1 PONSSE PLC, STOCK EXCHANGE RELEASE, 26 OCTOBER 2010, 9:00 a.m. PONSSE S INTERIM REPORT FOR 1 JANUARY 30 SEPTEMBER Net sales were EUR (Q1-Q3/2009 EUR 98.9) million. - Q3 net sales were EUR 54.7 (Q3/2009 EUR 28.9) million. - Operating result was EUR 15.3 (Q1-Q3/2009 EUR 15.0) million, which was equal to 8.9 ( 15.2) percent of net sales. Operating result of the period under review includes a non-recurring item of EUR 0.9 million. - Q3 operating result was EUR 5.4 (Q3/2009 EUR 2.4) million. Operating result of the period under review includes a non-recurring item of EUR 0.9 million. - Result before taxes was EUR 16.7 (Q1-Q3/2009 EUR 15.4) million. - Cash flow from business operations was positive EUR 14.4 (Q1- Q3/2009 EUR 4.4) million. - Earnings per share were EUR 0.59 (Q1-Q3/2009 EUR -0.65). - Equity ratio was 42.9 (46.0) percent. - Order books totalled EUR 77.4 (19.6) million. PRESIDENT AND CEO JUHO NUMMELA: During the third quarter of 2010, the demand for forest machines continued to be steady and good. In spite of the holiday season, the company s order intake developed strongly and at the end of the period under review, the order books totalled EUR 77.4 million (EUR 19.6 million). Of the market areas, Finland, Sweden, Russia and Central Europe maintained a strong flow of incoming orders. North America remains challenging. During the past quarter, the company s net sales increased by 89 percent compared to the corresponding period and amounted to EUR 54.7 (28.9) million. During the period under review, the company s net sales increased by 74 percent. Net sales of the service and information system businesses continued their strong growth. The company s customers had plenty of work even during the holiday season, which affected the growth of net sales in the service business. Operating result for the third quarter was EUR 5.4 (-2.4) million and EUR 15.3 (-15.0) million for the period under review. Operating costs (staff costs, depreciations and other operating expenses) were kept under control during the period under review and only increased by 13 percent.
2 During the period under review, cash flow from business operations was positive at EUR 14.4 (4.4) million. The increase in working capital from the beginning of the period under review is mainly due to an increase in spare parts inventories and current trade receivables. However, the turnover rate of raw materials and consumables has developed quicker than the absolute value of these inventories. The good demand for used machines has kept the stock of used machines at a moderate level. The assembly line of the company s Vieremä factory operated in one shift during the period under review. The new eight-wheeled harvesters have been well received by customers. During the period under review, the eight-wheeled harvesters represented a significant part of all harvesters manufactured. NET SALES Consolidated net sales for the period under review amounted to EUR (98.9) million, which is 74 percent more than in the comparison period. International business operations accounted for 68.7 (70.6) percent of total net sales. Net sales were regionally divided as follows: Nordic countries 49.3 (49.2) percent, the rest of Europe 28.3 (28.1) percent, North and South America 20.5 (19.7) percent and other countries 1.9 (3.0) percent. PROFIT PERFORMANCE Operating result was EUR 15.3 (-15.0) million. Operating result equalled 8.9 (-15.2) percent of net sales in the period under review. During the period under review, inventories valued at EUR 0.9 million, related to obsolete product models included in North and South America s inventories, were recorded as a non-recurring expense. Return on capital employed (ROCE) stood at 20.9 (-13.6) percent. Staff costs for the period under review totalled EUR 26.6 (23.7) million and other operating expenses EUR 18.8 (15.8) million. The net total of financial income and expenses was EUR 1.7 (-0.3) million. Exchange rate gains and losses with a net effect of EUR 2.5 (1.2) million during the period under review were entered under financial items. As a result of the company s approved correction request regarding income taxes, the taxes for the period under review were EUR 1.1 (-1.9) million. Net result for the period under review totalled EUR 17.8 (-17.4) million. Diluted and undiluted earnings per share (EPS) were EUR 0.59 (-0.65). The interim report was adjusted retrospectively in compliance with IAS 8. The interest on a hybrid loan must be taken into account in EPS, irrespective of whether a decision has been taken regarding the
3 distribution of dividends. The key indicators were adjusted for the hybrid loan interest payments, and the indicators are shown under Adjustments associated with the accounting treatment of the hybrid loan. STATEMENT OF FINANCIAL POSITION AND FINANCING ACTIVITIES At the end of the period under review, the total of consolidated statements of financial position amounted to EUR (148.0) million. Inventories totalled EUR 78.5 (73.8) million. Trade receivables totalled EUR 27.8 (18.9) million and liquid assets stood at EUR 12.1 (10.3) million. Group shareholders equity amounted to EUR 69.9 (67.8) million, and the parent company s equity was EUR 55.0 (51.2) million. Equity includes the hybrid loan of EUR 19 million issued on 31 March The interim report was adjusted retrospectively in compliance with IAS 8. The interest on hybrid loans must be recorded directly in equity when the liability to pay interest was created, i.e. in conjunction with the decision regarding the distribution of dividends. Consequently, the retained earnings at the end of 2009 were adjusted by EUR 2.0 million. The interest paid for the hybrid loan and the interest payment liability resulting from the decision to pay dividends, totalling EUR 4.5 million, were entered as a decrease in Group equity. The amount of interest-bearing liabilities was EUR 49.9 (54.2) million. The company has used 30 percent of its credit limits. The parent company's net receivables from other Group companies stood at EUR 66.7 (55.3) million. The parent company s receivables from subsidiaries mainly consisted of trade receivables. The Group had net liabilities amounting to EUR 35.2 (43.2) million, and the debt-equity ratio (gearing) was 71.5 (79.9) percent. The equity ratio stood at 42.9 (46.0) percent at the end of the period under review. Cash flow from business operations was EUR 14.4 (4.4) million. Cash flow from investing activities amounted to EUR -2.4 (-1.0) million. ORDER INTAKE AND ORDER BOOKS Order intake for the period under review totalled EUR (95.1) million, and period-end order books stood at EUR 77.4 (19.6) million. The minimum purchase commitments of dealers are not included in the order book total. The figures for the comparison period were adjusted in this respect. DISTRIBUTION NETWORK No changes took place in the Group structure during the period under review. The subsidiaries included in the Ponsse Group are Epec Oy, Finland; OOO Ponsse, Russia; Ponsse AB, Sweden; Ponsse AS, Norway; Ponsse Asia-Pacific Ltd, Hong Kong; Ponsse China Ltd, China; Ponsse Latin
4 America Ltda, Brazil; Ponsse North America, Inc., USA; Ponssé S.A.S., France; Ponsse UK Ltd, the United Kingdom; and Ponsse Uruguay S.A., Uruguay. Sunit Oy, based in Kajaani, Finland, is an affiliated company in which Ponsse Plc has a holding of 34 percent. R&D AND CAPITAL EXPENDITURE During the period under review, the Group s R&D expenses totalled EUR 4.1 (3.5) million, of which EUR 1.1 (0.7) million was capitalised. Capital expenditure amounted to EUR 2.4 (1.0) million. It mainly consisted of ordinary maintenance and replacement investments of machinery and equipment. MANAGEMENT Timo Karppinen (46), (M.Soc.Sc.), was appointed on 18 October 2010 as Ponsse Plc s Executive Director, Corporate Development and Strategy as of 1 January PERSONNEL The Group had an average staff of 813 (882) during the period and it employed 846 (803) people at the end of the period. SHARE PERFORMANCE The company s registered share capital consists of 28,000,000 shares. The trading volume of Ponsse Plc shares for 1 January - 30 September 2010 totalled 2,927,838, accounting for 10.5 percent of the total number of shares. Share turnover came to EUR 25.9 million, with the period s lowest and highest share prices amounting to EUR 6.63 and EUR 12.15, respectively. At the end of the period, shares closed at EUR 10.87, and market capitalisation totalled EUR million. At the end of the reporting period the company held 212,900 treasury shares. ANNUAL GENERAL MEETING A separate release was issued on 31 March 2010 regarding the authorizations given to the Board of Directors and other resolutions at the AGM. GOVERNANCE
5 In its decision-making and administration, the company observes the Finnish Companies Act, other regulations governing publicly listed companies and the company s Articles of Association. The company s Board of Directors has adopted this Code of Governance that complies with the Finnish Corporate Governance Code approved by the Board of the Securities Market Association in The purpose of the code is to ensure that the company is professionally managed and that its business principles and practices are of a high ethical and professional standard. The Code of Governance is available on Ponsse s website in the Investors section. SHORT-TERM RISKS AND THEIR MANAGEMENT As the utilisation rate of capacity increases, the risk related to the availability of parts and components also increases. The availability of certain types of components has deteriorated, and there are upward pressures in raw material prices. The company seeks to manage these risks through cooperation with business partners. The financial standing of suppliers is regularly and constantly monitored. The company surveys the availability of alternative suppliers to mitigate the potential availability and price risks. The parent company monitors the changes in Group receivables and the associated risk of impairment. The key objective of the company s financial risk management is to manage liquidity, interest and currency risks. The company ensures its liquidity with credit limit facilities agreed with different financial institutions. The company s financial liabilities are guaranteed by covenants. The most important covenant associated with the bank loans taken by the Group is its equity ratio. The terms and conditions of covenants were met at the end of the period under review. The effect of adverse changes in interest rates is minimized by utilizing credits linked to a different reference and by concluding interest swaps. The negative effects of currency rate fluctuations are mitigated by derivative contracts. The changes taking place in the fiscal and customs legislation of countries to which Ponsse exports may hamper the company s export trade or its profitability. OUTLOOK FOR THE FUTURE In 2010, the forest machine markets will improve more than expected from the previous year. Net sales of the service and information system businesses are expected to have strong growth during the last quarter. Factory capacity will be increased during the second half of the year to respond to the growing demand. During the last quarter, the
6 company will start to work in two shifts as it increases its capacity. The recruitment required for increasing capacity will be completed during the last quarter of the year. Net sales for 2010 will be considerably higher than in the previous year. Operating result and cash flow from business operations will both be clearly positive.
7 PONSSE GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR 1,000) IFRS IFRS IFRS 1-9/10 1-9/ /09 NET SALES 171,819 98, ,705 Increase (+)/decrease (-) in inventories of finished goods and work in progress 6,561-4,605-8,321 Other operating income ,154 Raw materials and services -114,572-66,869-95,982 Expenditure on employment-related benefits -26,638-23,684-31,968 Depreciation and amortisation -3,806-3,951-5,244 Other operating expenses -18,790-15,777-22,087 OPERATING RESULT 15,252-15,027-15,744 Share of results of associated companies Financial income and expenses 1, RESULT BEFORE TAXES 16,738-15,407-15,550 Income taxes 1,052-1,945-4,700 NET RESULT FOR THE PERIOD 17,790-17,352-20,251 OTHER ITEMS INCLUDED IN TOTAL COMPREHENSIVE RESULT: Translation differences related to foreign units TOTAL COMPREHENSIVE RESULT FOR THE PERIOD 17,136-16,902-20,307 Diluted and undiluted earnings per share (* IFRS IFRS 7-9/10 7-9/09 NET SALES 54,705 28,903 Increase (+)/decrease (-) in inventories of finished goods and work in progress 2, Other operating income Raw materials and services -35,530-18,173 Expenditure on employment-related benefits -8,328-5,968 Depreciation and amortisation -1,277-1,319 Other operating expenses -6,500-4,879 OPERATING RESULT 5,443-2,365 Share of results of associated companies Financial income and expenses -3, RESULT BEFORE TAXES 1,870-2,754 Income taxes
8 NET RESULT FOR THE PERIOD 1,260-2,904 OTHER ITEMS INCLUDED IN TOTAL COMPREHENSIVE RESULT: Translation differences related to foreign units 687 1,104 TOTAL COMPREHENSIVE RESULT FOR THE PERIOD 1,947-1,800 Diluted and undiluted earnings per share (* (* The interest on the subordinated loan for the period, less tax, was taken into account in this figure. ADJUSTMENT ASSOCIATED WITH THE ACCOUNTING TREATMENT OF HYBRID LOANS The interim report was adjusted retrospectively in compliance with IAS 8. In 2009, the Group recorded the interest paid for the hybrid loan as a decrease of equity. The interest on hybrid loans must be recorded directly in equity when the liability to pay interest was created. The liability is created in conjunction with the decision regarding the distribution of dividends. This adjustment affected equity by EUR -2.0 million. The effects on equity reserves are shown on the statement of changes in equity. The interest on a hybrid loan must be taken into account in EPS, irrespective of whether a decision has been taken regarding the distribution of dividends. The company s financial indicators were adjusted for the hybrid loan interest, and the table below shows the effect of the adjustment on the EPS for each of the reported periods. Undiluted earnings and earnings adjusted for dilution per share IFRS IFRS IFRS 1-9/ / /09 Previously reported Adjustment Adjusted earnings per share Undiluted earnings and earnings adjusted for dilution per share IFRS IFRS IFRS 1-3/10 1-6/10 4-6/10 Previously reported Adjustment Adjusted earnings per share
9 CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR 1,000) IFRS IFRS ASSETS NON-CURRENT ASSETS Intangible assets 6,229 5,287 Goodwill 3,440 3,440 Property, plant and equipment 23,669 25,374 Financial assets Holdings in associated companies 1,389 1,790 Non-current receivables 4,030 3,299 Deferred tax assets 2,302 1,774 TOTAL NON-CURRENT ASSETS 41,168 41,074 CURRENT ASSETS Inventories 78,541 67,920 Trade receivables 27,798 21,409 Income tax receivables 1, Other current receivables 4,578 3,508 Cash and cash equivalents 12,147 10,626 TOTAL CURRENT ASSETS 124, ,707 TOTAL ASSETS 165, ,781 SHAREHOLDERS EQUITY AND LIABILITIES SHAREHOLDERS EQUITY Share capital 7,000 7,000 Share premium and other reserves 19,030 19,030 Translation differences Treasury shares -2, Retained earnings 46,848 34,329 EQUITY OWNED BY PARENT COMPANY SHAREHOLDERS 69,868 59,566 NON-CURRENT LIABILITIES Interest-bearing liabilities 24,452 23,973 Deferred tax liabilities Other non-current liabilities TOTAL NON-CURRENT LIABILITIES 25,116 25,026 CURRENT LIABILITIES Interest-bearing liabilities 25,493 27,939 Provisions 4,100 4,935 Tax liabilities for the period Trade creditors and other current liabilities 40,480 27,278 TOTAL CURRENT LIABILITIES 70,518 60,189 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 165, ,781
10 CONSOLIDATED STATEMENT OF CASH FLOWS (EUR 1,000) IFRS IFRS 1-9/10 1-9/09 CASH FLOW FROM BUSINESS OPERATIONS: Net result for the period 18,010-17,352 Adjustments: Financial income and expenses -1, Share of the result of associated companies Depreciation and amortisation 3,806 3,951 Income taxes Other adjustments 4 2,363 Cash flow before changes in working capital 19,746-10,412 Change in working capital: Change in non-interest-bearing receivables -8,122 5,452 Change in inventories -11,519 14,477 Change in non-interest-bearing liabilities 13,263-8,040 Change in provisions for liabilities and charges Interest received Interest paid ,558 Other financial items 2,342 1,183 Income taxes paid -31 3,752 NET CASH FLOW FROM BUSINESS OPERATIONS (A) 14,411 4,403 CASH FLOW FROM INVESTMENTS Investments in tangible and intangible assets -2,437-1,044 Investments in other assets 0 0 Repayment of loan receivables 0 0 Dividends received 0 0 CASH OUTFLOW FROM INVESTMENT ACTIVITIES (B) -2,437-1,044 FINANCING Acquisition of treasury shares -1,564 0 Hybrid loan 0 19,000 Interest paid, hybrid loan -2,280-1,143 Withdrawal/repayment of current loans -1,940-28,502 Changes in current interestbearing receivables Withdrawal/repayment of noncurrent loans 96 10,099 Payment of finance lease liabilities Change in non-current receivables Dividends paid -4,193 0 NET CASH OUTFLOW FROM FINANCING (C) -10,454-1,183 Change in cash and cash equivalents (A+B+C) 1,521 2,176
11 Cash and cash equivalents on 1 January 10,626 8,095 Cash and cash equivalents on 30 September 12,147 10,270
12 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR 1,000) A = Share Capital B = Share premium and other reserves C = Translation differences D = Treasury shares E = Retained earnings F = Total shareholders equity EQUITY OWNED BY PARENT COMPANY SHAREHOLDERS A B C D E F SHAREHOLDERS EQUITY 1 JAN ,000 19, ,375 61,612 Adjustment for previous periods regarding the hybrid loan -2,046-2,046 SHAREHOLDERS EQUITY 1 JAN ,000 19, ,329 59,566 Direct entries to retained earnings *) -1,078-1,078 Dividend distribution -4,193-4,193 Purchase of the treasury shares -1,563-1,563 Other changes Total comprehensive income for the period ,790 17,136 SHAREHOLDERS' EQUITY 30 SEP ,000 19, ,228 46,848 69,868 SHAREHOLDERS' EQUITY 1 JAN , ,830 67,113 Direct entries to retained earnings *) -1,409-1,409 Dividend distribution Purchase of the treasury shares Other changes 19,010 19,010 Total comprehensive income for the period ,352-16,902 SHAREHOLDERS' EQUITY 30 SEP ,000 19, ,069 67,812 *) Consists of the interest paid for the hybrid loan classified as equity LEASING COMMITMENTS (EUR 1,000) 5,224 8,468 6, CONTINGENT LIABILITIES (EUR 1,000) Guarantees given on behalf of others 684 1, Repurchase commitments 3,280 4,602 4,111 Other commitments 1,964 1,969 2,080 TOTAL 5,928 7,580 7,142
13 3. PROVISIONS (EUR 1,000) Guarantee provision ,935 Provisions added 467 Provisions cancelled -1, ,100 KEY FIGURES AND RATIOS R&D expenditure, MEUR Capital expenditure, MEUR as % of net sales Average number of employees Order books, MEUR Equity ratio, % Diluted and undiluted earnings per share (EUR) Equity per share (EUR) FORMULAE FOR FINANCIAL INDICATORS Average number of employees: Average of the number of personnel at the end of each month. The calculation has been adjusted for part-time employees. Equity ratio, %: Shareholders equity + Non-controlling interests Balance sheet total - advance payments received * 100 Earnings per share: Net income for the period Non-controlling interests - Interest on hybrid loan for the period less tax Average number of shares during the accounting period, adjusted for share issues Equity per share: Shareholders equity Number of shares on the balance sheet date, adjusted for share issues ORDER INTAKE, MEUR 1-9/10 1-9/ /09 Ponsse Group The interim report has been prepared observing the recognition and valuation principles of IFRS standards, but not all of the requirements of IAS 34, Interim Financial Reporting, have been complied with. The same accounting principles were observed for the interim report as for the annual financial statements dated 31 December 2009, with the exception, however, that the following new standards, interpretations and amendments adopted by the EU were introduced from 1 January 2010: IFRS 3 (revised) Business Combinations; IAS 27 (revised) Consolidated and Separate Financial Statements; IFRIC 12 Service Concession Arrangements; IFRIC 15 Agreements for the Construction of Real Estate; IFRIC 16 Hedges of a Net
14 Investment in a Foreign Operation; IFRIC 17 Distributions of Non-cash Assets to Owners; IFRIC 18 Transfers of Assets from Customers; IFRIC 9 and IAS 39 (amendment) Reassessment of Embedded Derivatives in Conjunction with Reclassification; IAS 39 (amendment) Eligible Hedged Items and IFRS 2 (amendment) Share-Base Payments Group Cash-settled Share-based Payment Arrangements. These new standards, interpretations and amendments have no impact on the Group s interim report. In April 2009, IASB published improvements to 12 standards as part of its annual improvements programme. The Group has adopted the following most salient improvements from 1 January 2010: IFRS 8 (amendment) Operating Segments; IAS 17 (amendment) Leases and IAS 36 (amendment) Impairment of Assets, but these improvements have no impact on the Group s interim report. The above figures have not been audited. The above figures have been rounded off and may therefore differ from those given in the official financial statements. This communication includes future-oriented statements that are based on the assumptions currently known by the company s management and its current decisions and plans. Although the management believes that the future expectations are well founded, there is no certainty that these expectations will prove to be correct. This is why the results may significantly deviate from the assumptions included in the future-oriented statements as a result of, among other things, changes in the economy, markets, competitive conditions, legislation or currency exchange rates. Vieremä, 26 October 2010 PONSSE PLC Juho Nummela President and CEO FURTHER INFORMATION Juho Nummela, President and CEO, tel or Petri Härkönen, CFO, tel or DISTRIBUTION NASDAQ OMX Helsinki Ltd Principal media Ponsse Plc is a company specialising in the sales, manufacture, servicing and technology of cut-to-length method forest machines and is driven by genuine interest in its customers and their business. Ponsse develops and manufactures sustainable and innovative harvesting solutions based on customers needs. The company was established by forest machine entrepreneur Einari Vidgrén in 1970, and it has been a leader in timber harvesting solutions based on the cutto-length method ever since. Ponsse is headquartered in Vieremä, Finland. The company s shares are quoted on the NASDAQ OMX Nordic List. At the moment, the Ponsse Group does business in approximately 40 countries.