Outotec’s Interim Report January-March 2014

Weak Capex order intake and sales, good progress in services

January-March 2014 (comparison period in 2013):

• Order intake: EUR 210.3 (491.1) million, -57% (in comparable currencies -51%)
• Order backlog: EUR 1,215.8 (1,938.9) million, -37%
• Sales: EUR 343.9 (502.9) million, -32% (in comparable currencies -26%)
• Service sales: EUR 107.5 (103.8) million, +4% (in comparable currencies +16%)
• Operating profit from business operations¹⁾: EUR 12.4 (35.0) million, -65%

Financial guidance for 2014 reiterated

Based on the year-end order backlog, current market outlook, customer tendering activity, and volatility in exchange rates, the management expects that in 2014:

• Sales will be approximately EUR 1.5-1.8 billion, and
• Operating profit from business operations¹⁾ will be approximately 5-8%.

¹⁾ excluding one-time items and purchase price allocations (PPA) amortizations

President and CEO Pertti Korhonen:

“Weak investment sentiment in the mining and metals industry continued during the start of the year, resulting in low order intake. Customers continued to focus on brownfield capacity upgrades and modernizations rather than large greenfield projects where typically Engineering, Procurement, and Construction Management (EPCM) companies are employed as the main contractors. Our low level of unannounced orders in the first quarter was largely due to subdued equipment demand of the EPCM channel. As a process technology company, Outotec is addressing this shift in the market dynamics by offering the mining and metals companies solutions that enable them to better leverage their existing assets. The customer traction for this approach is good and we have a strong funnel of larger solution sales cases. However, decision-making takes time, and we continue to see large volatility in the quarterly Capex order intake.

The market for services continued solid, driven by reasonably good production levels in the industry. I am delighted that we were able to grow the service business with our new service concepts, further penetration into our installed base and expanded geographical coverage. Our service order intake was flat in the first quarter, with comparable currencies the growth was 15%. Service sales grew by 4% and with comparable currencies the growth was 16%. Service margins continued to be solid.

The main reasons for the reduced sales in the first quarter of 2014 were the weak Capex order intake in 2013, and devaluation of emerging market currencies. Profitability was weak due to reduced sales and high fixed costs in relation to sales. In addition, three large projects of the Metals, Energy & Water business area had weaker than planned profitability.

Weakened economy in emerging markets, further amplified by significant devaluation of currencies, political instability in some key markets, and concerns about the sustainability of China’s growth, are dragging the market down despite some recovery in US and European economies. We maintain our view that the mining and metals industries’ capital expenditure will continue to contract in 2014, however, we are seeing some early signs that the market may have reached the bottom. Although we have a good number of promising larger sales cases, we have been preparing ourselves for continued market slowness. The EUR 50 million efficiency improvement program is progressing according to plan and as part of that plan, we have also triggered temporary lay-offs as a response to the weak order intake in the beginning of the year. We are prepared to take further actions to adjust our costs in line with possibly continuing weak order intake and subsequent lower sales. In a cyclical industry we need to balance our actions to be well positioned for the eventual upward turn of the cycle.”

CHANGE IN REPORTING OF SERVICE CONTRACTS FROM JANUARY 1, 2014

Outotec’s long-term service contracts, which have production based volume dependent variable portion, are recognized in the order intake with the estimated sales value of the next 12 months. The fixed value contracts are recognized as full value when the order becomes effective. Following the previous recognition principles, the current calendar year’s portion of the long-term service contract was booked once per year into order intake. The change in the reporting principles did not have any material impact in the 2014 first quarter order intake compared to the comparison period.

Outotec provides leading technologies and services for the Sustainable use of Earth’s natural resources. As the global leader in minerals and metals processing technology, we have developed many breakthrough technologies over the decades for our customers in metals and mining industry. We also provide innovative solutions for industrial water treatment, the utilization of alternative energy sources and the chemical industry. With a global network of sales and service centers, research facilities and over 4,800 experts, Outotec generated annual sales of approximately EUR 1.9 billion in 2013. Outotec shares are listed on NASDAQ OMX Helsinki.

www.outotec.com