Annual Report 2010 - Outokumpu

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Group earnings per share totalled EUR -0.68 in 2010 (2009: EUR -1.86). Total
shareholder return (TSR) was 6.6% (2009: 64.4%). TSR is calculated as the
annual change in the Outokumpu share price plus the dividend, divided by the
starting share price for the year concerned. Outokumpu's share price was
EUR 13.26 at the beginning of the year and increased to EUR 17.88 on 6 April
2010 before falling back to EUR 13.88 at the end of the year (respective market
capitalisation of EUR 2 525 million). Dividends for 2009 totalling EUR 64 million
(EUR 0.35 per share) were paid in 2010.
In accordance with the Board of Directors' established dividend policy, the payout
ratio over a business cycle should be at least one-third of the Group's profit for the
period with the aim of making stable annual payments to shareholders. In its
annual dividend proposal, the Board of Directors, in addition to financial results,
takes into consideration Outokumpu's investment and development needs. The
Board of Directors is proposing to the Annual General Meeting to be held on 24
March 2011 that a dividend of EUR 0.25 per share be paid for 2010. The
corresponding dividend yield is 1.8%. Outokumpu's average dividend payout ratio
over the past five years has been approximately 65%.
Share-related key figures
€ 2010 2009
Earnings per share -0.68 -1.86
Equity per share 13.05 13.54
Dividend per share 0.25 1) 0.35
Share price on 31 Dec 13.88 13.26
Market capitalisation on 31 Dec, € million 2 525 2 400
1) The Board of Directors' proposal to the Annual General Meeting.
Economic value added
Outokumpu's overall financial objective is to generate the maximum sustainable economic value added (EVA) on capital
invested by the company's shareholders. Outokumpu uses the weighted average cost of capital (WACC) in defining the
capital charge for economic value added, and applies this when assessing the profitability of investment projects and
defining the economic and commercial value of the Group's business operations. In 2010, Outokumpu's WACC after
taxes was approximately 6%. This figure was obtained using a target capital structure in which the weight given to equity
is 60% and the weight given to debt is 40%. The cost of equity was 8.4% and the after-tax cost of debt was 3.3%. In
2010, economic value added by Outokumpu totalled EUR -284 million (2009: EUR -551 million).
Factors affecting Outokumpu's profitability
The stainless steel business is cyclical. In addition to the company's own actions, Group profitability depends on the
current stage in the global economic cycle and particularly on levels of industrial investment activity. Historical long-term
demand for stainless steel has been growing at an annual rate of 5–6%. Changes in regional or global production
capacity can sometimes have an adverse effect on stainless markets, resulting in temporary imbalances between supply
and demand. Increasing stainless steel production capacity in China will continue to have an effect on the global supply
situation in future years.
Outokumpu Annual Report 2010 – Outokumpu – Management discussion