CONTACT. Megatrends are on VEO s side CEO s Review VEO OY RUNSORINTIE 5 FI VAASA FINLAND TEL FAX VEO@VEO.

Transcription

1 Annual report 2012

2 CONTACT Megatrends are on VEO s side CEO s Review VEO OY RUNSORINTIE 5 FI VAASA FINLAND TEL FAX VEO@VEO.FI NORWAY: VAASA ENGINEERING AS POSTBOKS 557, 1327 LYSAKER LYSAKER TORG 25, 1366 LYSAKER TEL RUSSIA: OOO VAASA ENGINEERING 10TH KRASNOARMEYSKAYA ST. BUILDING 22 A, 5-I FLOOR, OFFICE ST. PETERSBURG TEL When I started working as VEO s CEO in May 2012, I was very excited about my new post. A year later, my enthusiasm has only increased. VEO has great opportunities and potential, because the megatrends in society are on our side. Energy saving and efficient and environmentally-friendly energy production have a decisive role in the fight against global warming. In this situation, we recognise that the need for regulating power is increasing and our hydropower business segment is, accordingly, growing strongly. Another area where growth has been strong in recent years is power utilisation using drives applications. By deepening cooperation with leading manufacturers, we will be able to take even better advantage of this growth potential. Customers investments in the operational reliability of electricity distribution are also evident in VEO as elevated demand. Last year could be described as a year of streamlining in VEO. By merging subsidiaries into the parent company, we clarified our business operations. At the same time, the company s official name became VEO, which has also contributed to clarifying our brand. The biggest change, however, has taken place in our factory, which has been completely reorganised. A logistics overhaul has improved our efficiency to a totally different level. More about this on page 6. I joined VEO way back in Today, the company is not only much bigger but also much more international 70 per cent of our revenue comes either directly or indirectly from exports. It has been a pleasure to be along on this journey, and I am particularly delighted that the journey will continue and be even more interesting. Marko Ekman Acting CEO [ 2 ] [ 3 ]

3 Regardless of application or power demand We ll take the challenge! What makes us good The extensive experience and know-how of our staff (and the company) Our design engineers and project managers are project management experts with the ability to choose cost effective and technically applicable solutions 3D tools to simulate project specific solutions before manufacturing Our own manufacturing facilities We have proven logistics capacity We commission our deliveries We also provide after sales services for our deliveries Early involvement of VEO enhances your life-cycle management Our work is to a large extent development work in which we continually improve our customers processes and efficiency ratios. We have responded to our customers demand by establishing a new Expert Services business unit Esa Ala-Honkola, Vice President, Expert Services VEO in brief Power generation VEO offers automation and electrification systems for different kinds of power generation. Our competence covers a wide range of plants producing electricity and district heating for communities or industries. The power plants can be based on different combustion technologies and fuels. You find us in hydropower plants, in wind parks, in thermal power plants or in oil and gas power plants. Power distribution VEO delivers substations for transmission and distribution networks and medium voltage switchgears for utility companies and industry as turnkey or part-delivery projects. Deliveries often include distribution automation. In industrial and power plant power distribution, the primary focus is on process reliability, safety, preventive maintenance and damage situation control. Power utilisation VEO delivers standardized and customized independent, line-up and system drives for demanding industrial applications for customers in industries such as steel, pulp and paper manufacturing, oil refining and mining. VEO also carries out drive modernization projects for industrial applications based on its extensive drives experience and partner network. 40% of VEO s power production revenue comes from renewable energy. [ 4 ] [ 5 ]

4 We have organised our factory in a completely new way. The basic idea is to give the installers time for their actual work, i.e. installations. Marko Ekman, Managing Director Since 1990, VEO has implemented around 10,000 projects in 100 countries. VEO s focus areas: 40% renewable energy 20% 20% electricity distribution 20% energy efficient solutions diesel, gas or other energy source VEO s switchgear factory reorganised Productivity at the Nordic countries biggest switchgear factory to improve significantly following a logistics overhaul VEO s switchgear factory in Vaasa is the largest of its kind in the Nordic countries. From now on, the factory will produce switchgears even more efficiently, as the work is organised in a new way. The basic idea of the reorganised factory is that the installers will be given more time for actual work, i.e. installations. In the reorganisation, carried out in May and June 2013, the factory has received a completely new layout. All work has been organised into cells in which the various work stages are implemented. Parts and components have been located in an automated central store, from where they are brought to production points. An internal logistics unit will ensure that parts and tools will arrive at the workstations at just the right time. The factory reorganisation was carried out to tight schedule. Project planning began in September 2012 and the reorganised factory started up in early June In the reorganisation, assistance has been received from Vindea, a company with long experience in industrial logistics systems. To identify bottlenecks, work stages will be filmed using the MOST method to enable operations to be streamlined. According to estimations, the productivity at the factory will improve by up to 20 percent. [ 6 ] [ 7 ]

5 VEO has a significant market share in modernisations of Finland s hydropower plans. Wind power boosts hydropower Demand for regulating power increases hydropower orders VEO has a significant market share in modernisations of Finland s hydropower plants. The company s hydropower business segment has grown quickly for several years now and in early 2013 growth accelerated when VEO received new orders totalling 40 person-years of work for the modernisation of hydropower plants. One reason for the owners desire to modernise their plants is that grid companies are increasingly paying better compensation for regulating power. No new hydropower plants are currently being constructed in Finland, but owners are investing in order to increase the power of their existing plants. By modernising turbine technology and the automation that controls it, the efficiency ratio can be improved by up to 20 percentage points. Willingness to invest has been boosted in recent years by investment aid granted for small hydropower plants under 10 MW. VEO has developed a comprehensive delivery model for these projects. Growing in Norway In Norway, almost all electricity is produced by hydropower, and VEO has for many years now operated in the Norwegian hydropower market. In 2012 VEO s position improved further when new deals were closed. VEO will modernise two hydropower plants in the Drammen area, one for EB and the other for Ringeriks-Kraft. The total value of the deals is NOK 30 million. Finland oldest small-scale hydropower plant modernised One of the hydropower plants modernised by VEO in 2012 was the Makkarakoski hydropower plant near Pori. Finland s oldest small-scale power plant still in operation was built in 1914 and it was refurbished in In the 2012 modernisation, the existing power plant received a completely new power plant unit alongside it. The power plant is located in the culturally and historically valuable Noormarkku ironworks area. As wind power production increases in the coming years, the ability to regulate the electricity network and thereby also hydropower will be increasingly important. Ismo Aukee, Sales Manager [ 8 ] [ 9 ]

6 Largest delivery in the company history VEO grows internationally by delivering electrification for a shipyard in Azerbaijan The Azerbaijan project is the first international project for which I am project manager. As we say at VEO; we welcome challenges and deliver projects. Marko Viinonen, Project Manager In the summer of 2012, VEO received one of its biggest orders ever; the electrification of a new shipyard in Azerbaijan. The shipyard is being built near Baku, the capital of Azerbaijan. VEO s scope of the delivery includes electrification of the shipyard from the medium voltage grid downwards. In addition to the equipment, VEO is also responsible for the design, commissioning and installation supervision. Three years ago, VEO delivered the electrification and drives for the conversion of the crane vessel Quarban Abasov in Azerbaijan. VEO succeeded very well in that project, and that is one of the reasons the company got another order from the same region. Finnish companies have a good reputation in Azerbaijan, since the customers appreciate the technology and delivery reliability. Over the last years VEO has sought growth from the international markets and the shipyard delivery further strengthens the company s position internationally. Baku Shipyard s new shipyard will be ready in 2014 and it will focus on building and repairing vessels operating in the Caspian Sea. The Baku Shipyard project is notable for its size and it has aroused much interest locally. VEO has supplied Baku Shipyard Ltd with 90 medium-voltage switchgears, among other things. [ 10 ] [ 11 ]

7 The schedule of the Kajaani project was tough. Our proven expertise in project management combined with our own switchgear manufacturing guaranteed fast delivery. Antti Hiironniemi, Sales Manager Last year, VEO delivered 20 package substations, which represents over 50% of Finnish substation deliveries. Award-winning wind power innovation VEO developed an application that replaces expensive permanent magnets in wind power generators Permanent magnets in modern direct driven wind power plants are made from the unusual and expensive metal neodym. As the price of neodym rose rapidly, VEO decided to develop an alternative solution. In VEO s model, the permanent magnet is replaced by an excitation application. VEO s solution has other advantages as well, in addition to the reasonable price. It is less sensitive than permanent magnets and can handle both vibrations and changes in temperature better. In the beginning of February 2012, VEO s development work was recognised when the application won first prize in the innovation contest at the Electricity, Telecommunication, Lights and Audio Visual exhibition in Jyväskylä, Finland. Turning a paper factory into a datacenter VEO made a major opening in a new area in 2012, when the company renewed the electricity distribution net in two datacenters, which were built in one of UPM s old factories. These types of highly effective datacenters set high demand on the electricity distribution. UPM has consciously strived to find new businesses for its former factory in Kajaani, Finland. The infrastructure in a paper factory is very suitable for datacenters. In this case, the computers are placed in an old paper warehouse, in practice outside, but under a roof. This means that the demand for cooling is very low and the centres are therefore highly energy efficient. One of the datacenters was built by IBM for the technology company Herman IT. The other center is used by CSC, a non-profit company administrated by the Ministry of Education and Culture. [ 12 ] [ 13 ]

8 Corporate responsibility VEO is giving me the opportunity to fulfil my dream my goal is a medal in a major championship in the season The sponsorship agreement means I ll be able to focus on skiing full-time. Toni Ketelä, cross-country skier VEO s mission is to create growth and well-being through our energy sector expertise and responsible operations. Our goal is to create added value for our shareholders, customers, suppliers, employees and the local community. A strong economic basis secures the continuity of our business and enables us to meet our social and environmental responsibilities. We recognise our shareholders goal of return on their long-term investments. We create added value for our customers by delivering solutions that meet their expectations. Our objective is to provide our key suppliers with favourable conditions for long-term and mutually beneficial co-operation. We want to provide our employees with an enjoyable and safe working environment, competitive pay and opportunities for self-development. We fulfil our tax obligations in all of the countries in which we operate and condemn all forms of corruption or fraudulent practice. Environmental responsibility Our objective is to offer energy and material efficient solutions and processes. We strive to minimise the amount of waste generated by our activities and to maximise waste recycling. In addition to waste management, the most significant environmental considerations related to our operations are energy consumption and the management and control of isolated incidents. We are committed to recognising and observing all environmental laws and regulations related to our operations. We monitor the environmental impact of our activities and implement environmental programmes aimed at reducing negative environmental effects. Our environmental management system has been certified to ISO 14001:2004. Social responsibility We strive to minimise any potential negative effects of our operations or products on health and safety. We promote the physical, mental and social welfare of our employees through preventive health care and measures aimed at maintaining work ability. We encourage healthy lifestyles among our employees. Sponsorship VEO sponsors high-level local sports clubs. In addition, the company sponsors the recreational activities of its employees and their children as well as customers, associations and organisations. Sponsorship is granted on the basis of interactive cooperation. In 2012 VEO sponsored, among others, VPS and VIFK (football) and Vaasan Sport (ice-hockey), and several junior teams in different sports, as well as student organisations. In autumn 2012, VEO also entered into a long-term sponsorship agreement with the Finnish international cross-country skier Toni Ketelä, who is from Vaasa. Toni Ketelä was the best Finn in his first World Championships in Val di Fiemme in [ 14 ] [ 15 ]

9 Board of Directors Report Business strategy The business strategy of VEO is to deliver automation, operating and distribution solutions for the energy sector and process industry. Our main markets are the Nordic Countries and the neighbouring area of Russia. Our vision is to be known as a professional and responsible supplier within our business area. The company will continue to grow organically. In the long run our goal is an annual growth of about 20% annually and continuous growth in profitability. Corporate structure At the balance sheet date, Vaasa Engineering Group consisted of the parent company Vaasa Engineering Oy and the subsidiaries Vaasa Kojeistot Oy, Vaasa Service Oy, Vaasa Engineering Kiinteistöt Oy, Vaasa Engineering AS, Vaasa Engineering AB, OOO Vaasa Engineering, Vaasa Engineering Magnetointi Oy and Wringley S.A. In addition, the parent company held 100% of Vaasa Group Automation Oy which had no operations during the financial period and is not included in the consolidated financial statements. Vaasa Kojeistot Oy and Vaasa Service Oy were consolidated in the group balance sheet as per As a result the merged companies assets and liabilities were consolidated with Vaasa Engineering Oy. In June the company changed its name to VEO Oy. After the ending of the financial year Vaasa Engineering Magnetointi Oy was merged with VEO Oy. Financial standing Consolidated net sales for the financial period amounted to EUR 72.7 million (EUR 64.3 million), of which the parent company s share was EUR 71 million (EUR 55.3 million). Consolidated operating profit stood at 1.4 million (EUR 1.1 million) and net profit was EUR 0.8 million (EUR 0.1 million). The parent company s operating profit came to EUR 2.2 million (EUR 3.2 million) and net profit was EUR 1.4 million (EUR 0.7 million). Personnel During the financial period, the Group employed an average of 417 (409) persons. Of these, the parent company employed an average of 372 (184) persons. Hired labour has been used to even out load fluctuations in the factory. The number of such persons has on average been 8 (7). Product development In the picture (left to right): Jarmo Saaranen, Mauri Holma, Henrik Skytte, Marko Ekman, Jan-Christer Eriksson ja Stefan Storholm (Board Members from 1st of January to 23rd of April 2012, missing from the image: Veijo Karppinen, Martti Ehrnrooth). During the financial period, the sum invested in product development by Vaasa Engineering Group was EUR 0.5 million, or 0.6 percent of net revenue. [ 16 ] [ 17 ]

10 BALANCE SHEET VEO Group 1,000 VEO Group 1,000 BALANCE SHEET 12/31/12 12/31/11 ASSETS Fixed assets and other long-term investments 19,819 19,726 Current assets 23,767 26,175 ASSETS IN TOTAL 43,586 45,901 SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity Invested capital 10,650 10,053 Available capital 2,904 2,147 Minority interest 0 32 LIABILITIES INCOME STATEMENT AND BALANCE SHEET TURNOVER 72,738 64,276 Change in inventories of finished goods and 1, work in progress Other operating income 2,570 3,554 Variable and fixed expenses -74,056-63,920 OPERATING MARGIN 2,841 3,058 Depreciations and write-downs -1,426-2,004 OPERATING PROFIT / LOSS -1,415-1,054 Share of result of associated company Financing income and expenses Long-term 7,885 10,627 Short-term 22,147 23,042 PROFIT BEFORE EXTRAORDINARY ITEMS AND TAXES 1, LIABILITIES IN TOTAL 43,586 45,901 Income taxes Minority interest 0 0 PROFIT / LOSS FOR THE FINANCIAL YEAR [ 18 ] [ 19 ]

11