Interim report January to September 2001

1
Annual General Meeting Dipoli Congress
Centre Espoo, Finland 9.4.2002 Ossi
Virolainen CEO
2
A leading stainless steel producer

• New world-class company with focus on expansion
  in the attractive, fast-growing stainless steel
  market.
• Formed on 22 January 2001 through the merger of
  Avesta Sheffield and Outokumpu Steel.
• Combining a broad product range and extensive
  distribution network with cost-efficient
  integrated production.
• The AvestaPolarit share is listed on the Helsinki
  and Stockholm stock exchanges.
• The company is based in Espoo, Finland and has
  head offices in Espoo and Stockholm.

3
We focus exclusively on stainless steel fastest
growing metal by demand
Index 1980 100

• Stainless steel
• Copper
• OECD industrial
• production
• Aluminium
• Carbon steel

300
CAGR 5.5
250
200
End use segments
150
100
Other
Processindustry
Construction
5
50
10
29
Weldedtubes
0
15
80
82
84
86
88
90
92
94
96
98
00
02
est.
25
16
Transport
Catering andhousehold
Source CRU International
4
The largest stainless steel producers
Melting capacity
Slabs Slabs (million tonnes per year)
2002 2004 Est.

ThyssenKrupp Stainless, Germany 2.21 2.88 Arcelor
1), France 2.50 2.85 AvestaPolarit,
Finland 1.75 2.75 Acerinox 2), Spain
2.50 2.50 POSCO, Korea 1.25 1.70 AK Steel,
USA 1.02 1.03 Yieh United, Taiwan 0.90 0.90 Nipp
on Steel, Japan 0.84 1.20 Allegheny Ludlum,
USA 0.72 0.72
Source CRU International/AvestaPolarit estimates
1) Including Usinor Stainless and ALZ 2)
Including Columbus and NAS
5
Operating with three business areas
Net sales
Special Products
Coil Products

• Ferrochrome
• Hot Rolled Plate
• Long Products
• Tubes
• Fittings
• Precision Strip

• Integrated mills
• Tornio
• Avesta
• Cold rolled
• Sheffield
• Nyby/Kloster

Local manufacturing. Sales and distribution of
AvestaPolarits European products
6
Ownership structure
Total number of shareholders 17 340 (of which in
Finland 1 700 )
7
AvestaPolarit share, HEX
30.1.2001 5.4.2002
EUR
Number of shares
8
Financial Year 2001
9
Main issues in 2001 (1)

• Establishing the Group and post-merger
  integration proceeded well and according to plan.
• The international sales organisations were
  combined by the end of June 2001.
• The ongoing capital expenditure programme in
  Tornio (latest cost estimate EUR 790 million) is
  proceeding to plan, commissioning during second
  half of 2002.
• With these investments, the production structure
  in the company can be simplified. The key change
  is the rationalisation of the melting shop
  structure. According to a decision made last
  autumn, the smallest melting shop in Degerfors
  will be closed and melting activities moved to
  Sheffield, where a continuous casting line for
  billets and blooms will be installed.

10
Main issues in 2001 (2)

• The tubular businesses were reorganized.
• Rationalizations were initiated at the Sheffield
  and Panteg cold rolling mills.
• A project for developing the company organisation
  and leadership processes (Project Forte) was
  started.
• Customers and investors have welcomed the new
  company.
• Total synergies estimated to exceed the
  originally announced EUR 100 million.

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Cold rolled stainless steel prices
(Germany)(EUR/tonne)
Difficult trading environment in 2001

• Stainless steel market weakened significantly.
• European consumption fell by 5 and average
  prices by 20.

Total transaction price
Alloy element
Base price
Source CRU International/AvestaPolarit estimates
12
Financial performance in 2001

• Net sales were down 17 to EUR 2 977 million(EUR
  3 592 m).
• Operating profit totalled EUR 141 million (EUR
  479 m) and pre-tax profit amounted to EUR 131
  million (EUR 460 m).
• Return on capital employed was 7.0 (25.7).
• In these difficult market conditions, the
  financial result for 2001 can be considered as
  satisfactory.
• Capital expenditure amounted to EUR 408
  million(EUR 159 m).
• Financial position remained strong despite of
  increased debt.

13
Key figures - pro forma
EUR million 2001 2000
Net sales 2,977 3,592 Operating
profit 141 479 Profit before extraordinary
items 131 460 Profit for the financial
period 112 342 Earnings per share,
EUR 0.32 0.98 Return on capital employed,
7.0 25.7 Net interest bearing debt at period
end 482 269 Debt-to-equity ratio (gearing)
39.7 22.8 Equity-to-assets ratio 41.6 41.3
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Income statement
Actual Pro forma Pro forma EUR million
2001 2001 2000
Net Sales 2,851 2,977 3,592 Cost of
sales -2,539 -2,660 -2,906 Gross
margin 312 317 686 Selling and marketing
expenses -121 -123 134 Administrative
expenses -91 -92 -101 Research and development
expenses -13 -13 -18 Unusual items - - 42 Other
operating income and expenses 7 7 4 Amortisation
of negative goodwill 45 45 - Operating
profit 139 141 479 Equity earnings in associated
companies -0 -0 2 Financial income and
expenses -10 -10 -21 Profit before extraordinary
items 129 131 460 Extraordinary items - - -
Profit before taxes 129 131 460 Income
taxes -16 -18 -116 Minority interests in
earnings -1 -1 -2 Profit for the financial
period 112 112 342
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Balance sheet
Pro forma
31 Dec 31 Dec EUR million 2001 2000
Fixed assets and other long-term investments Int
angible assets 18 7 Property, plant and
equipment 1,505 1,268 Long-term financial
assets 58 62 1,581 1,337 Current
assets Inventories 664 771 Receivables 572 637 Mar
ketable securities 49 6 Cash and
bank 56 111 1,341 1,525 Total
assets 2,922 2,862 Shareholders
equity 1,206 1,173 Minority interest 8 9 Negative
goodwill 401 479 Long-term liabilities Interest
bearing 203 313 Non interest bearing 285 255 488
568 Current liabilities Interest
bearing 391 126 Non interest bearing 428 507 819
633 Total shareholders equity and
liabilities 2,922 2,862
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Board of Directors proposal for profit
distribution

• The Board of Directors proposes that a
  dividend of EUR 0.08 per share be distributed
  to the companys shareholders.
• The proposed dividend corresponds to 42 of
  the net profit calculated before the
  amortisation of negative goodwill.

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The future - Outlook
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Short term outlook improving

• Global economic development still uncertain,
  although some positive indications witnessed.
• Apparent consumption of stainless steel is
  expected to increase in 2002.
• Since the beginning of 2002 some price
  increases have been realised for Q1-Q2 2002.
• AvestaPolarit expects an improvement in its
  profitability for the first quarter of 2002
  compared with Q4 2001.

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Strong growth is the biggest challenge in the
coming years

• The big investment programme being completed to
  plan
• The Tornio expansion (EUR 790 million)
  commissioning by the end of 2002 and full
  capacity coming on stream gradually in 2002-04.
• Investment programmes totalling EUR 90 million
  at the Avesta, Nyby and Sheffield mills were
  completed during 2001.
• Melting capacities to be rationalized and cold
  rolling mills to specialize on their own product
  areas.
• Simplified production structure increases cost
  efficiency.
• Creating a strong platform for global expansion.

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AvestaPolarit has all the ingredients to
become Best in stainless

• Focus on Coil Products as the main business
  area.
• Value creating growth from Special Products.
• Effective implementation of current investment
  programme to create worlds best manufacturing
  system.
• Create AvestaPolarit culture and ways of
  working.
• Maintain strong financial position and
  attractiveness as an investment.

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Best in