, Outokumpu is exposed to product
quality related liability claims. Such claims may result in severe
damages, impacting Outokumpu’s profitability. Outokumpu
manages and mitigates its legal risks by running internal
processes as well as governance and compliance programs and
policies, some of which extending beyond the local minimum
legal requirements.

Risks related to environmental regulation
The European Union’s unilateral Emission Trading System
(ETS) forms a risk for Outokumpu, indirectly in electricity
prices and directly in emission allowance costs. Outokumpu’s
European units cannot transfer these costs to product prices
due to global competition. However, Outokumpu has secured
part of its future electricity supply – and the associated
prices – through long-term contracts. Furthermore, Outokumpu
is participating in two nuclear power projects in Finland.

Outokumpu operates in accordance with the prevailing laws
and regulations, including environmental, chemical, and product
safety legislation. The environmental, chemical and consumer
safety legislation are the fastest developing regulation in EU.
Some non-fact based changes in this legislation, as proposed
in the EU, could have long-term impacts on Outokumpu’s
operations. Strict compliance with all of the relevant envi-
ronmental regulations causes increased costs and impacts
Outokumpu’s competitive position. Outokumpu mitigates these
impacts through the systematic identification and management

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Key risksOperational risks
Major disasters and business interruptions
Outokumpu’s production processes are dependent on the
continuous operation of critical production equipment, including
smelters, 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,
release of harmful substances 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 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 evaluating
its production facilities and production processes from a
risk management perspective and also by arranging regular
fire-safety and loss prevention surveys. Insurance covers a large
proportion of the associated risks.

Environmental accidents
The main environmental accident risks at production sites
relate to use of acids, hazardous waste, gases, landfill activities,
gradually developing pollution and long-term contamination

of soil or groundwater or effects of hazardous pollutants.
Outokumpu also has environmental liabilities and risks at
closed mines and sites. Certified environmental management
systems are in place at all production sites to manage the
environmental accident risks in a systematic way, including
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
Outokumpu has (through a holding company Voimaosakeyhtiö
SF) 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 expects to receive the construction
license by the end of 2021. Accordingly, Fennovoima plans
that commercial operation of the plant would begin in
2028. The project involves a number of potential risks for
Outokumpu, including project completion risks such as new
delays, cancellations, non-completion, technical risks, possible
tightening nuclear safety regulations in the future, and financial
risks such as budget overruns, non-competitive cost of power,
financing risks, cost and availability of the financing, fair value
of shareholding, political and public acceptance risks, and
environmental risks. When operational, shareholders will be
liable for their pro rata share of the company’s fixed energy
procurement costs and the right to procure their pro rata share
of the energy produced by the company at cost (the “Mankala
principle”). Considering the risks involved in the project, there
can be no assurance that one or more of the project risks will
not occur or that Fennovoima Oy will have adequate financing
for the project in the event of any future defaults by the direct
or indirect shareholders in Fennovoima Oy.

Outokumpu also faces project risks related to other ongoing
investments in the Kemi mine expansion and the digital

transformation project Chorus, which focuses on harmonizing
business processes, including the ERP renewal. These and
other ongoing investments and projects include similar project
risks which Outokumpu manages through its project manage-
ment process.

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 complex, 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
leaks 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, solutions and processes are efficient and reliable,
and also aims to ensure secure information management
and continuity at all company locations to avoid data loss
or situations in which business critical information becomes
unavailable. Moreover, Outokumpu has improved 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.
Outokumpu continued the business transformation program to
harmonize its enterprise level data, processes, and IT systems
as well as to develop or enhance business capabilities.

Safety and personnel
Outokumpu has set its safety vision and principles on high level.
Safety takes priority over all other activities. All Outokumpu
employees are responsible for their own safety, but also for the
safety of their colleagues. Outokumpu strongly believes that
all injuries can be prevented and the target is zero accidents.

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Key risksFurthermore, as a part of its vision for 2020, Outokumpu has
introduced must-win battles to reach its short-term targets,
safety being one of them, aiming at fully implemented, a
standardized and disciplined approach to safety that correlates
with improved quality and operational efficiency, leading to a
top decile position in the industry.

Despite the ongoing efforts and actions, serious incident or
fatal accident may occur during working time. Outokumpu
considers the risk of fatalities and serious injuries having a
significant impact on its safety culture and its reputation as an
employer. Moreover, Outokumpu believes that great focus and
the systematic development of safety performance and safety
culture will have a positive impact on operational performance
and discipline. Improving the safety performance through
driving the full implementation of our company standards
and processes, development of our SafeStart behavioural
programme at all sites and learning from good and best
practices have been Outokumpu’s main focus areas in 2019.

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 Outo-
kumpu’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. Outokumpu has imple-
mented 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 leaders.

Compliance, crime, and reputational harm
Outokumpu operates globally and its activities span multiple
jurisdictions and complex regulatory frameworks at a time of
increased enforcement activity and enforcement initiatives
globally in areas such as competition law, anti-corruption and
bribery, anti-money laundering, data protection (including EU
GDPR compliance) and trade restrictions, including sanctions.
Outokumpu’s governance and compliance processes may not
prevent breaches of law or governance standards. Outokumpu
also faces the risk of fraud by its employees, losses of critical
research and development data, misconduct as well as
violations 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 the applicable laws and
other standards could subject it to fines, loss of operating
licenses, loss of business, loss of management time and
company focus, breach of its 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 statements, policies, instructions and guidelines
and, as a result, may incur compliance costs (including fines)
and cause reputational damage. Inadequate internal controls
could also cause investors and other third parties to lose
confidence in Outokumpu’s reported financial information and
risk manage¬ment processes, which could have a material
adverse effect on Outokumpu’s business, financial condition
and results of operations. Outokumpu’s compliance program
aims to prevent and mitigate compliance risks from occurring
and is further developed continuously. The compliance risk
assessment forms the basis for the compliance action plan for
the forthcoming year.

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 euro, the Swedish

krona and the US dollar;

• Changes in levels of credit margins applied for Outokumpu;

• Risk related to prices of equities and fixed-income securities

invested e.g. under defined benefit pension plans;

• 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;

• Changes in fair value of equity investments in energy

production.

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

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Key risksSafety is one of the cornerstones in Outokumpu’s strategy and
ensuring the safety and good health of our employees is the
first priority. In addition, Outokumpu takes all labor practice
violations and related threats as well as its full transparency
and compliance in Environment, Social and Governance (ESG)
topics seriously. n

Corporate responsibility
risks and stakeholders’
materiality analysis

Outokumpu has also identified its exposures in sustainability
and corporate responsibility. Outokumpu’s Corporate Respon-
sibility Policy describes the main principles of the sustainable
development of economic, environmental, and social aspects
in the Group. The Group’s sustainability strategy was renewed
in 2019. It concentrates on three pillars: climate, environment
and society.

Corporate Responsibility risks are based on the previous materi-
ality analysis, which is based on an extensive data tool study of
the emerging trends in the steel industry and compared these
trends with the material topics of Outokumpu’s main peers,
customers and suppliers. The company has regular dialog with
stakeholders (customers, suppliers, investors, employees, NGOs,
authorities, communities, associations) and also assesses
the corporate responsibility risks through Outokumpu’s risk
management process. In the materiality analysis, the material
issues were not changed for 2019 and the five focus sustain-
ability issues for business were Occupational health, safety and
well-being; Responsible business practices; Energy manage-
ment; Material efficiency; and Customer experience. However,
there was increased focus on climate change related risks,
including impacts to Outokumpu Group and on contributing to
low carbon society by improving the energy management and
material efficiency.

Additional information on the materiality analysis is available on
Outokumpu’s website. These main topics from the materiality
analysis are also partially considered as Outokum¬pu’s key
risks, which are explained above within several risk scenarios,
including: risks related to environmental regulation; environ-
mental accident risks; raw materials, supplies and electricity;
compliance; and reputational harm.

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Key risksRemuneration

Board of Directors
As confirmed at Outokumpu’s Annual General Meeting 2019,
the annual remuneration for the members of the Board is
EUR 160,000 for the Chairman of the Outokumpu’s Board of
Directors, EUR 90,000 for the Vice Chairman and EUR 70,000
for the other members of the Board. The Annual General
Meeting 2019 decided that 40% of the annual remuneration
will be paid in the Company’s shares to be purchased from the
market at a price formed in public trading and in accordance
with the applicable insider regulations.

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 the members of the Board of
Directors are paid a meeting fee of EUR 600 per meeting for
each member of the Board of Directors and EUR 1,200 per
meeting when travelling to a meeting held outside the Board
member’s country of residence.

CEO

Compensation and benefits

The President and CEO’s remuneration consists of base salary,
taxable benefits (housing benefit, car benefit, phone benefit,
pension, medical and life insurance), share-based incentive and
annual short-term incentive determined by the Board based on
the company’s key targets.

The annual target incentive opportunity for the CEO under the
short-term incentive was 60% and the maximum incentive
opportunity 120% of the CEO’s annual base salary. The
short-term incentive for 2019 was based on the achievement of
net debt and group projects.

Pension benefits and terms of service

The CEO has the right to retire at the age of 63. He participates
in the Finnish TyEL pension system in addition to which he is
included in a defined contribution pension plan with an annual
insurance premium of 25% of his annual earnings, excluding
share rewards.

Outokumpu Annual report 2019 | Governance

The service contract of the CEO is valid until further notice. The
CEO is not entitled to a specific severance payment, and the
notice period is three months for both parties.

Other Leadership Team members

Compensation and benefits

The performance-based short-term incentive payable to the
members of the Leadership Team based on the targets set
for 2019 was based on the achievement of EBITDA, net debt,
safety, and individual objectives. The maximum payment varied
between 50% and 80% of the annual base salary in line with
local market practices for similar positions.

The Leadership Team members are also included in the
share-based incentive plans for Outokumpu management. No
separate remuneration is paid to the Group CEO or members
of the Leadership Team for membership of the Group’s internal
governing bodies.

Pension benefits and terms of service

For the members of the Leadership Team, the notice period
is six months for the employee and either twelve months for
the company, without additional severance compensation and
with the possibility to stop salary payment during the notice
period if the executive finds other employment before the
end of the notice period, or 18 months’ base salary at the
maximum, including salary for the notice period and severance
compensation.

The retirement age for the members of the Leadership Team is
63 or 65 years, depending on the country of employment and
date of appointment 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

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.

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.

Other terms

According to the share ownership plan of the Outokumpu Group,
the members of the Leadership Team are obliged to own Outo-
kumpu shares received under share-based incentive programs
to the value of their annual gross base salary. Half (i.e. 50%) of
the net shares received from the share-based programs must
be used to fulfil the above ownership requirement.

Guarantees and business relationships
Outokumpu did not provide any guarantees or other similar
commitments on behalf of members of its Board of Directors in
2019.

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. n

23 / 28

RemunerationFees, salaries and benefits paid

2019

Board of Directors

Chairman of the Board, Jordan
Vice Chairman of the Board, Malinen
Vice Chairman of the Board, Vaartimo
Board member, ter Horst
Board member, Sipilä
Board member, Takala
Board member, Vareille
Board member, Woodhouse

CEO, Baan
Deputy to the CEO, de la Camp (until 28.2.2019)
Other Leadership Team Members

2018

Board of Directors

Chairman of the Board, Jordan
Chairman of the Board, Ollila
Vice Chairman of the Board, Vaartimo
Board member, Akermann
Board member, Gualdoni
Board member, ter Horst
Board member, Malinen
Board member, Sipilä
Board member, Vareille

CEO, Baan
Deputy to the CEO, de la Camp
Other Leadership Team Members

Salaries and fees
with employee
benefits 1)

Performance/
project-related
bonuses 2)

Annual
remuneration

Share-based
incentives 3)

12,600
12,600
3,000
10,200
9,000
7,200
20,400
10,800
1,074,495
79,292
3,129,923

160,000
90,000
0
70,000
90,000
70,000
70,000
70,000

347,782
162,657
1,167,006

1,112,203
141,700
1,504,688

Salaries and fees
with employee
benefits 1)

Performance/
project-related
bonuses 2)

Annual
remuneration

Share-based
incentives 3)

4,200
2,400
6,600
4,800
2,400
6,600
6,600
5,400
7,200
1,075,835
469,111
3,380,035

160,000

90,000

70,000
70,000
70,000
70,000

700,997
249,044
1,595,081

929,081
211,861
2,041,259

1) For Board members, meeting fees. For Leadership Team members, salaries and employee benefits.

2) Actual Short Term Incentive payout of previous year.

3) Gross, including the value of the shares on the date of delivery and taxes.

Total

172,600
102,600
3,000
80,200
99,000
77,200
90,400
80,800
2,534,480
420,911
5,801,617

Total

164,200
2,400
96,600
4,800
2,400
76,600
76,600
75,400
77,200
2,705,913
930,016
7,016,375

Outokumpu Annual report 2019 | Governance

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RemunerationDecember 31, 2019 status of the ongoing Performance Share Plans

Performance Share Plans

Number of participants
Maximum number of gross shares to be paid 1)

CEO Baan
Other Leadership Team members
Other participants

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

Share delivery year

PSP 2017–2019

119

PSP 2018–2020

129

PSP 2019–2021

CEO PSP 2019–2020

134

92,000
342,000
1,039,600
1,473,600
Outokumpu’s return on operating capital
compared to a peer group in 2019
2020

72,000
280,000
909,200
1,261,200
Outokumpu’s return on operating capital
compared to a peer group in 2020
2021

136,000
602,000
1,723,890
2,461,890
Outokumpu’s return on operating capital
compared to a peer group in 2021
2022

120,000
–
–
120,000
Outokumpu’s return on operating capital
compared to a peer group in 2021
2021

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

December 31, 2019 status of the ongoing Restricted Share Plans

Restricted Share Pool

Number of participants
Maximum number of gross shares to be paid 1)

CEO Baan
Other Leadership Team members
Other participants

Total maximum number of gross shares to be paid 1)
Share delivery year

RSP 2017–2019

–
–
82,600
82,600
2020

RSP 2018–2020

RSP 2019–2021

–
–
102,500
102,500
2021

–
25,000
182,900
207,900
2022

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.

December 31, 2019 status of the ongoing Matching Share Plans

Matching Share Plans

Number of participants
Number of gross shares 1)

CEO Baan
Other Leadership Team members
Other participants

Total number of gross shares 1)
Shares delivered (net of taxes) 2)
Gross shares to be paid 3)
Share delivery years

CEO Plan 2019–2020

CEO Plan 2015–2019

Management Plan

168,888
–
–
168,888
–
168,888
2020

1,157,156
–
–
1,157,156
289,289
0
2016, 2017, 2018, 2019

–
753,746
667,000
1,420,746
495,638
355,181
2017, 2018, 2019, 2020

1) The gross number of shares (taxes included) payable for the Matching Share Plan
2) For the CEO, the same net amount was delivered in 2018, 2017 and 2016
3) The gross number of shares (taxes included) still payable

Outokumpu Annual report 2019 | Governance

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RemunerationShares and shareholders

Shares and share capital
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. All shares
in Outokumpu carry equal voting and dividend rights.

On December 31, 2019, the total number of Outokumpu
shares was 416,374,448. On December 31, 2019, Outokumpu
held treasury shares 4,599,733 (Dec 31, 2018: 5,810,729).

Outokumpu in the capital markets
Outokumpu continued its regular and active dialogue with
investors and analysts in 2019.

Key topics discussed with investors were Outokumpu’s financial
targets for 2020, balance sheet topics, Ferrochrome operations,
the performance of the business area Americas and market-re-
lated topics, especially European market and Asian imports.
Also, sustainability topics have been on the table increasingly in
2019 meetings. Outokumpu held its Annual General Meeting in
Helsinki, Finland, in March. Outokumpu arranged 16 roadshows
in Europe and in the US during the year. The company also met
investors at three industry seminars in Barcelona and New York.
In total, over 185 one-on-one meetings and conference calls
were held with investors during the year.

International shareholders held 22.0% of the total shares at
the end of December 2019 compared to 26.7% at the end of
the previous year. JPMorgan Chase & Co and M&G Investment
Management are the largest non-Finnish shareholders with
holdings of over 4%. The largest Finnish shareholder Solidium
Oy held 21.7% of Outokumpu shares. The share of Finnish
households and private persons increased from 27.3% in 2018
to 31.1% at the end of 2019.

Principal shareholders on December 31, 2019

Solidium Oy
Varma Mutual Pension Insurance Company
Ilmarinen Mutual Pension Insurance
Company
The Social Insurance Institution of Finland
State Pension Fund
Mandatum Life
Elo Mutual Pension Insurance Company
Tutkimuksen vaikuttavuuden tukisäätiö sr
Nordea Life Assurance Finland Ltd.
Keva
Nordea Bank Abp
OP-Finland Small Firms Fund
OP Life Assurance Company Ltd.
Tuuliainen Veikko
Sinituote Oy

90,324,385
12,350,112

10,100,000
9,298,652
5,827,142
4,320,675
4,215,000
3,020,000
2,816,469
2,365,000
2,081,342
1,777,691
1,558,565
1,336,631
1,300,000
152,691,664

21.69
2.97

2.43
2.23
1.40
1.04
1.01
0.73
0.68
0.57
0.50
0.43
0.37
0.32
0.31
36.66

Nominee accounts held by custodian banks
Treasury Shares
Other Shareholders
Total

88,647,824
4,599,733
170,435,227
416,374,448

21.29
1.10
40.95
100.00

Shareholders by group on December 31, 2019

● Nominee registered and non-Finnish holders 22%
● Finnish institutions, companies and foundations 25%
● Solidium Oy 1) 22%
● Households 31%

1) Solidium Oy is wholly owned by the Finnish state

Outokumpu Annual report 2019 | Governance

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Shares and shareholders

Share price development and
market capitalization
During 2019, Outokumpu’s share price peaked at EUR 4.04
and was EUR 2.23 at its lowest (2018 high/low: EUR 8.26/
EUR 3.18). The share price closed at the end of the year at
EUR 2.81, marking a decrease of 12.2% from the closing
price of EUR 3.20 at the end of 2018. At the end of 2019,
the company’s market capitalization was EUR 1.168 million,
compared to EUR 1,330 million at the previous year’s end.

In 2019, the average daily trading volume in Outokumpu shares
on Nasdaq Helsinki was 3.5 million shares. In total, 884 million
Outokumpu shares were traded on Nasdaq Helsinki during
2019, representing a value of EUR 5,325 million (2018: 827
million shares, which corresponded to EUR 6,277 million).

In addition to Nasdaq Helsinki, Outokumpu’s shares are traded
also on various alternative trading platforms.

More information about the shares on our website

Market capitalization and share price development

Monthly trading volume, million shares

€ million

4,000

3,000

2,000

1,000

2015

2016

2017

2018

2019

2015

2016

2017

2018

2019

● Month-end market capitalization, € million
Source: Nasdaq

Share price, €/share

Includes trading on Nasdaq Helsinki.
Source: Nasdaq

Outokumpu share price development in 2019, %

Dividend/share, €

Dec 31, 2018 = 100

140

120

100

150

120

0.25

0.20

0.15

0.10

0.05

0.00

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2015

2016

2017

2018

2019

Outokumpu
Nasdaq Helsinki

In 2015 no dividend was paid. 2019 is a proposal by the Board of Directors.

Outokumpu Annual report 2019 | Governance

27 / 28

Information for shareholders

Annual General Meeting 2020
Notice is given to the shareholders of Outokumpu Oyj to the
Annual General Meeting to be held on Tuesday, March 31,
2020 at 1.00 pm EET at Dipoli congress center in Otaniemi,
address: Otakaari 24, 02150 Espoo, entrance through the
Gala entrance (Juhlaovi). The reception of persons who have
registered for the meeting and the distribution of voting tickets
will commence at 12.00 pm EET.

Each shareholder, who is registered on March 19, 2020 in
Outokumpu’s shareholder register held by Euroclear Finland Oy,
has the right to participate in the Annual General Meeting.

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 the record date of the
Annual General Meeting, March 19, 2020, would be entitled
to be registered in the shareholders’ register of the company
held by Euroclear Finland Oy. Participation in the meeting also
requires that the shareholder has been registered into the
temporary shareholders’ register held by Euroclear Finland Oy
at the latest by March 26, 2020 by 10.00 am EET. A holder
of nominee-registered shares who wants to participate in the
Annual General Meeting has to be registered into the temporary
shareholders’ register by the account management organization
of the custodian bank latest by the time stated above.

A shareholder, who is registered in the shareholders’ register
of the company and who wants to participate in the Annual
General Meeting, shall register for the meeting no later than
March 26, 2020 by 4.00 pm EET by giving a prior notice of

participation, which shall be received by the company no later
than on the above-mentioned date. Such notice can be given as
of February 5, 2020 at Outokumpu’s Annual General Meeting
website, by e-mail: agm.outokumpu@innovatics.fi, by telephone:
+358 50 532 5582 (From Monday to Friday at 12.00–4.00 pm
EET), by telefax: +358 9 421 2428, or by mail to

Outokumpu Oyj
Share Register
P.O. Box 245
FI-00181 Helsinki, Finland

A shareholder may participate in the Annual General Meeting
and exercise his/her rights at the meeting by way of proxy
representation. Proxy documents should be delivered to
Outokumpu Oyj, Share Register, P.O. Box 245, FI-00181
Helsinki, Finland before the end of the registration period.

A complete notice to the Annual General Meeting and
additional information about it is available at
Outokumpu’s Annual General Meeting website.

Payment of the dividend
The Board proposes a dividend of EUR 0.10 per share based
on the balance sheet adopted for the account period ending
December 31, 2019. The dividend will be paid to shareholders
registered in the shareholders’ register of the company held
by Euroclear Finland Oy on the dividend record date April 2,
2020. The Board proposes that the dividend be paid on April 9,
2020. n

Outokumpu Annual report 2019 | Governance

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Working towards a world that lasts forever
We believe in a world that is efficient, sustainable, and designed to last
forever. The world deserves innovations that can stand the test of time and
are ready to be born again at the end of their life cycle. Stainless steel is
vital in enabling a sustainable world with economic prosperity.

Outokumpu Oyj
Salmisaarenranta 11
FI-00180 Helsinki, Finland
Tel. +358 9 4211
corporate.comms@outokumpu.com
www.outokumpu.com

@Outokumpu

Outokumpu Group

Outokumpu