Annual
report
Annual review
Outokumpu in brief ........................ 4
Key figures ................................. 5
CEO’s review ............................... 6
Vision and strategy . . . . . . . . . . . . . . . . . . . . . . . . . 8
Stainless steel market ..................... 10
Year 2020 .................................. 13
Sustainability review
Sustainability at Outokumpu ............... 2
Sustainable performance in 2020 ......... 3
SUSTAINABLE OPERATIONS ................ 4
Protecting the climate with stainlesssteel 4
Focus on energyefficiency ................. 7
We operate at the heart of the
circulareconomy ........................... 9
Reducing our impact on the environment . 11
Sustainable supply chain ................... 14
OUR PEOPLE & SOCIETY .................. 16
We operate safely, always .................. 16
Building the best work environment ....... 18
Outokumpu and society .................... 23
SUSTAINABLE SOLUTIONS ................. 25
Customers and expertise ................... 25
Research and development ................ 27
Scope of the report ......................... 28
Independent assurance report ............. 30
Governance
Corporate Governance Statement ......... 2
Key risks ................................... 19
Shares and shareholders .................. 24
Information for shareholders .............. 26
Remuneration Report ...................... 27
Review by the Board
of Directors and
Financial statements
REVIEW BY THE BOARD OF DIRECTORS ... 2
Group key figures ........................... 12
Alternative performance measures ........ 13
Share-related key figures ................... 16
FINANCIAL STATEMENTS ................... 18
Consolidated statement of income ........ 19
Consolidated statement of
comprehensive income ..................... 19
Consolidated statement of
financial position ........................... 20
Consolidated statement of cash flows ..... 21
Consolidated statement of
changes in equity ........................... 22
Notes to the
consolidated financial statements ......... 23
Parent company financial statements ..... 66
AUDITOR’S REPORT ........................ 70
Outokumpu Annual report | Annual review 2 / 14
Contents
This Annual report combines Outokumpu’s sustainability and financial reporting
for 2020. Outokumpu’s Sustainability review has been assured and the Financial
statements have been audited. Outokumpu’s Financial statements published
according to the ESEF regulation are available at www.outokumpu.com/reports.
The lower and side surfaces of the Myllysilta bridge in Turku, Finland, are cladded with our duplex
stainless steel that conceals and protects the other construction elements.
Annual
review
We are the global leader in stainless
steel and the producer of the most
sustainable stainless steel in the
world. Our stainless steel has the
highest recycled content and the
smallest environmental footprint in
the industry.
Outokumpu Annual report | Annual review 4 / 14
At Outokumpu, we work towards a world that lasts forever. The cornerstone of our business
is enabling growth and innovation through environmentally, economically, and socially
sustainable stainless steel products to benefit modern society for generations to come.
The foundation of our business is our ability
to tailor stainless steel into any form and for
almost any purpose. Our customers use it to
create civilization’s basic structures and its
most famous landmarks as well as products
for households and various industries. We are
the clear market leader in Europe and in the
second place in the Americas market. Our
ultimate vision is to be customer’s first choice
in sustainable stainless steel.
We are the industry leader in sustainability with
the highest recycled content, more than 90%,
and smallest carbon footprint. Our products
are extremely durable and corrosion resistant,
resulting in low life-cycle costs, and they are
endlessly and 100% recyclable.
As the inventor of stainless steel, Outokumpu
is committed to carrying this legacy forward
and to take the benefits of stainless steel
even further. With the vast expertise and
experience of our team, we ensure the high
quality and efficiency of our production at our
mills in Finland, Germany, Mexico, Sweden, the
UK and the US, and we serve our customers
through a global sales and service center
network. Outokumpu’s own chrome mine in
Kemi, Finland is the source of the key raw
material for stainless steel. Outokumpu Oyj
is headquartered in Helsinki, Finland, and our
shares are listed on Nasdaq Helsinki.
Outokumpu – the global leader in stainless steel
9,915
employees
Adjusted
EBITDA, EUR
250
million
Operations in
over 30
countries
CO
2
emissions
–17.0%
*
Recycled content
over 90%
Net debt reduced
to EUR
1,028
million
Sales EUR
5.6
billion
* Compared to the baseline of 2014–2016
In brief
Outokumpu Annual report | Annual review 5 / 14
0
100
200
300
400
500
600
700
20202019201820172016
Europe 62%
Americas 21%
Long Products 7%
Ferrochrome 3%
Other operations 7%
Europe 65%
Americas 27%
Long Products 8%
Year in figures
In 2020, we kept our financial performance on a similar level than year
before, despite a challenging year, and most importantly, we reduced our
net debt to EUR 1,028 million. In safety, the year was the strongest on
record with total recordable injury frequency rate of 2.4, better than our
target. We also increased our already high share of recycled content and
further decreased our CO
2
footprint, the lowest in the industry.
2020 2019 2018 2017 2016
Financial key figures
Net sales, EUR million 5,639 6,403 6,872 6,356 5,690
Deliveries, 1,000 tonnes 2,121 2,196 2,428 2,448 2,444
Adjusted EBITDA, EUR million 250 263 485 631 309
Net result, EUR million –116 –75 130 392 144
Operating cash flow, EUR million 322 371 214 328 389
Net debt, EUR million 1,028 1,155 1,241 1,091 1,242
Debt-to-equity, EUR million 43.6 45.1 45.1 40.1 51.4
Environmental key figures
Recycled content, % 92.5 89.6 88.6 87.0 87.1
C0
2
emission intensity, kg of CO
2
eq. per tonne steel 1,549 1,606 1,719 1,832 1,865
Energy intensity, use in GJ per tonne crude steel 11.0 10.9 10.1 9.3 9.5
Use rate of slag, % 77.1 90.8 89.9 91.1 90.0
Total landfill waste intensity, tonnes per tonne steel 0.590 0.500 0.472 0.364 0.406
Social key figures
Total recordable injury frequency rate
1)
2.4 3.2 4.1 4.4 8.7
Lost-time injuries rate
2)
1.4 1.4 1.7 1.8 2.2
Personnel 9,915 10,390 10,449 10,141 10,600
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.
Adjusted EBITDA, € million
Sales by business area, € 5,639 million
Stainless steel deliveries by business area, %
Key figures
Outokumpu Annual report | Annual review 6 / 14
Ever since the outbreak of COVID-19 in the
first quarter of 2020, Outokumpu has taken
strong measures to mitigate its impacts on our
employees, operations and business. Our priority
has been to secure the health and safety of
our employees and those close to us, and our
comprehensive actions during the year have
been proven effective. Outokumpu adjusted
operations to meet the lowered demand,
reduced fixed costs through cost compression
measures and focused on maintaining proactive
customer engagement to ensure the continua-
tion of customer service.
The efforts to mitigate the pandemic’s impacts
continued throughout the year 2020 into 2021
with ongoing new waves of the pandemic around
the world. Outokumpu’s measures for health
and safety and for running our operations and
business have transformed our ways of working
and collaborating. I am proud and thankful
of the resilience, flexibility and commitment
the Outokumpu team and our partners have
demonstrated.
In terms of overall safety, we maintained our
high standards and continued to improve our
safety performance reaching the strongest year
on record. The total recordable injury frequency
rate was 2.4, surpassing our target of below 3.0.
The year 2020 was unprecedented for the global economy, for societies
and individuals as well as for the stainless steel industry and Outokumpu.
In addition to the ongoing global market uncertainty and the market
disruption from Asian imports into Europe, the year was strongly shaped
by the COVID-19 pandemic.
CEO’s review
The market situation in Europe remained
difficult due to increased import pressure
from Asia, leading in the third quarter to the
historically lowest stainless steel price levels.
The definitive anti-dumping duties imposed in
October by the European Commission on hot
rolled stainless steel from Indonesia, China
and Taiwan were a step into the right direction.
However, they are still insufficient to restore a
level playing field and to secure a sustainable
future for the European stainless steel industry.
We call for available trade enforcement tools
to be applied in full.
Our full-year adjusted EBITDA amounted to
EUR 250 million. Even though the EBITDA was
lower than expected, in an exceptional market
situation reaching nearly the same level as in
2019 demonstrates the power of our actions
to step up and to protect our business in times
of challenge. As a result of working capital
release and stringent control of our capital
expenditures, we successfully reduced our net
debt to EUR 1,028 million, the lowest level
in recent history and below the year-end goal
of EUR 1,100 million. The extension of the
maturity of the EUR 650 million syndicated
revolving credit facility strengthens our debt
structure and liquidity profile.
CEO’s review
Outokumpu Annual report | Annual review 7 / 14
“We will continue to
execute strategic
measures to improve
our results.”
CEO’s review
Despite returning our financial performance
in the year shaped by COVID-19 back to near
2019 levels, our financial performance needs
further strenghtening. Hence, we will continue
to execute strategic measures to improve our
results.
Business area Europe was impacted by the
high import pressure from Asia and lower
prices. During the second half of the year,
the business area achieved an impressive
comeback leading to a full-year adjusted
EBITDA of EUR 142 million, which is a notable
achievement in a very challenging environment.
With a full-year adjusted EBITDA of EUR 55
million, business area Americas continued
its successful turnaround: operations have
been stabilized and commercial performance
is accelerating. The investment in ferritics in
Calvert reached ramp-up phase in the fourth
quarter, taking us closer to leveraging the
investment’s full potential. Outokumpu now
has strong footholds in both European and
American markets, strengthening our stability
and capabilities to meet our customers’ needs
in all markets.
Business area Ferrochrome holds a strong
potential for value creation at Outokumpu.
The ongoing Deep Mine expansion project,
expected to be finalized by the end of 2022,
ensures the ore availability at Kemi mine for
the coming decades. During 2020, business
area Long Products underwent a strategic
review, which was concluded in September with
a start of a turnaround program to develop the
business area internally.
In addition to navigating through an exceptional
year, Outokumpu launched its new long-term
strategy in 2020. After starting as CEO in
May, I took a deep dive into our business
and operations and discussed in detail with a
sizeable group of employees and customers
to lay a good foundation for the strategy work:
a thorough understanding of the company, its
strengths and areas that need development.
Outokumpu has made notable progress in
efficiency and productivity improvements, but
due to global market uncertainty, impacts
of the pandemic and market disruption from
Asian imports, further measures are needed
to improve the overall performance, cost
structure, operational efficiency and customer
engagement. Following a thorough assessment
and a full-potential analysis together with
our internal team, we introduced the new
strategy in November to position the company
competitively for the future by strengthening
its balance sheet in the shorter term and
de-risking the company in the long run.
The strategy is built on clear timebound
initiatives and targets and it calls for diligent,
decisive execution. It is centered on strict cost
and capital discipline, strong customer engage-
ment and a lean, delayered organization. We
set ambitious but realistic financial targets for
our strategy: EUR 200 million EBITDA run-rate
improvement and net debt to EBITDA of below
3.0x by the end of 2022. These targets are
fully based on our own improvement actions.
We are the industry leader in sustainability
with the lowest CO
2
footprint and with the
highest recycled content in our stainless steel.
In 2020, we succeeded in increasing the
already high share of recycled content in our
production to over 90% and further decreasing
our CO
2
footprint. We are well on track to
achieve our sustainability targets to reduce our
CO
2
emissions by 20% by 2023 and to reach
carbon neutrality by 2050. Sustainability has
always been in the very core of Outokumpu,
and we are pleased to note growing signifi-
cance of sustainability as a decision-making
criteria among our stakeholders – including
customers, investors and employees. To ensure
we continue to carry our responsibility as
the sustainability leader, we are sharpening
our sustainability strategy and roadmap. We
harness every measure we can to realize our
vision to be customer’s first choice in sustain-
able stainless steel.
I want to again thank our employees for the
resilience and commitment to keep each other
safe and our business running and improving
during the challenging year 2020. I also warmly
thank our customers and shareholders for their
continued trust in Outokumpu.
Heikki Malinen
President and CEO
CEO’s review
Outokumpu Annual report | Annual review 8 / 14
Strategy focuses on strengthening the balance
sheet and de-risking the company
Outokumpu’s strategy aims to competitively position the
company for the future by strengthening the balance
sheet in the shorter term and by de-risking the company
for strong returns in the long run. The strategy is built on
clear timebound initiatives and targets. Outokumpu is
the sustainability leader in its industry and Outokumpu’s
ultimate vision is to be customer’s first choice in
sustainable stainless steel.
imports into Europe and Mexico, we clearly
need further measures to improve our overall
financial performance, cost structure, opera-
tional efficiency and customer engagement.
The new strategy launched for the coming
years addresses all these topics.
Three phases of the strategy
Outokumpu’s strategy includes three phases
with each phase requiring strong and diligent
execution and focus, creating the foundation
for the next phase. Deleveraging the balance
sheet will continue throughout all three phases.
In the first phase of the strategy, during
2021–2022, we will focus on strengthening
the balance sheet. The following two phases of
the strategy will focus on targeted investments
in productivity, sustainability and value-adding
growth, and the targets will be communicated
at a later stage.
Outokumpu’s strategy builds on the company’s
strong foundation. Outokumpu is the industry
leader in sustainability. We have the lowest
CO
2
footprint and highest recycled content rate
in the industry, and we have ambitious targets
to strengthen our sustainability record further.
Outokumpu is also the leader in specialty
grades, and our customers see us as their
preferred partner. We have an experienced
team and world-class, stable operations with a
strong culture for continuous improvement.
Strategy for 2021–2022
During the first phase of the strategy, during
2021–2022, Outokumpu will prioritize
de-risking the company through margin
Phase 1: 2021–2022
Phase 2: 2023–2025
Continue de-leveraging the balance sheet
Customer’s
first choice in
sustainable
stainless steel
Phase 3: 2026–
Margin improvement and
de-leveraging the balance
sheet
Targeted productivity
investments to improve
margins
Investing in growth and
sustainability
succeeded in decreasing our total recordable
injury frequency rate (TRIFR) below 3.0 as
targeted. Improvements in sustainability,
operational excellence and commercial
excellence continued. Business area Americas
has succeeded on operational and commercial
stabilization, and in the area of digital
transformation we progressed for example with
the digital manufacturing program in Tornio mill.
New strategy in November
Outokumpu has made great progress with
efficiency and productivity improvements during
the past years, but due to ongoing global
market uncertainty, the impacts of COVID-19
pandemic and market disruption from Asian
During the reporting year, we continued to
improve Outokumpu’s competitiveness and
profitability in line with the goals for the
strategy period ending in 2020. The six focus
areas of the strategy were safety, sustainability,
operational excellence, commercial excellence,
the Americas and digital transformation. We
improved the safety of our operations and
Vision and strategy
Outokumpu Annual report | Annual review 9 / 14
improvement, cash flow management and
deleveraging the balance sheet. The new
financial targets, EUR 200 million EBITDA
run-rate improvement and net debt to EBITDA
of below 3.0× by the end of 2022, are fully
based on self-help improvement actions.
To reach these financial targets, the strategy is
divided into operational, commercial and orga-
nizational objectives: strict cost and capital
discipline, strong customer engagement and
a lean, delayered organization. Each of these
areas will contribute equally to the target of
EUR 200 million run-rate EBITDA improvement.
Outokumpu will increase raw material efficiency
and operational cost savings while limiting
annual capital expenditure to EUR 180 million
in 2021 and 2022 through maintenance
optimization and strict asset management.
As part of the strategy, Outokumpu’s core
businesses – stainless steel and ferrochrome
– focus on increasing the market penetration,
enhancing the product mix, growing in selected
segments and leveraging the company’s
leadership in specialty grades. Business area
Long Products is undergoing a turnaround
program to deliver significant improvement in
financial performance, following a strategic
review concluded in the second half of 2020.
With the approach on lean and delayered
organization, Outokumpu is simplifying the
organizational structure and accountability.
Outokumpu initiated restructuring measures
with the plan to create cost savings by
restructuring and reducing total employee
headcount by approximately 1,000 mostly by
the end of 2021. Outokumpu targets to have a
headcount of below 9,000 during 2022.
Concrete targets for
each business area
Efficient strategy execution is ensured
through a new steering model, in which
each business area has concrete plans and
initiatives. In business area Europe, the focus
will be on measures improving cost position
and customer engagement. In commercial
Strategic initiatives focus on de-risking the company
Customer excellence
• Enhanced product mix in all business areas
• Growth in selected segments
• Leverage specialty grades leadership
Cost &
capitaldiscipline
• Increased raw material efficiency
• Maintenance optimization
• Strict asset management
• Annual CAPEX EUR 180 million in 2021 and 2022
Lean and agile
organization
• Planned 10% reduction in Group headcount by end of 2021
• De-layered organization
• Strong performance management
Deleveraging the balance sheet
EUR
200
million
EBITDA improvement
*
<3.0×
Net debt / EBITDA
*run-rate improvement from
actions by year-end 2022
excellence, the target is to grow specialty
grades sales, supported by new products
and high-quality technical sales, and to
strengthen commodity sales through improved
cost competitiveness and stronger customer
engagement. In cost and capital discipline,
Europe continues to optimize raw material
costs, reduces fixed costs, accelerates manu-
facturing excellence programs, and optimizes
maintenance and procurement spend.
In the Americas business area, the focus
moves from turnaround to continuous improve-
ment and growth. We look to strengthen our
commercial footprint both in Mexico and in
the US, and to grow in selected segments:
automotive, appliances and pipe and tube. We
also aim to capture full benefits of the EUR
30 million ferritics investment which reached
the ramp-up phase at the end of 2020. In
cost and capital discipline we focus on slab
costs and freight costs optimization as well as
manufacturing excellence program.
Business area Ferrochrome holds strong
potential for future value creation. We plan
to increase sales through new product
development and to reduce reliance on spot
markets and logistics costs. Fine concentrating
plant capabilities and efficiency of the mining
will also be improved. The ongoing Deep Mine
investment extends ore availability until the
beginning of the 2040s.
“There is great value in the
company, and we will unlock
it with a clear strategy and
determined implementation.”
CEO Heikki Malinen
Vision and strategy
Outokumpu Annual report | Annual review 10 / 14
Consumer Goods & Medicals 51%
Chemical, Petrochemical & Energy 15%
Automotive & Heavy Transport 10%
ABC & Infrastructure 15%
Industrial & Heavy Industry 6%
Others 2%
Stainless steel market
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 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 90%. Mitigating climate change
by reducing our carbon footprint is a clear
focus area, and we aim to reduce our envi-
ronmental impact for example through energy
The long-term outlook for stainless steel
remains positive due to the increasing need of
long-lasting and sustainable solutions for the
world’s most critical challenges. Outokumpu
is the undisputed market leader in Europe and
strong number two in the Americas.
End-uses of stainless steel in 2020
Source: SMR, stainless steel finished products (rolled and forged products excl.
13Cr tubes, profiles), January 2021.
Market environment
Outokumpu Annual report | Annual review 11 / 14
95 00 05 10 15 20
0
1,000
2,000
3,000
4,000
5,000
201918171615141312
0.0
0.5
1.0
1.5
2.0
201918171615141312
5,000
10,000
15,000
20,000
25,000
efficient production and by using low-carbon
electricity. We are continuously looking for
ways to even further improve the sustainability
of our products and processes.
Global market with few big players
Outokumpu operates in the global stainless
steel market. Our world-class assets, compre-
hensive product portfolio and proven expertise
form a sound foundation for our strategy
execution and future success.
In 2020, the market for cold-rolled products
totaled approximately 26.5 million tonnes.
Outokumpu’s global market share was
approximately 6%. In Europe, our cold rolled
market share is approximately 30%, which
makes us the market leader in Europe. In the
USMCA region our market share is approxi-
mately 24% and in the US approximately 22%,
making Outokumpu the clear number two in
the Americas. (Sources: EUROFER, SMR, US:
Foreign Trade Statistics, American Iron & Steel
Institute)
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)
Stainless steel price
*
, EUR/t
Source: CRU January 2021
* Stainless steel reference price for cold rolled 304 2mm sheet in Europe.
Ferrochrome price, USD/lb
Source: Quarterly contract prices agreed between South African ferrochrome
producers and European buyers.
Nickel price, USD/t
Source: LME settlement, monthly average prices, including December 2020.
Stainless steel and raw material prices in 2020
Major stainless steel producers
Million tonnes 2021 2020
Tsingshan 9.8 9.8
TISCO 4.5 4.5
POSCO 3.3 3.3
Acerinox 3.3 3.3
Outokumpu 3.2 3.2
Aperam 3.0 3.0
Guanxi Chengde 3.0 3.0
Jiangsu Delong 2.9 1.1
YUSCO 2.8 2.8
Source: Stainless steel production capacity of slabs, CRU
November 2020.
Market environment
Outokumpu Annual report | Annual review 12 / 14
After an unusual year, the long-
term market outlook remains
positive with growing demand
The long-term outlook for stainless steel
demand remains positive despite the
disruption caused by the COVID-19 pandemic
in 2020. Global megatrends, such as
urbanization, climate change, and increased
mobility combined with growing global demand
for energy, food, and water, are expected to
support the future growth of stainless steel
demand. In 2020, the global steel production
amounted to 1,864 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.
Market environment
remains difficult
Global consumption and production of
stainless steels were in 2020 severely
disrupted by the shock arising from COVID-19
pandemic. Due to the wide lockdown schemes
the most pronounced impact in Europe and
Americas took place in the second quarter
and by the end of the year we started to see
a strong recovery. European steel industry
continues to suffer from the high level of
imports from the third countries and price
pressure despite the anti-dumping duties on
stainless steel hot rolled from China, Indonesia
and Taiwan imposed by the European Union
in April. The need for the renewal of the EU’s
Safeguard measures after June 2021 remains
in place as there are currently no signs of
easing overcapacities in Asia, nor lifting of the
US imports tariffs imposed in 2018. Global real
demand for stainless steel products amounted
to 42.8 million tonnes in 2020, a decrease of
3.3% from 44.3 million tonnes in 2019. The
demand in EMEA and Americas decreased
by 12.1% and 12.3, respectively, while APAC
only decreased by 0.2%. The annual demand
decreased most, by 15.6% in Automotive
& Heavy Transport segment. The demand
in Industrial & Heavy Industry decreased by
4.8%, in ABC and Infrastructure by 3.3%, in
Chemical, Petrochemical and Energy by 2.3%
and in Consumer Goods and Medicals by 0.5%.
(Source: SMR)
The global stainless steel production decreased
by around 5% in 2020 from the previous
year, reaching 50.4 million tonnes. The drop
in output was pronounced in the most of the
regions, while the output only grew in Indonesia
and remained on the same levels compared to
2019 in China. This on one hand demonstrates
the continuation of the rapid capacity build-up
in Indonesia, and on the other hand China’s
prompt recovery from the crisis caused by the
COVID-19 pandemic. (Source: CRU)
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 2020 by roughly
2% to 60.1 million tonnes. The global utiliza-
tion rate was assessed to have decreased to
the levels of 70% in 2020. 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)
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 2020, 52% of Outokumpu’s stainless steel
was sold directly to end-user customers. The
remaining approximately 48% of sales were
shipped to distributors that stock and process
stainless steel to serve end users.
Market environment
Outokumpu Annual report | Annual review 13 / 14
Year
Safety is a key priority at Outokumpu, and the
company is committed to protecting the health
and safety of its employees. Outokumpu has
several safety measures in place to ensure the
safety of people and to mitigate the negative
impacts of the COVID-19 pandemic. These
measures include for example suspending all
attendance at any gatherings or events, limiting
travel, face-to-face meetings and visitor access
to the sites to business critical, encouraging
remote work whenever possible, and imposing
quarantine for employees as needed.
Outokumpu monitors the COVID-19 situation
closely in each country in which it operates
and adjusts the required measures accordingly.
Despite the exceptional times brought about
by the pandemic, the company delivered its
strongest annual safety performance on record.
In 2020, Outokumpu navigated successfully
through the pandemic. Outokumpu has contin-
gency plans in place to mitigate operational
and financial risks. Thanks to decisive and
well-timed actions taken by the company, the
negative impacts of the COVID-19 pandemic
on Outokumpu’s operations have been very
limited. Outokumpu has been able to operate
efficiently throughout the pandemic and
has successfully adjusted its operations to
meet the current demand level. Outokumpu
also initiated immediate cost compression
measures when the COVID-19 pandemic began
to affect global stainless steel demand. The
actions continued throughout the year and
tight cost control supported the company’s
profitability and cash flow in 2020.
As a response to the pandemic, Outokumpu
reduced its capital expenditures to EUR 180
million in 2020. Furthermore, the cash release
from the net working capital reduction was
significantly above the targeted level of EUR
100 million. Included here are the deferred
VAT payments in Finland of EUR 75 million, of
which EUR 61 million was still outstanding
at year-end for up to one and a half years. In
November, Outokumpu closed the sale and
lease back transaction regarding its service
center premises in Hockenheim, Germany,
with net cash proceeds of EUR 14 million.
Including this transaction, Outokumpu was able
to release a total of EUR 23 million of cash
from non-core assets. In general, the COVID-19
situation slowed down the divestment of
non-core assets and the original target to book
approximately EUR 40 million of proceeds in
2020 did not materialize as planned.
Outokumpu has successfully managed its
liquidity through the pandemic and the
company’s financial position has remained
stable. Cash and cash equivalents amounted
to EUR 376 million at the end of the year
and the total liquidity reserves increased to
over EUR 1.0 billion. At the end of October,
Outokumpu signed together with a group of
banks a SEK 1,000 million revolving credit
facility, which is guaranteed by the Swedish
Export Credit Agency EKN. At the end of
December, Outokumpu agreed an amendment
and extension of its syndicated revolving credit
facility. Out of the EUR 574 million maturing
in May 2022, EUR 532 million was extended
until the end of May 2023.
The financial covenants of Outokumpu’s
financial agreements are based on debt-
to-equity ratio and Outokumpu remains in
compliance with the financial covenants of its
financing agreements.
In this report, we go through the impacts of
COVID-19, whenever there are any, in the
sustainability review and in the financial
statements.
Responding to COVID-19
Safe safety training during the summer’s
maintenance break in Avesta, Sweden, with marks
showing adequate distances for the participants.
Year 2020
Outokumpu Annual report | Annual review 14 / 14
Right direction in the Americas
Outokumpu’s business area Americas is
developing in the right direction, thanks to
the successful operational and commercial
stabilization. Business area Americas
continues its successful turnaround with full-
year adjusted EBITDA reaching EUR 55 million,
an improvement of over EUR 80 million from
2019. We are now accelerating the commer-
cial turnaround in the Americas supported
by our investment in ferritics capabilities
in Calvert. Our Calvert mill has been in the
American market for nearly ten years, with first
years dedicated to ramping up the new mill,
and Outokumpu has become the clear number
two in the American market. Going forward, we
want to strengthen our commercial footprint
in the US and in Mexico and grow in such
segments as automotive, appliances, and pipe
and tube.
Working at Europe’s biggest
recycling center
At our Tornio mill alone, we handle 1 million
tonnes of scrap, turning it into top-quality
stainless steel. In fact, our Tornio plant is
the largest material recycling center in all of
Europe, and sustainability means a lot to us.
Maija Mehtälä, Environmental Engineer at the
Outokumpu Tornio mill explains: “My mother
was an example to me on how to do recycling.
Nature and environmental issues were part
of daily life. Now, my workplace in Tornio is
Europe’s biggest material recycling center.
One of our biggest targets is to decrease our
environmental impact – something we have
been working on for decades. Stainless steel
can be used everywhere, and best of all, it is
100% recyclable. It is very important that you
bring your old pots and pans back to us, so
that we can give a new life for them.”
Watch Maija Mehtälä describe her work at
Outokumpu
Buying stainless steel has
never been easier
We launched a new digital sales channel in
2019 for the customers of our coil service
center in Hockenheim, Germany. In 2020,
we extended it to our coil service center in
Castelleone, Italy for customers in Italy and the
neighboring countries.
In our web shop, customers have 24/7 online
accessibility to information on our products,
availability, prices and lead times, with shipping
of stock material within 48 hours when
ordering before 12 noon CET. Our customers
can select from more than 1,000 standard
products from stock, as well as choose
cut sheets according to their needs. Paul
Schlimgen, SVP, Customer Experience and
Digital Sales Channels at Outokumpu: “The
journey to digitalize the sale of our products
has just started. We believe that this trend
is – like in other industries – non-reversible.
Therefore, we are continuing to follow this
important path by extending the service
offering for our customers.”
Visit our web shop
Duplex turned 90
In 2020, Outokumpu celebrated 90 years
since duplex stainless steel made its debut on
the world market. The global leader in stainless
steel used the opportunity to highlight the
growing role of duplex grades in supporting
sustainability. This is made possible by their
superior corrosion resistance and high strength.
Thanks to this combination of properties,
engineers can create lightweight components
and structures that provide a long life and
require minimum maintenance – delivering
excellent value for money and minimizing the
use of raw materials. As the inventor of duplex
stainless steel, Outokumpu is committed to
carrying this legacy forward: over the years,
we have developed super, lean and formable
duplex grades.
Find out more on duplex
Year 2020
Sustainability
review
We are proud provider of the most
sustainable stainless steel that
helps to build a world that lasts
forever. However, it’s not just about
what we do, but how we do it.
Outokumpu Annual report | Sustainability review 2 / 30
Our product is at the very core of our sustain-
ability approach. Stainless steel is a superb
material for sustainable solutions as it is
100% recyclable, efficient and long-lasting. The
cornerstone of our business is enabling growth
and innovation through sustainable stainless
steel solutions and our vision is to become our
customers’ first choice in sustainable stainless
steel.
However, it is not only what we do, but also
how we do it. We are the industry leader
in sustainability as according to internal
estimates our stainless steel has the lowest
carbon footprint of the industry when taking
into account all indirect emissions, including
raw materials. We also lead the industry in
terms of contribution to the circular economy.
The recycled content of our stainless steel
is more than 90% and we are continuously
looking for ways to minimize our environmental
impact. We have ambitious goals for our
sustainability and we are committed to
reach carbon neutrality by 2050 and are well
on-track to reach the short-term target of 20%
reduction by 2023.
Key initiatives to strengthen
the sustainability agenda
During 2020, we took steps to further
strengthen our sustainability agenda and our
sustainability approach was updated to reflect
the growing importance of sustainability and
the possibilities it offers to our business. Our
sustainability approach can be divided into
three themes: mitigating climate change,
protecting the environment and responsibility
to our people and the society.
Several key initiatives were launched during
the year to drive our sustainability approach
across the organization. Key initiatives included
renewing the environmental performance
KPIs, creating a road map to carbon neutrality,
launching working groups to strengthen
customer cooperation and marketing, as
well as developing a stronger sustainability
culture through internal communications and
an e-learning. Outokumpu has also joined the
ResponsibleSteel initiative.
The updated approach is based on a
materiality analysis and a mapping of our
key stakeholders – customers, employees,
suppliers, and investors – and the topics most
relevant to them. We maintain a continuous
Sustainability at
Outokumpu
As the leading global producer of sustainable
stainless steel, we are at the heart of moving
society towards ecologically, socially, and
economically sustainable solutions.
dialog with our key stakeholder groups to
follow emerging sustainability trends and
topics within the stainless steel industry. Key
topics discussed in 2020 include climate
change mitigation with lower carbon footprint,
improving energy efficiency, ensuring the safety,
well-being, and development of our personnel
and strengthening supply chain sustainability
with further assessment of environmental, social
and governance compliance.
Commitment to global
frameworks and standards
We are committed to the United Nation’s
Sustainable Development Goals (SDGs) and
our focus was realigned in 2019. We have
selected six SDGs that are the most relevant
either through the way we operate or through our
products.
Sustainability is integrated into all our operations,
activities, and decision making. Outokumpu’s
operations are guided by our Code of Conduct,
Ethical Principles, Corporate Responsibility Policy,
and Environment, Health & Safety and Quality
Policy. We expect our business partners and
suppliers to follow similar standards. All of our
policies are available at outokumpu.com.
All of Outokumpu’s sites are certified according
to quality ISO9001 and environment
ISO14001 management systems, including
energy efficiency targets. The functioning of
the systems is monitored by both internal and
external audits. These management systems are
used to implement sustainability issues on the
local level. No fines or non-monetary sanctions
occurred in 2020.
Sustainability at Outokumpu
Outokumpu Annual report | Sustainability review 3 / 30
Sustainability performance in
Outokumpu has set
challenging goals and key
sustainability performance
indicators. The company also
follows up and measures
other selected economic,
social and environmental
indicators.
All sustainability figures are available on our
sustainability data tool
Recycled
content on a
high level
Our stainless steel contains the highest
rate of recycled content in the industry.
Recycled content includes steel scrap and
recycled metals from other residuals.
More on resource efficiency
No significant
environmental
incidents
Outokumpu’s target is to have no
significant environmental incidents, and
the company has had no such incidents for
many years.
More on our environmental impact
Reduced CO
2
emissions
intensity
Our target is to reduce our CO
2
emissions by
20% by 2023 compared to the baseline of
2014–2016.
More on our actions on climate change
Work-related
injuries
continued
to decline
Our total recordable injury frequency rate
(TRIFR, per million working hours) continued
to decline and was 2.4 compared to 3.2 in
2019.
More on safety and health
Energy
efficiency
remained
stable
Our target was to improve energy efficiency
by 1% annually since 2010. Target was not
reached due to restructuring and changes
in the company.
More on energy efficiency
Continuous
performance
development
In 2020, 98% of all Outokumpu employees
in applicable countries had a regular
performance development discussion with
their managers.
More on our people
TARGET
100%
/RESULT
98%
TARGET
0
/ RESULT
0
TARGET
<3.0
/ RESULT
2.4
TARGET 2020
90%
/ STATUS
92.5%
TARGET 2020
12.9%
/ STATUS
3.6%
TARGET 2023
20%
/ STATUS
17.0%
Sustainable performance
Outokumpu Annual report | Sustainability review 4 / 30
Stainless steel production is energy intensive.
The keys to reducing our own carbon emissions
are to increase our energy efficiency and the
use of low carbon energy sources. Stainless
steel produced by Outokumpu has the
lowest total carbon footprint in the industry,
helping our customers to reduce their carbon
footprints.
Where do our emissions
come from?
The greenhouse gas emissions from Outo-
kumpu operations are limited to CO
2
emissions.
These emissions come directly from production
(scope 1), indirectly from the use of electricity
(scope 2) and from upstream emissions mainly
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. Electricity emissions are also
published as location-based emissions with
the specific emission factors for electricity
published by the country statistics.
Other indirect emissions for steel production
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 CO
2
net savings of steel use from life
cycle assessment.
Toward a lower carbon footprint
Our total company carbon profile, 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 in our steel
and improving resource efficiency are also
factors in reaching even lower CO
2
eq emissions
and reducing upstream emissions.
In 2020, the total specific CO
2
eq emissions
were reduced by 17.0% compared to the base-
line of 2014–2016. The high recycling rate is
the main driver to succeed in high reduction
of scope 3 emissions. CO
2
eq emissions from
transport reduced significantly by implementing
an intermodal transport strategy and reduced
emission factors. Travel restrictions due to the
COVID-19 pandemic lowered business travel
emissions to a fifth. The emissions allocated
to sold ferrochrome were not included in the
target report for the stainless steel.
Protecting the climate
with stainlesssteel
Stainless steel helps to combat climate change as
it is durable, long-lasting, and recyclable. In addition
to offering stainless steel with a low carbon profile,
we work continuously to further reduce our carbon
profile. Outokumpu is committed to reaching carbon
neutrality by 2050.
The keys to reducing
our own carbon
emissions are to
increase our energy
efficiency and the use
of low carbon energy
sources.
Sustainable operations
Outokumpu Annual report | Sustainability review 5 / 30
0.0
0.5
1.0
1.5
2.0
202322212019181714–16
0.0
0.5
1.0
1.5
2.0
2.5
205014–16 454030 352520
In 2020, Outokumpu consumed overall
27,655 TJ of primary fuels and electricity with
a decrease of 2.3% due to lower production.
However, the intensity figure slightly increased
by 1.5% to 11.0 GJ per tonne steel due to
increased ferrochrome production. See all data
on CO
2
emissions.
Climate commitment to
science-based targets
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 the global
temperature 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 the influence of yearly fluctuations.
Emission intensity refers to emissions per
tonne of produced steel. In recent years, the
reporting details were improved. We have now
covered 60% of our nickel input by supplier
specific emission details.
We also follow the well below 2°C scenario
convergence criteria of the steel industry’s
decarbonization approach: to reduce emission
intensity to 0.92 t CO
2
per tonne of crude steel
by 2050. Specific electricity emissions follow
the electricity decarbonization approach, where
the specific emission reduction target is 95%
by 2050.
Low-carbon roadmap
Outokumpu has prepared a roadmap to reach
the set targets. Electric arc furnace is the
best available technique for stainless steel
production. The continuous work to increase
energy and material efficiency, the amount
of recycled material and the amount of low
carbon electricity are currently the main drivers.
In addition to these, projects have been
identified.
In Tornio, the majority of direct CO
2
emissions
originate from coke which is used as a reduc-
tant in the ferrochrome production. Carbon
monoxide is a sidestream from that reduction
process. It is recycled as a heating fuel in
ferrochrome and stainless steel production
and about one third is sold outside. The use of
carbon monoxide creates CO
2
emissions that
are allocated according to the use either in
ferrochrome, stainless steel or as outsourced.
Replacing part or all coke with carbon neutral
reductants would reduce a notable amount
of CO
2
emissions in Tornio. In the long run,
direct reduction for ferrochrome could replace
completely the use of coal-based reductants.
This technology requires still research and
piloting and no technology is yet available.
The rest of the direct CO
2
emissions come
from the use of heating fuels, i.e. natural gas,
propane and a small amount of oil. In the
long run, these fuels could be replaced either
by induction heating or by the use of carbon
neutral fuels, such as biogas or, in some appli-
cations, hydrogen. The third option to reduce
CO
2
emissions in the atmosphere are the use
of Carbon Capture and Storage / Utilization
(CCS/CCU). R&D projects have been identified.
For all above mentioned potential projects,
both investment and operating costs are higher
than for the conventional technologies.
Climate scenario analysis
Outokumpu acknowledges the recommenda-
tions 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. Outokumpu has performed a
scenario analysis according to the stated
policies scenario and sustainable development
scenario analysis in line with the International
Energy Agency (IEA) Iron and Steel Technology
Roadmap 2020. The translation of the
strategies in financial terms considering the
transition and physical scenarios is ongoing.
The Stated Policies Scenario takes into
account countries’ energy- and climate related
policy commitments, including nationally
determined contributions under the Paris
Agreement, to provide a baseline scenario
against which we assess the additional policy
actions and measures needed to achieve
the Sustainable Development Scenario. The
Sustainable Development Scenario sets out
the major changes that would be required to
reach the main energy-related goals of the
United Nations Sustainable Development
Agenda, including an early peak and subse-
quent rapid reduction in emissions, in line
with the Paris Agreement, universal access
to modern energy by 2030 and a dramatic
reduction in energy-related air pollution. The
trajectory for emissions in the Sustainable
Development Scenario of IEA is consistent with
reaching global “net-zero” CO
2
emissions for
Target for Science Based Target criteria
Outokumpu’s CO
2
eq emission intensity,
tonnes of CO
2
eq per tonne steel
Outokumpu’s emissions scenarios,
Scope 1 , 2 & 3 emission intensity
Upstream CO
2
emission intensity
Transport & travel
Indirect
Direct
Upstream emissions
Direct and indirect emissions
Reduction target of 20% by 2023
Target 2023:
20% reduction
Stated policy
scenario
Sustainable
development
scenario
Sustainable operations
Outokumpu Annual report | Sustainability review 6 / 30
the energy system as a whole by around 2070.
(Source: International Energy Agency (IEA) Iron
and Steel Technology Roadmap, 2020)
To translate the steel industry scenarios to
the stainless steel production, it is assumed
that the emission intensity of the steel sector
is the same as the intensity of the stainless
steel production, including scope 3 emissions.
This approach goes for the company beyond
the science-based target convergency criteria
for the sector decarbonization approach. The
target year of the scenarios is set to 2050
in line with the company's carbon neutral
target. The assumption of the Sustainable
Development scenario includes the possible
CO
2
reduction projects at different maturity
grades according to the developed carbon
neutral road map. Additionally, an initiated
metal recycling project in Tornio will decrease
the related scope 3 emissions although some
direct and indirect emission increase will be
connected to that project. It is assumed in the
SDS scenario that nickel containing stainless
steel grades are produced fully by recycling. All
projects are to be realized during the journey in
addition to the efficiency improvements.
Climate change risks
The climate change risks have been analyzed
on today's situation, as well as on medium and
long-term time scale. The physical risks were
estimated by the Atlas of the Human Planet
of the EU's Joint Research Center from 2017
and 2019. According to these sources, our
company’s operation sites are not exposed to
or have mitigated relevant physical risks. Water
risk was further assessed on medium and long-
term time scale by the Aqueduct program from
World Resource Institute for 2030 and 2040.
Limited risks are detected in that evaluation.
Only very limited change in risk categories of
operation sites can be observed. Especially
the site in San Luis Potosí, Mexico, situated
in an arid area, will be under future water risk
increase. The water management of this site is
in focus and will be further evaluated on future
water stress.
Opportunities of a
low-carbon society
Climate change is one of the three megatrends
driving our business. The life cycle of a stain-
less 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.
Continuous increasing of material recycling
and energy efficiency as well as change to use
lower emission fuel and electricity have signifi-
cantly reduced the product’s carbon profile.
This is driving the competitive advantage on
high alloy steel with low-carbon footprint that
customers are increasingly demanding.
Investors are looking for financing sustainable
projects or investing in sustainable companies.
The low-carbon profile of Outokumpu's
stainless steel enables financial advantages
in investments and the transition to the
low-carbon society.
Emissions trading and
fair competition
80% of Outokumpu’s all direct CO
2
emissions
fall under the European Union Emissions
Trading Scheme (ETS). The ETS has finalized
the third trading period in 2020. In 2020, free
allocation for the Group was slightly above the
emissions. The fourth period will remain with
similar conditions but substantially shorter free
allocations.
The main risks of the next trading phase
2020–2030 of the emissions trading system
to Outokumpu involves the pass-through costs
of allowances to the electricity price and
reduction of electricity price compensations.
In the later part, the company needs to buy
allowances as some surplus allocations
available from production decrease in the
past will be used. The final decision on the
benchmarks for free allocation is expected
mid-2021. Allowance prices are expected
to increase especially as the Green Deal of
the European Commission requests further
greenhouse gas reduction, and the benchmark
for free allocation will decrease. Read about
the risks related to emissions trading in
Key risks section. The EU Emissions Trading
System does not take into account the product
life span. This is misleading for metal and
steel products because they decrease CO
2
emissions during their life span more than their
production phase causes.
Sustainable operations
Outokumpu Annual report | Sustainability review 7 / 30
0
20
40
60
80
100
20202019201820172016
Outokumpu is continuously striving to make its
production operations more energy and mate-
rial efficient and minimize its environmental
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.
In 2020, our improvement of energy efficiency,
calculated as a sum of different process steps
including ferrochrome, was 3.6% compared to
the baseline 2007–2009. The reached energy
efficiency corresponds to a yearly saving of
over 0.3 million MWh in 2020. Over the period
of 2010–2020 the average improvement
was 7%. The company could not reach the
target for year 2020 after a ten-year period
due to changes such as restructuring, new
grade production mix and the low capacity use
impacted the specific energy consumption. A
new target of at least 0.5% reduction per year
compared to the baseline 2018–2020 in
energy efficiency by 2030 was set. Additionally,
Origin of electricity, %
Renewable sources
Nuclear
Fossiles
1)
Includes electricity
mix of Mexico for the
first time.
1)
Focus on energyefficiency
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.
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.
Sustainable operations
Outokumpu Annual report | Sustainability review 8 / 30
cold rolling mills are expected to reach the
level of best performance of the last seven
years by 2023. The energy efficiency target for
2030 is set to reach 3 MWh/t.
Yield optimization improves
energy efficiency
The biggest energy-saving potential lies in the
optimization of yield. Yield refers to how much
sellable products we can make of the metal
raw materials added to the process. Energy
reduction and efficiency plans are included
in environmental management systems at
all our sites. In the past, we have been able
to improve our overall energy efficiency by
reorganizing production sites and optimizing
our internal supply chain. However, in recent
years this improvement has not been achieved.
In 2020, we did not succeed in increasing our
capacity utilization due to the difficult market
situation and the COVID-19 pandemic.
As energy sources, we use natural gas, propane,
or other fuels, such as diesel. Fossil fuels
cover about 81% of our total fuel consumption.
Outokumpu does not consume renewable fuels
in production processes today, but we utilize
our own recovered carbon monoxide process
gas with 19% of our total fuel. Process gases
and waste heat are also used to heat buildings
on sites.
Toward low-carbon electricity
Outokumpu has centralized energy procure-
ment in order to secure a sufficient energy
supply, to ensure predictable, competitive,
and stable energy prices, and to optimize the
energy portfolio also on low-carbon electricity.
In 2020, 76% of our electricity sources came
from low-carbon (renewable and nuclear)
sources. See more details in the data tool
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 and
in a new nuclear power plant project in Finland.
Fuel switch to lower carbon emission fuels is
ongoing. Natural gas has already been in use
at our sites in Germany, Mexico, the US, the
UK and now in Tornio, Finland. We still have
some improvement potential left in Sweden
where we are actively studying options for
alternative fuels.
Energy used in operations
Terajoules, TJ 2020 2019 2018
Electricity 15,735 16,167 17,189
Carbon monoxide gas 2,250 2,412 2,275
Natural gas 7,269 7,239 4,623
Propane 1,828 2,024 4,754
Diesel, light and heavy fuel oil 573 668 662
Energy 27,655 28,509 29,502
Energy use in GJ per tonne crude steel 11.0 10.9 10.1
Market-based electricity emission factor, kg CO
2
eq/MWh
0
50
100
150
200
250
300
20202019201820172016
* Hydro power recs are calculated as fossil fuel
replacements in specific countries.
*
Sustainable operations
Outokumpu Annual report | Sustainability review 9 / 30
We operate at the heart
of the circulareconomy
Stainless steel is a durable material that
fits perfectly into the circular economy.
Recycling saves resources, and stainless
steel is made of recycled materials and
is fully recyclable, without any quality
degradation.
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 manu-
facturing process to replace natural resources.
Record high recycled content rate
Recycled steel from both stainless and carbon
steel is our most important raw material.
Increasing the recycled content of stainless
steel is the most efficient way for Outokumpu
to reduce the overall environmental footprint.
The steel recycled content rate of our stainless
steel, defined according to ISO 14021, was
87.8% in 2020. This includes pre- and
post-consumer scrap. Including the use of
recycled metal from our waste streams, the
recycled content of our products was 92.5%
in 2020. We reached better recycling than
our target of 90% for 2020. The result might
have been impacted by the circumstances
created by the COVID-19 pandemic. We aim
to maintain the high level of 92.5% until 2023
and align all the target years in 2023 when the
first transitional science-based target will be
revised.
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 and scales. We are continuously
looking for best ways to recycle the metals of
Total waste
Tonnes
2020 2019 2018
Total non-hazardous waste 442,763 281,646
356,230
Recycled 46,619 49,227
52,736
Recovery 9,657 17,138
19,256
Landfilled 386,487 215,281
284,239
Total hazardous waste 152,588 146,765
163,555
Recycled 59,635 12,988
15,414
Recovery 25,471 53,252
47,700
Landfilled 67,482 80,525
100,442
Tailing sands 1,023,503 1,006,590
991,391
The recycled content of
our products, including
the use of recycled
metal from our waste
streams, was 92.5% in
2020, exceeding our
own target.
Sustainable operations
Outokumpu Annual report | Sustainability review 10 / 30
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
20202019201820172016
our melt shop dust. Dust recycling increased
especially at our site in Calvert, the US. These
sidestreams are either treated on site or by
an external facility for recycling in our melt
shops. Metal recycling is the main driver of the
reduction of the upstream material emissions
(scope 3).
In addition to metals, other 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 into the
environment. As far as reasonable, these are
also recovered and recycled in the process.
For instance, the used acids are continuously
Total waste development,
tonnes per tonne steel
Recycled
Recovered
Landfilled
Tailing sand
Tailing sand
Tailing sand
Tailing sand
Tailing sand
regenerated for reuse, and the hydrogen from
the bright annealing process is recovered in
the incineration of the process furnace.
Aim to reduce waste to landfill
in stainless steel production
Outokumpu’s long-term goal is zero-waste
stainless steel production, which means that
all production material streams are studied
carefully to find the means of fully recycling,
reusing, or selling them as by-products. 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. Therefore, we decided to set a
target for waste (other than slag) going to the
landfill to be reduced by 0.5% per year. We are
striving to reduce this even further.
The amount of tailing sands from the mining
operation increased in 2020 compared to the
previous year, as the production of chrome
concentrate increased. 17.8% of waste from
stainless steel production was recycled and
5.9% recovered. Other recovered materials 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 the mining
area itself.
Turning slag into by-products
Outokumpu sold or used 1.13 million tonnes of
slag as the main by-product of operations. Slag
is an essential material in the steel melting
process, and it is made from lime or other
natural minerals.
Outokumpu has developed slag-based mineral
products for road construction, refractory,
concrete production and for water treatment.
The use of our slag by-products reduces
the amount of landfilled waste, saves virgin
materials, and leads to lower CO
2
emissions.
For example, in road construction, slag use is
an environmentally and economically sustain-
able solution.
In 2020, the use rate (including use, recovery,
and recycling) of all slag was 77.1%. The
remaining 336,700 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. In 2020, less slag could
be used which resulted in higher amount of
landfilled slag.
Reutilizing slag is good
for the environment
Slag is an essential material in the steel
melting process. However, once it is
used, we also sell it under the trademark
of OKTO to replace the use of natural
materials, such as sand or crushed rock,
in construction. In 2020, together with
Destia, we compared the carbon footprint
of slag and other road structure materials.
Results showed that by replacing virgin
materials, slag significantly reduced CO
2
eq
emissions in an actual road construction
case. In this case, CO
2
eq savings of nearly
800 tonnes could be reached.
Utilizing 700,000 metric tons of ferro-
chrome slag annually may save up to one
million tonnes of gravel and rock. OKTO
insulation has been used for more than 50
years already. Over the years, the positive
environmental impacts have become
manifold and large areas of rock and sand
have been spared.
Sustainable operations
Outokumpu Annual report | Sustainability review 11 / 30
0
10
20
30
40
20202019201820172016
Reducing our impact
on the environment
Our growing environmental efficiency
is based on long-term efforts and
continuous improvement. We constantly
research and develop new ways of
operating to reduce the environmental
impact of stainless steel.
The biggest environmental impacts of stainless
steel production are dust emissions from melt
shop and ferrochrome production processes
into the air, water use and discharges from
production, use of direct and indirect energy,
and the waste created in the production
process. 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.
In Tornio, Finland the overall impact on the
environment was analyzed during 2020 in
connection with the revision of the environ-
mental permit. The impact of the Tornio site to
nearby sea area is negligible. The fallout via air
is minimal and in practice not shown outside
the mill area (modelling done by FMI, Finnish
Meteorological Institute).
Dust emissions remained low
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 a specialized recovery plant.
Our dust filtering systems are extremely
efficient and remove 99% of the particles. The
Steel melt shop
particle emissions, grams/t
At our Dillenburg
site in Germany,
wildflower meadow
and beehives meet
stainless steel mill.
Sustainable operations
Outokumpu Annual report | Sustainability review 12 / 30
measured particle emissions from all of our
production processes were 274 tonnes in
2020 (347 tonnes in 2019). A large amount
of particles, 128 tonnes, were emitted from
the ferrochrome production process. However,
the emission measurement campaigns
include high uncertainty causing a remarkable
fluctuation in the results year by year. The level
of dust emissions from the melt shops is within
the limits of environmental permits and inline
with BAT levels. No significant further reduction
is expected.
Water withdrawal and discharges
Million m
3
2020 2019 2018
Surface water 46.1 45.4 44.6
Municipal water 1.1 1.2 1.4
Groundwater 2.6 2.4 2.5
Rainwater 2.4 1.8 1.2
Water withdrawal by source 52.1 50.7 49.7
Water discharges by type and destination
Cooling water out 13.2 13.7 13.4
Wastewater out 22.1 22.4 23.4
Discharge to surface water 21.0 21.1 22.2
Emissions to water
Metal discharges to water, tonnes 41 34 25
Nitrogen in nitrates, tonnes
1)
1,070 1,046 1,443
1)
Data restated to give the discharged nitrate. Part of the nitrates are treated in a
municipal treatment plant.
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 captured
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 is discharged.
The main discharges into water are metals
and nitrates. The discharge is measured and
supervised by the authorities. In 2020, six
cases of minor non-compliances occurred.
They were coordinated with authorities, immedi-
ately removed and analyzed. Wastewater
treatment depends on the contamination of
the wastewater. The water is treated directly in
the water circle at the process step and 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. The
water impact is managed by the municipal
treatment operators.
The water used in the production is mainly
surface water and often includes rainwater.
The impact of water withdrawal is evaluated at
sites where river water is used, and where the
data on the river water is available. The impact
was screened by the percentage of withdrawn
water compared to the river flow on a yearly
basis in 2017 and revised in 2020. None of
the sites had an impact on the river, meaning
the withdrawal was below 5% at all sites.
Our production site in Avesta, Sweden, has
analysed the impact of the water management
to the river Dalälven. The water quality
remained unchanged with a very limited impact.
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 freshwater discharge was at about 50
megaliters. Water recycling and treatment at
this site are especially ambitious to minimize
the groundwater impact. According to the water
risk assessment, future water stress change
will be further evaluated.
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 a 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. The underground mine takes
drilling water from old open pits (rainwater),
and drilling water is also recycled inside the
underground mining process. All dewatering
from the mine is pumped to the closed circuit
of the tailings site and concentrator plant on
the surface level. Furthermore, a significant
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 2020, there were
four incidents involving radioactivity. All of
the incidents were dealt with 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 the melting
process, is controlled regarding radioactive
contamination.
Sustainable operations
Outokumpu Annual report | Sustainability review 13 / 30
amount of 1.6 million m³ of rain and snow
melting waters were collected in the process
in 2020. Kemi mine discharges 3,200,000 m
3
water, incl. rainwater, from the area, whereas
the water intake from the municipal supply is
only 23,500 m
3
.
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 (meters) below surface. The area of the
mine site has not been expanded.
The biggest impact on the 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 that 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 the tailing ponds
of the mine area which will be landscaped as
forest when full.
Environmental Impact Assessment process
has started at the Kemi mine in 2020, and
the process will continue during 2021. In
the process, the mine is looking to find more
sustainable processes related to material
recovery.
Biodiversity and cultural heritages
The production of stainless steel does not
occupy or reserve large areas of land or have
a significant effect on the biodiversity of the
Honey “made by
Outokumpu”
At our Dillenburg site in Germany, wildflower
meadow meets stainless steel mill. The
surprising wealth of plants and blossoms
on our plant premises provides nutrition
for numerous insects. We have among our
workforce an avid hobby beekeeper, our
operator Janosch Ritter, who together with
other our team members have created
a wildflower meadow to support the
protection of endangered insect species
and foster biodiversity.
In the summer, the project team also set
up beehives. The first honey “made by
Outokumpu” will be bottled next year. This
will be done in cooperation with a local
charity organization that will collect the
sales revenues.
Biodiversity
Site Area in km
2
Percentage
Calvert, US 4.69 18.8%
Dahlerbrück, Germany 0.063 0.3%
Kemi, Finland 9.16 36.7%
Tornio, Finland 6 24.0%
Total 79.7%
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.
These sites comprise 80% of the total owned
land. Areas once utilized by production are
remediated for further use.
Outokumpu's site in Tornio, Finland is located
near Natura protected water areas. No risk to
the protection basics of those areas have been
identified according to Natura assessment. In a
study, some very rare biotopes were found just
by the mill area as well as also some protected
animals, such as a frog race and otters.
The Kemi mine is adjacent to two Natura
protected peat and wetland areas but no
indication, claim or report of any negative
impact of mining activities on biodiversity have
been identified. The Kemi mine cooperates
with local ornithological society to monitor the
local biodiversity. During 2020, the Kemi mine
and Tornio operations have both done fish
plantings in addition to permit obligations to
increase biodiversity. In 2020, there has been
investigations related to biodiversity around the
Kemi Mine site (nature surveys) which will still
be updated during 2021.
In Dahlerbrück, Germany a 0.042 km²
protected area is partly located on the
company’s property. There are e.g. endangered
deciduous forests and natural silicate rock
biotype with some endangered animal habitats
and plant species such as crinkled hairgrass
and fern.
In Calvert, Alabama, the US, some 80 hectares
of the property is defined as wetland including
some restrictions on land use. The site
management has identified as a biodiversity
aspect that part of the wetland area is home to
a wide array of wildlife, like wild turkeys, bears,
fox squirrels, gopher tortoises and snakes,
among other species.
In 2020, the company started to evaluate the
possible impact on cultural heritage.
Sustainable operations
Outokumpu Annual report | Sustainability review 14 / 30
Sustainable supply chain
Stainless steel is a durable and long-lasting material used
by leading brands and demanding industries around the
globe. As the leading provider of sustainable stainless steel,
Outokumpu has strict requirements for traceability and
responsibility throughout the supply chain.
Our customers require assurance that the
materials for their applications are produced
and procured in an ethical and responsible
manner. Our most important raw material is
recycled steel, which primarily originates from
Europe and the US where our melt shops are
located.
The main alloying element, chromium,
originates from our own chrome mine that
differentiates us from our competitors. Our
mine in Kemi, Finland is the only chrome
mine in the EU and we produce ferrochrome
for all our steel melt shops and for sale. 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.
Outokumpu’s supply chain activities are guided
by our Code of Conduct, Supplier Requirements
and our Corporate Responsibility Policy.
Outokumpu is also committed to the Modern
Slavery Act.
Strict requirements on
ourselves and our suppliers
As our customers require a lot from us, we
place the most stringent requirements on
ourselves, and we 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.
We assess our new and existing suppliers, and
if there is evidence of any kind of violation of
our requirements, the 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 2020.
Outokumpu monitors its suppliers through
self-assessment, screenings, and audits. Due
to the COVID-19 pandemic, no on-site audits
were conducted during 2020. However, a
supplier performance assessment was
conducted for 103 of Outokumpu's key
suppliers in 2020, covering almost 60% of
key suppliers. In the supplier performance
assessment, suppliers are assessed using the
following criteria: technology, quality, supply,
cost, safety, environment and financial risk.
As a result, improvement opportunities and
Our target is to
transport as much of
our products by rail
and ship as possible.
Sustainable operations
Outokumpu Annual report | Sustainability review 15 / 30
improvement requirements were identified and
communicated to the suppliers.
General procurement supply chain
In 2020, Outokumpu had over 9,000 suppliers.
The 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 propor-
tion of spending on local suppliers was on
level of around 90% for general procurement,
excluding raw material suppliers. There were
no major changes in the supplier base during
the year.
Raw materials
We take into account the OECD Due Diligence
Guidance for Responsible Supply Chain. In
2019, our direct material suppliers were
screened 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. During 2020, only one site was audited
due to travel restrictions but 23 suppliers were
assessed under the ESG criteria resulting in
some development discussion and tracking
procedures.
Finnwatch, a Finnish NGO, published in
February 2021 a report on Outokumpu's supply
chain in Brazil. Outokumpu recognizes the
report and will further investigate the case.
Outokumpu has started to implement the UN
Guiding Principles on Business and Human
Rights.
Material and service suppliers
Outokumpu supplier countries, including the most important
supplier countries with purchases of more than 50,000 euros.
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, such as the implementation of
intermodal transportation. In intermodal
transportation, trucks are used for pre-carriage
and on-carriage but trains are used for long
distance transport. Also, the CO
2
eq emission
factors of trucks are continuously decreasing
due to better technique. In 2020, the company
could significantly decrease the transport
CO
2
eq emissions by about 19% although
production only decreased by 3.7%.
Sustainable operations
Outokumpu Annual report | Sustainability review 16 / 30
We operate safely, always
Safety is our highest priority. Everyone at Outokumpu has
the right to a safe and healthy working environment. 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 preven-
tive activities. Safety audits are performed
regularly according to a standardized audit
program. Due to the COVID-19 pandemic,
most of the audits were conducted remotely.
Our daily work is guided by common safety
principles, standards, guidelines, and our ten
Cardinal Safety Rules.
Hazard observations and Safety Behavioral
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.
Our safety network which comprises of every
site safety manager and is coordinated by the
Group safety function meets monthly to ensure
up-to-date safety topics are communicated
effectively and best practices are shared and
adopted.
Responding to COVID-19
Protecting the health and safety of employees
is the top priority at Outokumpu. During
the year, Outokumpu has taken several
rigorous safety measures to mitigate the
negative effects of the COVID-19 pandemic
on people and operations. A group-level crisis
management team has been responsible for
coordinating mitigation measures across the
company. Local crisis teams have implemented
site-specific rules and instructions according
to the decisions by the company and local
authorities.
Thanks to these decisive and well-timed
actions, the impacts have been limited. We
continue to monitor the development of the
pandemic closely in each country that we
operate in and adjust the needed measures
accordingly.
Strengthening positive
safety culture
During 2020, developing the company’s safety
culture was focused around creating a positive
safety culture across the organization.
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 that was 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.
In addition to the safety awareness training
and the regular task and location specific
safety education, a new e-learning course
Protecting the health
and safety of our
employees is always
our top priority,
and even more so
during the COVID-19
pandemic.
Our people & society
Outokumpu Annual report | Sustainability review 17 / 30
0
2
4
6
8
10
20202019201820172016
safety measure, declined from the previous
year and was 2.4 against the target of <3.0
(2019: 3.2). Group LTIFR (lost time injuries
per million working hours) was 1.4 against the
target of <1.2 (2019: 1.4).
The rate of all work-related accidents (total
recordable injuries and first aid treated injuries
per million working hours) was 13.7 (2019:
15.3).
Proactive safety action frequency was 5,353
(2019: 3,810). This includes reported near-
misses, hazard observations, SBOs, and other
preventive safety actions 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 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. In
addition, occupational hygiene measurements
are being carried out at Outokumpu sites to
ensure a healthy working environment.
The number of occupational diseases diag-
nosed in the Group was 0 (2019: 0). The total
absentee rate was 3.3% (2019: 4.2%).
Work-related injuries by region, accident and employee type
Group
BA
Europe
BA
Americas
BA Long
Products
BA Ferro-
chrome Employees
Contrac-
tors
TRIFR
1)
2.4 2.1 1.6 8.1 3.1 2.3 2.7
LTIFR
2)
1.4 1.5 1.1 3.1 1 1.3 1.7
Total recordable injuries
3)
53 25 9 13 6 40 13
Fatalities 0 0 0 0 0 0 0
Lost time injuries 31 18 6 5 2 23 8
Restricted work injuries 6 0 3 1 2 3 3
Medically treated injuries 16 7 0 7 2 14 2
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.
Work-related injuries
*
Lost time injuries
Fatalities
Restricted work injuries
Medically treated injuries
* Per 1 million working hours.
about controlling contractors in safety was
launched during 2020. Despite the restrictions
caused by the COVID-19 pandemic, safety
trainings at the sites could be arranged
according to plans by implementing safety
measures and control systems for minimizing
any risk.
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.
Outokumpu uses total recordable injuries
per million working hours of employees
and contractors (TRIFR) as the main safety
performance indicator. Group TRIFR, our main
Strong safety
performance,
strong safety culture
In 2020, our performance in safety was
on a very good level as we improved our
performance especially regarding our total
recordable injuries. This follows the long
trend of continuous improvement in safety
performance, proving that we have been
able to build a strong safety culture within
Outokumpu.
Since 2016, when the new safety KPIs
were implemented our total recordable
injury rate has declined over 70% from
8.7 to 2.4. Our lost time injury rate has
declined from 2.2 to 1.4.
“Everyone can be proud of this performance
that we have achieved and the strong
safety culture we have built. Our focus
on safety principles, safety standards
and sharing good practices throughout
the company has been the key to our
success. This shows that we are on the
right path toward our long-term goal of zero
accidents,” says Alastair McCubbin, Head
of Health & Safety.
Our people & society
Outokumpu Annual report | Sustainability review 18 / 30
We want to build our employees
the best work environment
The year 2020 was largely labeled by the impacts of the
COVID-19 pandemic. Also, the launch of Outokumpu's
new strategy set in motion a transformation affecting our
personnel at all levels. Our Ways of Working provide us now
with the fundamentals that describe our key success factors.
Mitigating the effects of
the pandemic
The outbreak and the continuous effects of
COVID-19 strengthened our teams, and our
joint response proved the cross-functional
cooperation within the organization to be
strong. Maintaining the level of collaboration
and effectiveness of work was a remarkable
achievement of all the Outokumpu team
members.
We empowered our employees to work
remotely whenever possible and helped to
adjust their work environment according to the
changed situation and restrictions caused by
the pandemic. The online meeting methods
were taken into use without delay, where
applicable, and adjusting the ways of working
in operations was systematic and prompt.
In these circumstances, social interaction
and face-to-face collaboration have naturally
shown their value. Nonetheless the amount
of successfully conducted remote work and
online meetings will have implications on our
future ways of interaction. The flexible view and
practice of combining remote and office work
will provide our way forward.
The Outokumpu Ways of Working
To steer our journey toward our vision, we
commit to promote a high-performing culture
and Outokumpu Ways of Working. The Ways of
Working were launched with our new strategy,
and they clarify and define the way we need
to work together in Outokumpu in the coming
years. They consist of six elements: we operate
safely always, we leverage the power of one
Outokumpu, we deliver, we grow people
and value diversity, we act sustainably, and
we are a trusted partner. The way we work
at Outokumpu is now condensed in these
fundamentals that describe our important
success factors.
In control rooms our operators ensure that
the process runs smoothly – all year round.
Our people & society
Outokumpu Annual report | Sustainability review 19 / 30
For example, related to valuing diversity, it is
very important that all people feel comfortable
to work in the company and can contribute
equally to our joint journey. There is zero
tolerance for any kind of discrimination in
Outokumpu, whether it is based on ethnic
origin, nationality, religion, political views,
gender, sexual orientation, age, or any other
factor. Outokumpu’s Code of Conduct sets
the way of operating in the Group, built on the
equal treatment of all people.
Our target is to align ourselves in these
six Ways of Working, thereby gaining the
ingredients to be a truly high performing
organization. The Outokumpu Ways of Working
provide us with a road map: they express the
requirements for our ways of working to be the
customer’s first choice in sustainable stainless
steel. During 2021, our Ways of Working will be
communicated and implemented throughout
the organization, and gradually also incor-
porated into our performance management
system and My Performance Commitment
development discussions.
Improving organizational health
We strive to improve our organizational
health. Elevating empowerment, role clarity,
and leadership were identified as the key
development areas for 2020, based on the
results of our global employee survey Organi-
zational Health Index conducted in 2019. By
developing our leadership capabilities, we can
significantly impact our business performance
and organizational health – hence improving
leadership and empowerment helps influence
many other areas of organizational health.
Outokumpu Ways of Working
We operate safely.
Always.
We work safely, comply with our cardinal safety rules, assess potential risks and take appropriate
measures to mitigate them.
We leverage the power of
one Outokumpu.
We work together, share and combine our knowledge, across functions and regions to create best
value for our customers.
We deliver.
We live up to our promises with clear roles and clear accountabilities. We have a passion for
continuous improvement.
We grow people and
value diversity.
We foster diversity and create work environment that allows all team-members to contribute and
develop.
We act sustainably.
We are driven by creating sustainable impact, environmentally, socially and economically.
We are a trusted partner.
We are a reliable and trusted partner towards all our stakeholders, our customers, employees,
investors and the communities we are operating in.
Although every day work was largely affected
by the pandemic, many development initiatives
took place to increase our organizational
health and employee satisfaction. We clearly
saw that the development on empowerment
and leadership supported us also in managing
the difficult and challenging situation caused
by the pandemic.
To ensure alignment with the new company
strategy and targets the 2020 organizational
health survey was moved forward. The next
survey will take place in 2021. By creating a
common understanding on how we run and
lead our business, engage and empower our
people, and moreover how the day-to-day
behaviors and mindsets are connected to the
company strategy, this employee engagement
survey will further support our Ways of Working.
Step-change in leadership
Strong leadership forms a firm foundation for
our high performing organization, and we aspire
to grow leaders within our own organization.
The basis for further leadership development
in Outokumpu is the implementation of the
Leadership Pipeline concept and methodology,
and our Step-Change in Leadership Excellence
program develops our leaders in all levels. The
program brings clarity to the expectations
of different roles and pushes accountability
forward in the organization in a coherent way.
The program has been piloted and rolled out in
several locations, and we are proceeding with a
top down approach starting with the Outo-
kumpu Leadership team and Group finance
team. The roll-out will then continue throughout
the organization, commencing with manage-
ment teams and then cascading within the
function or location, targeted at strengthening
the performance of each team and endorsing
them to become high performing.
The Step-Change in Leadership Excellence
program includes workshops where
management teams learn to function as a
cohesive unit, with a clear team purpose and
vision, aligned priorities and key deliverables
in alignment with the wider Outokumpu
organization and strategy. The training enables
individual leaders to complete the transition
into the leadership role that needs to be
executed to add most value to their team and
the organization.
For the recently appointed administrative
managers, who have stepped into their role
for the first time, we have developed in-house
a program to advance tools and methods
which drive performance, talent, and rewarding.
Leadership Pipeline is implemented in this
program as well as in our License to Lead shift-
leader program to our first-line managers in
Our people & society
Outokumpu Annual report | Sustainability review 20 / 30
operations. Hence, we will continue enhancing
the capabilities of our managers to ensure
alignment in our leadership on all levels.
A strong focus will be maintained on people
development and especially in leadership
development, and the Leadership Pipeline
program will be executed in more functions
and teams throughout the entire organization.
Making a career
In our international and process driven
organization, key roles require international and
cross-functional experience accompanied by
excellent leadership skills. To attract, develop,
deploy and retain the talent we need for the
future we have increased the rigor of our talent
management. This has included executing a
significant international rotation of leadership
inside the company: most of our major
operational units now have new leadership.
With a new talent management team, we are
defining the road map for the coming years to
ensure we employ capable and talented team
members to take over key positions in the
future, and the development work continues in
2021.
Defining and managing our talent pipeline and
the different talent pools – young talents, those
with high potential, and top leadership – form a
core responsibility of our global talent manage-
ment. Our intensive programs grow these talent
pools step by step, as we identify and assess
the potential of our talents in the different
pools to provide clarity about the strengths and
development areas of each talent.
For example, the global program Form your
Future sets the basis for international career
growth in Outokumpu, targeting newly hired
graduates. We provide them opportunities for
international collaboration, coaching, as well as
efficient presentation and communication skills.
The program also gives an opportunity to share
experiences, provide insights and inspiration
and moreover, get motivated by success
stories from our current leaders.
Learning and development
Amidst the COVID-19 pandemic and the
unexpected change in circumstances, it
was important to continue the training and
coaching efforts to further increase role clarity,
cooperation, and leadership skills to enable
the best execution of our goals. Thanks to
the quick and agile shift into virtual learning
methods and online exercises we were able
to maintain a fair number of training and
development measures despite the social
distancing restrictions and travel guidelines.
Even before the effects of COVID-19, the
share of e-learnings had risen significantly
as part of our learning plan and offering.
Self-evidently growth occurred also after the
outbreak of the pandemic, providing training
where learners participate in an online learning
course at different times, whenever it is the
most suitable for the participant and at their
own pace. To keep up the learning processes,
e-learnings were created, and courses were
launched in the areas of safety, manufacturing
excellence, and sustainability.
We also had a significant increase in the
quantity of webinars and virtual training
available. Initially, we experienced a brief
drop in the number of training sessions as
events were canceled, but the ways of working
quickly adjusted. Helping our own subject
matter experts enhance their training skills has
encompassed a systematic process for the
past three years, and amidst the pandemic, we
saw the benefits materialize. One driver was
the increased offering of learning sessions for
trainers instructing on the of use virtual tools
and methods. Virtual training delivers multiple
benefits especially in a global company spread
over several locations and sites. Many of our
face-to-face and classroom training sessions
were converted into online versions allowing
development to continue though people could
not travel nor meet in person.
To enhance efficiency, customer orientation,
and the understanding of quality in our
organization, we will introduce a learning
program on quality. The modular program is
targeted especially at our operators and it will
familiarize our employees with the significance
of quality – especially to our customers –, our
quality management system, and the way every
one of us affects quality.
In total in 2020, 93% of Outokumpu
employees participated in training sessions
and programs. Despite the significant increase
in remote and online training as well as
webinars, however, the number of training days
dropped during the exceptional year. Overall,
the number of training and development days
amounted to 9,978 (2019: 18,004) and
79,825 hours (2019: 144,036) during the year.
Setting and achieving targets
To ensure that managers and employees
understand their main tasks and how they
contribute to the business targets and the
strategy, we have a systematic process for
More experts in
problem solving
We strive to support the development of
our people, and to facilitate continuous
improvement in our operations, the
Outokumpu team members are regularly
trained and certified as experts in the Lean
Six Sigma methods and tools. Developing
process improvement and problem-solving
skills helps us to improve business
processes, e.g. by reducing variation and
eliminating defects and waste.
In 2020, on a regular basis, we celebrated
the achievement of our employees by
certifying new Green Belts, who help us to
continuously improve our processes and
procedures.
During the year, these training sessions
presented an example of the many which
were promptly transformed into virtual
format, and projects were executed in
the altered circumstances, with excellent
deliverables.
Our people & society
Outokumpu Annual report | Sustainability review 21 / 30
setting and achieving individual performance
and behavior targets as well as a discussion
about development needs. The core of
performance management in Outokumpu is My
Performance Commitment process, MPC.
Consistent execution of My Performance
Commitment process ensures high
performance by clarifying responsibilities
and individual accountabilities. Our target
setting process starts with the definition of
the business targets, which are cascaded
throughout the organization. Each employee
and their manager agree on individual
performance targets that contribute to the
overall business targets on the right level:
business targets, leaders’ targets, or individual
contributor targets.
In 2020, Outokumpu continued its perfor-
mance review process with increasing focus
on achieving results. Communication tools
for managers and employees were further
developed with an intensified attention on
follow-up and driving a performance culture in
the organization. To further strengthen engage-
ment and performance among employees,
Group supported managers with performance
tools and measures while also providing
training. Going into 2021, the target setting
and follow-up will be further strengthened
and intensified to secure a delivery following
the new strategy for positioning Outokumpu
competitively for the future.
My Performance Commitment process is
documented in our common HR platform
PeopleDrive. In 2020, 98% of employees in
applicable countries had a regular performance
development discussion with their respective
manager. The remaining 2% are mostly on
parental or other long-term leave. In those
countries where local contracts or regulations
do not make it possible to have performance
development discussions, Outokumpu follows
the local procedures.
Through having one global HR ERP system,
PeopleDrive, Outokumpu has been able to
improve and harmonize HR processes and
bring efficiency and better end-user experience
to managers and employees. During 2020
Outokumpu conducted several audits to ensure
high quality of data, acknowledging that the
global system supports an increasing number
of other processes and systems within the
Group.
Outokumpu’s remuneration principles and
framework was largely unchanged from the year
before: incentive plans remained the same
while the target setting was adjusted. Salary
budgets were set on very moderate market-
based levels observing the overall difficult
market situation. Long-term incentive programs
continue to focus on emphasizing shareholder
value creation and ownership culture and
setting a performance culture through Group
and BA level target setting. The commitment to
our new strategy and transformation will also
be reflected in the incentive programs within
Outokumpu.
Organizational development
As part of our aim for a lean and agile organi-
zation, we started delayering the organizational
structure. The target is a simplified and flat
structure with clear roles and responsibilities,
thereby creating a high level of individual
accountability.
In 2020, the number of employees decreased
by 475 globally. In April we concluded negoti-
ations to reduce our personnel in Germany by
approximately 370 full-time employees, and
the measures were close to completion at
the end of 2020. In the business area Long
Products, approximately 100 positions were
reduced by year end. Approximately 70% of the
redundancies took place in the UK, and shift
reductions were also implemented in Sweden
earlier in 2020. In November, Outokumpu
started employee negotiation processes in
selected operating countries with the plan
to create cost savings by restructuring and
reducing the total employee headcount by
up to approximately 1,000 mostly by the
end of 2021. The employee reductions were
planned to be 270 in Finland, 250 in Germany
and 190 in Sweden, with further reductions
planned across the European and Americas
based operations. Outokumpu has targeted a
headcount of below 9,000 during 2022.
By cultivating a lean and agile organization, we
aim to grow an organization with people who
have the capability of quickly reacting and
adapting in the changing market environment.
The year 2021 will see some of our teams
building their everyday tasks, manners and
routines after the delayering of the organiza-
tion, as certain functions will need to adapt the
structures or change the ways of working going
forward.
Outokumpu is committed to informing and
consulting its employees and their represen-
tatives to ensure a greater understanding of
the company and the competitive situation
in which we operate. In Europe, continuous
Keeping it safe
While we encourage remote work whenever
possible during the COVID-19 pandemic,
our mills would not run, and we could
not deliver top-quality stainless steel to
our customers, without our ever-present
experts in several shifts. During the year,
we took countless actions to ensure the
safety of those who could not work
remotely but also to keep our mills up and
running by global and local guidelines on
social distancing, hygiene and cleaning,
travel bans as well as limiting face-to-face
meetings and visitor access. Our teams
came up with various solutions like outdoor
meetings following the rules of social
distancing.
Here the Americas’ safety team, led by
Wayne Denton, is showing example of how
to organize the melt shop team’s safety
meeting safely.
Our Americas business area also success-
fully launched virtual customer visits to
replace real-life visits to our mills.
Our people & society
Outokumpu Annual report | Sustainability review 22 / 30
collaboration with the personnel takes place
in a joint consultative body, Personnel Forum,
which is an information channel between
our personnel and corporate management.
Personnel Forum appoints the Group Working
Committee, which is responsible for the
ongoing cooperation between management
and employees. Eight members represent
employees and three the management.
Normally, the Personnel Forum meets once a
year but in 2020, the Outokumpu Personnel
Forum was postponed and then canceled
due to COVID-19. A meeting of the Personnel
Forum is planned to be organized in 2021, yet
the COVID-19 situation will be monitored very
closely. Additionally, Group Working Committee
was heavily affected in 2020 by COVID-19, as
it was possible to convene face-to-face only
once, and the other three official meetings
were virtual. In addition, between mid-March
and end of June, Group Working Committee
had weekly COVID-19 update calls.
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 2020 altogether 79% of the
Group’s employees were covered by collective
agreements (2019: 79%). In sum, 2,496
days in 2020 were lost due to strikes (2019:
5,424).
Our people by region
2020 2019 2018
Finland 2,517 2,502 2,437
Germany 2,326 2,555 2,667
Sweden 1,888 1,975 1,940
The United Kingdom 502 560 571
Other Europe 747 727 698
Europe 7,980 8,319 8,313
The United States 1,010 1,064 1,072
Mexico 786 859 903
South America 84 87 86
Americas 1,880 2,010 2,061
Asia/Rest of the world 55 61 75
Group total 9,915 10,390 10,449
Sharing expertise
across functions
To enhance the development of training programs
internally, we have leveraged the power of one
Outokumpu. With an extensive collaboration across
functions, operations and different teams, during
2020 we have constructed for example a vast
training program concentrating on quality. In the
future, quality will help us to strengthen our market
position and we recognize that the foundation for
high-quality products is built on high-quality culture
throughout the organization. Thus, the aim is to
ensure that employees understand how they create
value for the customer and Outokumpu in terms
of product quality and how the contribution and
awareness of each and every one of us is crucial. The
training is targeted especially at operators and first
line managers but will also be available to process
specialists, decision makers and sales teams.
In addition to quality, online and in-house training
programs have been developed around topics such
as stainless products and properties as well as
making of stainless steel from scrap to slab. These
training programs will be rolled out during 2021–22.
Our people & society
Outokumpu Annual report | Sustainability review 23 / 30
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.
Outokumpu and society
Community investments
EUR 0 million (2019: 0)
Operating costs
EUR 4,613 million
(2019: 5,330)
Economic value distributed
Direct economic
value generated
Employee benefit expenses
EUR 735 million (2019: 774)
Payments to providers of capital
EUR 92 million (2019: 130)
Taxes paid to government
EUR 4 million (2019: 5)
Direct economic value
generated and distributed
Economic values retained in business
EUR 224 million (2019: EUR 295)
Revenues
EUR 5,669 million
(2019: 6,535)
stainless steel, significant local projects, and
sports associations.
We support research related to our field of
industry and maintain close cooperation with
educational institutes. In 2020, for instance,
Outokumpu strengthened cooperation with
local educational institutions in Finland with
Lapland University of Applied Sciences, Oulu
University of Applied Sciences and Vocational
College Lappia. This way, the competencies
and skills needed in the industry can be better
embedded into curriculums. Students, educa-
tional institutions and Outokumpu all benefit
from the systematic and long-term cooperation.
Apprenticeships have been offered to local
colleges, and student placements have
been made available in the form of one-year
programs.
Local communities
While Outokumpu operates in a global market,
our production sites are often located in
relatively small cities or towns. This means
that we are a significant part of the many of
the communities we operate in, and often
one of the 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, and we maintain continuous
cooperation with community officials and
representatives, other companies, schools,
and universities. Typically, sites have yearly
discussions with local community representa-
tives on relevant topics such as employment,
the environment, energy, or sponsoring of local
events.
As part of their community engagement, some
Outokumpu sites also continued their dialogue
within the community and with environmental
NGOs related to ongoing permit processes
or other environmental issues. In 2020,
Outokumpu launched an Environmental Impact
Assessment (EIA) procedure related to the
plans to expand our Kemi Mine. Discussions
about possible concerns related to the project
have been conducted with local stakeholders.
In this exceptional year, our responsibility as
a community member was very different than
it usually is. Cooperation took remote forms,
when it was not possible to organize events
due to social distancing. For example, instead
of organizing open-door events at our produc-
tion sites for neighbors and families of our
employees, we limited the number of visitors
at our sites to only business critical visits. Our
sites followed both Outokumpu’s own and local
guidelines by authorities to safeguard both our
employees and the community we operate in.
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
Our people & society
Outokumpu Annual report | Sustainability review 24 / 30
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 and
joined ResponsibleSteel initiative for the steel
industry.
Outokumpu is a member of several inter-
national organizations and provides relevant
information to decision-makers and experts
relating to the development of the business
environment and legislation. The Group also
participates in the work of trade organizations.
Our public affairs approach is to communicate
via industrial associations like Eurofer toward
governing bodies and regulators. Our total
spending on association memberships is
around EUR 2.5 million.
See the list of our memberships on our
website.
Ethics and Compliance
Outokumpu is strongly committed to
conducting business in a legal, compliant and
ethical way. The objective of Outokumpu’s
ethics and compliance program is to ensure
that Outokumpu and its employees comply
with the laws and regulations as well as
Outokumpu’s internal policies and instructions
and make sound, ethical decisions as part
of their daily work. The program also aims
to mitigate compliance risks by a set of
preventative and supervisory measures. During
2020 the implementation of all elements of
the ethics and compliance program continued
in close cooperation with the leadership,
business areas and business support functions.
The compliance governance bodies, including
Compliance Steering Group and a network of
compliance contact persons, also supported
with the implementation of the program.
Outokumpu’s Code of Conduct is the core
element of Outokumpu’s ethics and compli-
ance program as it sets the standards for what
is the right thing to do. That means acting
honestly, responsibly, and in an ethical manner
in everything we do. One of the key compliance
projects for 2020 was the revision of Code of
Conduct. The revision was made, inter alia, in
order to incorporate new Ways of Working and
strategies into the Code of Conduct and to
comply with the stricter external requirements
and expectations from the business partners.
The revised Code of Conduct will be launched
during 2021 together with the updated,
mandatory Code of Conduct e-learning for all
employees.
Outokumpu’s Code of Conduct sets zero
tolerance for corrupt practices. Outokumpu has
also an Anti-Corruption Instruction providing
more detailed guidance on responsible
business practices. In 2020, specific anti-
corruption related communications were made,
and anti-corruption e-learning was reissued to
all administrative employees. The e-learning
achieved a completion rate of 100%. The effec-
tiveness of the anti-corruption e-learning was
measured through a survey that was launched
for the first time as part of the improvement of
internal controls. Communications were also
made with respect to data protection topic
and data protection e-learning was relaunched
Rescue patrol
ready to serve
At our mills, we have internal task forces
who support local rescue services by
taking care of the situation until the rescue
services arrive. But some of our experts also
act as on-call firefighters in their community.
In Nyby, Sweden our task force works
closely with the local rescue service in the
Eskilstuna area. Among our stainless steel
experts, we have eight on-call firefighters
who work part-time and respond to hundreds
of emergency calls in their community every
year. As locals they have good knowledge
of the area, and they are an important
part of the local community's emergency
preparedness, with also certain tasks
agreed with the authorities. Outokumpu as
an employer supports our team members’
work as part-time firefighters and enables
their participation in the emergency
operations and exercises. As compensation,
Outokumpu gains own experts with solid
knowledge in fire protection, lifesaving and
accident prevention work.
in 2020 with the completion rate of 100%.
To strengthen the enforcement of mandatory
compliance e-learnings a consequence
management process was implemented in
2020. Through this process, the completion
of the mandatory compliance e-learnings can
be effectively monitored, and follow-up actions
can be taken in case of non-completions.
During 2020 further improvement actions
also continued in the identified other key risk
areas, including competition law compliance
and trade compliance. Within competition
law compliance, the company’s Competition
Law Compliance Policy was updated, several
webinars were conducted for selected target
groups and communications were made
through different channels on this topic. Within
the area of trade compliance, Outokumpu
has a Know Your Business Partner Instruction
detailing the principles and rules related to
establishing and monitoring relationships
with business partners and managing related
risks. During 2020, third party risks were
further mitigated with process improvements
and organizing several webinars on the trade
compliance topic for targeted groups.
Compliance risks, including risks related to
corruption, are assessed and reviewed annually
and described in the Key risks section in this
Annual report. More information regarding
our misconduct reporting can be found in the
review by the Board of Directors, Corporate
Governance statement, and our website.
Our people & society
Outokumpu Annual report | Sustainability review 25 / 30
We want to increase our customers’ compet-
itiveness with our products by improving their
efficiency, profitability, and sustainability. We
continuously innovate and improve our opera-
tions and products so that we can offer more
benefits to our customers. Together with our
customers, we can find new application areas
where stainless steel can make a positive
impact as a more sustainable solution. While
we had to adjust our operations in 2020 to
meet lower demand, our sales team proactively
engaged with our customers during these
exceptional times to ensure the continuation of
our service and remain our customers’ trusted
partner.
Outokumpu has a strong customer base
spread across the globe on every continent
and balanced over a range of industries. Our
customers build and construct infrastructure
and buildings, produce energy, and
manufacture appliances and cars. Most of
our customers are based in areas where we
have our own production: Europe, the US,
and Mexico. We also have a global sales and
service center network that serves customers
on all the main continents.
Outokumpu conducts regular customer satis-
faction surveys. In the latest one, conducted
in 2019, 95% of customers were satisfied,
very satisfied or absolutely satisfied with their
business relationship with us. Our strengths
are quick reaction to customer requests,
understanding customer needs and easy reach
of contact people, while we need to work on
our delivery performance. In the exceptional
year of 2020, we strove to keep our delivery
performance on an acceptable level but did not
manage to improve it significantly.
Customer cooperation goes online
Continuous interaction with customers helps us
to improve our understanding of our customers’
needs, challenges, and business environments.
This feedback helps us to achieve our growth
targets and guides us in improving our
performance, at the strategic and operational
levels. In 2020, our customer cooperation took
new remote forms. For example, the Americas
business area arranged virtual visits with top
distributor customers.
In terms of digitalizing our sales channels,
2020 was a significant step forward. Electronic
Data Interchange (EDI) has been a main pillar
of connecting on a transactional level with our
customers. Additionally, we have been able to
further expand our web shop offering. All those
Customers and expertise
Our customers are our focus in our new
vision, to be our customer’s first choice in
sustainable stainless steel.
Temoco provides bar
furniture and chose
Outokumpu as a
supplier because we
are a responsible
producer of stainless
steel.
Sustainable solutions
Outokumpu Annual report | Sustainability review 26 / 30
sales digitalization efforts do not only improve
the customer experience and satisfaction, but
also help us to further reduce administrational
effort and cost of sales.
Excess material sold
online in Germany
In 2020, we took another leap forward in
our sales digitalization efforts and set up a
new web shop selling excess material from
our German mills. Excess material can be for
instance leftovers due to order cancellations
and with sometimes very distinct dimensions,
or material that does not fulfill the quality
requirements for prime products, such as
with scratches on the surface, but which are
still too good to scrap it. We have always sold
excess material but by a different method and
a negotiation process.
Now with the web shop, our select customers,
who have bough excess materials before, can
immediately see what is available, and the
process runs smoothly for both Outokumpu
and the customers. Our excess material web
shop was set up in a record short time, in only
13 weeks. We are looking into possibilities to
expanding it to Tornio and Terneuzen.
Bridge built to last
New Pooley Bridge, the first stainless steel road bridge in the UK, was designed by Knight
Architects to replace the original historic stone bridge, swept away in a storm, and opened up
for traffic in October 2020. “We found that local people wanted to minimize the risk of future
flooding, to be able to see the landscape clearly and to include traditional stonework. We also
needed to minimize the impact of construction on the river,” explains Hector Beade Pereda,
Head of Design at Knight Architects.
Using strong duplex stainless steel, bridge designers could create something as slender as
possible, to help the bridge appear transparent so that people can see the landscape through
it. The slender design also allows the river to flow freely and avoids backing up during storms.
The duplex steel is also more tolerant of impacts by debris when the river level is high and
flowing fast. Light design minimized the impact of construction on the river.
Find out more on Pooley bridge
Transforming bar
industry sustainably
Temoco provides bar furniture for some
of the Nordics’ leading bars, transforming
the bar industry sustainably. Morten
Larssen, the owner of Temoco: “We chose
Outokumpu because they clearly show and
act like a responsible producer of stainless
steel. That business is all but green due
to the industrial process, but they do
their best to produce it as sustainably
as possible. The fact that 90% of the
raw materials used in their business are
recycled and 100% recyclable played a
large part and being located in the Nordics
ensures fair working conditions. We must
educate and inform our clients about all
the benefits sustainable options give to
the environment and to the economy. We
believe that more players in the market
will begin to pay more attention to
sustainability.”
Watch Morten Larssen describe the
sustainable business of Temoco
Sustainable solutions
Outokumpu Annual report | Sustainability review 27 / 30
Digitalizing Tornio
moves ahead
In 2020, we have been transforming our
Tornio mill into the most digitalized and
cost-competitive stainless steel operation
in the industry. We built our own industrial
digital platform based on Microsoft Azure
technology. We are using artificial intelli-
gence in process optimization, predictive
maintenance and quality control. Concrete
examples are surface inspection cameras
installed in integrated rolling, annealing
and pickling line as well as software and
sensory gates in the spare part storage for
automatic spare part storage inventory.
“This platform will enable us to transform
from experience-based and intuitive
decision-making to data-based deci-
sion-making,” says Minna Bhati, Program
Manager for the program. “Already we are
using data from Tornio’s machines to help
close the skills gap between operators
who have been producing stainless steel
for decades and those who are new to the
industry.”
Research and development
Outokumpu's research and development
(R&D) aims to create extraordinary value for
our collaboration partners both internally and
externally by delivering focused projects on
the current and future product demands of
our customers, developing and adopting new
process technologies, ensuring and improving
efficiency of our production processes,
ensuring best in class product support,
securing competitive knowledge and driving
value by using digital tools and data science.
Further optimization of
R&D organization
Our 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. As part of
organizational changes made in the Chief Tech-
nology Officer's function, the R&D organization
was further streamlined in 2020. Both process
and product R&D teams started to report
directly to the head of R&D. Outokumpu has
three R&D centers located in Avesta, Sweden,
in Krefeld, Germany and in Tornio, Finland. R&D
activities are focused on the development
of our production processes, products and
customer applications. In 2020, Outokumpu’s
R&D expenditure totaled EUR 21 million, 0.4%
of net sales (2019: EUR 17 million and 0.3%,
2018: EUR 15 million and 0.2%).
Process R&D
During 2020 the key process R&D projects
were focused on the optimization of product
quality, yield, production cost reduction and
material efficiency. R&D also contributed to
product transfers between the Outokumpu
units. A training program to further improve
the technical competences of our staff at
production operations was developed and
launched. Sharing of best practices between
Outokumpu production sites was also kept
high in our agenda, facilitated by so called CTC
(core technology competence) groups involving
technology experts from both production and
R&D teams. Process R&D experts continued to
be actively involved in our industrial digitali-
zation initiatives. A long-term R&D program
to aiming to reduce the CO
2
footprint of our
operations was initiated.
Product R&D
The product R&D projects are focused on
developing new steel grades, characterization
and improvement of the existing grades, as
well as the use of stainless steels in different
end-use application areas. The product R&D
activities are focused on the Outokumpu
Pro product family that offers stainless steel
products for specific applications or demanding
end use. Product and application development
projects mostly concentrate on the develop-
ment of sustainable solutions in certain key
segments, such as clean energy, transport and
construction.
R&D infrastructure and networking
Outokumpu is continuously developing its
R&D infrastructure and laboratory facilities. In
2020 one of our R&D key assets, the unique
pilot plant facility at Tornio R&D center, was
revamped. A completely new automation
system was installed, and furnace fuel changed
from LPG to LNG.
Outokumpu has an extensive network of
external R&D collaboration partners, including
top class universities and institutes, technology
suppliers and customers. Outokumpu actively
participates both in national and international
collaborative R&D projects and programs.
Outokumpu’s research and development function contributes to Outokumpu’s
new vision to be the customer's first choice in sustainable stainless steel.
Sustainable solutions
Outokumpu Annual report | Sustainability review 28 / 30
Scope of the report
Outokumpu has published its sustainability review as part of the Annual Report 2020.
Sustainability information is also available at www.outokumpu.com/sustainability.
developments of continuing sites and changes
in 2020 as part of the Annual Report. The
reported data includes all continuing sites.
Additional information is published on the
company’s website. The Annual Report 2020,
including Sustainability Review, was published
in March 2021.
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 30 in the Sustainability
Review. The Financial Statements 2020 have
been audited, and the auditor’s report is
available after the FInancial statements.
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 accor-
dance 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 indi-
vidual 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 investments 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 CO
2
eq
intensity of direct and indirect emissions of
electricity and upstream emissions. Emissions
are consolidated on production control.
CO
2
eq emissions of electricity are calculated
and monitored by the emissions factor of
Outokumpu’s electricity mix of 152 kg CO
2
eq/MWh (2019: 167 kg CO
2
eq/MWh),
given by the electricity supplier for the used
electricity and calculated as weighted average.
Some hydro power recs were calculated as
replacing fossil fuel of the concerning country.
In addition, the location-based electricity
emissions are disclosed. They are calculated
by the published country- specific emissions
factors of the electricity generation of 2018 or
2019 if available.
CO
2
eq emissions outside the company
(scope3), 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.
Emission factor of ferronickel was calculated
with 58% from supplier specific emissions
and 42% of LCA e-factor. Emissions of
sold ferrochrome are not allocated to the
stainless steel production of the company.
• For used gases, lime and dolomite,
electrodes and coke: by emissions factors of
ISO14404.
• For upstream emissions of coke and oil: by
emissions factors of WorldSteel Association.
• For internal and product transport: by
typical distances and type of transport
with the corresponding emissions factors.
The coverage of reporting includes all
Scope of the report
Outokumpu Annual report | Sustainability review 29 / 30
modes of transport, including intermodal
transportation.
• For business travel: by estimated driven
kilometers with emissions factors for the
car, and for flights by CO
2
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 2020 but
excluded from scope 3 emissions.
The recycled content according to ISO14021
(recycled steel 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 treated own 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 with 15%, 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 2020.
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 capabil-
ities so that they are unable to undertake
their normal duties.
• Medically treated injury (MTI) has to be
treated by a medical professional (doctor or
nurse).
• First aid treated injury (FTI), where the injury
did not require medical care and was treated
by a person themselves 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 observa-
tions (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 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.
Bonuses
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 calcu-
lated 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.
Scope of the report
Outokumpu Annual report | Sustainability review 30 / 30
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
2020, disclosed in Outokumpu Oyj’s
Sustainability Review 2020 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 Accountants 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 assurance 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 engage-
ment in accordance with the International
Standard on Assurance Engagements (ISAE)
3000 (Revised) “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 assess-
ment 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.
• Conducting three video interviews with sites
in Finland, Sweden and the United Kingdom.
• Interviewing employees responsible for
collecting and reporting the Sustainability
Information at the Group level and at the site
level where our online site visits and video
interviews 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 2020 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, 25 February 2021
PricewaterhouseCoopers Oy
Tiina Puukkoniemi Janne Rajalahti
Partner Partner
Authorised Public Authorised Public
Accountant (KHT) Accountant (KHT)
Independent assurance report
REVIEW BY THE BOARD OF DIRECTORS ............ 2
Group key figures ............................. 12
Alternative performance measures ................ 13
Share-related key figures ........................ 16
FINANCIAL STATEMENTS ....................... 18
Consolidated statement of income ................ 19
Consolidated statement of comprehensive income .... 19
Consolidated statement of financial position ......... 20
Consolidated statement of cash flows .............. 21
Consolidated statement of changes in equity ........ 22
Notes to the consolidated financial statements ...... 23
Income statement of the parent company ........... 66
Balance sheet of the parent company .............. 67
Cash flow statement of the parent company ......... 68
Statement of changes in equity of the parent company . 69
Commitments and contingent liabilities of
the parent company ........................... 69
AUDITOR’S REPORT ............................ 70
Review by
the Board of
Directors and
Financial
statements
Outokumpu’s financial statements according to the ESEF regulation are published at
www.outokumpu.com/reports.
Outokumpu Annual report | Review by the Board of Directors 2 / 76
Review by the Board of Directors
Throughout 2020 Outokumpu continued
rigorous measures to mitigate the negative
impacts of the ongoing COVID-19 pandemic
on its employees, operations and business.
The Group concluded the year without any
pandemic-related production losses. In safety,
the year was the strongest on record with
the total recordable injury frequency rate
of 2.4, surpassing the target of below 3.0.
Outokumpu increased its already high share of
recycled content in production to over 90% and
decreasing its CO
2
footprint, which is already
the lowest in the industry. Outokumpu was also
able to reduce its net debt to the lowest level
in recent history.
Business area Europe’s deliveries remained
relatively stable, but the result was negatively
impacted by significantly deteriorated prices
and weaker product mix. The Americas
continued its successful turnaround with the
adjusted EBITDA reaching EUR 55 million, an
improvement of over EUR 80 million from
2019. The ferrochrome production remained
on a record-high level. The Long Products
business area is going through a compre-
hensive turnaround program. Outokumpu is
decisively executing its new strategy to reach
its financial targets of EUR 200 million EBITDA
run-rate improvement and net debt to EBITDA
of below 3.0× by the end of 2022.
Responding to COVID-19
Safety is a key priority at Outokumpu, and the
company is committed to protecting the health
and safety of its employees. Outokumpu has
several safety measures in place to ensure
the safety of people and to mitigate the
negative impacts of the COVID-19 pandemic.
Outokumpu monitors the COVID-19 situation
closely in each country in which it operates
and adjusts the required measures accordingly.
Despite the exceptional times brought about
by the pandemic the company delivered its
strongest annual safety performance on record
and safety continues to be a key priority.
Outokumpu has contingency plans in place
to mitigate operational and financial risks.
Thanks to decisive and well-timed actions
taken by the company, the negative impacts
of the COVID-19 pandemic on Outokumpu’s
operations have been very limited. Outokumpu
has been able to operate efficiently throughout
the pandemic and has successfully adjusted
its operations to meet the current demand
level. Outokumpu also initiated immediate cost
compression measures when the COVID-19
pandemic began to affect global stainless
steel demand. The actions have continued
throughout the year and tight cost control has
supported the company’s profitability and cash
flow in 2020.
As a response to the pandemic, Outokumpu
reduced its capital expenditures to EUR 180
million in 2020. Furthermore, the cash release
from the net working capital reduction was
significantly above the targeted level of EUR
100 million. Included here are the deferred
VAT payments in Finland of EUR 75 million
of which EUR 61 million was still outstanding
at year-end for up to one and a half years. In
November Outokumpu closed the sale and
lease back transaction regarding its service
center premises in Hockenheim, Germany
with net cash proceeds of EUR 14 million.
Including this transaction, Outokumpu was able
to release a total of EUR 23 million of cash
from non-core assets. In general, the COVID-19
situation slowed down the divestments of
non-core assets and the original target to book
approximately EUR 40 million of proceeds in
2020 did not materialize as planned.
Outokumpu has successfully managed its
liquidity through the pandemic and company’s
financial position has remained stable. Cash
and cash equivalents amounted to EUR 376
million at the end of 2020 and the total
liquidity reserves increased to over EUR 1.0
billion. Outokumpu issues new EUR 125 million
convertible bond in July and signed together
with a group of banks a SEK 1,000 million
revolving credit facility, guaranteed by the
Swedish Export Credit Agency EKN, in October.
In December, Outokumpu agreed an amend-
ment and extension of its syndicated revolving
credit facility allowing for two consecutive
yearly extension requests of the maturity dates
until the end of May 2024. Out of the EUR
574 million maturing at the end of May 2022,
a facility amount of EUR 532 million has been
extended until the end of May 2023. The
financial covenants of Outokumpu’s financial
agreements are based on debt-to-equity
ratio and Outokumpu remains in compliance
with the financial covenants of its financing
agreements.
Market development
The global real demand for stainless steel
products amounted to 42.8 million tonnes
in 2020 and decreased by 3.3% from 44.3
million tonnes in 2019. The demand in EMEA
and Americas decreased by 12.1% and 12.3%,
respectively, while APAC only decreased by
0.2%. Annual demand decreased the most,
by 15.6%, in the Automotive & Heavy Transport
segment. Demand in Industrial & Heavy Industry
decreased by 4.8%, in ABC and Infrastructure by
3.3%, in Chemical, Petrochemical and Energy by
2.3% and in Consumer Goods and Medicals by
0.5%. (Source: SMR, January 2021)
Financial performance
In 2020, Outokumpu’s sales decreased to EUR
5,639 million (EUR 6,403 million) and adjusted
EBITDA to EUR 250 million (EUR 263 million).
EBIT decreased to EUR –55 million (EUR 33
million) in 2020 and the net result was EUR
–116 million (EUR –75 million).
Sales
€ million 2020 2019 2018
Europe 3,568 4,089 4,267
Americas 1,195 1,346 1,715
Long Products 493 642 740
Ferrochrome 411 461 542
Other operations 665 653 587
Intra-group sales –693 –788 –980
The Group 5,639 6,403 6,872
Stainless steel deliveries declined by 3%
compared to the previous year as a result of
weaker demand and were 2,121,000 tonnes
(2,196,000 tonnes). In addition, prices were
significantly lower in Europe and declined also in
Americas compared to the previous year. Various
cost saving measures supported profitability and
both input costs as well as fixed costs were at a
lower level compared to the previous year. Raw
material-related inventory and metal derivative
losses amounted to EUR 16 million in 2020
compared to the losses of EUR 64 million in
2019.
Review by the Board of Directors
Outokumpu Annual report | Review by the Board of Directors 3 / 76
Europe 62%
Americas 21%
Long Products 7%
Ferrochrome 3%
Other operations 7%
0
100
200
300
400
500
600
700
20202019201820172016
–100
0
100
200
300
400
500
20202019201820172016
As part of the actions for reaching the financial
targets of the first phase of its strategy and
creating cost savings, Outokumpu carried out
employee negotiation processes in selected
countries in 2020 aiming to reduce the
headcount by up to approximately 1,000 (10%
of the Group total headcount) by the end
of 2021. As a result, in 2020, Outokumpu
recognized EUR 59 million restructuring costs
related to personnel reduction measures,
reported as adjustments to EBITDA. Most of
these costs were provisions where the cash
outflow will take place mainly in 2021. The
adjustments to EBITDA in 2019 included
restructuring provisions of EUR 53 million and
a gain on a real estate sale of EUR 70 million.
Operating cash flow amounted to EUR 322
million in 2020 (EUR 371 million). The net
working capital reduced by EUR 247 million in
2020 (EUR 218 million) including the impact
from the deferred VAT payments in Finland
of EUR 61 million at the year-end. Net debt
amounted to EUR 1,028 million at the end of
2020, a decrease from EUR 1,155 million at
the end of 2019. Gearing was 43.6%, lower
than at the end of 2019 (45.1%).
Net financial expenses were EUR 98 million in
2020 (EUR 80 million) and interest expenses
EUR 78 million (EUR 76 million). Cash and
cash equivalents were at EUR 376 million at
the end of 2020 (EUR 325 million) and the
total liquidity reserves were EUR 1.0 billion
(EUR 1.0 billion). In addition, Outokumpu has
unutilized EUR 76 million short-term portion
of the syndicated facility available and EUR
34 million financing facility, which can be
used to finance certain part of the Kemi mine
investment.
Profitability
€ million 2020 2019 2018
Adjusted EBITDA
Europe 142 216 248
Americas 55 –27 –5
Long Products –8 –7 25
Ferrochrome 91 96 210
Other operations and intra-group items –29 –15 7
Group adjusted EBITDA 250 263 485
Adjustments –59 3 10
EBITDA 191 266 496
EBIT –55 33 280
Share of results in associated companies 2 6 3
Financial income and expenses –98 –80 –107
Result before taxes –151 –41 175
Income taxes 34 –33 –45
Net result for the financial year –116 –75 130
Adjusted EBITDA margin, % 4.4 4.1 7.1
EBIT margin, % –1.0 0.5 4.1
Return on capital employed, % –1.4 0.8 7.0
Earnings per share, € –0.28 –0.18 0.32
Diluted earnings per share, € –0.28 –0.18 0.32
Net cash generated from operating activities 322 371 214
Outokumpu adopted IFRS 16 – Leases on January 1, 2019. Comparative information was not restated, but
transition impacts of EUR 131 million were recognized into January 1, 2019 property, plant and equipment, and
non-current and current debt, respectively.
Sales, € 5,639 million
Adjusted EBITDA, € million
EBIT, € million
Review by the Board of Directors
Outokumpu Annual report | Review by the Board of Directors 4 / 76
20202019201820172016
–0.4
–0.2
0.0
0.2
0.4
0.6
0.8
1.0
20202019201820172016
0
500
1,000
1,500
2,000
0
20
40
60
80
2020
2019201820172016
0
10
20
30
40
50
20202019201820172016
0
100
200
300
400
20202019201820172016
0
1
2
3
4
Key financial indicators on financial position
€ million 2020 2019 2018
Net debt
Non-current debt 1,153 1,053 798
Current debt 251 427 511
Cash and cash equivalents 376 325 68
Net debt 1,028 1,155 1,241
Shareholders’ equity 2,360 2,562 2,750
Return on equity, % –4.7 –2.8 4.8
Debt-to-equity ratio, % 43.6 45.1 45.1
Equity-to-assets ratio, % 40.8 42.5 45.9
Interest expenses 78 76 70
Earnings per share, € Net debt, € million
Debt-to-equity ratio, % Equity-to-assets ratio, %
Capital expenditure and
depreciation, € million
Equity-to-assets ratio, %
Capital expenditure Depreciation
Capital expenditure, % of sales
Capital expenditure, measured on cash-basis,
amounted to EUR 180 million in 2020 (EUR
193 million). The ongoing investments include
the Kemi mine expansion, ferritics capabilities
in Calvert, Fennovoima project and the digital
transformation project Chorus, including the
ERP renewal.
Capital expenditure
€ million 2020 2019 2018
Europe 34 51 75
Americas 16 21 19
Long Products 3 16 22
Ferrochrome 92 77 47
Other operations 35 28 55
The Group 180 193 218
Depreciation and amortization 243 230 204
Capital expenditure definition changed from accrual-
based to cash-based capital expenditure in 2020.
Figures for 2019 and 2018 have been restated
accordingly.
Capital expenditure definition changed from accrual-
based to cash-based capital expenditure in 2020.
Figures for 2019 and 2018 have been restated
accordingly. Figures for 2017 and 2016 have not
been restated.
Review by the Board of Directors
Outokumpu Annual report | Review by the Board of Directors 5 / 76
Business areas
Europe’s sales decreased to EUR 3,568 million
in 2020 compared to EUR 4,089 million in
2019 and adjusted EBITDA decreased to
EUR 142 million (EUR 216 million). Stainless
steel deliveries remained relatively stable
and decreased only by 1% compared to the
previous year and amounted to 1,440,000
tonnes (1,459,000 tonnes). The 2020 result
was negatively impacted by significantly
deteriorated prices and weaker product mix.
Costs were at a lower level compared to
the previous year, and positive raw material
impacts supported profitability in 2020. Raw
material-related inventory and metal derivative
losses were EUR 11 million in 2020 (losses
of EUR 19 million). Adjustments to EBITDA
included EUR 47 million of restructuring costs
relating to personnel reductions in 2020 (EUR
53 million of restructuring costs and EUR 70
million of gains on the sale of real estate).
In 2020, real demand in the EMEA region
decreased by 12.1% compared to 2019 and
the apparent consumption by 10.8% (Sources:
SMR, January 2021 and CRU, January 2021).
Americas’ sales decreased to EUR 1,195
million in 2020 compared to EUR 1,346
million in 2019. Adjusted EBITDA increased
to EUR 55 million (EUR –27 million). Stainless
steel deliveries decreased by 2% in 2020 to
588,000 tonnes (601,000 tonnes). Positive
impacts from improved product mix were
offset by weaker prices in 2020 compared to
2019. However, positive raw material impacts
and lower costs supported profitability. Raw
material-related inventory and metal derivative
losses were EUR 1 million in 2020 (losses
of EUR 40 million). In 2020, US real demand
decreased by 11% compared to the previous
year, and in the Americas region the decrease
was 12.3% (Source: SMR, January 2021 and
American Iron & Steel Institute, January 2021).
Long Products’ sales amounted to EUR 493
million in 2020 compared to EUR 642 million
in 2019 and adjusted EBITDA amounted to
EUR –8 million (EUR –7 million). Stainless
steel deliveries decreased by 23% to 175,000
tonnes in 2020 compared to 2019 (226,000
tonnes). The negative impact from lower
volumes in 2020 was partly offset by stronger
product mix compared to 2019. Lower input
costs compared to previous year and cost
saving initiatives supported profitability in
2020. Raw material-related inventory and
metal derivative losses were EUR 3 million in
2020 compared to losses of EUR 9 million in
2019. Adjustments to EBITDA in 2020 include
EUR 3 million of restructuring costs relating to
personnel reductions.
Ferrochrome’s sales amounted to EUR 411
million in 2020 compared to EUR 461 million
in 2019. Adjusted EBITDA amounted to EUR
91 million (EUR 96 million). Ferrochrome
production remained at record-high levels in
2020 producing 498,000 tonnes (505,000
tonnes). Pricing was weaker in 2020 but
profitability was positively impacted by lower
input costs compared to 2019.
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, infrastruc-
ture, 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 urban-
ization. The properties and the low carbon
profile of Outokumpu’s stainless steel can help
customers to reduce their carbon footprint.
Market for solutions enabling the transition to
low carbon society will increase on the way to
2 degree or 1.5 degree scenarios for 2050.
Outokumpu acknowledges the recommenda-
tions 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. Outokumpu has performed a stated
policy scenario and sustainable development
scenario analysis in line with the International
Energy Agency Iron and Steel Technology
Roadmap, 2020. The translation of the
strategies in financial terms considering the
transition and physical scenarios is ongoing.
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 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.
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.
Policies and principles of
sustainability management
On group level, sustainability is managed
by the Group’s sustainability team. 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. All Outo-
kumpu operating sites are certified according
to quality ISO 9001 and environment ISO
14001 management systems. The functioning
of the systems is monitored by both internal
and external audits.
The most important policies guiding Outo-
kumpu’s Sustainability Management are the
Group’s Code of Conduct, Corporate Respon-
sibility 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
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for conducting business in a legal, compliant
and ethical manner, including zero tolerance
for corrupt practices and requiring compliance
with applicable laws and regulations, including
competition laws and trade sanctions
regulations.
The Corporate Responsibility Policy describes
the main principles of the sustainable develop-
ment of economic, environmental, and social
aspects in the Group. Outokumpu’s EHSQ
policy describes the company’s commitment
to continuous 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 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. 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 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 consistently monitors and tests adher-
ence to corporate guidance and standards,
while the sustainability organization follows-up
on environmental performance and legality
on a quarterly basis. In 2020, Outokumpu
carried out self-assessments of raw material
suppliers with production in countries who have
high environmental, social and governance
risks. Regular internal 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.
Sustainability targets
The Group’s environmental performance targets
are set for the reporting year with exemption of
the greenhouse gas emissions target:
• 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 tonne 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. Outokumpu aims to
improve the Group’s resource efficiency by
minimizing the use of virgin materials and
primary energy and by contributing to climate
protection.
New targets have been set for the next period:
• Increase material recycling (all metallic input
from waste streams, such as scrap, scales
or metals from slag and dust treatment per
tonne stainless steel) to 92.5% by 2023.
• Improve energy efficiency by 0.5% each
year by 2030, reported as improvement
compared to base-period of 2018–2020.
• Reduce the landfill production waste other
than slag by 0.5% each year by 2023.
In safety, the Group’s target for year 2020 was
to achieve total recordable injury rate of <3.0
per million working hours. The Group’s long-
term target is to achieve zero-level in injuries.
Environmental performance
The main environmental impacts from stainless
steel production 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.
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 2020, all used slag compared to the used
and landfilled slag (use rate) decreased to 77%
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20202019201820172016
0
2,000
4,000
6,000
8,000
10,000
12,000
(91%). The total amount of slag decreased by
20% compared to last year but less slag could
be used. On top of production waste, tailing
sand from mining is the most significant waste
item to be deposited in the mine site.
In 2020, Outokumpu could further increase
the level of material recycling (all metallic input
from waste streams, such as scrap, scales or
metals from slag and dust treatment per tonne
stainless steel) to 92.5% (89.6%), reaching an
exceptionally high level above the 2020 target
of 90%.
The improvement of the energy efficiency
calculated as a sum of different process steps
was 3.6% (6.1%) compared to the baseline of
2007–2009. More energy than expected was
needed as the production level was low and
interrupted by the difficult market conditions,
the produced steel grades changed, and
processing increased. There were no significant
environmental incidents.
In 2020, CO
2
intensity reduced by about
17% from baseline period 2014–2016 and
reached 86% of the targeted reduction by
2023. Landfilled waste increased despite the
reduction of production as more slag needed
to be deposited.
All Outokumpu sites have environmental
permits that set the basic framework for
production operations. In 2020, emissions
and effluents remained within permitted limits,
and the 13 minor breaches that occurred were
temporary, identified, and had only a minimal
impact on the environment.
The EU Emissions Trading Scheme (ETS) is
finalizing 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 2020,
free allocation for the Group was on the same
level as the emissions. The conditions for the
fourth period will remain similar as for the third
period but the allocations will be shorter.
Outokumpu is not a party to any significant
legal or administrative proceedings concerning
environmental issues, nor is it aware of any
realized environmental risks that could have a
material adverse effect on its financial position.
Social performance
Outokumpu’s main indicator for safety
performance is the total recordable injury
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 2.4 against the
target of <3.0 (3.2).
Environmental indicators
2020 2019 2018
Scope 1, 2 and 3 (direct and indirect) CO
2
emission intensity, kg per
tonne stainless steel 1,549 1,606 1,719
Energy intensity, GJ per tonne stainless steel 11.0 10.9 10.1
Use rate of slag, including slag from ferrochrome production, % 77.1 90.8 89.9
Total landfill waste intensity per tonne stainless steel 0.590 0.500 0.472
Outokumpu’s headcount decreased by 475
during the year and totaled 9,915 at the end
of December 2020 (2019: 10,390, 2018:
10,449). Total wages and salaries amounted
to EUR 547 million in 2020 (2019: EUR 568
million, 2018: EUR 541 million). Indirect
employee benefit expenses totaled EUR 188
million in 2020 (2019: EUR 206 million,
2018: EUR 135 million).
Outokumpu encourages everyone to raise their
concerns. All available reporting channels are
detailed in the Code of Conduct, including
the SpeakUp channel which is an externally
operated communication channel to report
misconduct confidentially and anonymously, if
allowed by laws and regulations. The SpeakUp
channel is available as a communication
channel in Outokumpu’s reporting process if
other reporting channels do not feel suitable.
In 2020, more than 20 investigations of
potential misconduct were recorded through
the various reporting channels. These incidents
have been investigated and proper corrective
and preventative actions have been taken as a
consequence.
During 2020, the implementation of
Outokumpu’s ethics and compliance program
continued in close co-operation with the
leadership, business areas and business
functions. As part of these efforts, the core
element of the program, Code of Conduct, was
revised and it will be implemented in 2021
with a mandatory e-learning for all Outokumpu
employees. In addition, anti-corruption and
data protection e-learning courses were
reissued and tailored training sessions were
organized in the competition law compliance
Personnel on December 31
and trade compliance areas in 2020. In order
to strengthen the enforcement of the manda-
tory compliance e-learnings, a consequence
management process was implemented
in 2020. Furthermore, compliance related
communications were given through different
channels on various topics.
Key social indicators
2020 2019 2018
Diversity
Employees
male, % 81 85 85
female, % 19 15 15
Board of Directors
male, % 50 57 67
female, % 50 43 33
Safety
Total recordable injury
frequency rate, per million
working hours 2.4 3.2 4.1
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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.
R&D activities are focused on development of
production processes, products and customer
applications. In 2020, Outokumpu’s R&D
expenditure totaled EUR 21 million, 0.4% of
net sales (2019: EUR 17 million and 0.3%,
2018: EUR 15 million and 0.2%).
As part of organizational changes in the
Chief Technology Office function, the R&D
organization was further streamlined in 2020.
During 2020, the process development
projects focused on optimization of product
quality, yield and production cost efficiency.
A long-term R&D program aiming at reducing
the CO
2
footprint of Group’s operations was
initiated. The product and application devel-
opment projects focused on developing new
steel grades, characterization and optimization
of existing grades, as well as on development
of new applications and markets for Group’s
products.
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 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 risk management focus in 2020 was on
implementing the mitigating actions of the
identified risks, supporting debt reduction at
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 miti-
gating actions to protect the Group’s earnings
and cash flows.
Outokumpu continued its systematic fire safety
and loss prevention audit program, focusing
on execution of the mitigating actions. Due
to 2020 travel restrictions, many audits were
conducted virtually using in-house expertise in
cooperation with external advisors.
The main realized risks in 2020 were related to
disruption of the stainless steel markets due to
the pandemic, and imports that continued to
have a negative impact on stainless steel base
prices and deliveries in Europe throughout the
year.
Strategic and business risks
Outokumpu’s key strategic and business risks
include: risks and uncertainties relating to the
development of overcapacity of global stainless
steel production, volatility of raw material and
end product prices; risks and uncertainties
implementing new IT systems and processes;
opportunities to 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 markets 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 include:
a major fire or machinery breakdown causing
business interruption; 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. 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 interruption 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 envi-
ronmental legislation and the potential 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).
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Outokumpu also evaluates annually its climate
change related risks, including main production
locations’ exposures on several threats and
risks driven by 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, 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
Outokumpu’s own employees and contractors,
which would also have a significant impact
on the 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 Outo-
kumpu 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
competition law, anti-corruption and bribery,
anti-money laundering, data protection;
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
operations globally including supply chain and
other business partners. Outokumpu takes seri-
ously all labor practice violations and related
threats as it insists on full transparency and
compliance on human rights topics. However,
Outokumpu operates mainly in regions, where
the risk related to social responsibility and
human rights are not considered high risk.
Financial risks
Key financial risks for Outokumpu include:
changes in the prices of nickel, iron, molyb-
denum, 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 for Outokumpu;
constrained access to new financing; coun-
terparty 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 Fenno-
voima 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-in-
come 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
strategy, 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.
Possible adverse changes in the global political
and economic environment, including a severe
global economic downturn may have a signifi-
cant negative impact on Outokumpu’s overall
business and access to financial markets.
Outokumpu also considers recent events in its
risk assessments, such as: the global impact of
the pandemic; the UK’s departure from the EU
and possible risks related to trade relations.
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 or 2020.
Shares
On December 31, 2020, Outokumpu Oyj ’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
4,372,236 treasury shares. The average
number of shares outstanding in 2020 was
411,824,420.
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Management shareholdings and
share based incentive programs
On December 31, 2020, the members of the
Board of Directors and the members of the
Outokumpu Leadership Team (OLT) altogether
held 1,059,306 shares, or 0.25% 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 a Performance Share Plan, a Restricted
Share Pool and a Matching Share Plan for
key employees. In 2020, after deductions for
applicable taxes, a total of 227,497 shares
were delivered to the participants of the
programs based on the 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 2019–2021, 2020–2022 and
their continuation for the period 2021–2023
was approved by the Board of Directors in
December 2020. The Performance Share Plan
for all three periods focuses on earning criteria
that measures Outokumpu’s profitability
and the efficiency with which its capital is
employed.
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
Outokumpu’s Annual General Meeting 2020
was held on May 28, 2020 in Helsinki, Finland
under special arrangements due to the
COVID-19 pandemic. The Meeting decided to
authorize the Board of Directors to decide at a
later stage and in its discretion on a dividend
payment in one or several instalments of a
total maximum of EUR 0.10 per share.
Following a review of the January–September
2020 financial results on November 5, 2020,
the Board of Directors decided that owing to
the importance of strengthening the Compa-
ny’s balance sheet no dividend would be paid
for the financial year 2019.
The Annual General Meeting also decided to
authorize 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
remuneration policy of the Company.
The Annual General Meeting decided in
accordance with the proposal by the Nomina-
tion Board that the Board of Directors would
consist of six members. The current members
of the Board of Directors Kati ter Horst, Kari
Jordan, Eeva Sipilä, Vesa-Pekka Takala, Pierre
Vareille and Julia Woodhouse were re-elected
for the term of office ending at the end of the
next Annual General Meeting. Kari Jordan was
re-elected as the Chairman and Eeva Sipilä
elected as the new Vice Chairman of the Board
of Directors.
Changes in the Outokumpu
Leadership Team
On April 14, Outokumpu’s Board of Directors
appointed Heikki Malinen, M.Sc. (Econ.), MBA
(Harvard), as President and CEO of Outokumpu
and the Chairman of the Leadership Team.
Malinen joined the company on May 1 and
assumed his role as the CEO on May 16,
2020. Malinen had been a member of the
Outokumpu Board of Directors since 2012,
and due to his appointment, resigned from the
Board at the end of April.
On July 16, it was announced that Liam Bates
was appointed President, Long Products with
immediate effect. Kari Tuutti, who had been
leading business area Long Products, decided
to pursue his career outside Outokumpu. In his
new position, Liam Bates did not continue as a
member of the Outokumpu Leadership Team.
On July 27, it was announced that Maciej
Gwozdz, President, business area Europe
had resigned from Outokumpu to take a new
position in another company. He continued to
work in his position in Outokumpu until the end
of September.
On August 31, it was announced that Reeta
Kaukiainen, Executive Vice President, Commu-
nications, Marketing and Investor Relations
had decided to pursue her career outside
Outokumpu. She continued in her position in
Outokumpu until the end of September.
On September 29, Outokumpu announced
changes in its Leadership Team. New members
appointed to the Leadership team were
Thomas Anstots, Executive Vice President,
Commercial, business area Europe; Stefan
Erdmann, Chief Technology Officer; Martti Sassi,
President, business area Ferrochrome; Niklas
Wass, Executive Vice President, Operations,
business area Europe and Tamara Weinert,
Acting President, business area Americas. The
new Leadership team became effective on
October 1, 2020.
On December 7, it was announced that Jan
Hofmann decided to pursue a new career
opportunity outside the company. Due to this
he resigned from the company with immediate
effect.
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 Nomi-
nation Board has been established to annually
prepare proposals on the composition of the
Board of Directors and director remuneration
for the Annual General Meeting.
On August 31, 2020 the four largest
shareholders of Outokumpu were Solidium
Oy, The Social Insurance Institution of Finland,
Ilmarinen Mutual Pension Insurance Company
and the State Pension Fund of Finland. As
the State Pension Fund of Finland informed
Outokumpu that it would not use its nomina-
tion right, the right transferred to Elo Mutual
Pension Insurance Company as the next largest
shareholder registered in the shareholder
Review by the Board of Directors
Outokumpu Annual report | Review by the Board of Directors 11 / 76
register. The shareholders appointed the
following representatives to the Nomination
Board:
• Antti Mäkinen, Managing Director at
SolidiumOy
• Outi Antila, Director General at The Social
Insurance Institution of Finland
• Jouko Pölönen, President and CEO at
Ilmarinen Mutual Pension Insurance
Company
• Satu Huber, Chief Executive Officer at Elo
Mutual Pension Insurance Company
The Nomination Board submitted its proposals
to Outokumpu’s Board of Directors on
December 4, 2020.
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, 2020
distributable funds totaled EUR 2,312 million,
of which retained earnings were EUR 188
million.
The Board of Directors is proposing to the
Annual General Meeting to be held on March
31, 2021 that no dividend will be paid for
2020 as in the challenging market environment
improving the Company’s financial position
continues to be of highest priority.
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2020 2019
1)
2018 2017
2)
2016
Scope of activity
Sales
€ million 5,639 6,403 6,872 6,356 5,690
– change in sales % –11.9 –6.8 8.1 11.7 –10.9
– exports from and sales outside
Finland, of total sales * % 96.3 95.9 96.7 96.5 96.4
Capital employed on Dec 31 * € million 3,543 3,904 4,086 3,929 3,816
Capital expenditure
3)
*
€ million 180 193 218 174 164
– in relation to sales % 3.2 3.0 3.2 2.7 2.9
Depreciation and amortization € million 243 230 204 216 226
Impairments
€ million 3 3 12 1 26
Research and development costs € million 21 17 15 13 20
– in relation to sales % 0.4 0.3 0.2 0.2 0.4
Personnel on Dec 31
4)
9,915 10,390 10,449 10,141 10,600
– average for the year
10,310 10,645 10,468 10,485 10,977
Profitability
Adjusted EBITDA * € million 250 263 485 631 309
– in relation to sales % 4.4 4.1 7.1 9.9 5.4
EBITDA * € million 191 266 496 663 355
EBIT * € million –55 33 280 445 103
– in relation to sales % –1.0 0.5 4.1 7.0 1.8
Result before taxes € million –151 –41 175 327 –13
– in relation to sales % –2.7 –0.6 2.5 5.1 –0.2
Net result for the financial year € million –116 –75 130 392 144
– in relation to sales % –2.1 –1.2 1.9 6.2 2.5
Return on equity * % –4.7 –2.8 4.8 15.4 6.4
Return on capital employed * % –1.4 0.8 7.0 11.3 2.6
2020 2019
1)
2018 2017
2)
2016
Financing and financial position
Net debt *
€ million 1,028 1,155 1,241 1,091 1,242
– in relation to sales % 18.2 18.0 18.1 17.2 21.8
Net financial expenses * € million 98 80 107 127 121
– in relation to sales % 1.7 1.3 1.6 2.0 2.1
Interest expenses * € million 78 76 70 92 105
– in relation to sales % 1.4 1.2 1.0 1.5 1.9
Net debt to adjusted EBITDA * 4.1 4.4 2.6 1.7 4.0
Share capital € million 311 311 311 311 311
Total equity € million 2,360 2,562 2,750 2,721 2,416
Equity-to-assets ratio * % 40.8 42.5 45.9 46.3 40.4
Debt-to-equity ratio *
% 43.6 45.1 45.1 40.1 51.4
Net cash generated from
operating activities € million 322 371 214 328 389
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 have not been
restated.
3)
Capital expenditure definition changed from accrual-based to cash-based capital expenditure in 2020. Figures
for 2019 and 2018 have been restated accordingly. Figures for 2017 and 2016 have not been restated.
4)
Personnel reported as headcount, not as full time equivalent.
Group key figures
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Alternative 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 2020 2019
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 Consolidated statement of income
€ million 5,639 6,403
Sales by destination to Finland Note 4. Geographical information
€ million 208 264
Exports from and sales outside
Finland
Sales – Sales by destination to
Finland € million 5,431 6,139
– exports from and sales outside
Finland, of total sales
Comparison to sales
% 96.3 95.9
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 Consolidated statement of
financial position € million 2,360 2,562
Net debt Defined later in this section
€ million 1,028 1,155
Defined benefit and other long-term
employee benefit obligations
Consolidated statement of
financial position € million 329 335
Net interest rate derivative liabilities Note 20. Fair values and nominal
amounts of derivative instruments € million –6 –5
Net accrued interest expenses Note 28. Trade and other payables
€ million 11 9
Less:
Defined benefit plan assets Consolidated statement of
financial position € million 64 68
Equity investments at fair value
through other comprehensive
income
Consolidated statement of
financial position
€ million 48 31
Investments at fair value through
profit or loss
Consolidated statement of
financial position € million 26 13
Investments in associate companies Consolidated statement of
financial position € million 38 38
Capital employed on Dec 31
€ million 3,543 3,904
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Key figure
Definition of the key figure or
source in the consolidated financial
statements 2020 2019
Operating capital
Operating capital is a measure for the amount of capital invested in Group’s operations. It is used as a
measure for the business areas’ net assets.
Capital employed on Dec 31 Defined earlier in this section
€ million 3,543 3,904
Net deferred tax asset on Dec 31 Note 3. Operating segment
information € million 257 217
Operating capital on Dec 31 Capital employed – Net deferred
tax asset € million 3,286 3,687
Capital expenditure
Capital expenditure indicates the investment in assets to generate future cash flows for the Group.
Capital expenditure Purchases of property, plant and
equipment and intangible assets,
other than emission allowances;
investments in equity at fair value
through other comprehensive
income and associated companies,
and acquisitions of businesses € million 180 193
– in relation to sales Comparison to sales
% 3.2 3.0
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 Consolidated statement of income
€ million –55 33
– in relation to sales Comparison to sales
% –1.0 0.5
Depreciation and amortization Note 6. Income and expenses
€ million 243 230
Impairments Note 6. Income and expenses
€ million 3 3
EBITDA EBIT + depreciation and
amortization + impairments € million 191 266
Adjustments to EBITDA Note 6. Income and expenses
€ million –59 3
Adjusted EBITDA EBITDA – Adjustments to EBITDA
€ million 250 263
– in relation to sales Comparison to sales
% 4.4 4.1
Key figure
Definition of the key figure or
source in the consolidated financial
statements 2020 2019
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.
Total equity on Dec 31 of previous
year
Consolidated statement of
financial position € million 2,562 2,750
Total equity on March 31
€ million 2,605 2,656
Total equity on June 30
€ million 2,525 2,624
Total equity on Sept 30
€ million 2,449 2,602
Total equity on Dec 31 Consolidated statement of
financial position € million 2,360 2,562
Total equity (4-quarter average) Average of the opening and 4
quarter-end values € million 2,500 2,639
Net result for the financial year Consolidated statement of income
€ million –116 –75
Return on equity Net result for the financial year /
Total equity (4-quarter average) % –4.7 –2.8
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
Defined earlier in this section
€ million 3,904 4,086
Capital employed on March 31
€ million 4,006 4,135
Capital employed on June 30
€ million 3,939 4,048
Capital employed on Sept 30
€ million 3,707 4,096
Capital employed on Dec 31 Defined earlier in this section
€ million 3,543 3,904
Capital employed (4-quarter
average)
Average of the opening and 4
quarter-end values € million 3,820 4,054
EBIT Consolidated statement of income € million –55 33
Return on capital employed EBIT / Capital Employed (4-quarter
average) % –1.4 0.8
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Key figure
Definition of the key figure or
source in the consolidated financial
statements 2020 2019
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.
Non-current debt Consolidated statement of
financial position € million 1,153 1,053
Current debt Consolidated statement of
financial position € million 251 427
Cash and cash equivalents Consolidated statement of
financial position € million 376 325
Net debt Non-current + current debt
– cash and cash equivalents € million 1,028 1,155
– in relation to sales Comparison to sales
% 18.2 18.0
Net financial expenses and interest expenses
Net financial expenses and interest expenses are measures for the cost of Group’s financing.
Net financial expenses Total financial income and
expenses in the Consolidated
statement of income € million 98 80
– in relation to sales Comparison to sales
% 1.7 1.3
Interest expenses Consolidated statement of income
€ million 78 76
– in relation to sales Comparison to sales
% 1.4 1.2
Net debt to Adjusted EBITDA
Net debt to Adjusted EBITDA is an indicator of the Group’s indebtedness.
Net debt Defined earlier in this section
€ million 1,028 1,155
Adjusted EBITDA Defined earlier in this section
€ million 250 263
Net debt to Adjusted EBITDA Net debt / Adjusted EBITDA
4.1 4.4
Key figure
Definition of the key figure or
source in the consolidated financial
statements 2020 2019
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 Consolidated statement of
financial position € million 2,360 2,562
Total assets Consolidated statement of
financial position € million 5,797 6,038
Advances received Note 28. Trade and other payables
€ million 7 11
Equity-to-assets ratio Total equity / (Total assets –
advances received) % 40.8 42.5
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 Defined earlier in this section
€ million 1,028 1,155
Total equity Consolidated statement of
financial position € million 2,360 2,562
Debt-to-equity ratio Net debt / Total equity
% 43.6 45.1
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Share-related key figures
2020 2019 2018 2017 2016
Earnings per share
1)
2)
€ –0.28 –0.18 0.32 0.95 0.35
Diluted earnings per share
1)
2)
€ –0.28 –0.18 0.32 0.90 0.35
Cash flow per share € 0.78 0.90 0.52 0.79 0.94
Equity per share
1)
2)
€ 5.73 6.22 6.70 6.59 5.84
Dividend per share € –
3)
– 0.15 0.25 0.10
Dividend payout ratio
1)
2)
% – – 47.4 26.3 28.8
Dividend yield % – – 4.7 3.2 1.2
Price/earnings ratio
1)
2)
neg. neg. 10.00 8.15 24.31
Development of share price
Average trading price € 2.66 3.01 5.39 8.11 4.51
Lowest trading price € 2.08 2.23 3.18 6.61 2.08
Highest trading price € 4.44 4.04 8.26 10.05 8.51
Trading price at the end of the period € 3.22 2.81 3.20 7.74 8.51
Change during the period % 14.8 –12.2 –58.7 –9.0 211.3
Change in the OMX Helsinki index during the period % 10.1 13.4 –8.0 6.4 3.6
Market capitalization at the end of the period
4)
€ million 1,327 1,155 1,312 3,194 3,520
Development in trading volume
Trading volume
5)
1,000 shares 1,100,628 884,254 826,636 1,021,607 955,682
In relation to weighted average number of shares % 267.3 215.0 201.1 247.7 230.6
Adjusted average number of shares
4)
411,824,420 411,198,002 411,065,622 412,363,204 414,411,287
Diluted average number of shares
4)
435,135,181 446,209,235 447,181,306 450,247,639 414,411,287
Number of shares at the end of the period
4)
412,002,212 411,774,715 410,563,719 412,671,549 413,860,600
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 have not been restated.
3)
The Board of Directors’ proposal to the Annual General Meeting.
4)
Excluding treasury shares.
5)
Includes only Nasdaq Helsinki trading.
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Earnings per share =
Net result for the financial year attributable to the equity holders
Adjusted average number of shares during the period
Cash flow per share =
Net cash generated from operating activities
Adjusted average number of shares during the period
Equity per share =
Equity attributable to the equity holders
Adjusted number of shares at the end of the period
Dividend per share =
Dividend for the financial year
Adjusted number of shares at the end of the period
Dividend payout ratio =
Dividend for the financial year
× 100
Net result for the financial year attributable to the equity holders
Dividend yield =
Dividend per share
× 100
Adjusted trading price at the end of the period
Price/earnings ratio (P/E) =
Adjusted trading price at the end of the period
Earnings per share
Average trading price =
EUR amount traded during the period
Adjusted number of shares traded during the period
Market capitalization at end of the period =
Number of shares at the end of the period ×
Trading price at the end of the period
Trading volume =
Number of shares traded during the period, and in relation to
the weighted average number of shares during the period
Definitions of share-related key figures
Review by the Board of Directors
Consolidated statement of income .......................... 19
Consolidated statement of comprehensive income ......... 19
Consolidated statement of financial position ................ 20
Consolidated statement of cash flows ....................... 21
Consolidated statement of changes in equity ............... 22
Notes to the consolidated financial statements ............. 23
1. Corporate information .............................. 23
2. Accounting principles for the
consolidated financial statements ................. 23
3. Operating segment information ..................... 33
4. Geographical information ........................... 35
5. Acquisitions and divestments ...................... 35
6. Income and expenses .............................. 36
7. Employee benefit expenses ........................ 37
8. Financial income and expenses .................... 37
9. Income taxes ........................................ 38
10. Earnings per share ................................ 40
11. Intangible assets .................................. 40
12. Property, plant and equipment .................... 41
13. Leases ............................................. 43
14. Impairment of intangible assets and property,
plant and equipment .............................. 44
15. Investments in associated companies and
joint ventures ...................................... 45
16. Carrying values and fair values of financial assets
and liabilities by measurement category .......... 45
17. Equity investments at fair value through other
comprehensive income ............................ 46
18. Share-based payment plans ...................... 47
19. Financial risk management, capital management
and insurances .................................... 49
20. Fair values and nominal amounts of
derivative instruments ............................. 55
21. Inventories ......................................... 56
22. Trade and other receivables ....................... 56
23. Cash and cash equivalents ....................... 57
24. Equity .............................................. 57
25. Employee benefit obligations ..................... 58
26. Provisions .......................................... 61
27. Debt ............................................... 61
28. Trade and other payables ......................... 63
29. Commitments and contingent liabilities .......... 63
30. Disputes and litigations ........................... 63
31. Related party transactions ........................ 64
32. Subsidiaries on December 31, 2020 ............. 65
Parent company
financial statements
Income statement of the parent company .................. 66
Balance sheet of the parent company ....................... 67
Cash flow statement of the parent company ................ 68
Statement of changes in equity of the parent company .... 69
Commitments and contingent liabilities of
the parent company .......................................... 69
18 / 76Outokumpu Annual report | Financial statements
Consolidated financial statements, IFRS
19 / 76Outokumpu Annual report | Financial statements
Consolidated statement of income Consolidated statement of
comprehensive income
€ million Note 2020 2019
Sales 3, 4, 6 5,639 6,403
Cost of sales –5,403 –6,108
Gross margin 236 295
Other operating income 6 22 107
Selling and marketing expenses
–68 –77
Administrative expenses –196 –198
Research and development expenses
–21 –17
Other operating expenses 6 –28 –77
EBIT –55 33
Share of results in associated companies 15 2 6
Financial income and expenses 8
Interest income 3 4
Interest expenses –78 –76
Market price gains and losses –10 4
Other financial expenses –13 –13
Total financial income and expenses –98 –80
Result before taxes –151 –41
Income taxes 9 34 –33
Net result for the financial year –116 –75
Earnings per share for result attributable to the equity holders of the
Company 10
Earnings per share, EUR –0.28 –0.18
Diluted earnings per share, EUR –0.28 –0.18
Net result for the financial year is fully attributable to the equity holders of the company.
€ million Note 2020 2019
Net result for the financial year –116 –75
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations
Change in exchange differences
–86 25
Reclassification adjustments from other
comprehensive income to profit or loss – 3
Cash flow hedges 20
Fair value changes during the financial year –8 12
Reclassification adjustments from other
comprehensive income to profit or loss –5 –1
Reclassification adjustments from other
comprehensive income to inventory 4 –2
Income tax relating to cash flow hedges
9 0 –1
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit plans 25
Changes during the financial year –12 –43
Income tax relating to remeasurements
9 4 10
Equity investments at fair value through other comprehensive income
17
Fair value changes during the financial year 4 –55
Income tax relating to equity investments at
fair value through other comprehensive income 9 – 1
Share of other comprehensive income in associated companies
15 –0 –0
Other comprehensive income for the financial year, net of tax –101 –49
Total comprehensive income for the financial year –217 –124
Total comprehensive income for the financial year is fully attributable to the equity holders of the company.
Consolidated financial statements
20 / 76Outokumpu Annual report | Financial statements
Consolidated statement of financial position
€ million Note 2020 2019
ASSETS
Non-current assets
Intangible assets 11, 14 610 607
Property, plant and equipment 12, 13, 14 2,631 2,767
Investments in associated companies 15 38 38
Equity investments at fair value through other comprehensive income 17 48 31
Derivative financial instruments 20 6 5
Deferred tax assets 9 264 229
Defined benefit plan assets 25 64 68
Trade and other receivables 22 1 2
Current assets
Inventories 21 1,177 1,424
Investments at fair value through profit or loss 26 13
Derivative financial instruments 20 17 15
Trade and other receivables 22 537 514
Cash and cash equivalents 23 376 325
TOTAL ASSETS 5,797 6,038
€ million Note 2020 2019
EQUITY AND LIABILITIES
Equity attributable to the equity holders of the Company
Share capital 311 311
Premium fund 714 714
Invested unrestricted equity reserve 2,103 2,103
Other reserves –46 –40
Retained earnings –721 –525
Total equity 24 2,360 2,562
Non-current liabilities
Non-current debt 27 1,153 1,053
Deferred tax liabilities 9 7 12
Defined benefit and other long-term employee benefit obligations 25 329 335
Provisions 26 84 85
Trade and other payables 28 45 29
Current liabilities
Current debt 27 251 427
Derivative financial instruments 20 32 17
Provisions 26 31 25
Current tax liabilities 6 17
Trade and other payables 28 1,500 1,475
TOTAL EQUITY AND LIABILITIES 5,797 6,038
Consolidated financial statements
21 / 76Outokumpu Annual report | Financial statements
Consolidated statement of cash flows
€ million Note 2020 2019
Cash flow from operating activities
Net result for the financial year –116 –75
Adjustments for
Depreciation, amortization and impairments
6, 11, 12, 14 246 233
Net expenses on provisions, and defined benefit and
otherlong-term employee benefit obligations
Gain/loss on sale of intangible assets and property,
plantand equipment
6
–6 –81
Net interest income and expense 8 71 63
Taxes 9 –34 33
Other non-cash adjustments 3 7
Change in working capital
Change in trade and other receivables –37 100
Change in inventories 237 129
Change in trade and other payables 47 –10
Provisions, and defined benefit and other
long-term employee benefit obligations paid –71 –53
Interest and dividends received 2 12
Interest paid –69 –56
Income taxes paid –10 –5
Net cash from operating activities 322 371
€ million Note 2020 2019
Cash flow from investing activities
Acquired businesses, net of cash – –3
Equity investments at fair value through other
comprehensive income 17 –13 –
Purchases of property, plant and equipment 12 –146 –161
Purchases of intangible assets 11 –20 –28
Proceeds from the disposal of subsidiaries, net of cash – 9
Proceeds from sale of property, plant and equipment 12 15 99
Proceeds from sale of intangible assets 11 – 10
Other investing cash flow
–10 10
Net cash from investing activities –175 –65
Cash flow before financing activities 147 306
Cash flow from financing activities
Dividends paid 24 – –62
Borrowings of non-current debt 496 515
Repayments of non-current debt –688 –76
Change in current debt 130 –396
Repayments of lease liabilities –33 –34
Other financing cash flow 0 3
Net cash from financing activities –94 –49
Net change in cash and cash equivalents 53 256
Cash and cash equivalents at the beginning of the financial year 325 68
Net change in cash and cash equivalents 53 256
Foreign exchange rate effect on cash and cash equivalents –1 0
Cash and cash equivalents at the end of the financial year 23 376 325
Consolidated financial statements
22 / 76Outokumpu Annual report | Financial statements
Consolidated statement of changes in equity
€ million Note Share capital
Premium
fund
Invested
unrestricted
equity
reserve
Misc. other
reserves
Fair value
reserve
from equity
investments
at FV through
OCI
Fair value
reserve from
derivatives
Cumulative
translation
differences
Remeasure-
ments of
defined
benefit plans
Treasur y
shares
Other
retained
earnings Total equity
Equity on Jan 1, 2019 311 714 2,103 3 5 –3 –56 –80 –40 –207 2,750
Net result for the financial year – – – – – – – – – –75 –75
Other comprehensive income – – – – –54 9 29 –33 – –0 –49
Total comprehensive income for the financial year – – – – –54 9 29 –33 – –75 –124
Transactions with equity holders of the Company
Contributions and distributions
Dividends paid 24 – – – – – – – – – –62 –62
Share-based payments 18 – – – – – – – – 7 –9 –3
Other – – – – – – – –3 – 3 –
Equity on Dec 31, 2019 311 714 2,103 3 –49 6 –27 –116 –33 –350 2,562
Net result for the financial year – – – – – – – – – –116 –116
Other comprehensive income – – – – 4 –10 –86 –8 – –0 –101
Total comprehensive income for the financial year – – – – 4 –10 –86 –8 – –117 –217
Transactions with equity holders of the Company
Contributions and distributions
Convertible bond 27 – – – – – – – – – 14 14
Share-based payments 18 – – – – – – – – 2 –1 1
Equity on Dec 31, 2020 311 714 2,103 3 –45 –4 –113 –124 –31 –454 2,360
Total equity is fully attributable to the equity holders of the company.
Consolidated financial statements
23 / 76Outokumpu Annual report | Financial statements
1. Corporate information
parent company, Outokumpu Oyj , has been
listed on the Nasdaq Helsinki since 1988. The
company’s address is P.O. Box 245, 00181
Outokumpu’s consolidated financial
statements according to ESEF regulations
are published in XHTML format at
www.outokumpu.com/reports. Financial
statements presented in other reports and
formats such as in the Annual report PDF or
the Financial report print, do not constitute as
reports according to the ESEF regulations.
employs some 10,000 professionals in more
than 30 countries.
In its meeting on February 4, 2021 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 state-
ments 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.
For the purpose of reporting according to ESEF
regulations: Outokumpu Oyj operated with this
name also in the previous year. Outokumpu
principal place of business is Helsinki, Finland .
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 2020
covering the period from January 1 to
December 31, 2020.
The consolidated financial statements have
been prepared in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union. The consoli-
dated financial statements have been prepared
in compliance with the IAS and IFRS standards
as well as the SIC and IFRIC interpretations
in force on December 31, 2020. 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 prin-
ciples. 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.
Responding to COVID-19
Safety is a key priority at Outokumpu, and the
company is committed to protecting the health
and safety of its employees. Outokumpu has
several safety measures in place to ensure
the safety of the people and to mitigate the
negative impacts of the COVID-19 pandemic.
Outokumpu monitors the COVID-19 situation
closely in each country in which it operates and
adjusts the required measures accordingly.
Outokumpu has contingency plans in place
to mitigate the operational and financial risks.
Thanks to decisive and well-timed actions
taken by the company, the negative impacts
of the COVID-19 pandemic on Outokumpu’s
operations have been very limited. Outokumpu
has been able to operate efficiently throughout
the pandemic and has successfully adjusted
its operations to meet the current demand
level. Outokumpu also initiated immediate cost
compression measures when the COVID-19
pandemic began to affect global stainless
steel demand. The actions have continued
throughout the year and the tight cost control
has supported company’s profitability and cash
flow in 2020.
As a response to the pandemic, Outokumpu
reduced its capital expenditures to EUR 180
million in 2020. Furthermore, the cash release
from the net working capital reduction was
significantly above the targeted level of EUR
100 million. Included here are the deferred
VAT payments in Finland of EUR 75 million of
which EUR 61 million was still outstanding at
year-end for up to one and a half years.
Outokumpu has successfully managed its
liquidity through the pandemic and company’s
financial position has remained stable. Cash
and cash equivalents amounted to EUR 376
million at the end of the year and the total
liquidity reserves increased to over EUR 1.0
billion. Outokumpu issued a new EUR 125
million convertible bond in July and signed a
revolving credit facility in the amount of SEK
1,000 million, guaranteed by the Swedish
Export Credit Agency EKN in October. In
December, Outokumpu agreed an amendment
and extension of its syndicated revolving credit
facility allowing for two consecutive yearly
extension requests of the maturity dates until
the end of May 2024. Out of the EUR 574
million maturing at the end of May 2022, a
facility amount of EUR 532 million has been
extended until the end of May 2023. The
financial covenants of Outokumpu’s financial
agreements are based on debt-to-equity
ratio and Outokumpu remains in compliance
with the financial covenants of its financing
agreements.
Outokumpu has not experienced material
credit risk impacts as a result of COVID-19.
The portion of unsecured receivables has been
approximately 4–6% of all trade receivables in
2020. Credit limits have remained available
from the insurer and there has been no
significant change in the insurance cover.
Outokumpu has monitored credit risk and
overdue situation closely, and continued its
close co-operation with insurers.
More information on the liquidity and
refinancing risk management as well as credit
and country risk management can be found in
note 19.
Notes to the consolidated financial statements
Notes to the consolidated financial statements
24 / 76Outokumpu Annual report | Financial statements
To ensure appropriate carrying amounts of
intangible assets and property, plant and
equipment, Outokumpu has continued its
practice to assess impairment indicators on
quarterly basis. Cash flow projections and
other valuation parameters were reviewed due
to the global economic slowdown resulting
from COVID-19. In reviewing these projections,
management had to make assumptions
relating to the severity of the outbreak’s impact
on market as well as the timing and pace of
the recovery. More information on impairment
testing can be found in note 14 and on
management judgements later in this note.
Outokumpu has utilized government support
schemes in its operating countries. Outokumpu
has received some compensation on its
personnel expenses. Outokumpu has also
utilized schemes available to defer VAT and
social security payments.
Adoption of new and amended IFRS
standards and interpretations
As of January 1, 2020, Outokumpu has applied
the following new and amended standards.
• Amendments to IAS 1 Presentation of
financial statements and IAS 8 Accoun-
ting 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 did
not have material impact on Outokumpu’s
consolidated financial statements.
• Revised Conceptual Framework of Finan-
cial Reporting (effective for financial years
beginning on or after January 1, 2020): The
International Accounting Standards Board’s
revised Conceptual Framework is used in
decisions on standard setting. The current
accounting standards have not changed,
but Framework is 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 compo-
nent of neutrality, revising the definitions
of an asset and a liability, removing the
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 did not have material
impact on Outokumpu’s consolidated
financial statements.
• Temporary amendments to IFRS 9, IAS
39 and IFRS 7 – Interest Rate Benchmark
Reform (effective for financial year
beginning on or after January 1, 2020): The
amendments modify certain specific hedge
accounting requirements to provide relief
from potential effects of the uncertainty
caused by the IBOR reform. In addition, the
amendments require companies to provide
additional information on their hedging
relationships which are directly affected
by these uncertainties. The amendments
did not impact Outokumpu’s consolidated
financial statements as Outokumpu currently
applies hedge accounting only to nickel
derivatives not impacted by the changes.
Other new or amended standards and
interpretations had no impact on Outokumpu’s
consolidated financial statements.
Outokumpu has not yet applied the following
new and amended standards and interpreta-
tions 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 IFRS 9, IAS 39, IFRS
7, IFRS 4 and IFRS 16 – Interest Rate
Benchmark Reform, Phase 2 (effective for
financial years beginning on or after January
1, 2021): The amendments address issues
arising during the interest rate benchmark
reform, including the replacement of one
benchmark rate with an alternative one.
The amendments cover: (1) accounting
for changes in the basis for determining
contractual cash flows as a result of IBOR
reform; (2) additional temporary exceptions
to applying specific hedge accounting
requirements to avoid failure of hedge rela-
tionships solely due to IBOR reform; and (3)
additional IFRS 7 disclosures related to IBOR
reform. The amendments are not expected
to have material impact on Outokumpu’s
consolidated financial statements.
• Amendments to IAS 1 Presentation of
financial statements – Classification of
Liabilities as Current or Non-current *
(effective for financial years beginning on
or after January 1, 2022, possibly deferred
to January, 2023): The amendments clarify
that liabilities are classified as either current
or non-current, depending on the rights that
exist at the end of the reporting period,
and that classification is unaffected by the
expectations of the entity or events after the
reporting date. The amendments also clarify
what IAS 1 means when it refers to the
settlement of a liability. The amendments
are not expected to have material impact
on Outokumpu’s consolidated financial
statements.
• Amendments to IAS 16 Property, Plant
and Equipment – Proceeds before
intended use * (effective for financial years
beginning on or after January 1, 2022):
The amendment prohibits an entity from
deducting from the cost of a property, plant
and equipment item any proceeds received
from selling produced items while preparing
the asset for its intended use. It also clarifies
that testing the functioning of an asset refers
to technical and physical performance of
the asset, not financial performance. The
amendment is not expected to have material
impact on Outokumpu’s consolidated
financial statements.
• Amendments to IAS 37 Provisions,
Contingent Liabilities and Contingent
Assets – Onerous Contracts * (effective for
financial years beginning on or after January
1, 2022): The amendment clarifies that the
direct costs of fulfilling a contract include
both the incremental costs of fulfilling the
contract and an allocation of other costs
directly related to fulfilling contracts. Before
recognizing a separate provision for an
onerous contract, the entity recognizes
any impairment loss that has occurred on
assets used in fulfilling the contract. The
amendment is not expected to have material
impact on Outokumpu’s consolidated
financial statements.
*Not yet endorsed by the EU.
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
Notes to the consolidated financial statements
25 / 76Outokumpu Annual report | Financial statements
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.
The alloy surcharge clause as well as daily
fixed pricing of stainless steel can reduce 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 expects and the
daily fixed pricing can also deviate from this
cycle depending on the timing of the delivery.
As the prices for all products to be sold in
the future are not known, a significant part
of the future prices are estimated according
to management’s best knowledge in net
realizable value (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.
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 the definition of the
discount rates for 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). In estimating future cash
flows, with regards to the COVID-19 pandemic,
management makes assumptions relating
to the severity of the outbreak’s impact on
market and financial development as well as
the timing and pace of the recovery. 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 manage-
ment 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 obligations.
Actuarial assumptions include, among others,
discount rate, the annual rate of increase in
future compensation levels and inflation rate.
The assumptions used are presented in note
25.
Provisions
The most significant provisions in the state-
ment of financial position relate to restructuring
programs and primarily include termination
benefits to employees. The judgement applied
mainly relates to the estimated amounts of
termination benefits.
The Group has also made provisions for known
environmental liabilities based on manage-
ment’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
Notes to the consolidated financial statements
26 / 76Outokumpu Annual report | Financial statements
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 statements of subsidiaries
are included in the consolidated financial
statements from the date on which control
commences until the date on which control
ceases.
Acquired or established subsidiaries are
accounted for by using the acquisition
method. The consideration transferred, and
the identifiable assets acquired and liabilities
assumed in the acquired company are
measured at fair value at the acquisition date.
The consideration transferred includes any
assets transferred by the acquirer, liabilities
incurred by the acquirer to former owners of
the acquiree, and the equity 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 identifi-
able assets acquired and liabilities assumed
at the acquisition date. Non-controlling
interest in the acquiree is measured acqui-
sition-by-acquisition either at fair value or at
value, which equals to the proportional share of
the non-controlling interest in the identifiable
net assets acquired. Changes in the parent
company’s ownership interest in a subsidiary
are accounted for as equity transactions if
the parent company retains control of the
subsidiary.
To those business combinations, which
have taken place before January 1, 2010,
accounting principles effective at that time
have been applied.
All intra-group transactions, receivables,
liabilities and unrealized margins, as well as
distribution of profits within the Group, are
eliminated in the preparation of consolidated
financial statements.
Associated companies
Companies, where Outokumpu generally holds
voting rights of 20–50% and in which Outo-
kumpu otherwise has significant influence, but
not control are included in the consolidated
financial statements as associated companies.
Associated companies are consolidated by
using the equity method from the date that
significant influence was obtained until it
ceases.
The Group’s share of the associated company’s
result for the period is separately disclosed
below EBIT in the consolidated statement
of income. Outokumpu’s share of changes
recognized in the associated company’s
other comprehensive income is recognized
in the Group’s other comprehensive income.
When Outokumpu’s share of the associated
company’s losses exceeds the carrying amount
of the investment, the investment is recognized
at zero value in the statement of financial
position and recognition of further losses is
discontinued, except to the extent that the
Group has incurred obligations in respect of
the associated company. The interest in an
associated company comprises the carrying
amount of the investment under the equity
method together with any long-term interest
that, in substance, forms a part of the net
investment in the associated company.
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.
Foreign currency transactions
Transactions of each subsidiary included in
the consolidated financial statements are
measured using the currency that best reflects
the economic substance of the underlying
events and circumstances relevant to that
subsidiary (“the functional currency”). The
functional currency is mainly the subsidiary’s
local currency except for subsidiaries in Mexico
and Argentina who use the US dollar as their
functional currency.
The consolidated financial statements are
presented in euros which is the functional
and presentation currency of the parent
company. Group companies’ foreign currency
transactions are translated into local functional
currencies using the exchange rates prevailing
at the dates of the transactions. Receivables
and liabilities in foreign currencies are
translated into functional currencies at the
exchange rates prevailing at the end of the
reporting period. Foreign exchange differences
arising from interest-bearing assets and
liabilities and related derivatives are recognized
Notes to the consolidated financial statements
27 / 76Outokumpu Annual report | Financial statements
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 trans-
lated into euro using the average exchange
rates of the reporting period. The assets and
liabilities for the statement of financial position
are translated using the exchange rates
prevailing at the reporting date. The translation
differences arising from the use of different
exchange rates explained above are recognized
in Group’s other comprehensive income. Any
goodwill arising on the acquisition of foreign
operations and any fair value adjustments to
the carrying amounts of assets and liabilities
arising on the acquisition of those foreign
operations are treated as assets and liabilities
of those foreign operations. They are translated
into euro using the exchange rates prevailing
at the reporting date. When a foreign operation
is sold, or is otherwise partially or completely
disposed of, the translation differences
accumulated in equity are reclassified in profit
or loss as part of the gain or loss on the sale.
Revenue 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 transporta-
tion. 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.
Outokumpu has made bill and hold arrange-
ments with its selected European customers.
Under these arrangements, based on a
customer request, Outokumpu holds the readily
available material at its own stock locations for
the customer up to a period of three months
before the actual delivery of the material.
However, Outokumpu has transferred control of
these materials to the customer and conse-
quently recognizes the revenue for the material
sales. The revenue related to Outokumpu’s
transportation service performance obligation
to deliver the material is recognized over the
time when the delivery takes place.
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 deter-
mined 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 differences
between the carrying amounts of assets and
liabilities in the financial statements and the
corresponding tax basis at the reporting date,
as well as for unused tax losses or credits carry
forward. Deferred tax assets are recognized
for all deductible temporary differences to
the extent that it is probable that future
taxable profits will be available, against which
deductible temporary differences can be
utilized. A valuation allowance is recognized
against a deferred tax asset if the realization
of the related tax benefit is not probable. The
ability to recognize deferred tax assets is
reviewed at the end of each reporting period.
Deferred tax liabilities are usually recognized
in the statement of financial position in full
except to the extent that the deferred taxes
arise from the initial recognition of an asset or
liability in a transaction which is not a business
combination and at the time of the transaction,
affects neither accounting profit nor taxable
profit.
Deferred taxes are calculated at the enacted
or substantially enacted tax rates that are
expected to apply by the end of the reporting
period. Generally, deferred tax is recognized to
the statement of income, except if the taxes
are related to items of other comprehensive
income or to transactions or other events
recognized directly in equity, in which case the
related income taxes are also recognized either
in other comprehensive income or directly in
equity, respectively.
Research and development costs
Research costs are expensed in the reporting
period in which they are incurred. Development
costs are capitalized when it is probable
that the development project will generate
future economic benefits for the Group, and
certain criteria related to commercial and
technological feasibility are met. These
Notes to the consolidated financial statements
28 / 76Outokumpu Annual report | Financial statements
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 finan-
cial 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 up to 10 years
Capitalized development costs up to 10 years
Intangible rights 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 substan-
tially 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
emissions. 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 companies are measured at cost. The
cost includes all expenditure directly attribut-
able to the acquisition of the asset. Govern-
ment 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 substan-
tial 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
depreciated on a straight-line basis over their
expected useful lives. Depreciation is based on
the following estimated useful lives:
Buildings 25–40 years
Heavy machinery 15–30 years
Light machinery and equipment 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 perfor-
mance of the existing asset and the cost can
be reliably measured. Costs arising on such
major renovations are accounted for as capital
expenditure and depreciated on a straight-line
basis over their estimated useful lives.
Gains and losses on 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 and support
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. Income from grants
and other support is presented as other
Notes to the consolidated financial statements
29 / 76Outokumpu Annual report | Financial statements
operating income. 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
recoverable amount is estimated. Goodwill is
tested at least annually, irrespective of whether
there is any evidence of impairment.
The recoverable amount of an asset is the
higher of fair value less costs to sell and value
in use. For goodwill testing purposes, the
recoverable amount is based on value in use
which is determined by reference to discounted
future net cash flows expected to be generated
by the asset. In Outokumpu, goodwill is tested
on operating segment level. The discount rate
used is a pre-tax rate that reflects the current
market view on the time value of money and
the asset-specific risks. An impairment loss is
the amount by which the carrying amount of
an asset exceeds its recoverable amount. An
impairment loss is recognized immediately
in profit or loss. The estimated useful life
of the asset that is subject to depreciation
or amortization is also reassessed when an
impairment loss is recognized.
A previously recognized impairment loss is
reversed if there has been a change in the
estimates used to determine the recoverable
amount. However, the reversal must not cause
that the adjusted carrying amount is higher
than the carrying amount that would have been
determined if no impairment loss had been
recognized in prior years. Impairment losses
recognized for goodwill are not reversed.
Leases
Group as a lessee
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.
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 compa-
nies 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 repayment 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 recognizing 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.
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
derecognized when the Group loses the rights
to receive the contractual cash flows on the
financial asset or it transfers substantially all
the risks and rewards of ownership outside the
Group.
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.
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.
Notes to the consolidated financial statements
30 / 76Outokumpu Annual report | Financial statements
Financial assets at fair value through
other comprehensive income
Financial assets at fair value through other
comprehensive income include hedge
accounted derivatives and equity investments
in listed and unlisted companies.
Equity investments and divestments of these
items are recognized at the trade date. Equity
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.
Equity investments 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 transac-
tion 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 manage-
ment. Fair value changes of equity investments
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-derivative financial assets
with fixed or determinable payments and are
not quoted in active markets. This category
includes trade and other receivables and cash
and cash equivalents.
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, 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 the liability) is not derecognized until
the liability has ceased to exist, that is, when
the obligation identified in a contract has been
fulfilled or cancelled or is no longer effective.
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 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. Effective-
ness 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
Notes to the consolidated financial statements
31 / 76Outokumpu Annual report | Financial statements
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 transac-
tion, 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. Accumu-
lated 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.
Provisions and contingent liabilities
A provision is recognized when Outokumpu
has a present legal or constructive obligation
as a result of a past event, and it is probable
that an outflow of economic benefits will be
required to settle the obligation and a reliable
estimate can be made of the amount of the
obligation. The Group’s provisions mainly
relate to restructuring plans, onerous contracts,
environmental liabilities, litigation and tax risks.
The amount recognized as a provision corre-
sponds 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 environ-
mental 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 exis-
tence will be confirmed only by the occurrence
of uncertain future events not wholly within the
control of the entity. Such present obligation
that probably does not require settlement of a
payment obligation and the amount of which
cannot be reliably measured is also considered
to be a contingent liability. Contingent
liabilities are disclosed in the notes to the
financial statements.
Employee benefits
Post-employment and other
long-term employee benefits
Group companies in different countries have
various post-employment benefit plans in
accordance with local conditions and practices.
The plans are classified as either defined
contribution plans or defined benefit plans.
The fixed contributions to defined contribution
plans are recognized as expenses in the period
to which they relate. The Group has no legal or
constructive obligation to pay further contribu-
tions if the receiving party is not able to pay
the benefits in question. All such arrangements
Notes to the consolidated financial statements
32 / 76Outokumpu Annual report | Financial statements
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 weighted
average number of shares in issue during
the period, excluding shares purchased by
Outokumpu and held as treasury shares.
Diluted earnings per share is calculated by
adjusting the weighted average number of
ordinary shares outstanding with the assump-
tion 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.
Notes to the consolidated financial statements
33 / 76Outokumpu Annual report | Financial statements
3. Operating segment
information
Outokumpu’s business is divided into four
business areas which are Europe, Americas,
Long Products and Ferrochrome. In addition to
the business area structure, Group Functions
cover Legal and compliance, Health and safety,
Raw material procurement, Finance and IR,
General procurement, Strategy, Transformation
office, HR, Group communications, Global
business services, R&D, Technology, Sustain-
ability and Group IT.
Business areas have responsibility for
commercials, supply chain management
and operations 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 opera-
tions 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
Reconciliation
2020
€ million Europe Americas
Long
Products Ferrochrome
Operating
segments
total
Other
operations
Eliminations
Group
External sales 3,485 1,194 415 151 5,245 394 – 5,639
Inter-segment sales 83 1 78 260 422 271 –693 –
Sales 3,568 1,195 493 411 5,667 665 –693 5,639
Adjusted EBITDA 142 55 –8 91 280 –29 –0 250
Adjustments to EBITDA
Restructuring costs –47 –2 –3 –1 –53 –6 – –59
EBITDA 95 53 –11 90 227 –36 –0 191
Depreciation and amortization –140 –54 –10 –34 –238 –4 –0 –243
Impairments –2 –1 – – –3 –0 – –3
EBIT –47 –1 –21 56 –14 –40 –1 –55
Share of results in associated companies – – – – – – – 2
Financial income – – – – – – – 3
Financial expenses – – – – – – – –101
Result before taxes – – – – – – – –151
Income taxes
– – – – – – – 34
Net result for the financial year – – – – – – – –116
Assets in operating capital 2,610 1,097 255 931 4,894 292 –213 4,973
Other assets – – – – – – – 561
Deferred tax assets – – – – – – – 264
Total assets – – – – – – – 5,797
Liabilities in operating capital 1,037 297 122 166 1,622 270 –205 1,687
Other liabilities – – – – – – – 1,744
Deferred tax liabilities – – – – – – – 7
Total liabilities – – – – – – – 3,437
Operating capital
1,573 801 133 766 3,272 21 –8 3,286
Net deferred tax asset – – – – – – – 257
Capital employed – – – – – – – 3,543
Notes to the consolidated financial statements
34 / 76Outokumpu Annual report | Financial statements
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. Outokumpu has concluded strategic review
of Long Products during 2020 and as a result,
Outokumpu has initiated a turnaround program
to develop the Long Products business
internally.
Ferrochrome produces charge grade of
ferrochrome. The business area has a chrome
mine in Kemi, Finland and ferrochrome
smelters in Tornio, Finland.
Other operations consist of activities outside
the four operating segments described above,
as well as industrial holdings. Such business
development and Corporate Management
expenses that are not allocated to the
business areas are also reported under Other
operations. Sales of Other operations consist
of 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.
Reconciliation
2019
€ million Europe Americas
Long
Products Ferrochrome
Operating
segments
total
Other
operations
Eliminations
Group
External sales 4,023 1,343 505 168 6,040 363 – 6,403
Inter-segment sales
66 3 137 293 498 290 –788 –
Sales 4,089 1,346 642 461 6,538 653 –788 6,403
Adjusted EBITDA 216 –27 –7 96 278 –21 6 263
Adjustments to EBITDA
Gain on the sale of real estate in
Benrath, Germany 70 – – – 70 – – 70
Restructuring costs in Germany
–53 – – – –53 – – –53
Settlement with ThyssenKrupp – – – – – –14 – –14
EBITDA 233 –27 –7 96 295 –35 6 266
Depreciation and amortization –134 –56 –8 –29 –226 –4 – –230
Impairments –1 –1 – –0 –2 –0 – –3
EBIT 99 –84 –16 67 66 –39 6 33
Share of results in associated companies – – – – – – – 6
Financial income – – – – – – – 8
Financial expenses – – – – – – – –89
Result before taxes – – – – – – – –41
Income taxes – – – – – – – –33
Net result for the financial year – – – – – – – –75
Assets in operating capital 2,876 1,209 296 854 5,235 292 –201 5,327
Other assets – – – – – – – 483
Deferred tax assets – – – – – – – 229
Total assets – – – – – – – 6,038
Liabilities in operating capital 975 295 139 163 1,571 262 –194 1,640
Other liabilities – – – – – – – 1,824
Deferred tax liabilities – – – – – – – 12
Total liabilities – – – – – – – 3,476
Operating capital
1,901 914 157 692 3,664 30 –7 3,687
Net deferred tax asset – – – – – – – 217
Capital employed – – – – – – – 3,904
Notes to the consolidated financial statements
35 / 76Outokumpu Annual report | Financial statements
5. Acquisitions and divestments
Outokumpu did not have any material acquis-
tions or divestments in 2020.
4. Geographical information
External sales by destination
€ million Finland Other Europe North America APAC region Other countries Group
2020
Business area
Europe 196 2,940 47 262 41 3,485
Americas – 0 1,144 5 45 1,194
Long Products 2 235 144 33 0 415
Ferrochrome 10 66 2 73 0 151
Other operations – – – – 394 394
208 3,240 1,337 373 481 5,639
2019
Business area
Europe 254 3,277 96 349 47 4,023
Americas – 0 1,277 13 52 1,343
Long Products 1 265 200 39 0 505
Ferrochrome 8 56 – 104 1 168
Other operations – – – – 363 363
264 3,598 1,573 506 462 6,403
Non-current assets
€ million
Finland Other Europe North America APAC region Other countries Group
2020 1,774 732 723 10 2 3,241
2019 1,762 764 834 11 2 3,374
Non-current assets are presented by the locations of the Group companies. Non-current assets exclude investments in associated
companies, financial instruments, deferred tax assets and defined benefit plan assets.
Notes to the consolidated financial statements
36 / 76Outokumpu Annual report | Financial statements
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.
Revenue related to bill and hold
Outokumpu has so-called bill and hold
arrangements in place with its selected
European customers where Outokumpu has
transferred control of the material to the
customer and recognized the revenue for the
material sales. In the end of 2020, the amount
of revenue recognized under the bill and hold
arrangements for products not delivered yet
was immaterial.
Depreciation and amortization by function
€ million
2020 2019
Cost of sales –233 –217
Selling and marketing expenses –2 –2
Administrative expenses –7 –11
Research and development expenses –1 –1
–243 –230
Other operating income
€ million 2020 2019
Gains from disposal of subsidiaries – 1
Gains on sale of intangible assets and property, plant and equipment 6 82
Insurance compensation 0 4
Other income items 16 20
22 107
Other income items include EUR 5 million of government support in 2020 mainly related to
COVID-19 support measures in various countries (2019: no material items).
Other operating expenses
€ million 2020 2019
Exchange gains and losses from foreign exchange derivatives
–12 –18
Market price gains and losses from commodity derivatives 5 –35
Market price gains and losses from derivative financial instruments –7 –52
Impairments –3 –3
Losses on sale of intangible assets and property, plant and equipment –0 –1
Other expense items –17 –21
–28 –77
Other expense items include EUR 11 million of expensed emission allowances in 2020 (2019: no
expenses).
Adjustments to EBITDA
€ million
2020 2019
Restructuring costs –59 –53
Gain on the sale of real estate in Benrath – 70
Settlement with ThyssenKrupp – –14
–59 3
In 2020, Outokumpu announced its new
strategy with the first-phase focus on de-risking
the company through deleveraging the balance
sheet. Actions include cost savings through
employee reductions, and the related restruc-
turing costs amounted to EUR 59 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 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 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.
Auditor fees
PricewaterhouseCoopers
€ million 2020 2019
Audit –2.0 –2.4
Audit-related services –0.0 –0.0
Tax advisory –0.0 –0.3
Other services –0.1 –0.4
–2.1 –3.1
PricewaterhouseCoopers Oy has provided
non-audit services to Outokumpu in total of
EUR 0.1 million during 2020. These services
comprised of sustainability reporting and other
agreed upon procedures.
Notes to the consolidated financial statements
37 / 76Outokumpu Annual report | Financial statements
7. Employee benefit expenses
€ million 2020 2019
Wages and salaries –547 –568
Termination benefits –56 –61
Social security costs –80 –84
Post-employment and other long-term employee benefits
Defined benefit plans –5 –7
Defined contribution plans –40 –40
Other long-term employee benefits –1 –9
Expenses from share-based payments –1 –0
Other personnel expenses –5 –6
–735 –774
In 2020, Outokumpu carried out employee
negotiation processes in selected operating
countries to create cost savings by restruc-
turing and reducing total employee headcount
by up to approximately 1,000 (10% of the
Group total) mostly by the end of 2021. The
fixed cost reductions are needed as the market
situation in Europe is challenging and import
pressure remains high, and the COVID-19
pandemic impacts the global economy. The
restructuring costs are reported as termination
benefits in the above table and as adjustments
to EBITDA (see note 6).
No profit-sharing bonuses based on the Finnish
Personnel Funds Act were recognized in 2020
nor in 2019.
More information on employee benefits for key
management can be found in note 31 and the
Remuneration report.
8. Financial income and expenses
€ million 2020 2019
Interest income 3 4
Interest expenses
Debt at amortized cost –56 –48
Factoring expenses –6 –10
Lease liabilities –12 –13
Other interest expenses –1 –
Interest expense on defined benefit and
other long-term employee benefit obligations –3 –6
Interest expenses –78 –76
Capitalized interests 3 5
Fees related to committed credit facilities –11 –14
Other fees –5 –4
Other financial expenses –13 –13
Exchange gains and losses
Derivatives –4 –0
Cash, loans and receivables –8 –4
Other market price gains and losses
Derivatives 1 3
Other 1 5
Market price gains and losses –10 4
Total financial income and expenses –98 –80
Other interest expenses include expenses of EUR 1 million related to deferred VAT payments in
Finland.
Notes to the consolidated financial statements
38 / 76Outokumpu Annual report | Financial statements
Exchange gains and losses in the consolidated statement of income
€ million 2020 2019
In sales –12 9
In purchases
1)
30 –16
In other income and expenses
1)
–12 –18
In financial income and expenses
1)
–11 –4
–6 –29
1)
Includes exchange gains and losses on elimination of intra-group transactions.
Exchange gains and losses include EUR 16 million of net exchange loss on derivative financial
instruments (2019: EUR 18 million net exchange loss) of which a loss of EUR 12 million has been
recognized in other operating expenses and a loss of EUR 4 million in financial items.
9. Income taxes
Income taxes in the consolidated statement of income
€ million 2020 2019
Current taxes –4 –5
Deferred taxes 39 –28
34 –33
Reconciliation of income taxes at statutory tax rate in Finland and
income taxes recognized in the consolidated income statement
€ million 2020 2019
Result before taxes –151 –41
Hypothetical income taxes at Finnish tax rate of 20% on consolidated result before tax 30 8
Difference between Finnish and foreign tax rates 4 4
Tax effect of non-deductible expenses and tax exempt income –6 –8
Current year losses for which no deferred tax asset recognized –0 –29
Deferred tax asset valuation movements –1 1
Taxes for prior years 4 –9
Tax effect of tax rate changes and other changes in tax laws 3 0
Income taxes in the consolidated statement of income 34 –33
Accumulated deferred taxes recognized in equity
€ million 2020 2019
Deferred tax on convertible bond equity component –3 –
Net investment hedging –4 –4
Remeasurements of the net defined benefit liability through other
comprehensive income
62 58
55 54
Notes to the consolidated financial statements
39 / 76Outokumpu Annual report | Financial statements
Deferred tax assets and liabilities
Jan1, 2020 Movements Dec31, 2020
€ million Deferred tax assets
Deferred tax
liabilities
Recognized in profit
or loss
Recognized in other
comprehensive
income or
directly in equity
Translation
differences Deferred tax assets
Deferred tax
liabilities
Intangible assets 8 –3 1 – 0 8 –2
Property, plant and equipment 16 –228 22 – 0 17 –207
Inventories 10 –18 4 – –0 10 –14
Net derivate financial assets 1 –4 1 – –0 1 –3
Other financial assets 19 –6 9 – –0 31 –9
Defined benefit and other long-term employee benefit obligations 51 –11 –3 4 0 52 –12
Other financial liabilities 112 –6 –16 –3 –0 89 –2
Provisions 5 –13 –2 – –0 7 –17
Tax losses and tax credits 283 – 22 – 1 306 –
505 –288 39 0 1 523 –266
Offset in country-level income tax consolidation –277 277 –260 260
Deferred taxes in the statement of financial position 229 –12 264 –7
Jan1, 2019 Movements Dec31, 2019
€ million Deferred tax assets
Deferred tax
liabilities
Recognized in profit
or loss
Recognized in other
comprehensive
income
Translation
differences
Deferred tax assets
Deferred tax
liabilities
Intangible assets 7 –4 3 – – 8 –3
Property, plant and equipment 29 –214 –27 – 0 16 –228
Inventories 20 –12 –17 – 0 10 –18
Net derivate financial assets 4 –13 5 1 –0 1 –4
Other financial assets –16 –10 40 –1 –0 19 –6
Defined benefit and other long-term employee benefit obligations 75 –33 –11 10 –1 51 –11
Other financial liabilities 88 –14 32 – 0 112 –6
Provisions 22 –20 –10 – 0 5 –13
Tax losses and tax credits 326 – –43 – 0 283 –
555 –320 –28 11 0 505 –288
Offset in country-level income tax consolidation –308 308 –277 277
Deferred taxes in the statement of financial position 247 –12 229 –12
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.
Notes to the consolidated financial statements
40 / 76Outokumpu Annual report | Financial statements
Tax losses carried forward
€ million 2020 2019
Expire in less than 1 year 3 –
Expire in 2–5 years 217 358
Expire later than in 5 years 1,883 1,759
Never expire 1,283 1,344
3,385 3,461
Finland 592 447
Germany 266 354
Sweden 374 314
The US 1,898 2,077
The UK 183 187
Other countries 73 82
3,385 3,461
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, 2020 tax
attributes of the Outokumpu Group for which
no deferred tax asset has been recognized
amount to EUR 1,942 million (Dec 31, 2019:
EUR 2,079 million). No material previously
unrecognized deferred tax assets were
recognized in 2020 or 2019. No deferred
tax liabilities were recorded on undistributed
profits on foreign subsidiaries, as such profits
are not to be distributed in the foreseeable
future.
10. Earnings per share
2020 2019
Result attributable to the equity holders of the Company, € million –116 –75
Weighted average number of shares, in thousands 411,824 411,198
Diluted average number of shares, in thousands 435,135 446,209
Earnings per share for result attributable to the equity holders of the Company
Earnings per share, € –0.28 –0.18
Diluted earnings per share, € –0.28 –0.18
11. Intangible assets
€ million
Good-
will
Other
intangible
assets
1)
Total
Historical cost on Jan 1, 2020 487 361 848
Translation differences –2 0 –2
Additions – 17 17
Disposals – –4 –4
Reclassifications – 2 2
Historical cost on Dec 31, 2020 485 377 862
Accumulated amortization and impairment on Jan 1, 2020 –21 –220 –241
Translation differences 2 –1 1
Amortization – –15 –15
Disposals – 3 3
Accumulated amortization and impairment on Dec 31, 2020 –19 –232 –252
Carrying value on Dec 31, 2020 466 144 610
Carrying value on Jan 1, 2020 466 141 607
Historical cost on Jan 1, 2019 489 332 821
Translation differences –2 –0 –2
Additions
– 36 36
Disposals – –7 –7
Reclassifications
– 1 1
Historical cost on Dec 31, 2019 487 361 848
Accumulated amortization and impairment on Jan 1, 2019 –22 –214 –236
Translation differences 2 1 2
Amortization – –7 –7
Disposals – 1 1
Accumulated amortization and impairment on Dec 31, 2019 –21 –220 –241
Carrying value on Dec 31, 2019 466 141 607
Carrying value on Jan 1, 2019
467 118 585
1)
Other intangible assets include land-use rights, emission allowances, capitalized development costs, patents,
licenses and software.
Intangible assets mainly comprise acquired assets.
Notes to the consolidated financial statements
41 / 76Outokumpu Annual report | Financial statements
During 2020, borrowing costs amounting to
EUR 0 million were capitalized on investment
projects (2019: EUR 4 million). Total interest
capitalized on December 31, 2020 was EUR
6 million (Dec 31, 2019: EUR 6 million).
Outokumpu determinates separate capitaliza-
tion rates for each quarter. The average rate
used during 2020 was 4.3%.
Emission allowances
Outokumpu had seven active sites operating
under EU’s Emissions Trading Scheme (ETS) in
2020. 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 2020 (2019: 1.0 million tonnes). For its
2020 emission allowance delivery, Outokumpu
will use allowances received for free, but also
allowances acquired from market in prior years,
and has therefore recognized EUR 11 million in
other operating expenses in 2020 (2019: no
expenses).
The emission allowance trading period
2013–2020 ended, and for the new period
2021–2030, all relevant Outokumpu sites have
applied free emission allowances according
to efficiency-based benchmarks and historical
activity. Decisions on free allocation conditions
are expected later in 2021. Emission
allowance position is regularly monitored and
optimized according to the definitions set in
corporate risk policies.
12. Property, plant and equipment
€ million
Land
Mine
properties Buildings
Machinery and
equipment
Other
tangible
assets
Advances
paid and
construction
work in
progress Total
Historical cost on Jan 1, 2020 128 72 1,286 4,691 135 294 6,606
Translation differences
–2 – –12 –46 1 –3 –62
Additions 2 17 10 37 1 102 169
Disposals –4 – –10 –43 –1 – –58
Reclassifications – 23 8 31 1 –64 –2
Other 0 – 1 –2 – – –0
Historical cost on Dec 31, 2020 123 112 1,283 4,668 137 330 6,654
Accumulated depreciation and
impairment on Jan 1, 2020 –15 –39 –719 –2,983 –82 –2 –3,840
Translation differences 0 – –0 1 –1 –0 1
Disposals – – 3 43 1 – 46
Depreciation –1 –9 –47 –165 –4 –0 –227
Impairments – – –2 –1 – – –3
Accumulated depreciation and
impairment on Dec 31, 2020 –16 –48 –766 –3,105 –86 –2 –4,023
Own property, plant and equipment 70 64 481 1,457 51 327 2,450
Right-of-use assets 37 – 37 106 0 1 181
Carrying value on Dec 31, 2020 107 64 517 1,563 51 328 2,631
Carrying value on Jan 1, 2020 112 33 567 1,708 53 293 2,767
Notes to the consolidated financial statements
42 / 76Outokumpu Annual report | Financial statements
€ million Land
Mine
properties Buildings
Machinery and
equipment
Other
tangible
assets
Advances
paid and
construction
work in
progress Total
Historical cost on Jan 1, 2019 before IFRS 16 transition 136 71 1,243 4,511 137 235 6,332
IFRS 16 transition impact 13 – 40 77 0 – 131
Translation differences 1 – 3 7 –0 1 10
Additions – 1 3 58 1 142 205
Disposals –20 – –6 –43 –3 –1 –73
Disposed subsidiaries – – –1 –4 –0 – –6
Reclassifications – – 5 76 1 –79 3
Other – – – 7 – –2 5
Historical cost on Dec 31, 2019 128 72 1,286 4,691 135 294 6,606
Accumulated depreciation and
impairment on Jan 1, 2019 –14 –33 –676 –2,868 –80 –2 –3,673
Translation differences –0 – 0 5 0 0 5
Disposals – – 5 42 3 – 49
Disposed subsidiaries – – 1 3 0 – 4
Depreciation –1 –6 –48 –164 –4 – –223
Impairments –0 – –1 –2 –0 – –2
Accumulated depreciation and
impairment on Dec 31, 2019 –15 –39 –719 –2,983 –82 –2 –3,840
Own property, plant and equipment 74 33 532 1,581 53 293 2,566
Right-of-use assets 38 – 35 126 0 – 200
Carrying value on Dec 31, 2019 112 33 567 1,708 53 293 2,767
Carrying value on Jan 1, 2019 121 37 567 1,644 56 233 2,659
During 2020, EUR 2 million of borrowing costs
were capitalized on investment projects (2019:
EUR 2 million). Total interest capitalized on
December 31, 2020 was EUR 25 million
(Dec 31, 2019: EUR 24 million). Outokumpu
determines separate capitalization rates for
each quarter. The average rate used during
2020 was 1.5%.
Notes to the consolidated financial statements
43 / 76Outokumpu Annual report | Financial statements
13. Leases
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 equip-
ment range up to 15 years. Lease terms for
land and buildings can be significantly longer
with remaining terms for individual contracts
on land of approximately 45–95 years.
Leases for machinery and equipment include
also contracts with variable lease payments
based on usage of the equipment. Machinery
and equipment are also hired with daily
rates for temporary use and thus reported as
short-term leases. Outokumpu applies the
recognition exemption for short-term leases
and leases of low-value assets. Leases of low
value assets typically include office equipment.
Right-of-use assets
€ million Land Buildings
Machinery and
equipment Advances paid Total
Historical cost on Jan 1, 2020 41 42 204 – 286
Additions
0 8 8 1 16
Other changes 0 0 –2 – –2
Historical cost on Dec 31, 2020 41 49 210 1 301
Accumulated depreciation on Jan 1, 2020 –2 –6 –77 – –85
Depreciation
–1 –6 –27 – –34
Accumulated depreciation on Dec 31, 2020 –3 –13 –104 – –120
Carrying value on Dec 31, 2020 37 37 106 1 181
€ million Land Buildings
Machinery and
equipment Advances paid Total
Historical cost on Jan 1, 2019 before IFRS 16 transition 28 1 100 2 131
IFRS 16 transition impact 13 40 77 – 131
Additions – 0 19 1 19
Other changes – – 7 –2 5
Historical cost on Dec 31, 2019 41 42 204 – 286
Accumulated depreciation on Jan 1, 2019 –1 –0 –52 – –53
Depreciation –1 –6 –26 – –33
Accumulated depreciation on Dec 31, 2019 –2 –6 –77 – –85
Carrying value on Dec 31, 2019 38 35 126 – 200
Lease liabilities
€ million 2020 2019
Non-current
174 176
Current
18 30
192 206
Maturity analysis of lease liabilities is presented in note 19.
Amounts recognized in the statement of income
€ million 2020 2019
Depreciation of right-of-use assets –34 –33
Interest expenses on lease liabilities –12 –13
Expenses related to short-term leases –10 –13
Expenses related to leases of low-value items –1 –1
–56 –59
Amounts recognized in the statement of cash flows
€ million 2020 2019
Repayments of lease liabilities –33 –34
Interest paid on lease liabilities –12 –13
–45 –46
Notes to the consolidated financial statements
44 / 76Outokumpu Annual report | Financial statements
14. Impairment of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment by operating segment
Goodwill Other intangible assets Property, plant and equipment
€ million
2020 2019 2020 2019 2020 2019
Europe 343 343 5 4 1,140 1,220
Americas – – 1 1 705 811
Long Products 9 9 2 3 88 98
Ferrochrome 114 114 0 0 686 615
Other operations – – 136 133 11 24
466 466 144 141 2,631 2,767
Impairment testing
Impairment testing is carried out on operating
segment level, as they are the Group’s
cash-generating units. Goodwill, other
intangible assets, and property, plant and
equipment by business area are presented in
the above table. In addition, the test covers
the net working capital of each business area.
In 2020, due to COVID-19, the cash flow
projections and other testing parameters were
reviewed on a quarterly basis.
The recoverable amounts of the cash-gen-
erating units are based on value-in-use
calculations, prepared using discounted cash
flow projections, based on the new strategy
approved by the management in November,
2020, and include cash flow forecasts for
2021–2026 after which the terminal value
is calculated. The carrying amount to which
the recoverable amount is compared, is the
operating capital of the segment as presented
in note 3 and defined in the Alternative
performance measures section of the Review
by the Board of Directors.
Key assumptions are discount rate, terminal
value growth rate, average global growth
in end-use consumption of stainless steel
and base price development, and the
values assigned to the key assumptions are
conservative. As the base-line for the cash
flow projections was the performance level
impacted by COVID-19, the estimates also
include assumptions relating to the severity of
the pandemic’s impact on market and financial
development as well as the timing and pace
of the recovery, where the management has
used external analyses on different scenarios
to define a realistic estimate for Outokumpu’s
business and operating environment.
Discount rate is the weighted average pre-tax
cost of capital (WACC), as defined for Outo-
kumpu. 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
Europe was 8.2% (2019: 7.6%), for Americas
10.1% (2019: 10.7%), for Long Products 9.1%
(2019: 9.2%), and for Ferrochrome 8.1%
(2019: 7.6%).
In the terminal value, growth rate assump-
tions are 0.5% (2019: 0.5%) for Europe,
Ferrochrome, and Long Products and 1.0%
(2019: 1.0%) for Americas. 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 1,057 million. Increase of 4.4 percentage
points in after-tax WACC would cause the
recoverable amount to equal the carrying
amount. Also, 25% decrease in EBITDA would
cause the recoverable amount to equal the
carrying amount. A terminal growth rate of 0%
would not lead to impairment.
The estimated recoverable amount of Americas
exceeds its carrying amount by approximately
EUR 181 million. Increase of 1.4 percentage
points in after-tax WACC would cause the
recoverable amount to equal the carrying
amount. Also, 12% decrease in EBITDA would
cause the recoverable amount to equal the
carrying amount. A terminal growth rate of 0%
would not lead to impairment.
The estimated recoverable amount of Long
Products exceeds its carrying amount by
approximately EUR 35 million. Increase of 1.7
percentage points in after-tax WACC would
cause the recoverable amount to equal the
carrying amount. Also, 12% decrease in EBITDA
would cause the recoverable amount to equal
the carrying amount. A terminal growth rate of
0% would not lead to impairment.
The estimated recoverable amount of
Ferrochrome exceeds its carrying amount by
approximately EUR 277 million. Increase of
2.8 percentage points in after-tax WACC would
cause the recoverable amount to equal the
carrying amount. Also, 18% decrease in EBITDA
would cause the recoverable amount to equal
the carrying amount. A 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 2020 nor 2019.
However, impairment losses of EUR 3 million
related to asset obsolence were recognized
in Europe and Americas in 2020 (2019:
impairment losses of EUR 3 million).
Notes to the consolidated financial statements
45 / 76Outokumpu Annual report | Financial statements
15. Investments in
associated companies
Outokumpu has the following associated
companies which are all equity accounted.
Based on the amounts reported in Group’s
consolidated financial statements, it is
concluded that the investments are immaterial.
Associated companies
Domicile Ownership, %
Manga LNG Oy Finland 45
OSTP Holding Oy Finland 49
Rapid Power Oy Finland 33
Summarized financial information
on associated companies
€ million 2020 2019
Carrying value of
investments in associated
companies 38 38
Group’s share of total
comprehensive income 2 6
16. Carrying values and fair values of financial assets and liabilities by measurement category
Measured at
2020
€ million Amortized cost
Fair value
through other
comprehensive
income
Fair value through
profit or loss
Carrying
amount Fair value
Fair value
hierarchy level
Non-current financial assets
Equity investments – 48 – 48 48 3
Trade and other receivables 1 – – 1 1 –
Derivatives held for trading – – 6 6 6 2
Current financial assets
Other investments – – 26 26 26 1
Trade and other receivables 385 – – 385 385 –
Hedge accounted derivatives – 8 – 8 8 2
Derivatives held for trading – – 10 10 10 2
Cash and cash equivalents 376 – – 376 376 –
762 56 42 860 860
Non-current financial liabilities
Non-current debt 1,153 – – 1,153 1,208 2
Current financial liabilities
Current debt 251 – – 251 251 2
Trade and other payables 1,246 – – 1,246 1,246 –
Hedge accounted derivatives – 11 – 11 11 2
Derivatives held for trading – – 21 21 21 2
2,650 11 21 2,682 2,737
The fair value of non-current debt is determined by using quoted prices for listed instrument, for loans and lease liabilities the fair value is determined
by discounted cash flow method where yields observed at reporting date are used. The fair value of the convertible bonds includes the value of the
conversion rights.
Notes to the consolidated financial statements
46 / 76Outokumpu Annual report | Financial statements
17. Equity investments at
fair value through other
comprehensive income
€ million 2020 2019
Carrying value on Jan 1 31 86
Additions 13 –
Fair value changes 4 –55
Carrying value on Dec 31 48 31
Fair value reserve in equity
€ million 2020 2019
Fair value on Dec 31
48 31
Fair value at initial recognition 93 80
Fair value reserve –45 –49
Equity investments at fair value through other
comprehensive income consists of investments
which are not held for trading, and which
the Group has irrevocably elected at initial
recognition to recognize in this category.
These are mainly strategic 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 27 million
holding in Voimaosakeyhtiö SF providing
ownership to Fennovoima Oy and EUR 20
million of holdings in other energy companies
in which Outokumpu does not have control,
joint control or significant influence. During year
2020 Outokumpu invested EUR 13 million to
Voimaosakeyhtiö SF and by the end of 2020
Outokumpu has invested totally EUR 92 million
in the shares of Voimaosakeyhtiö SF. The EUR
4 million increase in fair value in 2020 relates
to energy producing companies and is caused
mainly due to rise in estimated long-term
prices of electricity.
Measured at
2019
€ million Amortized cost
Fair value
through other
comprehensive
income
Fair value through
profit or loss Carrying amount Fair value
Fair value
hierarchy level
Non-current financial assets
Equity investments – 31 – 31 31 3
Trade and other receivables 2 – – 2 2 –
Hedge accounted derivatives – 0 – 0 0 2
Derivatives held for trading – – 5 5 5 2
Current financial assets
Other investments – – 13 13 13 1
Trade and other receivables 359 – – 359 359 –
Hedge accounted derivatives – 7 – 7 7 2
Derivatives held for trading – – 8 8 8 2
Cash and cash equivalents 325 – – 325 325 –
686 38 26 750 750
Non-current financial liabilities
Non-current debt 1,053 – – 1,053 1,068 2
Current financial liabilities
Current debt 427 – – 427 431 2
Trade and other payables 1,291 – – 1,291 1,291 –
Hedge accounted derivatives – 1 – 1 1 2
Derivatives held for trading – – 16 16 16 2
2,771 1 16 2,788 2,807
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 equity investments 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 equity investments at fair value through
other comprehensive income presented in note 17 represents also the reconciliation of level 3 changes.
Notes to the consolidated financial statements
47 / 76Outokumpu Annual report | Financial statements
18. Share-based payment plans
During 2020, Outokumpu’s share based
payment programs included Performance
Share Plan 2012 (Plans 2018–2020,
2019–2021 and 2020–2022), Restricted
Share Pool Program 2012 (Plans 2018–2020,
2019–2021 and 2020–2022) and Matching
Share Plan for the key management. Matching
Share Plan and Performance Share Plan
2019–2020 for the CEO related to the former
CEO, and ended when he left the company.
Share-based programs are part of the Group’s
incentive and commitment-building system for
key employees. The objective of the programs
is to retain, motivate and reward selected
employees for good performance which
supports Outokumpu’s strategy.
The Performance Share Plan 2017–2019
ended and based on not achieving the targets,
no shares were rewarded to the participants.
Regarding the Restricted Share Pool Program
plan 2017–2019, after deductions for
applicable taxes, in total 49,147 shares were
delivered to 53 participants based on the
conditions of the plan.
In December 2019, the Board of Directors
approved the commencement of the new plan
(plan 2020–2022) of the Performance Share
Plan from the beginning of 2020. At the end of
the reporting period 127 persons participated
in the plan and they had been allocated in
total 2,903,702 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 December 2019, the Board of Directors
approved the commencement of the new
plan (plan 2020–2022) of Restricted Share
Pool Program from the beginning of 2020.
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 37 persons participated in the plan and
they have been allocated in total 161,900
gross shares.
In April 2016, the Board of Directors approved
the commencement 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 matched each share acquired
by the participant with two gross shares from
which applicable taxes were deducted and the
remaining net number of shares was delivered
in four equal installments at the end of 2017,
2018, 2019 and 2020, respectively. In order
to receive the matching shares, the partic-
ipants were required to keep all the shares
they had acquired until the vesting of each
matching share tranche. In 2020, the Board
of Directors approved the delivery of the last
reward tranche from the plan. After deduction
of applicable taxes, the net number of shares
delivered was 178,350.
Outokumpu used its treasury shares for all
share reward payments.
In December 2020, the Board of Directors
approved the commencement of the
2021–2023 plans for the Performance Share
Plan 2012 and the Restricted Share Pool
Program 2012 from the beginning of 2021.
For the financial year 2020, the share-based
payment expenses included in the employee
benefit expenses were EUR 1 million (2019:
EUR –0 million). The total estimated value
of the share-based payment plans is EUR 2
million on December 31, 2020. This value is
recognized as an expense in the statement of
income during the vesting periods.
Detailed information of the share-based incen-
tive programs can be found in Outokumpu’s
home page www.outokumpu.com.
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
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
completion of the project earliest in 2029, and
the range of potential fair values is wide.
Notes to the consolidated financial statements
48 / 76Outokumpu Annual report | Financial statements
The general terms and conditions of the share-based incentive programs
Performance Share Plan
Grant date Feb 2, 2018 Feb 20, 2019 March 9, 2020
Vesting period Jan 1, 2018–Dec 31, 2020 Jan 1, 2019–Dec 31, 2021 Jan 1, 2020–Dec 31, 2022
Share price at grant date 6.61 3.55 2.80
Exercised In shares and cash In shares and cash In shares and cash
Vesting conditions
Non-market Outokumpu’s return on operating capital compared to a peer group
Other relevant conditions A salary-based limit for the maximum benefits
Restricted Share Pool Program
Grant date June 1, 2018 April 18, 2019 March 9, 2020
Vesting period Jan 1, 2018–Dec 31, 2020 Jan 1, 2019–Dec 31, 2021 Jan 1, 2020–Dec 31, 2022
Share price at grant date 5.76 3.72 2.80
Exercised In shares and cash In shares and cash In shares and cash
Vesting conditions Continuation of employment until the shares are delivered, a salary-based limit for the maximum benefits
Matching Share Plan for the management
Grant date April 27, 2016
Vesting period Jan 1, 2017–Dec 31, 2020
Share price at grant date 5.35
1)
Exercised In shares and cash
Vesting conditions 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.
1)
Incentive fair value at the grant date reported as the average fair value based on the share purchase dates.
Notes to the consolidated financial statements
49 / 76Outokumpu Annual report | Financial statements
19. Financial risk management,
capital management
and insurances
The main objectives of financial risk manage-
ment are to reduce earnings volatility and to
secure sufficient 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, with a focus
on sufficient liquidity during the pandemic
in 2020. 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 responsibil-
ities, 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 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. CFO office together
with 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
Försäkrings aktiebolag 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 transac-
tions and balance sheet items for each of the
market risk categories. In interest rate, energy
price and emission price risk the forecasted
items are included in the underlying risk
position. 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 metal 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. Conse-
quently, 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 below.
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.
Continuing an exception to hedging policy
approved in 2019, the main operating entity in
Sweden hedged its fixed price sales orders to
limited extent, and did not hedge its fixed price
purchase orders.
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 discounts.
Fair value risk consists of currency denomi-
nated 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
Sensitivity of financial instruments to market risks
Dec31, 2020 Dec31, 2019
€ million In profit or loss
In other comprehensive
income In profit or loss
In other comprehensive
income
+/–10% change in EUR/USD exchange rate +3/–4 – +5/–6 –
+/–10% change in EUR/SEK exchange rate
–2/+3 – –9/+11 –
+/–10% change in nickel price in USD +0/–0 +5/–5 –3/+3 +0/–0
+/–1% parallel shift in interest rates –9/+10 – –6/+7 –
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 21–31%. With +/–30% change in dollar denominated price, the effect in
profit or loss is about EUR +0/–0 million and in other comprehensive income EUR +15/–15 million for nickel derivatives.
Notes to the consolidated financial statements
50 / 76Outokumpu Annual report | Financial statements
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 2020
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 equity.
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.
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 2020 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 47% (2019: 64%) of
the Group’s debt has an interest period of less
than one year and the average interest rate
of non-current debt on December 31, 2020
was 4.9% (Dec 31, 2019: 4.5%). 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. Furthermore, 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 250 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
Commodities. 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. 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. A 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
Currency distribution and re-pricing of outstanding net debt
Dec31, 2020
€ million
Currency Net debt
1)
Derivatives
2)
Average rate, %
1)
Duration. year
3)
Rate sensitivity
4)
EUR 1,204 –450 5.1 3.9 3.4
SEK –26 436 0.0 0.1 4.1
USD –94 18 0.0 –0.0 –0.8
Others –56 3 0.3 –0.0 –0.5
1,028 7 6.2
Dec31, 2019
€ million
Currency Net debt
1)
Derivatives
2)
Average rate, %
1)
Duration. year
3)
Rate sensitivity
4)
EUR 1,292 –587 5.6 2.8 3.5
SEK –9 581 –0.1 0.2 5.7
USD –77 6 1.0 0.0 –0.7
Others –50 5 0.8 0.0 –0.5
1,155 5 8.0
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.
Foreign exchange positions of EUR-based companies
Dec31, 2020 Dec31, 2019
€ million SEK USD GBP Other SEK USD GBP Other
Trade receivables and payables –6 –257 11 7 0 –248 12 11
Loans and bank accounts
1)
440 50 0 6 525 59 –7 17
Derivatives –438 179 –30 –27 –525 183 –14 –29
Net position –4 –28 –19 –14 0 –7 –9 –1
Foreign exchange positions of SEK-based companies
Dec31, 2020 Dec31, 2019
€ million EUR USD GBP Other EUR USD GBP Other
Trade receivables and payables 67 –23 2 5 69 –17 4 18
Loans and bank accounts
1)
9 9 1 1 26 8 0 1
Derivatives –122 –1 –12 –12 –217 –49 –11 –29
Net position –46 –15 –10 –5 –121 –58 –7 –9
1)
Includes cash and cash equivalents, loan receivables and debt.
Notes to the consolidated financial statements
51 / 76Outokumpu Annual report | Financial statements
of price fixed purchase orders, inventories of
nickel- containing materials and price fixed
sales orders. Based on the 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.
During the reporting year, the share of sales
contracts in Europe with fixed price continued
to increase. Furthermore, the ability to pass
price changes in alloy metals to stainless
steel prices varied resulting in a varying price
relationship between e.g. LME nickel prices
and stainless steel.
Hedge accounting programs in nickel
derivatives were broadened during 2020. Both
Business Area Europe and Business Area Amer-
icas have active hedge accounting programs
in nickel derivatives. The hedge accounting
covers a meaningful part of Group nickel price
risk 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 similar
to that of nickel, except for the value of the
exposure being lower and secondly, Outo-
kumpu 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. 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 (phase III)
emission trading period, ending in 2020.
Outokumpu manages energy price risk centrally.
The electricity and gas price risks are reduced
with fixed price supply contracts and partial
ownership in power utilities.
Security price risk
Outokumpu has equity investments and fixed
income securities. On December 31, 2020,
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 26 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 fifth 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, 2020, the maximum
exposure to credit risk of trade receivables was
EUR 384 million (2019: EUR 359 million). The
portion of unsecured receivables during 2020
has been approximately 4–6% of all trade
receivables. During 2020, credit limits have
remained available from the insurer and there
is no significant change in the insurance cover.
As a COVID-19 mitigation action, Outokumpu
has more frequently monitored credit risk and
the overdue situation and continued its close
co-operation with the insurers. 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 risk 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 counterparties 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.
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 2020, Outokumpu strengthened its
liquidity reserves in response to the COVID-19
pandemic as well as improved its maturity
profile of debt. In March, Outokumpu refi-
nanced EUR 120 million pension loan with new
maturity of 10 years. In July, Outokumpu issued
new EUR five years 125 million unsecured
convertible bonds, where the proceeds were
used for general corporate purposes and the
prepayment of debt. In October, Outokumpu
signed a new SEK 1000 million secured
revolving credit facility, which is guaranteed by
the Swedish Export Credit Agency EKN. The
facility can be used to finance Outokumpu’s
subsidiary Outokumpu Stainless Ab in Sweden
and includes a condition allowing for two
Notes to the consolidated financial statements
52 / 76Outokumpu Annual report | Financial statements
consecutive yearly extensions of the maturity
until the end of May 2024. In addition, in
December, Outokumpu agreed an amendment
and extension of its syndicated revolving credit
facility allowing for two consecutive yearly
extension requests of the maturity dates until
the end of May 2024. Out of EUR 574 million
maturing at the end of May 2022, a facility
amount of EUR 532 was extended until end of
May 2023. Furthermore, the use of the EUR
120 million Kemi mine facility continued and
Outokumpu drew EUR 44 million new long-term
capital expenditure funding for the project. In
addition to funding measures, Outokumpu also
deferred VAT payments in Finland of EUR 75
million of which EUR 61 million is outstanding
at year end.
Net debt development
€ million 2020 2019
Net cash flow from operating
activities 322 371
Net cash flow from investing
activities –175 –65
Cash flow before financing
activities 147 306
Dividends paid – –62
Convertible bond equity
portion 17 –
Other financing cash flow 0 3
Cash flow impact on net debt 164 248
Opening net debt 1,155 1,241
IFRS 16 transition impact – 131
Cash flow impact on net debt –164 –248
Change in net debt, non–cash 37 32
Closing net debt 1,028 1,155
In 2020 the Moody’s corporate family rating for
Outokumpu decreased from B2 to B3 and the
rating for secured notes decreased from B1 to
Credit facilities
€ million Maturity Total 2020
Utilized
2020
Available
2020 Total 2019 Utilized 2019
Available
2019
Committed revolving credit facility May 2021 76 – 76 76 – 76
May 2022 42 – 42 574 – 574
May 2023 532 – 532 – – –
Committed Kemi mine investment facility Sept 2030
1)
120 86 34 120 42 78
Committed SEK 1,000 million revolving credit facility May 2022 100 – 100 – – –
Commited facilities total 870 86 784 770 42 728
Uncommitted Finnish commercial paper program N/A 800 231 569 800 101 699
1)
Availability period until March 2022
B2. Both ratings have negative outlook at the
end of the year.
Notes to the consolidated financial statements
53 / 76Outokumpu Annual report | Financial statements
Contractual cash flows
2020
€ million 2021 2022 2023 2024 2025 2026–
Bonds – – – 250 – –
Convertible bonds – – – – 125 –
Loans from financial institutions 2 5 340 10 10 51
Pension loans – 13 43 37 31 76
Lease liabilities 18 17 15 15 14 113
Other loans 0 0 0 0 0 6
Commercial papers 231 – – – – –
Trade payables 1,246 – – – – –
Interest payments and facility charges 67 61 46 28 18 167
Currency derivatives
Outflows 1,267 – – – – –
Inflows –1,279 – – – – –
Interest derivatives –2 –2 –2 –1 – –
1,550 94 442 339 198 413
On December 31, 2020, the Group had cash and cash equivalent amounting to EUR 376 million
and committed available long-term credit facilities totaling EUR 674 million. In addition, the EUR
34 million long-term facility is available for financing the Kemi mine investment.
2019
€ million 2020 2021 2022 2023 2024 2025–
Bonds – – – – 250 –
Convertible bonds 250 – – – – –
Loans from financial institutions 8 4 4 405 5 30
Pension loans 40 48 62 28 22 24
Lease liabilities 30 64 11 9 8 84
Commercial papers 101 – – – – –
Trade payables 1,180 – – – – –
Interest payments and facility charges 66 55 42 27 12 148
Currency derivatives
Outflows 1,816 – – – – –
Inflows –1,813 – – – – –
Interest derivatives –1 –1 –1 –1 –1 –
1,678 171 118 467 296 285
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.
The revolving credit facility totalling EUR 650
million, the sustainability linked term 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.
Notes to the consolidated financial statements
54 / 76Outokumpu Annual report | Financial statements
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, with a focus
on sufficient liquidity during the pandemic in
2020. 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
structure 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 2020 several
measures targeting to increase liquidity and
average maturity of debt were implemented.
The revolving credit facilities, 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
financial covenant on debt-to-equity ratio and
the defined covenant level is 100 percent. In
2020 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 2020, several
capital transactions were made between
German units and from Germany to Sweden
and Finland. In addition a shareholder contribu-
tion was made to Visenta Försäkringaktiebolag.
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.
The 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’s long-term 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 2020 2019
Total equity 2,360 2,562
Non-current debt 1,153 1,053
Current debt 251 427
Total debt 1,404 1,480
Total capitalization 3,764 4,042
Total debt 1,404 1,480
Cash and cash equivalents –376 –325
Net debt 1,028 1,155
2020 2019
Debt-to-equity ratio, % 43.6 45.1
Net debt to adjusted EBITDA 4.1 4.4
The debt-to-equity ratio improved slightly
despite of low profitability. Successful cost
scrutiny and cash preservation through working
capital management and capex reductions
supported the ratio to remain stable.
Insurances
The Group’s business is capital intensive and
key production processes are rather tightly
integrated and have therefore interdependen-
cies. Property damage and business interrup-
tion 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. During the reporting year there
were no events leading to significant insurance
claims. Outokumpu’s captive insurance
company, Visenta Försäkringsaktiebolag, is
registered in Sweden and can operate as direct
insurer and as reinsurer. The assets increased
in 2020 to EUR 42 million (2019: EUR 19
million) due to shareholder’s contribution
of SEK 220 million. This enabled Visenta to
continue and increase its participation to Outo-
kumpu’s property and business interruption
insurance. Visenta also continued to provide
surety to cover certain potential environmental
liabilities in connection with the operations in
Kemi and Tornio.
Outokumpu continued its systematic fire safety
and loss prevention audit program, focusing
on execution of the mitigating actions. Due
to 2020 travel restrictions, many audits were
conducted virtually using in-house expertise in
co-operation with external advisors.
Notes to the consolidated financial statements
55 / 76Outokumpu Annual report | Financial statements
20. Fair values and nominal amounts of derivative instruments
2020 2019 2020 2019
€ million
Positive
fair value
Negative
fair value
Net
fair value
Net
fair value
Nominal
amounts
Nominal
amounts
Currency and interest rate
derivatives
Currency forwards 4 –16 –12 –3 1,273 1,815
Currency options, bought – – – 0 – 6
Interest rate swaps 6 – 6 5 325 200
Tonnes Tonnes
Metal derivatives
Forward nickel contracts,
hedge accounted 8 –11 –4 6 26,417 8,048
Forward nickel contracts 6 –5 1 –6 19,132 9,772
Forward molybdenum
contracts – – – –0 – 18
Nickel options, bought – – – 0 – 5,500
Total derivatives 24 –32 –8 3
Less long-term derivatives
Interest rate swaps 6 – 6 5
Short-term derivatives 17 –32 –15 –2
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 (nickel derivatives)
In 2020, Outokumpu continued cash flow
hedge accounting for two selected nickel
hedging programs, for sales and purchases,
and began a new one for sales in order to
reduce volatility of the underlying nickel linked
earnings. The programs are implemented
for business area Americas and business
area Europe and cover meaningful part of
the Group sales contracts. 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,
forward element is recognized in profit or loss.
The used nickel derivative instruments are
forwards. The selected derivative instruments
correspond to the pricing model used in the
underlying. The ineffectiveness is tested
regularly. The management estimates that
possible ineffectiveness can arise related to
credit risk or timing of transactions, but these
are estimated to be immaterial.
2020 2019
Fair value of nickel derivatives, € million –4 6
Nominal amount of nickel derivatives, tons 26,417 8,048
Hedge ratio 1:1 1:1
Fair value reserve in other comprehensive income, € million –4 6
Reclassified from other comprehensive income to profit or loss, € million
1)
–2 –10
Reclassified from other comprehensive income to profit or loss, € million
2)
7 7
Reclassified from other comprehensive income to inventory, € million –4 2
1)
Included in sales
2)
Included in cost of sales
Hedge accounted cash flow
hedges (EUR/SEK)
Outokumpu had a ten year EUR/SEK hedge
accounting program which ended at year end
2019. In 2019, the remaining part EUR 4
million was reclassified from other comprehen-
sive income to profit and loss, to cost of sales.
Master netting agreements
and similar arrangements
Outokumpu enters into derivative transactions
with most counterparties under ISDA agree-
ments. 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
Notes to the consolidated financial statements
56 / 76Outokumpu Annual report | Financial statements
as a default occurs, all outstanding transac-
tions 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.
21. Inventories
€ million 2020 2019
Raw materials and consumables 387 440
Work in progress 419 460
Finished goods and merchandise 369 523
Advance payments 2 0
1,177 1,424
€ million 2020 2019
Derivative assets
Gross amounts of recognized financial assets in the statement of financial position 24 20
Related financial instruments that are not offset 15 11
8 9
Derivative liabilities
Gross amounts of recognized financial liabilities in the statement of
financialposition 32 17
Related financial instruments that are not offset 15 11
17 6
The most important commodity price risk for
Outokumpu is caused by fluctuation in nickel
and other alloy prices. The alloy surcharge
clause as well as daily fixed pricing of stainless
steel can reduce 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
expects and the daily fixed pricing can also
deviate from this cycle depending on the timing
of the delivery. As the prices for all products to
be sold in the future are not known, a signif-
icant part of the future prices are 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. Reversal of NRV write-downs
of EUR 15 million were recognized in income
statement during 2020 (2019: write-downs of
EUR 1 million). In 2020, Outokumpu continued
to apply cash flow hedge accounting for two
selected nickel hedging cases and started a
new, third one. More details on commodity
price risk are presented in note 19 and on
hedge accounting in note 20.
22. Trade and other receivables
€ million 2020 2019
Non-current
Other accruals and receivables 1 2
Current
Trade receivables 384 359
VAT receivable 44 55
Income tax receivable 23 29
Prepaid insurance expenses 10 9
Other accruals 35 28
Other receivables 41 34
537 514
Impairment of trade receivables
On Jan 1 7 7
Recovery of doubtful receivables –1 –
On Dec 31 5 7
Age analysis of trade receivables
Neither impaired, nor past due 362 312
Past due 1–30 days 17 40
Past due 31–60 days
3 3
More than 60 days 2 4
384 359
The maximum exposure to credit risk at the
reporting date is the carrying amount of 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, 2020 Outokumpu has
derecognized trade receivables totaling EUR
269 million (2019: EUR 321 million), which
represents fair value of the assets. Net
proceeds received totaled EUR 263 million
(2019: EUR 312 million). Underlying assets
have maturity of less than one year. The
maximum amount of loss related to derecog-
nized assets is estimated to be EUR 10 million
(2019: EUR 11 million). This estimate is based
on insurance policies and contractual arrange-
ments of factoring companies and Outokumpu.
The analysis does not include impact of any
operational risk related to Outokumpu’s
contractual responsibilities.
Notes to the consolidated financial statements
57 / 76Outokumpu Annual report | Financial statements
24. Equity
Share capital, premium fund and invested unrestricted equity reserve
€ million
Number
of shares,
1,000
Share
capital
Premium
fund
Invested
unrestricted
equity reserve Total
On Jan 1, 2019 410,564 311 714 2,103 3,127
Shares delivered from the share-based payment programs
1)
1,211 – – – –
On Dec 31, 2019 411,775 311 714 2,103 3,127
Shares delivered from the share-based payment programs
1)
227 – – – –
On Dec 31, 2020 412,002 311 714 2,103 3,127
Treasury shares
1)
4,372
Total number of shares on Dec 31, 2020 416,374
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.
23. Cash and cash equivalents
€ million 2020 2019
Cash at bank and in hand 374 323
Short-term bank deposits and
cash equivalents 2 2
376 325
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 2020 was
–0.0% (Dec 31, 2019: 0.2%).
According to the Articles of Association,
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
financial 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 Share-
holders, and other items based on the local
regulations of the Group companies. Retained
earnings include remeasurements of defined
benefit plans, treasury shares, cumulative
translation differences and other retained
earnings and losses.
Distributable funds
On December 31, 2020, the distributable
funds of the parent company totaled EUR
2,312 million of which retained earnings
were EUR 188 million. The Board of Directors
proposes to the Annual General Meeting in
2021 that no dividend will be paid for 2020.
No dividend was paid for 2019.
Notes to the consolidated financial statements
58 / 76Outokumpu Annual report | Financial statements
framework set out in the funding policies and
local regulation. 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 2020,
these contributions were GBP 6 million, and
the remaining GBP 3 million will be paid in
February 2021. The preliminary actuarial
valuation started on January 1, 2020 indicates
continued improvement on the scheme’s
funding and this new valuation is expected to
be finalized during the first quarter of 2021.
Defined benefit cost recognized in the consolidated
statements of income and comprehensive income
€ million 2020 2019
In EBIT –5 –7
In financial income and expenses –2 –3
Defined benefit cost recognized in the consolidated statement of income –8 –10
In other comprehensive income –12 –43
Total defined benefit cost recognized –19 –53
Gross defined benefit obligations and plan assets
€ million 2020 2019
Present value of funded defined benefit obligations 781 783
Present value of unfunded defined benefit obligations 3 3
Fair value of plan assets –534 –537
Net defined benefit liability 250 249
Amounts recognized in the consolidated statement of financial position
€ million 2020 2019
Defined benefit liability 314 318
Defined benefit plan assets –64 –68
Net defined benefit liability 250 249
Other long-term employee benefit liabilities 16 18
Gross defined benefit obligations and plan assets are presented in the statement of financial position netted
per plan either as a liability or an asset depending on nature of the netted item. The defined benefit liability and
the other long-term employee benefit obligations are presented in the statement of financial position aggregated
amounting to EUR 329 million on December 31, 2020 (Dec 31, 2019: EUR 335 million).
25. Employee benefit
obligations
Outokumpu has established several defined
benefit and defined contribution plans in
various countries. The most significant defined
benefit plans are in Germany 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 obligations,
which are nearly all closed for new entrants.
Basis to all pension obligations in Germany
are bargaining agreements and/or individual
contracts (management obligations). Manage-
ment plan and other pension obligations are
based on annuity payments, whereas plans for
normal employees are based on one lump sum
payment after retirement.
In addition, all the obligations 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
for most part unfunded. However, in 2019 a
CTA model (Contractual Trust Arrangement)
was introduced under which the plans are
funded and previously unfunded plans are
reported as 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 2020 a GBP 110 million buy-in insurance
solution was implemented to the scheme
changing the scheme’s asset portfolio.
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 proportion
of equities, which are expected to outperform
corporate bonds in the long-term, it might face
higher volatility and risk in the short-term. The
investment portfolio might also be subject to a
range of other risks typical of the assets held,
in particular credit risk on bonds and exposure
to the property market.
Change in bond yields: A decrease in
corporate bond yields will increase plan
liabilities, although this will be partially offset
by an increase in the value of the plans’ bond
holdings (if any). In a situation where the return
on plan assets is lower than the corporate
bond yields, a plan may face a shortfall which
might lead to increased contributions.
Inflation risk: Inflation rate is linked to both
future pension and salary increase, and higher
inflation will lead to higher liabilities.
Longevity: The majority of Outokumpu’s
defined benefit obligations are to provide
benefits for the life of the member, so
increases in life expectancy will result in an
increase in the plans’ liabilities.
Funding
Funding requirements are generally based
on pension fund’s actuarial measurement
Notes to the consolidated financial statements
59 / 76Outokumpu Annual report | Financial statements
Movement in net defined benefit liability
2020 2019
€ million
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
On Jan 1 786 –537 249 702 –471 231
Current service cost 5 – 5 6 – 6
Interest expense/(income) 12 –10 2 16 –13 3
Remeasurements arising from
Return on plan assets – –32 –32 – –38 –38
Demographic assumptions –15 – –15 –7 – –7
Financial assumptions 68 – 68 88 – 88
Experience adjustment –9 – –9 –0 – –0
Exchange differences –25 28 2 21 –24 –3
Employer contributions – –22 –22 – –31 –31
Benefits paid –38 38 – –40 40 –
Settlements –1 1 –0 1 – 1
On Dec 31 783 –534 250 786 –537 249
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,
2020 was EUR 315 million (Dec 31, 2019:
EUR 316 million), and the fair value of plan
assets was EUR 13 million (Dec 31, 2019:
EUR 11 million) on December 31, 2020. For
the UK, the present value of obligation was
EUR 445 million (Dec 31, 2019: EUR 444
million), and the fair value of plan assets was
EUR 509 million (Dec 31, 2019: EUR 512
million) on December 31, 2020.
The weighted average duration of the overall
defined benefit obligation is 17.2 years.
In Germany and in the UK the weighted
average durations are 13.8 and 20.2 years,
respectively.
The expected contributions to be paid to the
defined benefit plans in 2021 are EUR 28
million.
Significant actuarial assumptions
Germany The UK Other countries
Discount rate, % 2020
0.72 1.25 2.41
2019 0.90 2.00 2.72
Future salary 2020 – – 1.30
increase, % 2019 – – 1.57
Inflation rate, % 2020 – 2.80 –
2019 – 3.00 –
Future benefit 2020 1.70 2.75 –
increase, % 2019 1.70 2.85 –
Medical cost trend 2020 – – 4.70
rate, % 2019 – – 4.70–5.20
Life expectancy 2020 RT 2018 G 96% SAPS All Pensioner
Amounts tables with CMI
Core Projection Model
–2019
Standard mortality tables
2019 RT 2018 G 96% SAPS All Pensioner
Amounts tables with CMI
Core Projection Model
–2016
Standard mortality tables
Allocation of plan assets
€ million 2020 2019
Equity instruments 33 49
Debt instruments 150 282
Other assets 348 203
Total plan assets 531 534
Allocation of plan assets covers 99.5% of total
defined benefit plan assets. On December 31,
2020, 76% of the plan assets were invested
in quoted instruments (Dec 31, 2019: 95%),
the change resulting from the buy-in insurance
solution in the UK. 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 20%/80% 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.
The significant actuarial assumptions are
presented separately for the significant
countries, and for other countries a weighted
average of the assumptions is presented.
Notes to the consolidated financial statements
60 / 76Outokumpu Annual report | Financial statements
Germany Change in assumption Increase in assumption Decrease in assumption
2020
Discount rate 0.5% Decrease by 6% Increase by 7%
Future benefit increase 0.5% Increase by 3% Decrease by 3%
Life expectancy 1 year Increase by 3%
2019
Discount rate 0.5% Decrease by 6% Increase by 7%
Future benefit increase 0.5% Increase by 3% Decrease by 3%
Life expectancy 1 year Increase by 3%
The UK Change in assumption Increase in assumption Decrease in assumption
2020
Discount rate 0.5% Decrease by 9% Increase by 10%
Future benefit increase 0.5% Increase by 6% Decrease by 6%
Life expectancy 1 year Increase by 3%
2019
Discount rate 0.5% Decrease by 9% Increase by 11%
Future benefit increase 0.5% Increase by 7% Decrease by 6%
Life expectancy 1 year Increase by 3%
Other countries Change in assumption Increase in assumption Decrease in assumption
2020
Discount rate 0.5% Decrease by 4% Increase by 4%
Medical cost trend rate 0.5% Increase by 1% Decrease by 1%
Future salary increase 0.5% Increase by 3% Decrease by 4%
Life expectancy 1 year Increase by 7%
2019
Discount rate 0.5% Decrease by 4% Increase by 4%
Medical cost trend rate 0.5% Increase by 1% Decrease by 1%
Future salary increase 0.5% Increase by 3% Decrease by 4%
Life expectancy 1 year Increase by 7%
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, 2020
were EUR 16 million (Dec 31, 2019: EUR 18
million).
Multi-employer defined benefit plans
ITP pension plans operated by Alecta in
Sweden and plans operated by Stichting
Bedrijfspensioenfonds voor de metaalindustrie
in the Netherlands are multi-employer defined
benefit pension plans. However, it has not
been possible to get sufficient information
for the calculation of obligations and assets
by employer from the plan operators, and
therefore these plans have been accounted for
as defined contribution plans in the consoli-
dated financial statements.
Sensitivity analysis of significant actuarial assumptions
Reasonably possible changes at the reporting date to one of the weighted principal assumptions,
while holding all other assumptions constant, would have affected the defined benefit obligation
as shown below:
Notes to the consolidated financial statements
61 / 76Outokumpu Annual report | Financial statements
26. Provisions
€ million
Restructuring
provisions
Environmental
provisions
Other
provisions Total
Provisions on Jan 1, 2020 56 48 5 110
Increases in provisions 50 3 2 54
Utilized during the financial year –43 –2 –1 –45
Unused amounts reversed –1 –1 –1 –4
Provisions on Dec 31, 2020 62 48 5 115
€ million 2020 2019
Non-current provisions 84 85
Current provisions 31 25
115 110
27. Debt
€ million 2020 2019
Non-current
Bonds 249 249
Convertible bonds 108 –
Loans from financial institutions 414 445
Pension loans 199 183
Lease liabilities 174 176
Other loans 8 –
1,153 1,053
Current
Convertible bonds – 248
Loans from financial institutions 2 8
Pension loans – 40
Lease liabilities 18 30
Commercial paper 231 101
251 427
Net debt
Non-current and current debt 1,404 1,480
Cash and cash equivalents –376 –325
Net debt 1,028 1,155
The bond maturing in 2024 as well as credit facilities and loans from financial institutions include
financial covenants, which are described in note 19.
Restructuring provisions
Restructuring provisions relate mainly to
the restructuring and employee negotiation
processes carried out in selected countries in
2020 to create cost savings by restructuring
and reducing total employee headcount by
up to approximately 1,000 (10% of the Group
total) mostly by the end of 2021. The fixed
cost reductions are needed as the market
situation in Europe is challenging and import
pressure remains high, and the COVID-19
pandemic impacts the global economy. These
provision are expected to result in cash
outflows predominantly in 2021.
Restructuring include also some provisions
related to the 2019 measures in Germany
targeting to improve competitiveness through
cost reductions. The cash outflows related to
these provisions took mainly place in 2020
with some cash outflows still expected in 2021.
Environmental provisions
Majority of the environmental provisions are
for closing costs of production facilities and
landfill areas, removal of problem waste and
landscaping in facilities in Finland, 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.
Other provisions
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.
Notes to the consolidated financial statements
62 / 76Outokumpu Annual report | Financial statements
Changes in non-current and current debt
2020
€ million Non-current debt
Current portion of
non-current debt
Non-current lease
liabilities
Current portion of
lease liabilities Current debt Total
On Jan 1
877 295 176 30 103 1,480
Financing cash flows 117 –296 – –33 130 –82
Transfer to current debt –0 0 –21 21 – 0
Other non-cash movements –14 2 19 – –0 6
On Dec 31 979 0 174 18 232 1,404
2019
€ million
Non-current debt
Current portion of
non-current debt
Non-current lease
liabilities
Current portion of
lease liabilities Current debt Total
On Jan 1, before IFRS 16 transition 715 10 82 3 499 1,309
IFRS 16 transition impact – – 101 29 – 131
Financing cash flows 452 –13 – –34 –396 9
Transfer to current debt –290 290 –32 32 – 0
Other non-cash movements –1 9 24 – – 32
On Dec 31 877 295 176 30 103 1,480
Regarding cash and cash equivalents, the reconciliation of cash effective and non-cash movements is presented in the consolidated statement of
cash flows.
Bonds
Outstanding amount
€ million Interest rate, % 2020 2019
2018 fixed rate bond maturing on June 18, 2024
4.125 250 250
Convertible bonds
Outstanding amount
€ million Interest rate, % 2020 2019
2015 fixed rate bond matured on Feb 26, 2020 3.250 – 250
2020 fixed rate bond maturing on July 9, 2025 5.000 125 –
The convertible bonds maturing in July
2025 can be converted into maximum of
38,191,261 ordinary shares in Outokumpu
representing 9.3% of the outstanding shares at
year end. The conversion period commenced
on August 19, 2020 and will end on June 25,
2025. The current conversion price is set at
EUR 3.273 per ordinary shares. 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 bonds.
Notes to the consolidated financial statements
63 / 76Outokumpu Annual report | Financial statements
28. Trade and other payables
€ million 2020 2019
Non-current
VAT payable 18 –
Accruals 27 29
45 29
Current
Trade payables 1,225 1,265
Accrued employee-related expenses 73 65
Accrued interest expenses 11 9
VAT payable 86 23
Withholding tax and social security liabilities 21 20
Payables related to factoring programs 8 11
Advance payments received 7 11
Other accruals 55 47
Other payables
14 24
1,500 1,475
Non-current and current VAT payables on
December 31, 2020 include the deferred VAT
payments in Finland in 2020 of EUR 61 million.
On December 31, 2020, accrued volume
discounts related to contracts with customers
amounted to EUR 34 million (Dec 31, 2019:
EUR 37 million).
Customer contract liabilities related to
unperformed transportation service amounted
to EUR 1 million on December 31, 2020 (Dec
31, 2019: EUR 1 million). These liabilities
and advances received are expected to be
recognized as revenue during the first quarter
of 2021.
30. Disputes and litigations
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 or 2020.
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 2020 amounted to EUR 24 million
(Dec 31, 2019: EUR 29 million), and the part
exceeding the share pledge and guarantee is
presented under other commitments.
Outokumpu Oyj is, in relation to its share-
holding 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 2020 amounted
to EUR 0 million (Dec 31, 2019: EUR 1
million). These liabilities are reported under
other commitments.
Outokumpu has a long-term energy supply
contract that includes a minimum purchase
quantity. There is uncertainty whether the
company will be able to utilize this minimum
purchase quantity in full by the end of 2028
or whether there will be additional cost to the
company from this contract.
Investment commitments
Outokumpu’s share of the Fennovoima
investment is about EUR 250 million of
which EUR 92 million has been paid by the
end of the reporting period. Annual capital
expenditure related to the project is expected
29. Commitments and contingent liabilities
€ million 2020 2019
Mortgages and pledges on Dec 31
Mortgages 3,203 3,192
Other pledges 13 13
Guarantees on Dec 31
On behalf of subsidiaries for commercial and other commitments 29 27
On behalf of associated companies for financing 2 4
Other commitments on Dec 31 10 14
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 51 million on
December 31, 2020 (Dec 31, 2019: EUR 68
million).
Notes to the consolidated financial statements
64 / 76Outokumpu Annual report | Financial statements
31. Related party transactions
Outokumpu’s related parties include the
key management of the company and their
close family members, associated companies,
subsidiaries and Solidium Oy. The transactions
with related parties are presented in the tables
below. Key management includes Leadership
Team members and members of the Board of
Directors. The principal associated companies
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 Outo-
kumpu on December 31, 2020. 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 with related partied are carried
out at arms-length principles.
Transactions and balances
with related companies
€ million 2020 2019
Sales and other operating
income
69 89
Purchases –37 –7
Dividend income
– 10
Trade and other receivables 21 29
Trade and other payables 3 3
Employee benefits for the
key management
€ thousand 2020 2019
Short-term employee benefits 3,889 5,320
Termination benefits 1,489 –
Post-employment benefits
1)
367 1,574
Share-based payments 205 235
Remuneration to the Board of
Directors
658 706
6,608 7,834
1)
Includes only supplementary pensions.
Employee benefits for the key management
include the benefits to each Leadership Team
or Board of Directors member, which are
associated with these management positions.
Benefits that are associated with positions
held within Outokumpu before or after such
management position are not included in the
presented amounts.
Employee benefits for the CEO
€ thousand 2020 2019
Salaries and other short-term
benefits 989 1,074
Bonuses – 276
Post-employment benefits 281 444
Share-based payments 4 372
1,274 2,167
Employee benefits for the CEO in 2020 include
Heikki Malinen as of May 16, 2020 and
Roeland Baan until May 15, 2020.
CEO Malinen has the right to retire at the age
of 65 and he participates in the Finnish TyEL
pension system and there are no supplemen-
tary pension plans in place. Former CEO Baan
had a defined contribution pension plan in
place with an annual insurance premium of
25% of his annual earnings, excluding share
rewards.
Outokumpu has not had specifically appointed
Deputy to the CEO since February, 2019. In
January–February 2019, the employee benefits
to the Deputy to the CEO were EUR 117
thousand.
More information on key management’s
employee benefits can be found in the
Remuneration report.
Remuneration to Board of Directors
€ thousand 2020 2019
Chairman Kari Jordan 181 173
Vice Chairman Eeva Sipilä, as of May 28, 2020, member until May 27, 2020 108 99
Vice Chairman Heikki Malinen, until April 30, 2020 7 103
Vice Chairman Olli Vaartimo, until March 27, 2019 – 3
Member Kati ter Horst 88 80
Member Vesa-Pekka Takala, as of March 27, 2019 88 77
Member Pierre Vareille 94 90
Member Julia Woodhouse, as of March 27, 2019 93 81
658 706
Notes to the consolidated financial statements
65 / 76Outokumpu Annual report | Financial statements
Country
Group
holding, %
Europe
Outokumpu AS Norway 100
Outokumpu B.V. The Netherlands 100
Outokumpu Distribution France S.A.S. France 100
Outokumpu Distribution Hungary Kft. Hungary
100
Outokumpu Distribution Polska Sp. z o.o. Poland
100
Outokumpu Europe Oy *
)
Finland 100
Outokumpu Ges.m.b.H. Austria 100
Outokumpu India Private Limited India 100
Outokumpu K.K. Japan 100
Outokumpu Management (Shanghai) Co., Ltd *
)
China
100
Outokumpu Middle East FZCO United Arab Emirates 100
Outokumpu Nirosta GmbH Germany 100
Outokumpu N.V. Belgium 100
Outokumpu Prefab AB Sweden 100
Outokumpu Press Plate AB Sweden
100
Outokumpu PSC Benelux B.V. The Netherlands 100
Outokumpu PSC Finland Oy Finland 100
Outokumpu PSC Germany GmbH Germany 100
Outokumpu (Pty) Ltd South Africa 100
Outokumpu S.A. Spain 100
Outokumpu (S.E.A.) Pte. Ltd Singapore 100
Outokumpu Shipping Oy Finland 100
Outokumpu S.p.A. Italy
100
Outokumpu Stainless AB Sweden 100
Outokumpu Stainless B.V. The Netherlands 100
Outokumpu Stainless Oy Finland 100
Outokumpu Stainless Pty. Ltd Australia 100
Outokumpu Stainless Steel (China) Co. Ltd China
100
Outokumpu Tornio Infrastructure Oy Finland 100
Country
Group
holding, %
Americas
Outokumpu Brasil Comercio de Metais Ltda Brazil 100
Outokumpu Fortinox S.A. Argentina 100
Outokumpu Mexinox Distribution S.A. de C.V. Mexico 100
Outokumpu Mexinox S.A. de C.V. Mexico
100
Outokumpu Stainless USA, LLC The US
100
ThyssenKrupp Mexinox CreateIT, S.A. de C.V. Mexico 100
Long Products
Fagersta Stainless AB Sweden 100
Outokumpu Stainless Bar, LLC The US 100
Outokumpu Stainless Ltd The UK 100
Ferrochrome
Outokumpu Chrome Oy *
)
Finland 100
Other operations
Outokumpu Americas, Inc. The US 100
Outokumpu Distribution Benelux B.V. The Netherlands 100
Outokumpu Holding Germany GmbH *
)
Germany 100
Outokumpu Holding Italia S.p.A. Italy
100
Outokumpu Holding Nederland B.V. *
)
The Netherlands 100
Outokumpu Mining Oy Finland
100
Outokumpu Stainless Holding GmbH Germany
100
Outokumpu Stainless Holdings Ltd The UK 100
Outokumpu Stainless UAB Lithuania 100
Québec Inc. Canada 100
Viscaria AB *
)
Sweden
100
Visenta Försäkrings AB Sweden
100
In addition Outokumpu has branch offices in South Korea, Switzerland, Taiwan, Thailand, The UK
and Vietnam.
This list does not include all holding companies or all dormant companies.
The Group holding corresponds to the Group’s share of voting rights.
*
)
Shares and stock held by the parent company
32. Subsidiaries on December 31, 2020
Notes to the consolidated financial statements
66 / 76Outokumpu Annual report | Financial statements
Parent company
financial statements
Income statement of the parent company
€ million 2020 2019
Sales 664 652
Cost of sales –565 –555
Gross margin 99 97
Other operating income 0 17
Selling and marketing expenses –10 –17
Administrative expenses –110 –115
Other operating expenses –8 –0
EBIT –29 –19
Financial income and expenses –58 16
Result before appropriations and taxes –87 –3
Appropriations
Group contribution 111 53
Change in depreciation difference –0 –0
Income taxes
– –0
Result for the financial year
24 51
According to the Finnish accounting standards (FAS), the parent company financial statements
are presented in addition to Group financial statements. The parent company’s financial
statements have been prepared in accordance with Finnish accounting standards. The parent
company Outokumpu Oyj’s income statement and balance sheet items are mainly internal and are
eliminated on the group level.
67 / 76Outokumpu Annual report | Financial statements
Balance sheet of the parent company
€ million 2020 2019
ASSETS
Non-current assets
Intangible assets 130 120
Property, plant and equipment 2 9
Financial assets
Shares in Group companies 3,713 3,821
Loan receivables from Group companies 771 254
Shares in associated companies 15 17
Other shares and holdings
60 80
Other financial assets 6 5
4,565 4,176
Total non-current assets 4,698 4,305
Current assets
Current receivables
Loans receivable 221 843
Trade receivables
67 53
Prepaid expenses and accrued income 23 39
Other receivables 160 91
470 1,026
Cash and cash equivalents
332 272
Total current assets 801 1,298
TOTAL ASSETS 5,500 5,603
€ million 2020 2019
EQUITY AND LIABILITIES
Shareholders’ equity
Share capital 311 311
Premium fund 720 720
Invested unrestricted equity reserve 2,123 2,123
Retained earnings 164 113
Result for the financial year 24 51
3,343 3,319
Untaxed reserves
Accumulated depreciation difference 1 1
Liabilities
Non-current liabilities
Bonds 250 250
Convertible bonds
125 –
Loans from financial institutions
330 405
Pension loans 143 103
Other non-current loans 1 0
849 758
Current liabilities
Convertible bonds – 250
Loans from financial institutions – 6
Pension loans – 40
Group bank account liabilities
787 722
Other current loans 263 244
Trade payables 177 208
Accrued expenses and prepaid income 15 13
Other current liabilities 65 42
1,307 1,525
Total liabilities 2,156 2,283
TOTAL EQUITY AND LIABILITIES 5,500 5,603
Parent company financial statements
68 / 76Outokumpu Annual report | Financial statements
Cash flow statement of the parent company
€ million 2020 2019
Cash flow from operating activities
Result for the financial year 24 51
Adjustments for
Depreciation and amortization 12 5
Impairments 33 0
Gain/loss on sale of intangible assets, and property, plant and equipment –0 –5
Interest income –38 –68
Interest expense 46 36
Change in provisions 1 0
Exchange gains and losses 2 3
Group contributions –111 –53
Other non-cash adjustments 8 –1
–47 –83
Change in working capital
Change in trade and other receivables 0 –6
Change in trade and other payables –27 47
–27 41
Interest received 39 75
Interest paid –45 –34
Income taxes paid – –0
–6 41
Net cash from operating activities –55 51
€ million 2020 2019
Cash flow from investing activities
Investments in subsidiaries and other shares and holdings –13 –274
Purchases of intangible assets –19 –30
Proceeds from disposal of subsidiaries and other financial assets 108 239
Proceeds from sale of property, plant and equipment – 1
Proceeds from sale of intangible assets 2 11
Change in other long-term receivables 21 361
Net cash from investing activities 99 308
Cash flow before financing activities 44 358
Cash flow from financing activities
Dividends paid – –62
Borrowings of non-current debt 444 473
Repayments of non-current debt –664 –76
Change in current debt 85 –806
Cash flow from group contribution 53 185
Other financing cash flow 97 176
Net cash from financing activities 16 –109
Net change in cash and cash equivalents 60 249
Net change in cash and cash equivalents in the balance sheet 60 249
Parent company financial statements
69 / 76Outokumpu Annual report | Financial statements
€ million Share capital Premium fund
Invested
unrestricted equity
reserve Retained earnings Total equity
Equity on Jan 1, 2019 311 720 2,123 175 3,330
Result for the financial year – – – 51 51
Dividends paid – – – –62 –62
Equity on Dec 31, 2019 311 720 2,123 164 3,319
Result for the financial year – – – 24 24
Dividends paid – – – – –
Equity on Dec 31, 2020 311 720 2,123 188 3,343
Statement of changes in equity of the parent company
€ million 2020 2019
Other pledges on Dec 31 13 13
Guarantees on Dec 31
On behalf of subsidiaries
For financing 327 350
For commercial guarantees 0 3
For other commitments 28 26
On behalf of associated companies
For financing 2 4
Other commitments on Dec 31 10 14
Commitments and contingent liabilities of the parent company
A major part of Outokumpu’s borrowings are secured by security
to the real property of selected subsidiaries.
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 2020 amounts to EUR 24 million (Dec 31,
2019: EUR 29 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 2020 amounted to EUR 0 million (Dec 31,
2019: EUR 1 million). These liabilities are reported under other
commitments.
Outokumpu’s share of the Fennovoima investment is about EUR
250 million of which EUR 92 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.
In 2020, Outokumpu Oyj recognized an impairment of EUR
33 million to its shareholding in Voimaosakeyhtiö SF providing
ownership to Fennovoima Oy. In the income statement, the
impairment is recognized in financial income and expenses. The
impairment did not impact Outokumpu Group’s consolidated
financial statements under IFRS where the shareholding is
valued at fair value.
Distributable funds on Dec 31
€ million 2020 2019
Retained earnings 164 113
Result for the financial year 24 51
Invested unrestricted equity reserve 2,123 2,123
Distributable funds on Dec 31 2,312 2,287
Parent company financial statements
Outokumpu Annual report | 70 / 76Outokumpu Annual report | Auditor’s Report
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
We have audited the financial statements
of Outokumpu Oyj (business identity code
0215254-2) for the year ended 31 December
2020. The financial statements comprise:
• the 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 and notes to the consolidated
financial statements, including 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.
Basis for Opinion
We conducted our audit in accordance with
good auditing practice in Finland. Our responsi-
bilities under good auditing practice are further
described in the Auditor’s Responsibilities for
the Audit of the Financial Statements section
of our report.
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.
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
Materiality
Audit Scope
Key Audit
Matters
• Overall group materiality: € 35 million (2019: € 38 million)
• The audit scope includes all significant companies, covering the vast
majority of revenues, assets and liabilities.
• Valuation of goodwill
• 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
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.
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 materiality, including the overall group
materiality for the consolidated financial
statements as set out in the 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.
Auditor’s Report (Translation of the Finnish Original)
Outokumpu Annual report | 71 / 76Outokumpu Annual report | Auditor’s Report
Overall group materiality € 35 million (2019: € 38 million)
How we determined it 0.6% of net sales 2020
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 signif-
icance 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 represented 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 2020 the group’s goodwill
balance amounted to € 466 million.
Goodwill is tested at least annually, irrespec-
tive 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 in 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.
Auditor’s report
Outokumpu Annual report | 72 / 76Outokumpu Annual report | Auditor’s Report
Key audit matter in the
audit of the group
How our audit addressed
the key audit matter
Valuation of Property, Plant
and Equipment
Refer to notes 2 and 12 in the consolidated
financial statements.
As at 31 December 2020 the group’s Property,
Plant and Equipment (PPE) amounted to €
2,631 million, which is 45% of the total assets
and 112% 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 in the estimation process.
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
How our audit addressed
the key audit matter
Valuation of Inventories
Refer to notes 2 and 21 in the consolidated
financial statements.
As at 31 December 2020 the group’s invento-
ries amounted to € 1,177 million.
Inventories are stated at the lower of cost and
net realizable value (NRV). Net realizable value
is the estimated selling price in the ordinary
course of business, less the estimated costs of
completion and the estimated costs necessary
to make the sale. The most important
commodity price risk for Outokumpu is caused
by fluctuation in nickel and other alloy prices.
The alloy surcharge clause as well as daily
fixed pricing of stainless steel can reduce 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 expects and the
daily fixed pricing can also deviate from this
cycle depending on the timing of the delivery.
As the prices for all products to be sold in
the future are not known, a significant part of
the future prices are 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.
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.
Our audit work included testing management’s
key controls in place to ensure proper valuation
and existence of inventories.
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.
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Key audit matter in the
audit of the group
How our audit addressed
the key audit matter
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.
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 details to reduce the related
risks of material misstatement to an acceptably
low level.
Key audit matter in the audit
of the parent company
How our audit addressed
the key audit matter
Valuation of subsidiary shares in the
parent company’s financial statements
As at 31 December 2020 the value of
Outokumpu Oyj’s subsidiary shares amounted
to € 3,712 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.
We assessed the appropriateness of the method
and management’s judgement and estimates
in the calculations through the following
procedures:
• 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
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.
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 or the parent company
financial statements.
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Responsibilities 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
consolidated financial statements that give a
true and fair view in accordance with Interna-
tional 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 consid-
ered 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 statements. 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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Other 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 4 years.
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.
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 4 February 2021
PricewaterhouseCoopers Oy
Authorised Public Accountants
Janne Rajalahti
Authorised Public Accountant (KHT)
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Independent Auditor’s Reasonable Assurance Report
on Outokumpu Oyj’s ESEF Financial Statements
To the Management of Outokumpu Oyj
We have been engaged by the Management
of Outokumpu Oyj (business identity code
0215254-2) (hereinafter also “the Company”)
to perform a reasonable assurance engage-
ment on the Company’s consolidated IFRS
financial statements for the financial year
1January – 31December 2020 in European
Single Electronic Format (“ESEF financial
statements”).
Management’s Responsibility for
the ESEF Financial Statements
The Management of Outokumpu Oyj is
responsible for preparing the ESEF financial
statements so that they comply with the
requirements as specified in the Commission
Delegated Regulation (EU) 2019/815 of
17 December 2018 (“ESEF requirements”).
This responsibility includes the design,
implementation and maintenance of internal
control relevant to the preparation of ESEF
financial statements that are free from material
noncompliance with the ESEF requirements,
whether due to fraud or error.
Our Independence and
Quality Control
We have complied with the independence and
other ethical requirements of the International
Code of Ethics for Professional Accountants
(including International Independence
Standards) issued by the International Ethics
Standards Board for Accountants (IESBA Code),
which is founded on fundamental principles of
integrity, objectivity, professional competence
and due care, confidentiality and professional
behavior.
Our firm 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.
Our Responsibility
Our responsibility is to express an opinion
on the ESEF financial statements based on
the procedures we have performed and the
evidence we have obtained.
We conducted our reasonable assurance
engagement in accordance with the Interna-
tional Standard on Assurance Engagements
(ISAE) 3000 (Revised) Assurance Engagements
Other than Audits or Reviews of Historical
Financial Information. That standard requires
that we plan and perform this engagement to
obtain reasonable assurance about whether
the ESEF financial statements are free
from material noncompliance with the ESEF
requirements.
A reasonable assurance engagement in
accordance with ISAE 3000 (Revised)
involves performing procedures to obtain
evidence about the ESEF financial statements
compliance with the ESEF requirements. The
procedures selected depend on the auditor’s
judgment, including the assessment of the
risks of material noncompliance of the ESEF
financial statements with the ESEF require-
ments, whether due to fraud or error. In making
those risk assessments, we considered internal
control relevant to the Company’s preparation
of the ESEF financial statements.
We believe that the evidence we have obtained
is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion, Outokumpu Oyj’s ESEF financial
statements for the financial year ended
31 December 2020 comply, in all material
respects, with the ESEF requirements.
Our reasonable assurance report has been
prepared in accordance with the terms of our
engagement. We do not accept, or assume
responsibility to anyone else, except for
Outokumpu Oyj for our work, for this report, or
for the opinion that we have formed.
Helsinki, 2 March 2021
PricewaterhouseCoopers Oy
Authorised Public Accountants
Janne Rajalahti
Authorised Public Accountant (KHT)
Governance
This Governance section includes
Outokumpu’s Corporate Governance
statement, Remuneration Report
as well as information on risks and
shareholders.
Outokumpu Annual report | Governance 2 / 31
Regulatory and structural framework
is a public limited liability company, listed on
Nasdaq Helsinki and incorporated and domi-
ciled in Finland. In its corporate governance
and management, Outokumpu Oyj complies
with the laws and regulations applicable to a
Finnish public company, the company’s Articles
of Association and the Corporate Governance
Policy approved by the company’s Board of
Directors.
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 ultimate responsibility for the
management and operations of the Outokumpu
Group (“the Group”).
The latest Corporate Governance Statement
and other updated corporate governance
information can be found on the Group’s
Corporate Governance website.
The General Meeting of Shareholders convenes
at least once a year. In accordance with the
Finnish Companies Act, the General Meeting
of Shareholders is the highest decision-making
body of the company. The Act provides
that certain important decisions such as
amendments to the Articles of Association,
approval of the financial statements, increasing
or decreasing share capital, decisions on
dividends, and the election of the Board
of Directors and the auditors, are the
exclusive domain of the General Meeting of
Shareholders. In addition, the Annual General
Meeting makes advisory resolutions on the
Remuneration Policy and the Remuneration
Report.
Corporate Governance
Statement
In the architectural
masterpiece Edificio
Forum in Barcelona,
Spain, 28,000 panels
of Outokumpu Supra
austenitic stainless
steel create a finish
that replicates the
surface of water.
Corporate Governance statement
Outokumpu Annual report | Governance 3 / 31
Composition and operations of the Board of Directors December ,
Kari Jordan
Chairman of the
Board of Directors
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
Executive Vice President and Member of the Group Executive
Management: Nordea AB and predecessors 1994–2004
Member of the Board of Management: OKOBANK 1987–1994
Work experience
Chief Financial Officer and Deputy to the CEO: Metso Outotec
2020–
Chief Financial Officer and Deputy to the CEO: Metso
Corporation 2016–2020
Executive Vice President and Chief Financial Officer: Cargotec
Corporation 2008–2016
SVP, Investor Relations and Communications: Cargotec
Corporation 2005–2008
VP, Investor Relations: Metso Corporation 2004–2005
Investor Relations Manager: Metso Corporation 2002–2004
Equity Analyst: Mandatum Stockbrokers (part of Sampo group)
1999–2002
Associate Consultant: Arkwright AB, Stockholm, Sweden
1997–1998
Positions of trust
Board member (2012–2016) and Audit Committee chairman
(2014–2016): Metso Corporation
Board member: Basware Corporation 2010–2013
Eeva Sipilä
Vice Chairman of the
BoardofDirectors
b. 1973, Finnish citizen
M. Sc. (Econ.), CEFA
Outokumpu Board member
2017–
Vice Chairman of the Board
2020–
Chairman of the Audit
Committee
All Board members are independent of the company and its significant shareholders.
Board of Directors’ CVs are also available at our webpages
Positions of trust
Vice Chairman of the Board of Directors: Nordea Bank Abp2019–
Chairman of the Supervisory Board: Varma Mutual Pension
Insurance Company 2015–2019
Vice Chairman of the Board: Nokian Tyres Plc 2018–
Chairman of the Board: Finland Chamber of Commerce 2012–2016
Chairman of the Board: Finnish Forest Industries Federation
2009–2011
Vice Chairman of the Board: Confederation of Finnish Industries
(EK) 2009–2011, 2013–2014
Holds several positions of trust in foundations and non-profit
associations.
Corporate Governance statement
Outokumpu Annual report | Governance 4 / 31
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
Chief Financial Officer (CFO), Member of the Group Executive
Committee: Outotec Oyj 2006–2009
Executive Vice President, Corporate Controller, Member of the
Group Executive Committee: Outokumpu Oyj 2005–2006
Senior Vice President, Corporate Controller: Outokumpu Oyj
2001–2005
Vice President, Corporate Controller: Outokumpu Oyj
1998–2001
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–
Board member, the Economy and Tax Committee: Confederation
of Finnish Industries (EK) 2013–2016
Vesa-Pekka Takala
Member of the
BoardofDirectors
b. 1966, Finnish citizen
M.Sc. (Econ.)
Outokumpu Board member
2019–
Member of the Audit
Committee
Additional information on work experience and positions of trust
to be found on the Company’s website
Work experience
Executive Vice President, Head of Stora Enso Paper, member of
the Group Leadership team: Stora Enso 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
Director, Customer Service Centre West, Publication Paper:
Stora Enso 2010–2012
Several managerial positions in the paper business: 1996–2010
Business analyst: Jaakko Pöyry Consulting, Singapore
1994–1996
Positions of trust
Board member: Climate Leadership Coalition 2019–
Board member (2017–), Vice chair (2019–2020) and Chair
(2020–): EURO-GRAPH asbl
Board member: Finnish Forest Industries Federation 2015–
Kati ter Horst
Member of the
BoardofDirectors
b. 1968, Finnish citizen
M.Sc. (Econ.), MBA
(International Business)
Outokumpu Board member
2016–
Member of the Remuneration
Committee
Corporate Governance statement
Outokumpu Annual report | Governance 5 / 31
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
Group Chief Executive: Wagon Plc. 2004–2007
Senior Executive Vice President: Alcan Inc. 2003–2004
Senior Executive Vice President and President of the Aluminium
Conversion Sector: Pechiney 2002–2003
Executive Vice President and President of the Exhaust Systems
Business Group: Faurecia 1999–2002
Chairman and CEO: GFI Aerospace (now LISI Aerospace)
1995–1999
CEO of Group subsidiaries Cefival and Specitubes 1990–1995
and several operational and staff positions 1982–1989:
Vallourec Group
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
Director, Implementation Team: Ford Motor Company
2004–2005
Director, Team Value Management, Strategy & Business
Development: Ford Motor Company 2002–2003
Pierre Vareille
Member of the
BoardofDirectors
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
Julia Woodhouse
Member of the
BoardofDirectors
b. 1958, British citizen
BA (hons) History
Outokumpu Board member
2019–
Member of the Audit Committee
Positions of trust
Independent non-executive board member, Standards & Regulation
Board: Royal Institution of Chartered Surveyors 2020–
Member of the Advisory Board: Nexcel, a BP/Castrol automotive
technology start-up company 2019–2020
Member of the Strategic Advisory Board: Ford/Michelin
2016–2018
Committee member: Ford Motor Company Global Purchasing
Personnel Development Committee 2016–2018
Committee member: Ford Motor Company North America
Purchasing Diversity Committee 2012–2015
Member: Ford/Ford Otosan Joint Venture Sourcing Governance
Forum 2007–2011
In addition, Ms. Woodhouse has held several additional roles on
operating boards including Components Division and International
Operations.
Positions of trust
Chairman of the Board: Société Bic SA 2018–
Board member (2015–), 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
Lead Director and Vice President of the Board: Société Bic SA
2016–2018
Board member and member of the Audit Committee: Société
Bic SA 2009–2016
Board member: CentraleSupelec 2008–2019
Chairman: European Aluminium Association 2015–2016
President: Alumni Association of the Ecole Centrale 2011–2013
In addition, Mr. Vareille has been a Member of the Board of
Directors of diverse organizations such as the Advisory Board of
the Confederation of British Industry, the European Committee
of the MEDEF (Confederation of the French Industry) and the
GIFAS (French Aerospace Industries Association).
Corporate Governance statement
Outokumpu Annual report | Governance 6 / 31
The 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, 2020 were
independent of the company and its significant
shareholders.
Outokumpu shares and share-based
rights (parent and subsidiaries) owned
by each director and their controlled
corporations on December 31, 2020
Board member
Number of
shares
Kari Jordan 206,828
Kati ter Horst 33,998
Eeva Sipilä 38,509
Pierre Vareille 44,829
Vesa-Pekka Takala 30,848
Julia Woodhouse 19,848
Total 374,860
Operations and appointment
of the Board of Directors
The general objective of the Board of Directors
is to direct Outokumpu’s business and strate-
gies in a manner that secures a significant and
sustained increase in the value of the company
for its shareholders and to ensure that the
company acts as a reliable and trusted partner
towards all its stakeholders. 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 the 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.
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:
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 divest-
ments and monitor their implementation;
• Decide on the Group’s external financing and
treasury matters as follows and as further
defined in the Board Charter;
i. All long-term financing arrangements by
any Group company;
ii. Any major leasing arrangements; sale
of receivables programmes; short-term
financing arrangements; and pledges and
guarantees; by any Group company;
iii. Any major short-term derivatives or long-
term derivatives, or any derivatives not
done for hedging or liquidity management
purposes; by any Group company;
iv. Any other significant financing and
treasury transactions which are otherwise
out of the Group’s normal course of
business;
• 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 decide on the CEO’s terms of service,
including incentive schemes, on the basis of
a proposal made by the Board’s Remunera-
tion Committee;
• Nominate and dismiss the members of
the Outokumpu Leadership Team and to
define their areas of responsibility based
on a proposal by the Board’s Remuneration
Committee;
• 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
and related party transactions 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 to the Annual General Meeting on
dividend distribution;
• Make a proposal to the Annual General
Meeting concerning the election of an
external auditor and auditing fees;
• Make proposals to the Annual General
Meeting concerning the Company’s Remu-
neration Policy and Remuneration Report;
and
• 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;
Corporate Governance statement
Outokumpu Annual report | Governance 7 / 31
• Monitor financial position, liquidity, and debt
maturity structure;
• Monitor the Group’s control environment;
• 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; and
• Reassess its activities on a regular basis.
In 2020, the Board of Directors conducted
an assessment of its ways of working and
performance with support from an external
service provider. The assessment results were
presented to the Shareholders’ Nomination
Board.
According to the company’s Articles of
Association, the Board of Directors constitutes
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, Vice Chairman and 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, there-
fore, 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 6 members was elected at the
Annual General Meeting 2020. Board meetings
will be held as regularly as deemed necessary,
but at least five times every year. In 2020, the
Board of Directors had 23 meetings, and the
average attendance rate was 99%.
Breakdown of individual
attendance at Board meetings
23 meetings in 2020 Attendance
Kari Jordan 23/23
Kati ter Horst 23/23
Heikki Malinen, until April 30, 2020 9/9
Eeva Sipilä 22/23
Pierre Vareille 23/23
Vesa-Pekka Takala 23/23
Julia Woodhouse 23/23
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’
Nomination 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 2020.
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 perma-
nent 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 Audit
Committee Charter 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 statements, the company’s financial
position, auditing work, internal controls and
compliance matters, the scope of internal
and external audits, fees paid to the auditors
the Group’s tax position, the Group’s financial
policies, monitoring and assessing related
party transactions and other procedures for
managing Group risks. In addition, the Audit
Committee prepares a recommendation to
the Board of Directors concerning the election
of an external auditor and auditing fees at a
General Meeting. The Audit Committee met six
times during 2020, and the attendance rate
was 100%.
Breakdown of individual attendance
at Audit Committee meetings
6 meetings in 2020 Attendance
Eeva Sipilä 6/6
Kati ter Horst, until April 30, 2020 1/1
Vesa-Pekka Takala 6/6
Julia Woodhouse 6/6
Remuneration Committee
The Remuneration Committee consists of
the Chairman of the Board and a minimum
of two additional Board members. The
tasks of the Remuneration Committee is to
prepare proposals to the Board concerning
the appointment of the company’s top
management and principles relating to the
compensation they receive as well as the
company’s Remuneration Policy and Remuner-
ation Report. The terms of service and benefits
of the Leadership Team members other than
the CEO, are determined and approved by the
Remuneration Committee.
The Committee’s rules of procedure shall be
further defined in the Remuneration Committee
Charter, approved by the Board. The Remuner-
ation Committee met nine times during 2020,
and the average attendance rate was 93%.
Corporate Governance statement
Outokumpu Annual report | Governance 8 / 31
Outokumpu’s Annual General Meeting in 2012
resolved to establish a Shareholders’ Nomi-
nation 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 share-
holders of the company are annually appointed
to the Nomination Board. The largest share-
holders 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 deter-
mined, 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
2020 were Solidium Oy, the Social Insurance
Institution of Finland, Ilmarinen Mutual Pension
Insurance Company and the State Pension
Fund of Finland. As the State Pension Fund of
Finland informed Outokumpu that it will not
use its nomination right, the right transferred
to Elo Mutual Pension Insurance Company
as the next largest shareholder registered in
Outokumpu’s shareholder register.
These shareholders nominated the following
individuals as their representatives in the
Nomination Board: Antti Mäkinen, Managing
Director of Solidium Oy; Outi Antila, Director
General at The Social Insurance Institution of
Finland, Jouko Pölönen, President and CEO of
Ilmarinen Mutual Pension Insurance Company
and Satu Huber, Chief Executive Officer at
Elo Mutual Pension Insurance Company.
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 four times,
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 incorporated
these proposals into the notice convening the
Outokumpu 2021 Annual General Meeting of
Shareholders.
Shareholders’ Nomination Board
Breakdown of individual attendance at
Remuneration Committee meetings
9 meetings in 2020 Attendance
Kari Jordan 9/9
Kati ter Horst, from May 1, 2020 6/6
Heikki Malinen, until April 30, 2020 1/3
Pierre Vareille 9/9
Temporary 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 2020.
Corporate Governance statement
Outokumpu Annual report | Governance 9 / 31
Executive Management
Biographical details of the CEO and the Leadership Team on December 31, 2020
Heikki Malinen
President and CEO
b. 1962, Finnish citizen
M.Sc. (Econ.), MBA (Harvard)
President and Chief Executive Officer 2020–
Chairman of the Outokumpu Leadership Team
2020–
Responsibility: Group management, legal,
corporate affairs and compliance, safety and
health and business area Europe
Employed by Outokumpu Group since 2020
Pia Aaltonen-Forsell
CFO
b. 1974, Finnish citizen
M.Soc.Sc. (Econ.), MBA
Chief Financial Officer, 2019–
Member of the Outokumpu Leadership Team
2019–
Responsibility: Financial and business
controlling, treasury, mergers and acquisitions,
taxation, internal controls and internal audit,
investor relations, general procurement,
strategy and Transformation Office
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
Senior Vice President, Finance, IT and M&A, Building
and Living: Stora Enso 2012–2013
Senior Vice President & Group Controller: Stora Enso
2009–2012
Various finance and managerial positions: Stora Enso
2000–2009
Positions of trust
Board member (2017–) and Audit Committee Chair
(2018–): Uponor
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: UPMKymmene Corporation, Helsinki,
Finland 2006–2008
President: UPM North America, Chicago, USA
2004–2005
President of Sales: UPM North America, Chicago, USA
2002–2003
Managing Partner: Jaakko Pöyry Consulting, New York,
USA 2000–2001
Engagement Manager: McKinsey & Co, Atlanta, USA
1997–1999
Director, Business Development UPM Paper Divisions,
Helsinki, Finland 1994–1996
Positions of trust
Vice Chairman (2019–2020) and Board member:
Outokumpu 2012–2020
Vice Chairman (2016–2018) and Board member:
Service Sector Employers PALTA 2013–2019
Chairman: Realia Group 2017–2020
Board member: East Office of Finnish Industries
2012–2019
Chairman: American Chamber of Commerce (AmCham
Finland) 2009–2014
Board member: Ilmarinen Mutual Pension Insurance
Company 2014–2016
Board member: Federation of Finnish Technology
Industries 2011–2012
Supervisory Board member: Finnish Fair Corporation
2014–2019
Supervisory Board member: Ilmarinen Mutual Pension
Insurance Company 2013
Board member: Botnia Oy 2006–2008
Corporate Governance statement
Outokumpu Annual report | Governance 10 / 31
Thomas Anstots
Executive Vice President, Commercial,
business area Europe
b. 1962, German citizen
M.Sc. (Mechanical Engineering)
Executive Vice President, Commercial,
business area Europe 2020–
Member of the Leadership Team 2020–
Responsibility: Sales in business area Europe
and global marketing
Employed by Outokumpu Group since 2012
Work experience
Senior Vice President, Head of Sales, business area
Europe: Outokumpu 2019–2020
Senior Vice President, Sales North: Outokumpu
2014–2018
Vice President, Sales Central and Service Center
Operations: Outokumpu 2013
General Manager: Nirosta Service Center: Inoxum/
ThyssenKrupp Nirosta 2010–2012
Managing Director Technology, Service Center Group:
ThyssenKrupp Nirosta 2005–2009
Vice President, Business Processes and Applications:
ThyssenKrupp Nirosta 2002–2004
Plant Manager, Finish Departments: ThyssenKrupp
Nirosta 1998–2001
Various Manager and Senior Manager Positions in
Cold Rolling Mill Production: Thyssen Edelstahl/Krupp
Thyssen 1989–1997
Positions of trust
Member of the Board and Vice Chairman: ISER
Germany 2016–
Stefan Erdmann
Chief Technology Officer
b. 1972, German citizen
M.Sc. (Eng.)
Chief Technology Officer 2020–
Member of the Leadership Team 2020–
Responsibility: Research and development,
technology, sustainability, investment steering
and Group IT
Employed by Outokumpu Group since 2018
Work experience
Senior Vice President and CTO: Outokumpu
2018–2020
Technical Managing Director: Aluminium Norf GmbH
2015–2018
Vice President; Global Research and Development:
Novelis Inc 2011–2015
General Manager; Business Unit Can Europe: Novelis
AG 2009–2011
General Manager: Novelis Deutschland GmbH
2007–2009
Sales Director Painted Products: Novelis Europe
2006–2007
Various operational and managerial positions: Novelis
and Alcan 1993–2006
Corporate Governance statement
Outokumpu Annual report | Governance 11 / 31
Martti Sassi
President, business area Ferrochrome
b. 1964, Finnish citizen
M.Sc. (Eng.)
President, business area Ferrochrome 2020–
Member of the Leadership Team 2020–
Responsibility: Business area Ferrochrome
Employed by Outokumpu Group since 1990
Work experience
Senior Vice President – business area Ferrochrome:
Outokumpu 2018–2020
Senior Vice President – Tornio Stainless and
Ferrochrome Operations: Outokumpu 2016–2018
Senior Vice President – Tornio Stainless Operations:
Outokumpu 2012–2016
Vice President – Tornio Stainless Business Excellence:
Outokumpu 2010–2012
General Manager – Tornio Cold Rolling Plant:
Outokumpu 2006–2010
Various operations and R&D positions 1990–2006:
Outokumpu
Positions of trust
Board member: Association of Finnish Steel and Metal
Producers 2020–
Chairman of Board: Chamber of Commerce in Lapland
2020–
Council member: International Chromium Development
Association 2019–
Board member: EuroAlliages 2018–
Johann Steiner
Chief Human Resources Officer
b. 1966, German citizen
M.Sc. (Econ.)
Chief Human Resources Officer 2020–
Member of the Outokumpu Leadership Team
2013–
Responsibility: Human resources, Group
communications and Global Business Services
(GBS)
Employed by Outokumpu Group since 2013
Work experience
Executive Vice President – Human Resources and
Organization Development: Outokumpu 2016–2020
Executive Vice President – Human Resources, IT, Health
and Safety: Outokumpu 2013–2016
Executive Vice President – Human Resources and
Health, Safety and Sustainability: Outokumpu 2013
Group HR Director: SAG Group GmbH 2012
Operating Partner: Humatica AG 2010–2012
Group HR Director: Clariant International AG
2002–2008
VP Executive Policies: EADS (former DaimlerChrysler
Aerospace AG) 1999–2002
Senior Consultant: Towers Perrin 1993–1998
Corporate Governance statement
Outokumpu Annual report | Governance 12 / 31
Work experience
Senior Vice President – Operations Europe: Outokumpu
2020
Senior Vice President – Tornio Operations: Outokumpu
2018–2020
Vice President – Quarto Plate: Outokumpu 2015–2018
General Manager Production: Outokumpu Degerfors
2010–2015
Various operational positions: Outokumpu 2002–2010
Positions of trust
Board member: Swedish Steel association
(Jernkontoret) 2015–
Niklas Wass
Executive Vice President, Operations,
business area Europe
b. 1977, Swedish citizen
M.Sc. (Environmental Science)
Executive Vice President, Operations, business
area Europe 2020–
Member of the Leadership Team 2020–
Responsibility: Operations and supply chain
management in business area Europe
Employed by Outokumpu Group since 2002
Tamara Weinert
Acting President, business area Americas
b. 1965, German citizen
MBA, M.Sc.
Acting President, business area Americas
2020–
Member of the Leadership Team 2020–
Responsibility: Business area Americas
Employed by Outokumpu Group since 2012
Work experience
Senior Vice President – Sales South & Overseas,
business area Europe: Outokumpu 2016–2020
Senior Vice President – Finance & Control, business
area Europe: Outokumpu 2013–2016
Vice President – Investor Relations: Outokumpu
2012–2013
Director Treasury, Risk Management, Insurance &
Investor Relations: Inoxum 2012
Director, Head of Corporate & Structured Finance:
Vattenfall 2011–2012
Treasurer: N.V. Nuon 2008–2010
Risk Management: N.V. Nuon 2000–2008
International postings in India, Singapore, Russia,
Netherlands and Finland
Information on work experience and positions of
trust to be found on the Company’s website
Corporate Governance statement
Outokumpu Annual report | Governance 13 / 31
Outokumpu shares and share-based
rights (parent or subsidiaries)
owned by the CEO and Leadership
Team members and their
respective controlled corporations
on December 31, 2020
Member of the Leadership Team
Number of
shares
Heikki Malinen 45,459
Pia Aaltonen-Forsell 0
Thomas Anstots 94,909
Stefan Erdmann 10,000
Olli-Matti Saksi 317,676
Martti Sassi 17,196
Johann Steiner 155,444
Niklas Wass 18,443
Tamara Weinert (acting) 25,319
Total 684,446
More information on compensation can be
found in the Remuneration Report.
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 deputy to the CEO, if one has
been appointed, is responsible for attending to
the CEO’s duties in the event that the CEO is
prevented from doing so. Currently, no deputy
to the CEO has been appointed.
Leadership Team and
Business Area Boards
The Outokumpu Leadership Team, chaired by
the CEO, is a reporting and decision-making
forum for steering and managing Outokumpu’s
corporate agenda. The Outokumpu Leadership
Team consists of the CEO, his/her deputy
(if one has been appointed) and other key
members of senior management. The Group
Functions Board is a sub-section of the Outo-
kumpu Leadership Team and a monitoring and
decision-making forum for the corporate affairs
of the Group Functions. The Group Functions
Board is chaired by the CEO. Decisions taken
by the Group Functions Board are reported to
the Outokumpu Leadership Team.
Each Outokumpu business area is steered by
a Business Area Board, chaired by the CEO.
The Business Area Boards consist of the CEO,
the Chief Financial Officer, the Head of the
respective business area and selected other
key members of senior management.
The decision-making authorities of the
Leadership Team and the Business Area
Boards follow from the authority of the CEO. It
is the duty of these bodies to run and develop
the Group’s operations in line with the strategy
and targets set by the Board of Directors.
The Leadership Team and the Business Area
Board meetings are convened by the CEO.
Minutes shall be kept for each meeting.
The Leadership Team, the Group Functions
Board and the Business Area Boards typically
meet once a month.
Organization structure on Dec 31, 2020
President and CEO
Heikki Malinen
Human resources
Finance
Technology and sustainability
AmericasEurope operations Europe commercial Long Products
Ferrochrome
Corporate Governance statement
Outokumpu Annual report | Governance 14 / 31
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 the 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 envi-
ronment 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 Corporate Responsibility
Policy and Ethics Statement. The Outokumpu
Code of Conduct describes the Group’s basic
values and offers standardized, practical
guidelines for managers and employees to
follow. Furthermore, the Internal Control
Policy, the Approval Policy and the Identity and
Access Management Policy define many of
the principles related to the system of internal
controls.
Internal control procedures and the main features of the risk management systems
Risk management
process in Outokumpu
Leadership Team
Business areas and
Group functions
Operations
Enterprise-wide risks
Risk
reporting
(external/
internal)
Identification
Evaluation and
prioritization
Mitigation
Regular risk
updates
Risk monitoring
and control
Responsibility for risks
Top-down
Policies, guidelines
and requirements
Bottom-up
Identification,
evaluation, mitigation
and reporting
The performance management and the risk
management processes are key management
activities in enabling an efficient control
environment. In all sections of the Group’s
operations, the planning activities and the
setting of both operational and financial
targets are executed in accordance with Outo-
kumpu’s overall business targets. Management
follow-up of related achievements and risks
is carried out through regular management
reporting and meeting routines.
In 2020, Outokumpu has established a
separate Internal Control function to oversee
and develop Outokumpu’s system of internal
controls. The new function is also responsible
for Group-wide governance, risk and compli-
ance coordination. With the lead of the Internal
Control function, Outokumpu has continued
the measures to develop and implement global,
aligned and consistent risk management and
the internal control process, which is expected
to provide improved assurance for the Group
to reach its key targets. In the course of 2021,
the new risk management and internal control
processes will be implemented wider to cover
the key entities and functions of the Group.
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 manage-
ment activities. In addition to supporting
Outokumpu’s strategy, the aim of risk manage-
ment is identifying, evaluating, mitigating
and controlling risks from the perspective of
shareholders, customers, suppliers, personnel,
creditors, and other stakeholders.
Risk management organization
The Board of Directors carries ultimate respon-
sibility 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
considered 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 the risks
connected with their own operations. The Risk
Management Steering Group and the Board of
Directors review the key risks and actions to be
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
Corporate Governance statement
Outokumpu Annual report | Governance 15 / 31
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 operational level risks.
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 the 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 and other stakeholders. Risk
mitigation actions are defined according to the
risk identification and the impact/likelihood
assessments.
Focus areas
The focus in risk management in 2020 was
on implementing the mitigation actions of the
identified risks, supporting debt reduction at
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 miti-
gating actions to protect the Group’s earnings
and cash flows.
Outokumpu continued its systematic fire safety
and loss prevention audit program, focusing
on execution of the mitigating actions. Due to
the 2020 travel restrictions, many audits were
conducted virtually using in-house expertise in
cooperation with external advisors.
The main realized risks in 2020 were related
to the disruption of the stainless steel
markets due to the pandemic, and imports
that continued to have a negative impact on
stainless steel base prices and deliveries in
Europe throughout the year.
Internal controls for
financial reporting
Outokumpu’s control process for financial
reporting is mainly based on the Internal
Control Policy, Outokumpu Accounting Prin-
ciples and the Approval Policy, 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.
Financial reporting is prepared in a harmonized
way in accordance with International Financial
Reporting Standards (IFRS). The Outokumpu
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 2020, Outokumpu implemented a process
and solution to report financial statements in
the European Single Electronic Platform (ESEF).
Outokumpu also launched a new financial
closing management system to develop quality,
consistency and transparency of the controls
around financial closing process including
account reconciliations and manual journals. At
the end of 2020 the new processes covered
more than half of the targeted scope. In 2021,
Outokumpu will further implement its financial
closing management system across the Group
and plans to continue developing its financial
reporting process and related controls.
The 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
The risks related to the Group’s financial
reporting are managed according to
Outokumpu’s risk management process and
classified as operational risks that 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 and in
2020 one focus area was the risk related to
inventory valuations.
Control activities
In addition to the Board of Directors, finance
management at all levels as well as the Boards
of subsidiary companies are responsible for
ensuring that the internal controls relating to
financial reporting are in place. Outokumpu has
centralized the majority of its accounting and
financial reporting in its global business service
centers, which enables the efficient execution
of internal control activities.
The aim of control activities is to discover,
prevent, and correct the 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 incompatible tasks (i.e. one
person performing a critical activity and also
being responsible for controlling that activity)
are segregated. Control activities consist
of different kinds of measures and include
reviews of financial reports by Group manage-
ment and in business area management teams,
the reconciliation of accounts, analyses of
the logic behind reported figures, forecasts
compared to actual reported figures, and
analyses of the Group’s financial reporting
processes, among others. A key component is
the monitoring of monthly performance against
financial and operational targets. These control
activities take place at different levels of the
organization.
The most important accounting items in
Outokumpu are the valuation and reporting of
inventories and other items requiring manage-
ment judgment, such as provisions. Moreover,
in difficult market situations, such as the
current COVID-19 pandemic, asset impairment
calculations and the related sensitivity
analyses are equally important. These items
are carefully monitored and controlled on a
Corporate Governance statement
Outokumpu Annual report | Governance 16 / 31
regular basis, both within business areas and
at the Group level.
Information technology and solutions play an
important role in ensuring the appropriate
structures for 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 trans-
formation 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, with
improved system-based controls embedded
in processes. The first rollouts of the new
ERP together with other related IT systems
took place during 2019. Further rollouts of
the system will take place in 2021 as the
scheduled rollouts for 2020 were postponed
partly due to the COVID-19 pandemic.
Outokumpu has centralized the majority of its
accounting and financial reporting in its global
business service centers, which enables further
development and harmonization opportunities
for internal control activities.
Information and communication
Group-wide policies and principles are available
to all Outokumpu employees. Instructions
relating to financial reporting are communi-
cated to all of the parties involved. The main
communication channels employed are regular
controller meetings, Outokumpu’s intranet,
other easily accessible databases, and email.
In the pandemic situation with remote work
promoted, only a very limited number of
face-to-face controller meetings have been
organized. Finance 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 compa-
nies 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 function monitors
that an appropriate control environment exists
across the Group. Risk management, compli-
ance 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 Board 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, improve operations,
and monitor and support the organization in
the achievement of its objectives. Through a
systematic, disciplined approach, Internal Audit
determines whether governance and compli-
ance processes, the internal control system,
and the risk management process, as designed
and represented by the Board of Directors and
the Outokumpu Leadership Team, are effective
and efficient.
With a strong commitment to integrity
and accountability, Internal Audit provides
value to the Board of Directors and senior
management as an objective and direct source
of information, insights and independent
advice. Internal Audit monitors adherence to
Group principles, policies and instructions,
and leads investigations on fraudulent and
noncompliant behaviors and activities. Internal
Audit performs its function on behalf of and
directly reports to the Board Audit Committee
and to the executive management. The internal
audit plan is approved by the Board Audit
Committee. In addition, the function may carry
out unscheduled audits when needed.
In 2020, Internal Audit performed six oper-
ational audits. The results of the audits that
were 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, no issues of
material risk for the Outokumpu Group were
identified. The 2021 internal audit plan will
focus on strategy implementation, key projects
and certain Group companies selected based
on assumed level of different types of risk.
Outokumpu encourages everyone to raise their
concerns. There are several ways to report
alleged misconduct, including SpeakUp, an
externally operated communication channel,
that offers the option to report misconduct
confidentially and anonymously, if allowed by
the laws and regulations.
SpeakUp is available both internally on
company intranet and for external stakeholders
via the company webpage. More than twenty
investigations of potential misconduct were
recorded in 2020, and thereof 16 cases were
reported via SpeakUp and 6 were recognized
through other channels.
During the year Internal Audit provided
additional support e.g. in investigation of the
possible segregation of duty issues in the
system environment.
Compliance
Outokumpu is strongly committed to the
highest ethical standards and complies with
the applicable laws and regulations of the
countries in which it operates as well as with
the agreements and commitments it has made.
Outokumpu’s Code of Conduct sets out these
ethical standards and provides guidelines for
a common way of operating with the aim of
ensuring that all Outokumpu employees live up
to Outokumpu’s ethical standards.
Outokumpu’s Legal and Compliance function
is responsible for managing and continuously
developing Outokumpu’s ethics and
compliance program. Outokumpu’s ethics
and compliance program is described in
more detail as part of Outokumpu & society
at www.outokumpu.com. The Legal and
Compliance function reports to the CEO and
to the Outokumpu Leadership Team as well
Corporate Governance statement
Outokumpu Annual report | Governance 17 / 31
as 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, Head of Internal Audit, Corporate
General Counsel and Head of Compliance. The
Compliance Steering Group met four times
in 2020. A network of compliance contact
persons supports the local implementation
of the ethics and compliance program in the
business areas and business support functions.
Insider management
The company’s Insider Rules, the Finnish
insider laws and regulations, including the
EU Market Abuse Regulation, constitute the
primary legal framework for the insider issues
relevant to the Group and its employees.
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 responsi-
bilities 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 Management 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
derivatives 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 the applicable
insider regulations. The publication of inside
information shall be made in accordance with
the company’s Disclosure Policy.
Outokumpu’s Head of Legal 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 deter-
mined 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 Compa-
ny’s Legal and Compliance function maintains
a non-public 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 imple-
mented under arms-length terms.
Monitoring and Reporting
Related Party Transactions
Outokumpu Oyj’s Audit Committee monitors
the evaluation process. Related party trans-
actions 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 proce-
dures. Information on transactions concluded
between the company and its related parties is
disclosed annually in the company’s consoli-
dated 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 Autho-
rized Public Accountants (KHT) or accounting
Corporate Governance statement
Outokumpu Annual report | Governance 18 / 31
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 be made public if it is supported
by shareholders holding a minimum of 10%
of all the company’s shares and voting rights
and the person or company proposed has
consented to such nomination.
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 Pricewaterhouse-
Coopers 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 companies.
PricewaterhouseCoopers Oy was elected
as the Group Auditor in the Annual General
Meeting held on May 28, 2020 and has
been the Auditor of Outokumpu for four
consecutive terms. Both Outokumpu and
Pricewaterhouse Coopers Oy emphasize the
requirement stipulating 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 the non-audit services
purchased by the Group from Pricewater-
houseCoopers at the global level. In 2020,
the auditors were paid fees totaling EUR 2.0
million, of which the non-auditing services
accounted for EUR 0.1 million.
Corporate Governance statement
Outokumpu Annual report | Governance 19 / 31
Key risks
Strategic and
business risks
Risks related to Outokumpu’s
business priorities and targets
Outokumpu’s new vision is to be customer’s
first choice in sustainable stainless Outokum-
pu’s new strategy is built on clear timebound
initiatives and targets to competitively position
itself for the future by strengthening its balance
sheet in the shorter term and by de-risking
the company for strong returns in the long run.
Outokumpu’s strategy defines The Outokumpu
Ways of Working:
We operate safely, always
We work safely, comply with our cardinal
safety rules, assess potential risks and take
appropriate measures to mitigate them.
We leverage the power of
one Outokumpu
We work together, share and combine our
knowledge across functions and regions to
create best value for our customers.
We deliver
We live up to our promises with clear roles and
clear accountabilities. We have a passion for
continuous improvement.
We grow people and value diversity
We foster diversity and create a work
environment that allows all team members to
contribute and to develop.
We act sustainably
We are driven by creating sustainable impact,
environmentally, socially and economically.
We are a trusted partner
We are a reliable and trusted partner towards
all our stakeholders, our customers, employees,
investors and the communities we operate in.
Outokumpu’s current expectations regarding
the outcome of the strategy and ways of
working are based on a number of assump-
tions that 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 commissioning 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 safe-
guard 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 investigations against
China, Indonesia and Taiwan by the European
Commission should ease the market pressure.
Quotas are set to expire in June 2021.
Outokumpu’s current expectations regarding
the market trends are based on 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
Key risks
Outokumpu Annual report | Governance 20 / 31
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 opera-
tions. 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, production
downtimes and business interruptions. Risks
associated with its external sales of chromite
and ferrochrome include COVID-19 causing
uncertain demand impacts, market price of
chromium impacted by ore export tax intro-
duced in South Africa, 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 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 other 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, the
COVID-19 pandemic, and 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. Financial risks related to raw mate-
rials 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 substan-
tial portion of Outokumpu’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 avia-
tion 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) presents 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 EU Chemicals Strategy for
Sustainability is a risk to market for many
metals and alloys as the target is to ban all
use of “substances of concern” in European
industry and consumer goods. The approach
is based on intrinsic hazard rather than risk.
This can hamper the market of metal products,
recycling of products and materials as well as
the use of by-products. Strict compliance with
all environmental regulations could increase
costs and impact Outokumpu’s competitive
position. Outokumpu mitigates these impacts
through the systematic identification and
management of environmental, chemical,
and product safety risks, through emission
trading, and by maintaining a proactive dialog
with stakeholders involved in the framing of
environmental legislation.
Key risks
Outokumpu Annual report | Governance 21 / 31
Operational 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 busi-
ness interruptions and have a negative impact
on Outokumpu’s profitability. Primarily because
of the high temperatures required for produc-
tion, 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 environ-
mental 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 originally
expected to receive the construction license by
the end of 2021. However, that is now highly
unlikely. The original Fennovoima plans that
commercial operation of the plant would begin
in 2028 is also highly unlikely as the project
continues to progress slowly. The project
involves several risks for Outokumpu, including
project completion risks such as continued
delays, cancellations, non-completion, tech-
nical risks, possible tightening nuclear safety
regulations, 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 environ-
mental 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
management 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
Key risks
Outokumpu Annual report | Governance 22 / 31
the production and supply chain processes. In
addition, the enterprise architecture is complex,
and the large number of different and unharmo-
nized 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 transforma-
tion 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 at a 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. Furthermore, as a part of its
strategy, Outokumpu has introduced ways of
working 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, striving to be an
industry leader.
Despite the ongoing efforts and actions, a
serious incident or fatal accident may occur
during working hours to Outokumpu employees
or contractors. 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, with a focus on risk
assessments and risk reduction plans in place
on all sites in addition to implementation plans
for other major company safety standards.
In the current situation of the COVID-19
pandemic the safety function and operational
teams have collaborated to create safety,
hygiene and distancing rules and practices to
look after the health of our employees, prevent
the spread of the virus in the workplace and
allow us to maintain production.
Outokumpu’s ability to continue and grow
its business as well as provide high-quality
products depends, to a large extent, on the
contributions made by its key personnel. The
loss of key individuals or other employees who
have specific knowledge of, or relationships
with, trade customers in markets in which
Outokumpu operates could have significant
impacts on Outokumpu’s business. If Outo-
kumpu 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 implemented
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 appli-
cable laws and other standards could subject it
to fines, loss of operating licenses, loss of busi-
ness, 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 management 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 developed continuously.
The compliance risk assessment forms the
basis for the compliance action plan for the
forthcoming year.
Key risks
Outokumpu Annual report | Governance 23 / 31
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.
Sustainability
and Corporate
responsibility risks
Outokumpu has also identified its exposures in
sustainability and corporate responsibility.
Protecting the climate
Climate change is one of the most urgent
challenges the world is facing today. Outo-
kumpu aims to protect the climate with our
sustainable stainless steel. We are developing
our operations to reach carbon neutrality by
2050. We are already on track to meet our
short-term target of reducing our emissions
by 20% by 2023. We work closely with our
customers to help them develop solutions that
further decrease their carbon footprint and
reduce burden on climate.
Environmental impacts
Protecting the environment in the locations
where we operate is our highest priority and
a part of our licence to operate. We have
made significant investments in environmental
protection over the past years and we will
continue to develop our processes even further.
We aim to have a minimal impact on nature
and biodiversity.
People and society
Outokumpu is deeply connected to the wider
society through our employees, contractors,
investors, local communities and other
stakeholders. The safety and wellbeing of
our employees is our highest priority and we
conduct our business with the highest ethical
standards. We also contribute to the wellbeing
of communities through our economic impact.
Circular economy
Outokumpu uses high amounts of recycled
materials. Stainless steel is endlessly recy-
clable without any loss in quality. It is also the
most efficient way to reduce the environmental
impact of production processes enabling us
to produce sustainable stainless steel. So, we
continuously aim for higher recycling rates in
our operations. Currently, Outokumpu’s rate of
recycled content is the highest in the industry,
over 90%.
Traceability and responsibility
throughout the supply chain
Outokumpu is a part of a global supply chain
by producing stainless steel for leading brands
and 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.
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. All
suppliers and subcontractors must comply with
our Code of Conduct or similar standards and
meet our supplier requirements. Outokumpu
monitors its suppliers closely through self-as-
sessment, screenings and audits.
Safety is one of the cornerstones in Outokum-
pu’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.
Additional information is available on
Outokumpu’s website.
Key risks
Outokumpu Annual report | Governance 24 / 31
Nominee registered and non-Finnish holders 21%
Finnish institutions, companies and foundations 24%
Solidium Oy
1)
22%
Households 33%
Shares 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 2020. All shares in Outokumpu carry
equal voting and dividend rights.
On December 31, 2020, the total number
of Outokumpu shares was 416,374,448.
On December 31, 2020, Outokumpu held
4,372,236 of treasury shares (Dec 31, 2019:
4,599,733).
Outokumpu in the capital markets
Outokumpu continued the regular and active
communication with investors and analysts in
2020. Due to the global COVID-19 pandemic,
almost all meetings and roadshows were virtual
as well as the Capital Markets Day, which was
arranged in March.
Key topics in the investor discussions were
the impacts of the COVID-19 pandemic on
Outokumpu, Asian imports and trade defence
measures, balance sheet, the Americas’
performance, sustainability and the new
strategy, which was published in November.
Outokumpu held its Annual General Meeting
in Helsinki, Finland, in May under special
arrangements due to the COVID-19 pandemic.
During 2020 Outokumpu arranged nine
roadshows in Europe and in the US. The
company also met investors at three virtual
industry seminars. In total, 116 one-on-one
Principal shareholders on December 31, 2020
Shares %
Solidium Oy 90,324,385 21.69
Ilmarinen Mutual Pension Insurance Company 11,450,000 2.75
The Social Insurance Institution of Finland 9,298,652 2.23
State Pension Fund 6,827,142 1.64
Varma Mutual Pension Insurance Company 5,453,112 1.31
Elo Mutual Pension Insurance Company 5,210,988 1.25
Mandatum Life 3,698,266 0.89
Nordea Life Assurance Finland Ltd. 2,968,677 0.71
Tutkimuksen vaikuttavuuden tukisäätiö sr 2,820,000 0.68
Merivirta Jyri Tapio 2,000,000 0.48
Keva 1,765,000 0.42
OP Life Assurance Company Ltd. 1,531,208 0.37
OP-Finland Small Firms Fund 1,427,691 0.34
Virala Oy Ab 1,350,000 0.32
Belgrano Inversiones Oy 1,350,000 0.32
147,475,121 35.40
Nominee accounts held by custodian banks 83,374,696 20.02
Treasury Shares 4,372,236 1.05
Other Shareholders 181,152,395 43.53
Total 416,374,448 100.00
Shareholders by group on December 31, 2020
1)
Solidium Oy is wholly owned by the Finnish state
Outokumpu Annual report | Governance 25 / 31
0
30
60
90
120
150
20202019201820172016
0.00
0.05
0.10
0.15
0.20
0.25
20202019201820172016
20202019201820172016
0
2
4
6
8
10
0
1,000
2,000
3,000
4,000
€ million
40
60
80
100
120
140
160
DecNovOctSepAugJulJunMayAprMarFebJan
Market capitalization and share price development Monthly trading volume, million shares
Month-end market capitalization, € million Share price, €/share
Source: Nasdaq
Includes trading on Nasdaq Helsinki.
Source: Nasdaq
meetings and conference calls were held with
investors in 2020.
International shareholders held 20.7% of the
total shares at the end of December 2020
compared to 22.0% at the end of the previous
year.
The largest Finnish shareholder Solidium Oy
held 21.7% of Outokumpu shares. The share
of Finnish households and private persons
increased from 31.1% in 2019 to 33.5% at
the end of 2020.
Share price development
and market capitalization
During 2020, Outokumpu’s share was EUR
4.44 at its highest and EUR 2.08 at its lowest
(2019 high/low: EUR 4.04 / EUR 2.23). At
the end of the year the share price closed at
EUR 3.22, marking an increase of 14.75%
from the closing price of EUR 2.81 at the end
of 2019. At the end of 2020, the company’s
market capitalization was EUR 1,341 million,
compared to EUR 1,168 million at the
previous year’s end.
In 2020, the average daily trading volume in
Outokumpu shares on Nasdaq Helsinki was
4.4 million shares. In total, 1,101 million
Outokumpu shares were traded on Nasdaq
Helsinki during 2020, representing a value of
EUR 5,325 million (2019: 884 million shares,
which corresponded to EUR 5,325 million).
In addition to Nasdaq Helsinki, Outokumpu’s
shares are traded also on various alternative
trading platforms.
Outokumpu share price development in 2020, %
Outokumpu
Nasdaq Helsinki
Dec 30, 2019 = 100
Dividend/share, €
2020 is a proposal by the Board of Directors.
Shares and shareholders
Outokumpu Annual report | Governance 26 / 31
Information for shareholders
Annual General Meeting 2021
Notice is given to the shareholders of
Outokumpu Oyj to the Annual General Meeting
to be held on Wednesday, March 31, 2021
at 1.00 pm EET at the company’s head office
at Salmisaarenranta 11, Helsinki, Finland.
Shareholders of the company and their proxy
representatives may participate in the meeting
and exercise their rights as shareholders only
by voting in advance and by making counterpro-
posals and presenting questions in advance in
accordance with instructions in the notice and
otherwise by the company. In order to prevent
the spread of the COVID-19 pandemic, it is not
possible to attend the meeting in person.
Each shareholder, who is registered on the
record date March 19, 2021 in Outokumpu’s
shareholder register held by Euroclear Finland
Oy, has the right to participate in the Annual
General Meeting. A shareholder, whose shares
are registered on his/her personal Finnish
book-entry account, is automatically shown in
the shareholder register.
Registration for the meeting and advance
voting will begin on March 10, 2021 at
12.00, following the deadline for submitting
counterproposals to be placed for a vote.
A shareholder, who is registered in the
shareholders’ register of the company and
who wants to participate in the Annual General
Meeting, must register for the Meeting and
vote in advance no later than March 25, 2021
by 4.00 pm EET by which time the registration
and votes need to be received.
A shareholder, who has a personal Finnish
book-entry account, may register and vote in
advance on certain items on the agenda of the
Annual General Meeting from March 10, 2021
12.00 until 4.00 pm EET on March 25, 2021
a) at Outokumpu’s Annual General Meeting
website or
b) by mail to Innovatics Oy, Yhtiökokous/
Outokumpu Oyj, Ratamestarinkatu 13 A,
00520 Helsinki or by email to
agm.outokumpu@innovatics.fi.
If the shareholder participates in the meeting
by sending the votes in advance by mail or
email to Innovatics Oy before the end of the
registration and advance voting period, this
constitutes registration for the Annual General
Meeting, provided that the shareholder
information required for registration is provided.
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, 2021, 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, 2021 by 10.00 am EET.
This constitutes due registration for the Annual
General Meeting.
A holder of nominee registered shares is
advised to early enough request the necessary
instructions regarding the registration in
the temporary shareholders’ register, the
issuing of proxy documents and registration
for the Annual General Meeting from his/her
custodian bank. 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.
In addition, the account management orga-
nization of the custodian bank shall arrange
advance voting on behalf of the holders of
nominee registered shares by the end of the
registration date above.
A complete notice to the Annual General
Meeting and information on the voting, making
counterproposals and presenting question
is available at Outokumpu’s Annual General
Meeting website.
Payment of the dividend
The Board of Directors is proposing to the
Annual General Meeting to be held on March
31, 2021 that no dividend will be paid for
2020 as in the challenging market environment
improving the Company’s financial position
continues to be of highest priority.
Remuneration
Report
28 / 31Outokumpu Annual report | Remuneration Report
Dear shareholder,
Development of remuneration and financial development over the past five years
2020 2019 2018 2017 2016
Board of Directors
1)
, € 658,400 705,800 576,200 617,315 763,000
President and CEO
2)
, € 1,264,729 2,534,480 2,705,913 4,104,317 3,578,465
Employees’ average
3)
, € 53,637 53,922 52,159 54,554 53,293
Adjusted EBITDA, € million 250 263 485 631 309
1)
Total remuneration paid to the Board of Directors, including annual remuneration and meeting fees for all
members.
2)
Total remuneration paid to the CEO, including salary, employee benefits and incentives, for Roeland Baan from
2016 until May 15, 2020 and for Heikki Malinen from May 16, 2020.
3)
Personnel expenses without indirect employee costs and termination benefits, divided by the average number
of employees during the year.
Remuneration Report
On behalf of the Board, I am pleased to
present Outokumpu’s Remuneration Report for
2020, following the guidelines of the Corporate
Governance Code 2020.
The report presents the remuneration paid or
due to the Board members and the President
and Chief Executive Officer for year 2020. The
materialized remuneration is in line with the
Remuneration Policy of the Governing Bodies
of Outokumpu approved at the Annual General
Meeting 2020. The report also reflects the
targets outlined in the Remuneration Policy.
Our Remuneration Policy aims to translate
our cultural heritage into a remuneration
framework that attracts and retains people,
who fit the business culture and deliver talent,
international experience and attitude that
match our long-term business ambitions.
Following this target, the remuneration
of Outokumpu’s Board members in 2020
compensated for their time commitment,
knowledge and required experience to
contribute to the Board’s work, as well as
the level of responsibility that they bear. It
enabled attracting and retaining high caliber
Board members with the experience and skills
necessary in a company and business of this
size and complexity, thus contributing to the
long-term financial performance and success of
the company.
Similarly, the CEO remuneration in 2020 was
in line with our compensation philosophy
which includes shareholder value creation as
the underlying focus of the reward strategy,
business strategy aligned incentives, pay for
performance and competitive remuneration. For
year 2020, the CEO received market compet-
itive base pay but no incentive payment. This
reflects the below target financial performance,
due to the challenging market situation with
continuing high import pressure in Europe and
the COVID-19 pandemic impacting the global
economy.
Going forward, we will continue to review and
refine our remuneration arrangements to
ensure they deliver on our goals, accounting
for the everchanging business environment,
legislative changes and well as your opinion as
a shareholder.
The table below gives further insight in how
the development of the Board member fees
and CEO remuneration compares to the
development of the average remuneration
of employees and to Outokumpu’s financial
development over the last five years.
Kari Jordan
Chairman of the Board of Directors
Remuneration
29 / 31Outokumpu Annual report | Remuneration Report
Fees of the Board of Directors
Outokumpu’s Annual General Meeting 2020
approved the following annual remuneration to
be paid to the members of Outokumpu’s Board
of Directors: EUR 163,000 for the Chairman of
the Board, EUR 91,600 for the Vice Chairman
and for the Chairman of the Board’s Audit
Committee and EUR 71,100 for the other
members of the Board. The Annual General
Meeting 2020 decided that 40% of the annual
remuneration will be paid in the company’s
own shares using treasury shares or 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.
The Board members are not entitled to other
financial benefits and they are not as a main
rule employed by the company or any company
belonging to its group. Thus, the Board
members are not eligible for any employment
related salaries or pension schemes. The fees
paid to the Board members are presented in
the table below.
Remuneration and meeting fees of the Board of Directors in 2020 and 2019
€
Due based on
2020
2020 2019
Annual compensation
Meeting fees
1)
Total
Annual compensation
Meeting fees
1)
TotalMeeting fees
1)
Share portion Cash portion Share portion Cash portion
Kari Jordan, Chairman
1,800 66,241 96,759 18,000 181,000 64,645 95,355 12,600 172,600
Eeva Sipilä, Vice Chairman
2)
1,800 37,225 54,375 16,200 107,800 36,360 53,640 9,000 99,000
Kati ter Horst, Member 1,800 42,206 28,894 16,800 87,900 28,280 41,720 10,200 80,200
Vesa-Pekka Takala, Member 1,800 42,206 28,894 16,800 87,900 28,280 41,720 7,200 77,200
Pierre Vareille, Member
1,800 42,206 28,894 22,800 93,900 28,280 41,720 20,400 90,400
Julia Woodhouse, Member
1,800 42,206 28,894 21,600 92,700 28,280 41,720 10,800 80,800
Heikki Malinen, Vice Chairman
3)
0 0 0 7,200 7,200 36,360 53,640 12,600 102,600
Olli Vaartimo, Vice Chairman
4)
0 0 0 0 0 0 0 3,000 3,000
Total 10,800 272,291 266,709 119,400 658,400 250,485 369,515 85,800 705,800
1)
Meeting fees have been entered in the table on the year when they have been paid and include also committee meeting fees.
2)
Eeva Sipilä was elected as the new Vice Chairman of the Board at the Annual General Meeting 2020.
3)
Heikki Malinen was Vice Chairman of the Board until April 30, 2020.
4)
Olli Vaartimo was Vice Chairman of the Board until March 27, 2019.
Remuneration
30 / 31Outokumpu Annual report | Remuneration Report
The remuneration of the President and CEO
consists of base salary, benefits, and an
annually determined short-term incentive
plan. In addition, the CEO participates in
the long-term incentive arrangement of the
company consisting of individual performance
share plans.
The Performance Share Plans are covered by
the following share ownership requirement
applied by Outokumpu Group: The members of
Outokumpu’s Leadership Team, including the
CEO, are obliged to own Outokumpu shares
received under the company’s share-based
incentive programs corresponding to the value
of their annual gross base salary. Half (50%) of
the net shares received from the share-based
incentive programs must be used to fulfil the
above ownership requirement. This requirement
applied to CEO Baan as long as he continued
in the company’s service. This requirement
also applies to CEO Malinen.
CEO Malinen has the right to retire at the age
of 65 and he participates in the Finnish TyEL
pension system and there are no supple-
mentary pension plans in place. The service
contract of the CEO is valid until further notice.
The CEO is entitled to a severance payment of
twelve (12) months, and the notice period is
six (6) months for both parties.
The former CEO Baan had the right to retire at
the age of 63 and participated in the Finnish
TyEL pension system in addition to which he
was included in a defined contribution pension
plan with an annual insurance premium of 25%
of his annual earnings, excluding share rewards.
The contributions to the defined contribution
pension plan amounted to EUR 281,344 in
2020 (EUR 444,208 in 2019). The former
CEO’s service contract was valid until further
notice and he was not entitled to a severance
payment. The notice period was three months
for both parties.
Remuneration of the CEO
Remuneration of the CEO paid in 2020 and 2019
€
2020
Heikki Malinen
1)
2020
Roeland Baan
1)
2019
Roeland Baan
Base salary and benefits 487,010 501,510 1,074,495
Short-term incentives
2)
0 276,209 347,782
Long-term incentives
3)
0 0 1,112,203
Share portion – – 711,550
Cash portion – – 400,653
Total remuneration 487,010 777,719 2,534,480
Share of fixed pay of total remuneration 100% 64% 42%
Share of variable pay of total remuneration 0% 36% 58%
1)
Heikki Malinen was appointed as President and CEO as of May 16, 2020 until when Roeland Baan acted as
the CEO.
2)
Paid short-term incentives have been entered in the table on the year when they have been paid. They usually
relate to the performance in the previous year.
3)
Long-term incentives are paid partly in shares and partly in cash, to cover for income taxes and other taxes
arising from the reward. Shares were delivered on the following dates with respective prices: March 20, 2019
(EUR 3.6102 per share) and December 20, 2019 (EUR 2.767 per share).
Remuneration of the CEO not yet paid but due based on the year 2020
€
2020
Heikki Malinen
Short-term incentives
Remuneration due based on the achievement of STI performance measures in 2020 0
Long-term incentives
Number of gross shares due based on the achievement of PSP 2018–2020 performance
measures 0
Remuneration
31 / 31Outokumpu Annual report | Remuneration Report
The CEO’s earning opportunity and performance measures in the short-term incentive plan
Heikki Malinen Roeland Baan
Earning opportunity (% of gross annual base salary) (% of gross annual base salary)
Threshold
0.5% 0.6%
Target 50% 60%
Maximum
100% 120%
Performance measures in 2019 Weight Achievement Payout Weight Achievement Payout
Net debt – – – 40% Partly achieved 62% of the target
Strategic projects – – – 60% Partly achieved 35% of the target
Performance measures in 2020
Weight Achievement Payout
1)
Weight Achievement Payout
Group EBITDA 40% Below threshold 0% of the target – – –
Strategic projects 60% Achieved 0% of the target – – –
1)
If the achievement of the group EBITDA target (as included in the management plan) is below threshold, the total short-term incentive payout is decided by the Board of
Directors. Therefore, the payout for different targets can in such cases be less than their actual achievement.
The CEO’s earning opportunity and performance measures in long-term incentive plans and grants in 2020
Performance Share Plan 2018–2020 Performance Share Plan 2019–2021 Performance Share Plan 2020–2022
Earning opportunity
Threshold
1)
2)
6% 14% 22%
Target
1), 3)
11% 28% 44%
Maximum
1), 4)
22% 56% 67%
Grant
5)
21,500 48,500 130,451
Payout year 2021 2022 2023
Performance measures
Performance criteria
Return on operating capital compared
to a peer group (Q4 2019–Q3 2020)
Return on operating capital compared
to a peer group (Q4 2020–Q3 2021)
Return on operating capital compared
to a peer group (Q4 2021–Q3 2022)
Weight 100% 100% 100%
Achievement Below threshold – no payout Performance period ongoing Performance period ongoing
1)
Expressed in percentage of gross annual base salary at the time of the grant.
2)
The threshold is 50% of target in all PSP periods.
3)
The target of 50% of annual base salary is prorated to time in position during the performance period, i.e. 8/36 for PSP 2018–2020, 20/36 in PSP 2019–2021 and
32/36 in PSP 2020–2022.
4)
The maximum is 200% of target in PSP 2018–2020 and PSP 2019–2021, while 150% of target in PSP 2020–2022.
5)
Number of gross shares at target level. The number of shares was determined using the share price at the time of plan approval, i.e. EUR 4.00 for PSP 2018–2020, EUR
4.50 for PSP 2019–2021 and EUR 2.66 for PSP 2020–2022.
Remuneration
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