Report

Outokumpu interim report

January-September 2021

Contents
Outokumpu interim report January-September 2021	......................................................................................................... 3
President & CEO Heikki Malinen.........................................................................................................................................	4
Outlook for Q4 2021 ............................................................................................................................................................	4
Results….............................................................................................................................................................................	5
Strategy execution ..............................................................................................................................................................	6
Financial position and cash flow..........................................................................................................................................	6
Market development............................................................................................................................................................	6
Business area Europe .........................................................................................................................................................	7
Business area Americas......................................................................................................................................................	8
Business area Ferrochrome ................................................................................................................................................	9
Business area Long Products ...........................................................................................................................................	10
Sustainability .....................................................................................................................................................................	11
Personnel ..........................................................................................................................................................................	12
Shares… ...........................................................................................................................................................................	12
Risks and uncertainties .....................................................................................................................................................	12
Events after the reporting period .......................................................................................................................................	12
Financial information .........................................................................................................................................................	13

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Outokumpu interim report January-September 2021

Realized prices for stainless steel increased and Q3 adjusted EBITDA rose to EUR 295 million

Highlights in Q3 2021

Highlights in January-September 2021

• Stainless steel deliveries were 575,000 tonnes (488,000 tonnes)1.
• Adjusted EBITDA increased to EUR 295 million (EUR 22 million).
• EBITDA was EUR 295 million (EUR 10 million).
• Operating cash flow amounted to EUR 180 million (EUR 170 million).
• Net debt decreased to EUR 749 million (June 30, 2021: EUR 897 million).
• Gearing decreased to 24.6% (June 30, 2021: 31.9%).

• Stainless steel deliveries were 1,809,000 tonnes (1,599,000 tonnes).
• Adjusted EBITDA amounted to EUR 695 million (EUR 172 million).
• EBITDA was EUR 695 million (EUR 161 million).
• Operating cash flow amounted to EUR 213 million (EUR 210 million).
• Net result was EUR 394 million (EUR -78 million).

Group key figures		Q3/21	Q3/20	Q2/21	Q1-Q3/21	Q1-Q3/20	2020
Sales	EUR million	1,949	1,254	1,873	5,495	4,289	5,639
EBITDA	EUR million	295	10	223	695	161	191
Adjusted EBITDA 1)	EUR million	295	22	223	695	172	250
EBIT	EUR million	234	-51	163	513	-22	-55
Adjusted EBIT 1)	EUR million	234	-39	163	513	-10	4
Result before taxes	EUR million	217	-77	143	461	-93	-151
Net result for the period	EUR million	182	-63	129	394	-78	-116
Earnings per share 2)	EUR	0.40	-0.15	0.30	0.91	-0.19	-0.28
Diluted earnings per share 2)	EUR	0.37	-0.15	0.28	0.84	-0.19	-0.28
Return on capital employed	%	12.9	0.2	5.2	12.9	0.2	-1.4
Net cash generated from operating activities	EUR million	180	170	6	213	210	322
Net debt at the end of period	EUR million	749	1,105	897	749	1,105	1,028
Debt-to-equity ratio at the end of period	%	24.6	45.1	31.9	24.6	45.1	43.6
Capital expenditure 3)	EUR million	32	35	37	115	145	180
Stainless steel deliveries	1,000 tonnes	575	488	626	1,809	1,599	2,121
Personnel at the end of period, full-time equivalent 4)		9,137	9,815	9,088	9,137	9,815	9,602

1. Adjusted EBITDA or EBIT = EBITDA or EBIT - Items classified as adjustments.
2. Calculated based on the share-issue-adjusted weighted average number of shares. Comparative information is presented accordingly.
3. In Q4/2020, Outokumpu changed its capital expenditure definition from accrual-based to cash-based capital expenditure. Comparative information is presented accordingly.
4. In Q1/2021, Outokumpu changed its main personnel amount measure from headcount to full-time equivalent personnel. Comparative information is presented accordingly. On June 30, 2021 the Group employed, in addition, some 690 summer trainees.

1 Figures in parentheses refer to the corresponding period for 2020, unless otherwise stated.

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President & CEO Heikki Malinen

High realized prices and continuous progress on our margin improvement actions supported our profitability in the third quarter. We increased our adjusted EBITDA to EUR 295 million, which is the best quarter in Outokumpu's recent history. Stainless steel deliveries decreased by 8% from the second quarter, which is in line with the expected seasonal pattern.

I am proud that we have achieved EUR 695 million of adjusted EBITDA in the first three quarters of the year. The result is supported by a combination of strong market environment and our own decisive actions in strategy execution.

All business areas provided solid results in the third quarter. In Europe, the remarkable recovery from COVID-19 lows continued. Demand was strong in distributor business, domestic appliances and automotive. Business area Europe's adjusted EBITDA reached EUR 149 million, while deliveries seasonally decreased by 13%. The turnaround in Americas continues to be successful. The business area has improved its performance now for five consecutive quarters, and the adjusted EBITDA reached EUR 84 million in a strong market environment. Deliveries remained flat compared to the second quarter. Ferrochrome operations performed well, contributing EUR 64 million to the Group's adjusted EBITDA. Also, the turnaround in business area Long Product has progressed well.

Sustainability is at the core of our operations, and we are continuously taking steps towards our ambitious Science-Based Targets initiative (SBTi) of 1.5 ºC

Outlook for Q4 2021

Group stainless steel deliveries in the fourth quarter are expected to remain at a similar level compared to the third quarter.

The European ferrochrome benchmark price increased to USD 1.80/lb for the fourth quarter.

emission reduction target. In the third quarter, our energy efficiency was at a good level due to high volumes and development projects. We also announced that we are increasing the share of wind power in our electricity procurement, which is again an important step on our sustainability journey.

In July, the European Commission provided a proposal for the Carbon Border Adjustment Mechanism (CBAM). The proposal currently includes only scope 1 emissions and therefore, it does not create sufficient protection for carbon leakage. For stainless steel, it would be crucial that CBAM is applied to the whole carbon footprint (scope 1, scope 2 and scope 3).

In safety, there has been an unfortunate increase in the total recordable injury frequency rate from the previous quarters' all-time low levels. Actions to get back on track with our best-in-class safety performance have been taken across sites. In terms of the big picture, we have taken a massive leap in safety during the past five years, and it continues to be of the highest priority.

We are well on track with our strategy execution, targeting a EUR 200 million EBITDA run-rate improvement by the end of 2022. We have now reached a cumulative run-rate impact of EUR 163 million. Given the strong momentum, we decided to increase the target by EUR 50 million to EUR 250 million by the end of 2022. So far, over 500 initiatives have been executed across the company and I am very proud of our progress. I want to thank our dedicated employees for making this happen.

Higher stainless steel prices are reflected in the already received orders and compensating the inflationary pressures in energy, consumables and freight in the fourth quarter.

Adjusted EBITDA in the fourth quarter of 2021 is expected to be higher compared to the third quarter.

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Adjusted EBITDA		Q3/20
per business area		Q3/21
	170
million	140
80
EUR	110
50

20 -10

Group adjusted

EBITDA

	320
million	280
160
	240
	200
EUR	120
80
	40
	0

Operating cash flow

million	200
100
	150
EUR	50
	0

Net debt and leverage

billion	2.0		6.0
1.0	3.0
EUR	1.5		4.5
0.5				1.5
	0.0				0.0

Net debt

Net debt to adj. EBITDA

Results

Q3 2021 compared to Q3 2020

Outokumpu's sales increased significantly in the third quarter of 2021 compared to the previous year and amounted to EUR 1,949 million (EUR 1,254 million). In the strong market environment, adjusted EBITDA rose to EUR 295 million (EUR 22 million). Total stainless steel deliveries grew by 18% from the reference period, which was negatively impacted by the global COVID-19 pandemic. Profitability in the third quarter of 2021 was supported by increased realized prices for stainless steel in both Europe and Americas as well as higher ferrochrome sales price. Increased prices, which were driven by the strong COVID-19 rebound, exceptionally long order book and augmented raw material prices, offset the higher energy and consumable prices, which burdened the result. Both fixed and variable costs increased compared to the reference period. Raw material-related inventory and metal derivative gains increased and amounted to EUR 22 million (gains of EUR 3 million). Other operations and intra-group items' adjusted EBITDA was EUR -10 million (EUR -7 million).

Q3 2021 compared to Q2 2021

Outokumpu's sales increased to EUR 1,949 million in the strong market environment in the third quarter of 2021 (Q2/2021: EUR

1,873 million). Total stainless steel deliveries declined by 8%, but adjusted EBITDA increased to EUR 295 million (Q2/2021: EUR 223 million) as the realized prices for stainless steel were at a higher level in both Europe and Americas. Profitability was also positively impacted by the increased ferrochrome sales price. At the Group level, fixed costs were higher and the planned maintenance costs increased from the previous quarter. Maintenance plans in the third quarter were, however, executed effectively, resulting in lower expenditure than planned. Also, significant cost inflation in energy and consumable prices burdened profitability in the third quarter. Raw material-related inventory and metal derivative gains increased from the previous quarter and amounted to EUR 22 million (Q2/2021: gains of EUR 7 million). Other operations and intra-group items' adjusted EBITDA amounted to EUR -10 million (Q2/2021: EUR -19 million).

January-September 2021 compared to January- September 2020

Outokumpu's sales grew significantly and amounted to EUR 5,495 million during the first three quarters of 2021 (EUR 4,289 million). Higher realized prices for stainless steel supported profitability and adjusted EBITDA increased to EUR 695 million (EUR 172 million). Stainless steel deliveries grew by 13% from the reference period, which was negatively impacted by the global COVID-19 pandemic. Overall, costs increased slightly compared to the previous year. Raw material-related inventory and metal derivative gains increased to EUR 70 million (losses of EUR 31 million), mainly due to positive timing impacts. Other operations and intra-group items' adjusted EBITDA amounted to EUR -37 million (EUR -19 million).

EBIT increased to EUR 513 million (EUR -22 million) and net result to EUR 394 million (EUR -78 million).

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