Rautaruukki is to accelerate its step change into a company specialising in steel construction and special steels and is to reorganise its structure. In addition to the efficiency programmes initiated last year to improve cost competitiveness and potential for profitable growth, focus within the company's largest business area, Ruukki Metals, is shifting increasingly more clearly to special steels. The other business area, Ruukki Construction, is to divide into two new business areas, Ruukki Building Products and Ruukki Building Systems. The aim of this is to improve profitability and growth, as well as to improve manageability, the transformation pace and transparency.
Ruukki is aiming to significantly improve the company's cost competitiveness and to strengthen the potential for profitable growth in all its business areas. This is why, last year, Ruukki initiated an efficiency programme aimed at cost benefits totalling EUR 100 million. Projects under the programme have progressed as expected and it is currently estimated that that the improvement in earnings performance pursued will be visible in full from the third quarter of this year onwards.
"The decisions we have now made are a response to strengthen the company's performance and especially to the overcapacity prevailing in the standard steel business in Europe. This overcapacity weakens the profitability of operations and forces companies to seek new business models and business opportunities. Within our construction business, we have many segments with excellent potential for profitable growth also in the future. On the other hand, we also have a clear need to significantly improve the profitability of certain parts of the business and to simplify business models. The specialisation strategy within our steel business has proven effective and successful. During the first quarter of the year, special steel products accounted for 32 per cent of net sales in our steel business. We are now accelerating our transformation and focusing strongly on special steels, building products and energy-efficient solutions with the aim of being a leading niche actor in these sectors," outlines Sakari Tamminen, Ruukki's President & CEO.
Standard steels business being more strongly turned into a special steels business
Ruukki's specialisation in the steel business has proven successful. Profitability of special steels is clearly higher than that of standard products and price fluctuations are smaller. In recent years Ruukki has built a platform for specialisation and now has a good market position and strong special steel brands such as Raex, Optim, Laser and Ramor. Success in the present business environment calls for increasingly advanced and faster specialisation. Ruukki's size and flexibility make this possible.
During the course of 2013, the weaker performing standard steel business will increasingly strongly be turned into a special steels business consisting of high-strength, wear-resistant and special-coated steels. In addition, the company will also accelerate global sales of special steels. This means expanding and diversifying distribution, significantly strengthening the sales organisation through transfers and recruiting new resources, and by establishing a presence, during the current year, in many new markets such as Vietnam, Indonesia and Mexico. Success on this front requires a strong focus on narrow niche sectors within the limits of which the emphasis is strongly on identifying new customers and applications. Our future focus will increasingly be on new applications and markets such as, for example, sales of Optim high-strength steels to the construction industry, speeding up in general the approval process and launch of new products and intensifying important OEM customer relationships. As regards standard products, we will concentrate on restoring the soundness of our product portfolio. The underperforming part will be downsized, whereas the share of special steels will grow and production capacity will be aligned to achieve a more effective utilisation rate.
Construction business to be divided into growth areas and businesses for improvement
Ruukki Construction is to be split into two business areas, Ruukki Building Products and Ruukki Building Systems. The aim of this is to improve profitability and growth, as well as to improve manageability, the transformation pace and transparency by separating profitably growing business areas from businesses which have clear need for profitability improvement.
Ruukki Building Products consists of roofing, sandwich panel, foundation and infrastructure products, including services. The profitability of these sections is at a satisfactory or good level and they show excellent potential for profitable growth also in the future. Growth in market share of roofing products will be pursued especially in Russia, Poland and the Nordic countries by, among other things, strengthening our own distribution and partnership network, expanding installation and by speeding up the launch of new products and services onto the market. Our most recent launch was Ruukki Classic Solar thermal roof, which utilises solar heat. The company will strengthen sales of sandwich panels, especially energy panels, and piles in the Nordic countries, actively pursue new markets and focus on developing and the rapid commercialisation of new, energy-efficient products that utilise renewable energy sources.
Ruukki Building Systems consists of the building project business, operations in Russia and the new energy-efficient and functional buildings development unit. The project business will be turned around to make it profitable during 2013 and the company will withdraw from bridge projects. Use of the entire production capacity will be optimised to restore competitiveness and profitability. Construction in Russia offers significant potential for profitable growth, especially within commercial construction and agriculture. Work in Russia will continue on developing sales and the product portfolio driven customer needs. The new unit developing energy-efficient and functional commercial buildings aims to create a foundation for future growth by integrating the best of Ruukki's products and know-how.
Corporate Executive Board appointments in conjunction with restructuring
Olavi Huhtala will remain EVP, Ruukki Metals and continue being a member of the Corporate Executive Board.
Marko Somerma, who is currently Chief Strategy Officer, has been appointed EVP, Ruukki Building Products with effect from 1 May 2013. Tommi Matomäki, who is currently EVP, Ruukki Construction, has been appointed EVP, Ruukki Building Systems. Toni Hemminki, who is currently SVP, Technology, Energy and Environment, has been appointed Chief Strategy Officer and will retain his existing responsibilities. The above persons will all continue being members of the Corporate Executive Board.