Outotec's Interim Report January-June 2014 OUTOTEC OYJ

OUTOTEC OYJ                         INTERIM REPORT                    JULY 31, 2014 AT 9.00 AM INTERIM REPORT JANUARY-JUNE 2014 Order intake improved 80% from Q1, lower profitability due to higher project costs January-June 2014 (comparison period in 2013): * Order intake(1)): EUR 589.8 (856.7) million, -31%, in comparable currencies -23% * Service order intake(1)): EUR 281.0 (272.0) million, 3%, in comparable currencies 18% * Order backlog: EUR 1,259.7 (1,761.3) million, -28% * Sales: EUR 679.1 (1,014.3) million, -33%, in comparable currencies -28% * Service sales: EUR 225.9 (238.4) million, -5%, in comparable currencies 5% * Operating profit from business operations(2)): EUR 16.3 (78.3) million, -79% April-June 2014 (comparison period in 2013) * Order intake(1)): EUR 379.5 (365.6) million, 4%, in comparable currencies 15% * Service order intake(1)): EUR 147.8 (138.5) million, 7%, in comparable currencies 21% * Sales: EUR 335.2 (511.4) million, -34%, in comparable currencies -30% * Service sales: EUR 118.4 (134.6) million, -12%, in comparable currencies -3% * Operating profit from business operations(2)): EUR 3.9 (43.3) million, -91% Financial guidance for 2014 (published on July 28, 2014) Based on the current market outlook, customer tendering activity and assessment of order backlog, the management expects that in 2014: * Sales will be approximately EUR 1.4-1.6 billion, and * Operating profit from business operations(2)) will be approximately 4-6%. The main reasons for the change in financial guidance were: * Lower sales in Capex business due to delayed order intake in the beginning of the year, and slowness in project implementation in Russia due to increased geopolitical uncertainty. * Cost overruns in five large Capex projects which have been won during 2009-2012, the majority of which are expected to be completed by the end of 2014. Previous financial guidance Based on the year-end order backlog, the current market outlook, customer tendering activity, and volatility in exchange rates, the management expects that in 2014: * Sales will be approximately EUR 1.5-1.8 billion, and * Operating profit from business operations(2)) will be approximately 5-8%. (1)) The change in the service reporting principles increased January-June 2014 order intake by approximately EUR 35 million (Q2 2014 approximately EUR 25 million). (2)) Excluding one-time items and purchase price allocations (PPA) amortizations Summary of key figures Q2 Q2 Q1-Q2 Q1-Q2 Last 12 Q1-Q4   2014 2013 2014 2013 months 2013 ------------------------------------------------------------------------------- Sales, EUR million 335.2 511.4 679.1 1,014.3 1,576.3 1,911.5 ------------------------------------------------------------------------------- Gross margin, % 19.3 20.9 19.4 20.0 20.6 20.7 ------------------------------------------------------------------------------- Operating profit from business operations, EUR million 3.9 43.3 16.3 78.3 100.9 162.9 ------------------------------------------------------------------------------- Operating profit from business operations, % 1.2 8.5 2.4 7.7 6.4 8.5 ------------------------------------------------------------------------------- Operating profit, EUR million -0.3 39.9 8.4 71.5 78.8 141.9 ------------------------------------------------------------------------------- Operating profit margin, % -0.1 7.8 1.2 7.1 5.0 7.4 ------------------------------------------------------------------------------- Profit before taxes, EUR million -2.0 37.8 4.4 67.7 69.0 132.2 ------------------------------------------------------------------------------- Net cash from operating activities, EUR million 2.6 55.2 7.3 21.6 -56.3 -42.1 ------------------------------------------------------------------------------- Net interest-bearing debt at the end of period, EUR million -29.6 -192.4 -29.6 -192.4 -29.6 -87.1 ------------------------------------------------------------------------------- Gearing at the end of period, % -6.6 -42.5 -6.6 -42.5 -6.6 -18.2 ------------------------------------------------------------------------------- Working capital at the end of period, EUR million -22.4 -143.8 -22.4 -143.8 -22.4 -14.0 ------------------------------------------------------------------------------- Return on investment, %, LTM 13.9 40.0 13.9 40.0 13.9 25.7 ------------------------------------------------------------------------------- Return on equity, %, LTM 10.5 29.8 10.5 29.8 10.5 19.4 ------------------------------------------------------------------------------- Order backlog at the end of period, EUR million 1,259.7 1,761.3 1,259.7 1,761.3 1,259.7 1,371.7 ------------------------------------------------------------------------------- Order intake, EUR million 379.5 365.6 589.8 856.7 1,245.5 1,512.4 ------------------------------------------------------------------------------- Personnel, average for the period 4,864 4,979 4,847 4,902 4,900 4,927 ------------------------------------------------------------------------------- Earnings per share, EUR -0.01 0.15 0.02 0.27 0.26 0.51 ------------------------------------------------------------------------------- President and CEO Pertti Korhonen: "Investment sentiment in the mining and metals industry improved in the second quarter and this is also visible in our order intake which was up 80% from the first quarter. Despite the challenging market, there were no cancellations and the margins of the new orders were on a solid level. Our sales decreased from the comparison period due to the low opening order backlog for 2014, delayed order intake in the beginning of the year, and slowness in project implementation in Russia because of increased geopolitical uncertainty. The demand for services continued solid due to the reasonably good production levels in the industry. I am pleased that, despite the fact that our customers currently focus on reducing their operational costs, we were able to continue to grow our service order intake by offering new service concepts, increasing the penetration to our installed base and expanding geographical and technology coverage of our services. Our profitability in the second quarter was disappointing due to the negative result of Metals, Energy & Water business caused by cost overruns in five large Capex projects. These projects have been won between 2009 and 2012, and the majority of which are expected to be completed by the end of 2014. I am very pleased with the good profitability of the Minerals Processing business. I am also satisfied with our service margins which have continued to be on a healthy level despite the market pressures. Our EUR 50 million efficiency improvement program announced in October 2013 has progressed well and this far achieved EUR 40 million annualized savings. In addition to the efficiency program, our continuous operational improvement activities reduced our January-June 2014 operational fixed costs by EUR 44 million compared to previous year. Despite some positive signs from the recovering mining and metals investment market, we want to be prepared for possible continued Capex market slowness and possible effects of geopolitical uncertainties in Russia and other markets. Therefore to complement the EUR 50 million efficiency improvement program, we have initiated further actions, such as right-sizing of our resources in the areas were we have excess capacity or inefficiencies, and improving cost- competitiveness of our products and supply chain. In addition, we continue to drive the growth of services business to improve profitability and decrease volatility. Outotec's sales funnel is solid and there is a wide range of projects under development and negotiations. However, visibility to timing of new orders remains challenging. Our large installed base and customers' need to optimize operations continue to provide good opportunities for growing our value-adding life-cycle services business." CHANGE IN REPORTING OF SERVICE CONTRACTS FROM JANUARY 1, 2014 In order to improve the transparency of Outotec's service business, the long- term service contracts, which have a production-based volume-dependent variable portion, are recognized in the order intake with the estimated sales value of the next 12 months. The fixed value contracts are recognized as full value when the order becomes effective. According to old principles, the current calendar year's portion of the long-term service contract was booked once per year into the order intake. The change in the service reporting principles increased January-June 2014 order intake by approximately EUR 35 million (Q2 2014: approximately EUR 25 million). This text is a summary of Outotec's January-June 2014 Interim Report. The full report is available as an attachment to this report. FURTHER INFORMATION Outotec Oyj Pertti Korhonen, President and CEO tel. +358 20 529 211 Mikko Puolakka, CFO tel. +358 20 529 2002 Rita Uotila, Vice President - Investor Relations tel. +358 20 529 2003, mobile +358 400 954 141 Format for e-mail addresses: firstname.lastname@outotec.com BRIEFING Date: Thursday, July 31, 2014 Time: 2.00 pm (Finnish time) Venue: Bank, Unioninkatu 20, Helsinki Joining via webcast You may follow the briefing via a live webcast at www.outotec.com. The webcast will be recorded and published on Outotec's website for on-demand viewing. Joining via teleconference You may also join the briefing by telephone. To register as a participant in the teleconference and Q&A session, please dial 5 to 10 minutes before the start of the event: FI: +358 9 8171 0465 SE: +46 8 5199 9355 UK: +44 20 3194 0550 US: +1 855 2692 605 (toll free) Contact information is gathered for registration purposes only and is not used for commercial purposes. FINANCIAL REPORTING SCHEDULE IN 2014 * Interim Report for January-September: October 30, 2014 * Capital Markets Day, Outotec headquarters Espoo, Finland: December 4, 2014 DISTRIBUTION NASDAQ OMX Helsinki Ltd Main media www.outotec.com Outotec provides leading technologies and services for the Sustainable use of Earth's natural resources. As the global leader in minerals and metals processing technology, we have developed many breakthrough technologies over the decades for our customers in metals and mining industry. We also provide innovative solutions for industrial water treatment, the utilization of alternative energy sources and the chemical industry. With a global network of sales and service centers, research facilities and over 4,800 experts, Outotec generated annual sales of approximately EUR 1.9 billion in 2013. Outotec shares are listed on NASDAQ OMX Helsinki. [HUG#1844492]