1 (11) INTERIM REPORT JANUARY 1 MARCH 31, 2003 A POSITIVE TURN IN THE RESULT DEVELOPMENT OF THE OKMETIC GROUP The Group s net sales for three months totalled 13.4 million euro (1Q2002: 14.9 million euro). The operating loss was -1.4 million euro (-1.0 million euro). In any case, the operating loss decreased considerably in comparison to the last quarter of the year 2002 when the net sales were at the level of the period under review, but the operating loss was -3.9 million euro. The competion continued to be tense. INTERIM REPORT IN BRIEF The demand for silicon wafers started to improve slowly at the end of 2002, and the trend continued during the period under review. The industry's price level decreased. The order book of the Okmetic Group increased. The net sales for the period under review amounted to 13.4 million euro (14.9 million euro), which means that it was at the level of the last quarter of 2002 as expected. The operating loss was -1.4 million euro (-1.0 million euro). Profitability, nevertheless, increased significantly in comparison to the previous quarter. The equity ratio of the Group was 57.3% at the end of the period under review (65.1%). Projections for the near future are uncertain. However, the net sales of the Group are expected to increase and the unprofitable result to improve towards the end of the year. The Annual General Meeting that was held on 27th March 2003 confirmed the Financial Statements of both Okmetic Oyj and the Group. No dividends shall be distributed for The Annual General Meeting decided, in accordance with the proposal of the Board of Directors, to authorise the Board to increase the share capital. MARKET SITUATION The market situation in the semiconductor industry remained challenging during the first quarter. The events and news that contributed to the uncertainty of the global markets were clearly reflected in the semiconductor industry and the demand that had been increasing since the previous year, turned back towards decline. The global sales of semiconductor components between January and March remained 3.2% lower than those of the last quarter of the previous year (SIA, Semiconductor Industry Association). Compared to the first quarter of the previous year, invoicing for the semiconductor industry increased by 13%. Despite the decrease in semiconductor sales, the volume of silicon wafer sales in the first quarter increased by 3.7% in comparison to the corresponding figure of the last quarter of the previous year. The majority of growth originated from the types of wafers that are used in high-volume products (SEMI, Semiconductor Equipment and Materials International). The market share of Okmetic remained strong in its chosen strategic market areas.
2 (11) NET SALES The net sales of the Okmetic Group remained at the expected level, i.e million euro (14.9 million euro). The price level of Okmetic s products decreased in comparison to the previous year, in accordance with the decrease in the industry price level. Sales by product groups developed in accordance with the strategy of the company and the market share of special products (MEMS, POWER) increased. 1Q2003 (average 2002) ICprime 39% (47%) MEMS 29% (25%) POWER 32% (28%) The order book of the Group increased during the period under review. RESULT The operating loss of the Group was -1.4 million euro (-1.0 million euro). The operating loss was 10.5% of net sales (6.9%). The slightly better result of the previous year was a consequence of the good market situation of the spring Towards the end of the year the market situation changed to worse. Nevertheless, the result development of Okmetic took a positive turn in the first quarter of The operating loss decreased significantly in comparison to the last quarter of 2002, when the net sales were at the level of the period under review, but the operating loss was million euro, 30% of the net sales. All plants achieved better results in accordance with the objectives. The positive development is a result of the increase in the deliveries concerning special product groups as well as the decreases in number of personnel and material expenses. FINANCING AND EQUITY RATIO The financing situation of the Group remained sound. Cash flow from operating activities was 0.1 million euro for the period under review. The cash flow of the quarter was primarily weakened by the increase in sales receivables that exceeded the decrease in inventories, which took place at the end of the period. Liquid assets amounted to 3.4 million euro at the end of March. The dollardenominated currency forward agreements that are in place to hedge sales are spread for the term of a little over one year. The equity ratio of the Group was 57.3% at the end of March and shareholder s equity per share was 4.50 euro. PRODUCT DEVELOPMENT, INVESTMENTS AND DEVELOPMENT PROGRAMME The Group continued to concentrate strongly on the development of new products. Investments on product development activities contributed to a 6.2% (6.8%) share of net sales. The most important products from the point of view of product development are currently the SiC- (silicon carbide) and SOI-products.
3 (11) The extensive investment programme that contributed to the diversification and increase in production capacity was completed in The 0.8 million euro of investments for the period under review are a consequence of the final stages of the programme. A development programme aiming to expand the customer base and to intensify marketing was launched in the Group. The programme will also contribute to the improvement of productivity and the increase of flexibility in operating processes and organisation, in order to respond to the changing market situations that are typical to the industry. PERSONNEL The number of personnel at the end of the period was 477 (562). The number of personnel has been continuously adjusted to meet the current market situation. During the summer, the number of personnel will increase due to the summer holiday substitutes. The production organisation was renewed in the Group at the beginning of the year and since then, the combined production of all plants has been the responsibility of one Production Manager. STOCK EXCHANGE QUOTATION AND TRADING During the period between 1st January and 31st March 2003 a total of 1.1 million shares were traded, which corresponds to 6.5 per cent of the total of 16.9 million shares. The price of a share has been on a slight increase during the last month, following the general movements of stock quotations. The lowest quotation for the period was 1.45 euro and the highest 2.57 euro per share, which gives an average for the period of 1.77 euro. The closing quotation was 1.75 euro. The market value of the entire share capital was 29.6 million euro. THE DECISIONS OF OKMETIC OYJ S ANNUAL GENERAL MEETING Okmetic Oyj s Annual General Meeting that was held on 27th March 2003 adopted the Financial Statements of both Okmetic Oyj and the Group and discharged the members of the Board of Directors and the President from personal liability. No dividends shall be distributed for The members of the Board of Directors until the end of the next Annual General Meeting are as follows: Mr Mikko J. Aro; Heikki Huomo, Director of Nokia Ventures Organisation; Juho Mäkinen, Executive Vice President, Technology, of Outokumpu Oyj; Pekka Paasikivi, Chairman of the Board of Directors of Oras Oy; Pekka Salmi, Director of SITRA, the Finnish National Fund for Research and Development. Esa Lager, Executive Vice President - Finance and Administration, was elected as a new member of the Board. The Board of Directors elected Mikko J. Aro as its Chairman and Juho Mäkinen as its Vice Chairman in its organization meeting that was held immediately after the Annual General Meeting. SVH PricewaterhouseCoopers Oy, Authorised Public Accountants, were appointed auditors. The Annual General Meeting accepted the proposal of the Board of Directors for authorising the Board to increase the share capital (APPENDIX 1).
4 (11) PROJECTIONS FOR THE NEAR FUTURE The uncertainty in the markets continues, and competion is still fierce. Demand is expected to recover slowly. The net sales of Okmetic for the entire year are expected to remain at the level of the previous year. The decrease in operating loss that began during the first quarter continues, but the operating result for the entire year is expected to be modest. The result estimates will improve if the demand for semiconductors increases significantly. Cash flow from operating activities is expected to be positive. Slow growth is expected in the semiconductor industry in the months to come. The latest estimates for annual growth are at approximately 10%. The increase from the previous year in the capacity utilisation rate of the industry at last provides opportunities for the increase in semiconductor prices. The growth of sensor manufacturing for the automobile industry is estimated to be stronger than the growth of the traditional semiconductor industry. Strong growth is estimated in the semiconductor industry in the year 2004 (Gartner Dataquest, IC Insights, and SIA). In terms of area, the volume of wafer deliveries is expected to increase by 5-10% this year. When it comes to the special products of Okmetic, growth is estimated to be stronger than these figures. The development programme that aims to improve the performance of Okmetic continues intensively. In Vantaa 7th May 2003 The Board of Directors
5 (11) INTERIM REPORT JANUARY 1 MARCH 31, 2003 CONSOLIDATED INCOME STATEMENT EUR 1,000 January 1- January 1- January 1- March 31, March 31, December 31 Net sales 13,381 14,942 57,738 Operating expenses -14,785-15,966-63,889 Operating profit/loss -1,404-1,024-6,151 Financial income and expenses ,970 Profit/loss before extraordinary items -1,957-1,600-8,121 Extraordinary items Profit/loss before taxes -1,957-1,600-8,121 Income taxes ,802 Net income -1,957-1,638-6,319 CONSOLIDATED BALANCE SHEET EUR 1,000 March 31, March 31, December 31, Assets Fixed assets Intangible assets 1,052 1,320 1,172 Tangible assets 109, , ,059 Investments Total fixed assets 110, , ,475 Current assets 8,045 8,362 8,645 Inventories 10,633 10,840 9,219 Receivables 3,406 3,136 3,751 Cash and cash equivalents 22,084 22,338 21,615 Total current assets 132, , ,090 Shareholders equity and liabilities Shareholders equity Share capital 11,821 11,821 11,821 Other shareholders equity 64,243 74,576 66,818 Subordinated loans 6,598 6,576 6,598 Total shareholders equity 82,662 92,973 85,237 Minority interest - 7,232 - Liabilities Deferred tax liability 14 1, Long-term liabilities 18,727 16,205 19,184 Short-term liabilities 31,471 25,787 31,655 Total liabilities 50,212 43,648 50, , , ,090
6 (11) CASH FLOW EUR 1,000 January 1- January 1- January 1- March 31, March 31, December 31 Operating activities ,431 Investing activities ,762-24,742 Financing activities 306 9,466 18,693 Change in cash and cash equivalents ,233-1,618 PLEDGES, CONTINGENT LIABILITIES AND OTHER COMMITMENTS EUR 1,000 March 31, March 31, December 31, Capital of the loans secured by mortgages 38,823 18,399 38,311 Mortgages 45,074 45,747 45,074 Other pledges 8,908-8,908 Leasing commitments 3,208 4,310 3,449 Derivative contracts/ Currency forward agreements: Contract value 14,183 20,265 17,518 Fair value 11,932 20,633 15,257 Hedging (situation on 31st March) (+ profit, - loss) 2, ,261 Interest rate swaps: Contract value 9,956-8,409 Fair value The market value of the interest-rate swap has been calculated as the difference between the undiscounted interest flows of the interest-rate swaps by using the market rate of interest pertaining to the rate changed on The amount of credit to which the interest-rate swap applies has been stated as the under-lying asset value.
7 (11) KEY FIGURES SHOWING FINANCIAL PERFORMANCE January 1- January 1- January 1- March 31, March 31, December 31 Net sales 13,381 14,942 57,738 Net sales, change % Export and foreign operations share of net sales % Operating profit/loss % of Net sales Return on equity, % Return on investment, % Non-interest bearing debt 9,643 12,591 10,630 Net debt to net equity, % Equity ratio, % Capital expenditure ,762 24,742 % of Net sales Depreciation 3,348 2,956 13,432 Research and development 1) expenditure 828 1,018 4,060 % of net sales Average personnel Personnel at the end of the period
8 (11) KEY FIGURES OF THE GROUP PER SHARE March 31, March 31, December 31 Earnings/share undiluted, euro Earnings/share diluted, euro Shareholders equity per share, euro Dividend by share, euro Dividend per earnings, % Price per earnings Development of share price (Jan 1, - March 31, 03) Average trading price Lowest trading price Highest trading price Trading price (Jan 1, - March 31, 03) at the end of the period Market capitalization at the end of the period, 1,000 euro 29,553 83,087 38,841 Development in trading volume Trading volume, transactions 1,090,970 1,352,737 4,097,207 In relation to weighted average, % Trading volume, euro 1,930,850 6,591,456 15,202,025 The weighted average number of shares during the accounting period under review, adjusted by the share issue 2) 16,887,500 16,887,500 16,887,500 The number of shares at the end of the accounting period, adjusted by the share issue 2) 16,887,500 16,887,500 16,887,500 Adjusted average number of shares during the accounting period including the dilution due to convertible loans and options 12,917,849 16,744,540 16,099,136 Adjusted average number of shares at the end of the accounting period including the dilution due to convertible loans and options 12,917,849 16,744,540 16,099,136 1) Research and development expenditure has been presented in gross figures and only long-term projects based on research program have been taken into account. 2) Per share figures have been adjusted in accordance with the guidelines issued by the Finnish Accounting Board (KILA) 390/1999 and have been adjusted to correspond to the current number of shares in the Company.
9 (11) QUARTERLY KEY FIGURES FOR / / / /2003 Net sales 13,381 Change % compared to previous 2.6 Operating profit/loss -1,404 % of net sales Profit before extraordinary items -1,957 % of net sales Cash from operating activities 118 Investing activities -769 Financing activities 306 Increase/decrease in cash and cash equivalents -345 Personnel at the end of the period 477 QUARTERLY KEY FIGURES FOR / / / /2002 Net sales 13,036 13,853 15,906 14,942 Change % compared to previous Operating profit/loss -3, ,536-1,024 % of net sales Profit before extraordinary items -4, ,012-1,600 % of net sales Cash from operating activities 684 3, Investing activities -10,132-2, ,762 Financing activities 5,729 3, ,466 Increase/decrease in cash and cash equivalents -3,719 4, ,233 Personnel at the end of the period
10 (11) QUARTERLY KEY FIGURES FOR / / / /2001 Net sales 10,969 11,989 16,094 18,253 Change % compared to previous Operating profit/loss -3,114-1,276 1,248 2,358 % of net sales Profit before extraordinary items -3,482-1, ,147 % of net sales Cash from operating activities 2,892 1,935 8,656 1,904 Investing activities -13,196-7,765-17,732-5,053 Financing activities ,563 10,927 Increase/decrease in cash and cash equivalents -10,339-6,638-10,639 7,778 Personnel at the end of the period The figures are unaudited. In the written interim report, the figures in parenthesis refer to the corresponding period in the previous year. OKMETIC IN BRIEF Okmetic is a growing technology company that manufactures high-quality silicon wafers and other products based on silicon, and markets these products to semiconductor and sensor industries worldwide. The company has plants in Espoo and Vantaa in Finland and in Allen, Texas, in North America. Okmetic puts emphasis on customer satisfaction and the high quality of products and services. The company is quoted on the Helsinki Exchanges under the symbol OKM. More information on the Company is available at Okmetic s home page at
11 (11) OKMETIC OYJ APPENDIX 1 The proposal of the Board of Directors to Okmetic Oyj's Annual General Meeting for authorising the Board to decide on increasing the share capital The Board of Directors shall propose to the Annual General Meeting to be held on 27 March 2003 that the Board be authorised to increase the Company's share capital by a new issue or by issuing options or convertible bonds in one or more tranches starting 27 March 2003 until the next Annual General Meeting but not later than within one year of the date of the Annual General Meeting. The aggregate maximum number of shares to be issued in the new issue or to be offered for subscription pursuant to options or convertible bonds shall be 2,000,000 new shares. Pursuant to this authorisation, the share capital of the Company may be increased by a maximum of 1,400,000 euros. The authorisation shall include the right to deviate from the shareholders' pre-emptive subscription rights provided for in Chapter 4:2 of the Companies Act with regard to subscribing for new shares, convertible bonds, or option rights and the right to decide regarding subscription prices, those entitled to subscribe and subscription terms and the terms for convertible bonds and option rights. The authorisation may be used in deviation of the shareholders' pre-emptive rights if the deviation is justified by an important financial reason for the Company such as the use of shares, convertible bonds and/or option rights in consideration for company or business acquisition, personnel incentives or other arrangements related to business development or capital management. When the share capital is increased through a new issue, other than on the basis of convertible bonds or option rights, the Board of Directors is entitled to decide that the shares may be subscribed for against contribution in kind, or by using right of setoff or under other given terms.