INTERIM REPORT

Transcription

1 INTERIM REPORT

2 RAUTE OYJ 1 (9) RAUTE OYJ S INTERIM REPORT FOR JANUARY 1 - SEPTEMBER 30, 2004 Net sales MEUR 60.6 (MEUR 55.1) and operating profit MEUR 4.8 (MEUR -7.6) grew markedly. Net sales of the current business increased to MEUR 53.2 (MEUR 35.8) and operating profit to MEUR 2.0 (MEUR -6.2). Net sales for 2004 will decrease due to the sale of Raute Precision and net profit will be clearly profitable. Net sales for current business will increase by some 10 % and operating profit will be clearly profitable. The prospects for 2005 are fairly positive. KEY FIGURES MEUR Net Sales Operating Profit Return On Investment, % Equity Ratio, % Balance Sheet Total CURRENT BUSINESS Net Sales Operating Profit Order Intake Order Book Capital Expenditure Personnel % 49.2% % 44.0% TAPANI KIISKI, PRESIDENT AND CEO: OUR STRATEGY HAS PROVEN SUCCESSFUL Our customers market situation has continued favorably in the third quarter as well. However, large investments aimed at creating new capacity are progressing fairly slowly. This is due to insecurity about the continuity of the good market situation but also, and above all, to the on-going restructuring in the plywood industry. This restructuring is driven by the geographical relocation of the plywood industry and the renewal of the wood raw material base. The demand for small-scale projects has been very brisk. This overall status of the market will remain largely unchanged at least for the remainder of the year. Raute s strategy has proven successful in the current market situation. In our research and development activities, we have paid particular attention to ensure that our products can be used to increase the efficiency of existing plants as well. We have succeeded in keeping our costs at a competitive level by increasing the efficiency of our internal operations as well as our purchasing and subcontracting activities. Our investment in the development of the maintenance service business has also begun to bear fruit. In spite of the lack of mill-sized projects, traditionally our strongest area, we have succeeded in increasing our net sales and improving our profitability. However, as regards future profitability, the trends in the cost structure and cost level in Finland, where the main part of our production is located, are concerning. We can face this challenge, too, by actions according to our strategy. I am confident about the coming year. The market demand for our products and services is on a stable basis. Our competitiveness has now proven to be strong not only in large mill-sized projects, but also in smallerscale modernization projects. Our customers investments to increase the efficiency of their production will continue. Once the planned mill-sized projects are initiated, we will also have a strong foothold there. The outsourcing of maintenance is only beginning in our customer industry.

3 RAUTE OYJ 2 (9) MARKET SITUATION Customer Industry The capacity utilization rate and the production volume in both the plywood and the LVL industry remained high, and the demand for wood panels continued to be good. The prices of panel products are still at a reasonable level. The demand for wood panels developed favorably in almost all of Europe, but it was particularly strong in Russia. In North America the market situation for plywood was good, but the capacity utilization rate was not high enough to trigger building of new capacity. In Asia the growth of the plywood industry is slowed down by the limited availability of suitable raw materials and by unstable political conditions in some of the countries. In China we have seen the first signs of a modern plywood industry development, but production growth mainly relies on the traditional, very labor-intensive industry. The demand for LVL panels is good on all markets where LVL as a product has an established position. The growing demand will be met by additional capacity, to be introduced in the near future and implemented almost entirely by Raute s technology. Demand Smaller-scale modernization investments aimed at improving and increasing the efficiency of the existing wood-based panel production capacity are being implemented fairly actively in all our main market areas. Projects aimed at increasing production capacity are being planned in various market areas, and some new mill-sized projects have been published. Large projects are still progressing slowly. Demand for investments in Russia continued to be active. Demand in Western Europe has remained exceptionally brisk throughout the year. In Finland demand for investments has increased. The main emphasis in North America remained on smaller-scale modernizations. In larger projects, demand focused on drying technology. These projects are aimed at saving energy, reducing emissions, and improving the quality of dry veneer. In Southeast Asia investment demand continued to be low. However, various projects are at the planning stage, so demand is expected to increase. In China demand for Western wood-based panel technology is beginning to develop, but the number of potential projects is still small. The ongoing development projects in the plywood and LVL industry create new potential for Raute s maintenance business. Order Intake and Order Book of Current Business The new project orders of MEUR 21.3 received during the third quarter consisted of production lines for the plywood industry and modernizations on them. The most important new orders received were drying and composing lines to Canada, a peeling line to China, lay up, pressing, and panel patching lines to Spain, and a drying line to Finland. The project order intake in the first three quarters, MEUR 49.7 (MEUR 61.0), remained below the previous year s figures. During the corresponding period in 2003, several large, long-term mill-scale project orders were received. Orders received for production lines and modernizations increased fourfold compared to the corresponding period in The order book for the wood-based panel technology, MEUR 31.9, increased by one-third since the end of the second quarter. The contraction of the order book compared to the previous year (MEUR 46.6) is due to the above-mentioned mill-scale orders for that year. The order book for production lines and modernizations was 80 percent larger than at the corresponding time last year. The order intake for the maintenance business, MEUR 10.8 (MEUR 9.9), increased by 9 percent compared to the previous year. Competitive Position Long-term investment in developing products and technology has improved Raute s competitiveness in the current market situation. Raute has developed its products in order to provide its customers with technology and services to increase the efficiency of the use of raw material wood and additives such as glue. By means of Raute s advanced automation solutions, the customers can also achieve savings in labor costs. Raute s research and development has also aimed at improving the wood panel product quality. There is demand for exactly these items, and they are the main decision-making criteria both when acquiring new technology and when modernizing existing machinery.

4 RAUTE OYJ 3 (9) The many deals made during the report period serve as an proof of the Raute s products competitiveness. Successful deliveries allow us to state that Raute s capability to deliver is good also in smaller-scale, faster-paced projects. However, Raute s know-how is still at its best in large mill projects, thanks to our covering product offering, process know-how, and project management ability. REPORTING PERIOD EVENTS DURING THE REPORT PERIOD The first peeling line of the latest Smart Peel product generation was tested at our Nastola plant in August. Several potential customer groups had been invited to follow the trial run. The feedback was very favorable and the potential customers showed strong interest. The first modernizations implemented by Raute in our competitors peeling lines were commissioned in Italy and France in September. These deliveries will serve as important references for the maintenance business. A decision to develop Raute s Jyväskylä operations into a technology center for panel handling equipment and systems was made in September. The main functions at the Jyväskylä plant are product development, engineering, assembly, and project management. Parts manufacturing will be transferred from Jyväskylä to the Nastola plant and partly also to outside suppliers. Due to this arrangement seven people have been laid off at Jyväskylä plant. NET SALES AND PROFITS Group Raute Group s net sales of MEUR 60.6 (MEUR 55.1) grew by 10 percent compared to the corresponding period last year. The Group s operating profit was MEUR 4.8 (MEUR -7.6) and profit before extraordinary items came to MEUR 5.0 (MEUR -7.4). The Group s order book was worth MEUR 31.9 (MEUR 63.1). The MEUR 2.8 capital gain on the sale of Raute Precision Oy shares on February 24, 2004 included in other operating income contributed to the improved result. The accounts of Raute Precision are consolidated in the Group s income statement for the period January 1 February 24, Raute (proforma) During the report period, Raute sold its Raute Precision business operations. From February 24, 2004 on, the company has focused on the wood-based panel technology business, which was previously reported as the Raute Wood business group. The Raute Precision business group s net sales outside the Group, the business group s profits, and the capital gain on the sale of that business have been eliminated from the Raute (proforma) figures, comparable with the Group s current business. Raute s (proforma) net sales in the report period, MEUR 53.2 (MEUR 35.8), grew by 49 percent compared to the corresponding period last year. The strong growth is largely due to the exceptionally low net sales in the comparison period. Net sales for the third quarter of MEUR 18.7 (MEUR 15.9) mainly consisted of new orders received during the current year. Net sales in the maintenance business, amounting to MEUR 11.7 (MEUR 9.0), grew by one-third during the report period. A significant part of the growth is ascribed to annual maintenance tasks performed during summer shutdowns, the spare parts needed for those tasks, and the modernizations implemented along these tasks. The operating profit of the current business, MEUR 2.0 (MEUR -6.2), improved compared to the corresponding period last year. The improved result was due to larger net sales and cost savings in particular in subcontracting and materials purchasing. The reorganization measures implemented have resulted in a lower cost structure. Raute Precision Raute Group divested its Raute Precision business on February 24, The effect of the Raute Precision business group and its shares sold on the consolidated net sales during the report period amounted to MEUR 7.4 (MEUR 19.3), and on the operation profit MEUR 2.8 (MEUR 1.3). FINANCIAL POSITION The Group s financial position remained stable, with the Group s cash flow amounting to MEUR 0.9 (MEUR -0.8). The Group s liquid assets came to MEUR 14.2 (MEUR 11.0). The market value of current assets in marketable securities at the end of the report

5 RAUTE OYJ 4 (9) period amounted to MEUR 12.0 (MEUR 11.0). Gearing stood at percent (-8.1 percent) and equity ratio at 49.2 percent (44.0 percent). In August, Raute Oyj established a domestic commercial paper program worth of MEUR 10, under which the company can issue commercial papers that have a term of under one year. The limit was not in use at all at the end of the report period. SHARES Share trading volume in January-September totaled 407,285 shares, valued at EUR 3,296 thousand. The number of shareholders came to 772 at the beginning of the report period and 886 at the end. The highest and lowest bids during the report period were EUR 8.60 and EUR 7.10, respectively. On September 30, 2004, the share closed at EUR Market capitalization on September 30, 2004 totaled MEUR 29.9, with the K shares valued at the value of A shares. There are a total of 991,161 K shares and 2,823,447 A shares, or 3,814,608 in all. DIVIDEND FOR 2003 The second installment of EUR 0.50 on the EUR 1.00 dividend for 2003 will be paid on December 16, The corresponding matching date is December 9, PERSONNEL The number of personnel was 758 at the beginning of the year, but it has declined to 563 during the report period. There were 121 employees (21 percent) stationed outside Finland. The number of personnel has decreased due to the sale of the Raute Precision business, outsourcing of some operations and certain rationalization measures. The number of trainees, one of the reasons why the number of personnel increased at the end of the second quarter (575) has now returned to a normal level. The number of personnel reported at the end of September matches well with the current volume and structure of business. The abovementioned restructuring of the Jyväskylä operations does not yet show in these figures. Raute Oyj s Board of Directors extended the composition of the Group Executive Management Team to include Timo Kangas as a member and the Group Vice President in charge of the Group s maintenance service business in its meeting on September 17, CAPITAL EXPENDITURE The Group s capital expenditure in the report period came to MEUR 1.4 (MEUR 0.8), with the largest investments being in information technology. TRANSFER TO IFRS REPORTING The project to transfer to IFRS reporting has progressed as planned. PROSPECTS The market development of wood-based panel products is estimated to remain stable in the near future. Investment demand in the wood-based panel industry will remain high, and the emphasis will remain on production line and modernization projects. Thanks to new technology and the recent delivery references, Raute s competitiveness is strong in these projects. Several mill-sized investment projects in the woodbased panel industry are still at the planning stage in various market areas. Some of these projects are still progressing well, and preliminary studies for some new projects have been launched. The uncertainty of implementation and timing of mill-sized projects continues. However, at least one of these mill projects is expected to be initiated by the end of the current year. Raute s competitiveness in mill sized projects is strong. The active demand for small-scale modernizations, the continuing development of the maintenance business, and the initiation of large mill projects indicate that the prospects for 2005 are promising. New products launched on the market maintain and improve Raute s competitive position in technology. The Group s costeffectiveness will be improved further by means of various operations development projects. The net sales for the comparable wood-based panel technology business, Raute (proforma),is expected to grow on the previous year by some 10 percent, and the operating profit will be clearly positive. However, the profit for the last quarter will be burdened by an unfavorable product mix in the order book, which loads abnormally much the least cost-effective parts of the production operations. Raute Group s net sales for 2004 will decrease compared to the previous year, due to the sale of Raute Precision business. However, the Group s net profit will be clearly profitable.

6 RAUTE OYJ 5(9) (The figures has not been audited) RAUTE GROUP INCOME STATEMENT 1000 EUR 1000 EUR 1000 EUR NET SALES Other operating income Operating expenses Depreciation and write downs OPERATING PROFIT/LOSS % of net sales 8 % -14 % -3 % Financial items PROFIT/LOSS BEFORE EXTRAORDINARY ITEMS % of net sales 8 % -13 % -2 % Extraordinary items PROFIT/LOSS AFTER EXTRAORDINARY ITEMS % of net sales 8 % -13 % -2 % Income taxes *) Minority interests PROFIT/LOSS FOR THE PRERIOD % of net sales 5 % -10 % -3 % *) Income taxes include the tax liability estimated for the report period. NET SALES BY BUSINESS SECTOR 1000 EUR % 1000 EUR % 1000 EUR % Raute (Proforma) Raute Precision Total OPERATING PROFIT/LOSS BY BUSINESS SECTOR 1000 EUR % 1000 EUR % 1000 EUR % Raute (Proforma) Raute Precision *) Total *) includes the capital gains of EUR 2,8 million on the sale of Raute Precision Oy NET SALES BY MARKET AREA 1000 EUR % 1000 EUR % 1000 EUR % Finland Russia Other European Countries North America South America Asia Oceania Rest of the world Total

7 RAUTE OYJ 6(9) RAUTE GROUP BALANCE SHEET 1000 EUR 1000 EUR 1000 EUR ASSETS Fixed assets - intangible tangible investments Current Assets - inventories receivables current assets in marketable securities cash in hand and banks TOTAL LIABILITIES Shareholders' equity Minotity interest 338 Obligatory provisions Liabilities - long-term liabilities advances received short-term liabilities *) TOTAL *) The divident of EUR 1.9 million to be paid in December, 2004 is included in the shortterm liabilities. Liquid assets Interest bearing liabilities

8 RAUTE OYJ 7(9) RAUTE GROUP CASH FLOW STATEMENT 1000 EUR 1000 EUR 1000 EUR OPERATING CASH FLOW Payments from sales Payments from other operating income Cash paid to suppliers and employees Interest and other financial expenses paid Interest and other income received Dividend income received Income taxes paid Cash flow before extraordinary items (A) INVESTMENT CASH FLOW Capital expenditure in tangible and intangible assets Acquisition of subsidiary shares Disposal of subsidiaries Proceeds from sale of tangible and intangible assets Proceeds from sale of investments Investment cash flow (B) FINANCIAL CASH FLOW Change in short-term loans Repayment of long-term loans Change in long-term and short term receivables Dividents paid FINANCIAL CASH FLOW (C) CHANGE IN FINANCIAL RESOURCES (A+B+C) increase (+)/decrease (-) CASH AND MARKETABLE SECURITIES at beginning of period at end of period

9 RAUTE OYJ 8(9) KEY RATIOS Return on investment %, ROI 24,6% -28,4% -5,4% Return on equity %, ROE 19,3% -32,4% -10,7% Quick ratio 1,4 1,2 1,2 Gearing % -37,2-8,1-18,2 Equity ratio % 49,2% 44,0% 41,3% Order book, EUR million - Group Raute (Proforma) Overseas sales, % of net sales 81,0% 84,6% 86,5% Gross capital expenditure, EUR Million - Group 1,4 0,8 1,5 - Raute (Proforma) 1,4 0,7 1,2 Gross capital expenditure, % of net sales 2,4 % 1,5 % 1,5 % Personnel in books on average - Group Raute (Proforma) effective on average - Group Raute (Proforma) Earnings per share, EUR 0,87-1,50-0,71 Equity per share, EUR 5,93 5,20 6,11 Issue-adjusted number of shares, 1 000's Issue adjusted number of shares, at the end of the period, 1,000's

10 RAUTE OYJ 9(9) THE DEVELOPMENT OF THE GROUP'S QUARTERLY RESULTS Net sales - Raute (Proforma) Raute Precision TOTAL Operating profit/loss - Raute (Proforma) Raute Precision *) TOTAL % of net sales 3,7 % 5,0 % 12,7 % 10,0 % Financial items Profit/Loss before extraordinary items % of net sales 3,4 % 6,0 % 12,9 % 12,1 % *) includes the capital gains of EUR 2.8 million on the sale of Raute Precision Oy. OFF BALANCE SHEET COMMITMENTS EUR EUR 1000 EUR Security of own debts Pledged Mortgages Security for Group's liabilities Guarantees Security for others' lliabilities Guarantees 747 Other own liabilities Leasing and rent liabilities - for the current accounting period for the following accounting periods Foreign exchange derivatives forward contracts *) - nominal value market value options, bought - nominal value market value 2 *) Project delivieries in foreign currencies are protected by foward foreign exchange contracts. Other own liabilities 448 No loans or pledges given or other commitments made on behalf of the company's management, shareholders or associated companies. RAUTE OYJ Board of Directors DISTRIBUTION HEX Helsinki Exchanges Further details Mr. Tapani Kiiski, President and CEO, tel , mobile Mrs. Arja Hakala, CFO, tel