UPDATE 2-Outokumpu to cut one in six jobs

Thu Oct 20, 2011 5:11am EDT

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* To cut up to 1,300 jobs, 16 pct of staff

* Q3 operating loss 15 mln euros vs market view 47.7 mln

* Sees significant Q4 EBIT loss

* Shares up 7.5 pct (Adds share reaction, analyst comment)

HELSINKI, Oct 20 (Reuters) - Outokumpu said it expected to report a significant operating loss in its final quarter as weak demand and prices continued to hit margins forcing the stainless steel maker to cut up to 1,300 jobs in an effort to reduce costs.

The Finnish company said it would cut up to one in six jobs across its business units to reduce annual costs by 100 million euros ($138 million) by the end of 2012.

Outokumpu was hard hit by the global downturn as customers halted major investment projects, and it has not seen demand fully recover.

"Following the summer period, global economic uncertainty and lower metal prices weakened underlying demand for stainless steel. Distributors are hesitant about placing orders," the company said in a statement.

Outokumpu said its fourth-quarter operating loss would be significant due to lower delivery volume, lower average base prices and the declining value of raw material inventories.

July-September operating loss, excluding raw material-related inventory losses and one-offs, was 15 million euros, near the top of analysts' forecasts which had an average of 47.7 million.

The company also announced its deputy CEO Karri Kaitue's departure. Former chief executive Juha Rantanen was replaced by Mika Seitovirta on April.

Shares in the company, down about 60 percent since the beginning of the year, traded 7.5 percent higher at 5.51 euros by 0907 GMT.

Swedbank analyst Erkki Vesola saw few positives in the company's update.

"Distributors' stocks are low, so to me the outlook that they gave for fourth quarter shows the underlying demand must be very weak," said Vesola.

"But these cost cuts are no doubt necessary for them. Another good point was that their gearing went down due to good cash flow." ($1=0.725 euros) (Reporting by Tarmo Virki, Jussi Rosendahl; Editing by David Hulmes and Mike Nesbit)

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