Vaahto Group’s Preview of Results for Fiscal Year 1.9.2009–31.8.2010

VAAHTO GROUP PLC OYJ STOCK EXCHANGE BULLETIN 11.11.2010 at 10.30

VAAHTO GROUP’S PREVIEW OF RESULTS FOR FISCAL YEAR 1.9.2009–31.8.2010

Vaahto Group’s turnover for the fiscal period ending in August 2010 was 35.2 million euros (comparative: 75.7 million euros), with an operating loss of 2.9 million euros (2.3 million euros). In the weak market, turnover decreased by 54% from that of the corresponding period of the previous year, and the fiscal period’s result was negative. Toward the end of the period, the Group’s order book started growing and profitability of the business operations improved. The result for the latter half of the fiscal period was positive, thanks to real-estate transactions and improved profitability of the business.

 

Pulp & Paper Machinery

 

The Pulp & Paper Machinery division’s turnover for the period under review was 21.5 million euros (52.1 million euros), with an operating loss of 4.8 million euros (operating loss of 2.4 million euros). In weak market conditions, turnover fell by 59% from the previous year’s figure, and the result was negative. Profit of approx. two million euros from the sale of a building in Tampere improved the result for the fiscal year. Toward the end of the fiscal period, the Group’s order book began growing and profitability improved.

 

Significant actions were made in the development of the service business of the Pulp & Paper Machinery division. Vaahto Service’s product selection for paper machine servicing expanded in line with objectives, contributing to the considerable increase in order books. By the end of the fiscal period, the order backlog of the rapidly circulating service business had quadrupled from what it was at the beginning of the year – thus, the service business shows good prospects for the next fiscal year.

 

The Pulp & Paper Machinery division’s most significant delivery project during the period was the tissue-paper machine rebuild for Metsä Tissue in Mänttä. In spite of the tight schedule, the project was completed sooner than planned, and the rebuilt machine entered production use in April. The delivery included a new crescent former, headbox, and reel as well as a rebuilt short-circulation system and press. The modernization has increased the efficiency of the production line, thanks to the better runnability of the paper machine and refining lines as well as the increased running speed.

 

The order book of the Pulp & Paper Machinery division’s project business started to increase in the latter half of the fiscal year. The most important orders at the end of the period were an order for four headboxes from Taishan Gypsum Co. Ltd. in China and a shoe press order from Indonesia’s Fajar Paper.

 

In September, after the end of the fiscal year, Vaahto Pulp & Paper Machinery’s project business received an order for four headboxes from Dongguan Jianhui Paper Co. Ltd. and Dongguan Jinzhou Paper Co. Ltd., both from China, and an order for modernization of Fajar Paper’s PM7 board machine in Indonesia. The combined value of these project orders, which were received after the end of the fiscal year, is approximately 14 million euros, and the deliveries will take place in 2011.

 

Vaahto Pulp & Paper Machinery’s goal is to keep strengthening its position as one of the leading suppliers of technology and services in international paper and board machine markets. One measure in pursuit of this goal is to establish a production unit in China. This was decided upon by the Board of Directors of the parent company during the 2009–2010 fiscal year. However, the implementation of the project has been delayed because of the current economic situation.

 

Process Machinery

 

The Process Machinery division’s turnover for the fiscal year was 13.8 million euros (24.7 million euros), with an operating profit of 1.9 million euros (0.1 million euros). In the challenging market, the Group’s turnover decreased by 44% from the previous fiscal year’s figure. Sales proceeds of approximately 2.6 million euros, in total, from sales of a building in Pietarsaari and the HVAC business improved the result for the period.

 

The market situation was extremely weak for the Process Machinery division’s vessel business. Toward the end of the fiscal year, the number of projects in the offer phase showed a clear increase, and the outlook for the next fiscal period has improved considerably.

 

The market situation for the agitator operations of the Process Machinery divisions has picked up, and the order book grew notably during the period under review. The outlook for the current fiscal year is good.

 

Results

 

Vaahto Group’s turnover for the fiscal period was 35.2 million euros (75.7 million euros), with an operating loss of 2.9 million euros (2.3 million euros). Turnover decreased by 54% from the previous fiscal year’s figure. The operating loss for the period was 8.1% (comparative: operating loss of 3.1%) of the Group’s turnover. The main reasons for the loss were the strong decline in turnover and the weak profitability of the Pulp & Paper division’s projects. Sales proceeds of approximately 4.6 million euros, in total, from sale of the Group’s buildings in Tampere and Pietarsaari and the HVAC business improved the result for the period.

 

Financing

 

The Group’s cash flow totaled -16.0 million euros (16.5 million euros). The Group’s net financing costs for the period under review came to 1.0 million euros (1.1 million euros). The investment cash flow for the fiscal year was -0.3 million euros (-3.6 million euros). The Group’s equity ratio was 21.8% (23.2%).

 

The total on the consolidated balance sheet was 39.0 million euros (50.1 million euros). The decrease in the balance-sheet total is mostly because of a payment received after the close of that fiscal year for delivery of a significant project, while payments to suppliers were made, for the most part, before the end of the fiscal year. This is reflected in the operating cash flow and key figures in the cash flow calculation.

 

There were some changes in the Group’s financial arrangements after the end of the fiscal year. The Group’s buildings in Tampere and Pietarsaari were sold during the period under review, but the sale price was paid after the end of the period, in September 2010, and the amount paid, about eight million euros, was used primarily for payment of loans from credit institutions and pension loans. These measures will decrease the balance-sheet total and improve the company’s equity ratio. The Group’s interest-bearing borrowing costs after these financial arrangements consist, for the most part, of long-term loans from financial institutions. The financing required for the Group’s working capital has been secured through sufficient financial instruments.

 

Investments

 

The Group’s investments in capital assets for the fiscal period totaled 0.8 million euros (3.7 million euros). Investments consisted mainly of smaller machinery and equipment acquisitions.

 

Information systems

 

The Group’s information systems and information management were developed further, in accordance with the centralized operations model.

 

Research and development

 

The Group’s research and development activities were focused for the most part on expansion of the product range for the Pulp & Paper Machinery division’s service operations and improvement of the key components for paper and board machines. The scope of the Group’s R&D activities remained the same as in the previous fiscal period.

 

Personnel

 

The number of Group personnel averaged 371 (410) over the period.

 

Risks and business uncertainties

 

Demand for Vaahto Group products depends largely on economic cycles and on developments in the world economy and our customer industries. Risk caused by fluctuations in demand is being compensated for through adjustment of the Group’s sales operations in line with the economic cycles of various markets and customer industries.

Large-scale projects involve the risk of the final result falling short of expectations, since the project’s future costs and other risks that could affect the delivery cannot be assessed precisely enough at the tender stage. Risks associated with large projects can be managed by applying various quality management systems, profitability analyses, directives, and acceptance procedures.

 

The Group’s financial risk management objectives are to minimize harmful effects on the Group’s result caused by fluctuations in financial markets and to ensure that the Group can gain equity and liability financing on competitive terms.

 

Business-related risks of material, consequential, and liability-based losses are covered by appropriate insurance policies.

 

Shareholders’ equity

 

Information concerning Vaahto Group Plc Oyj’s shares is provided in item 24 of the Notes to the Consolidated Financial Statements, “Notes on the shareholders’ equity.”

 

The Board of Directors has no authority to issue new shares, convertible bonds, or bonds with warrants, nor the authorization to obtain or surrender shares.

 

Administration

 

The Annual General Meeting of December 16, 2009, elected the following members to the Board of Directors of Vaahto Group Plc Oyj:

 

Seppo Jaatinen

Heikki Marttinen

Martti Unkuri

Antti Vaahto

Mikko Vaahto

 

The Board elected December 16, 2009 Seppo Jaatinen as chairman and Antti Vaahto as vice-chairman.

 

Heikki Marttinen resigned from the Board on January 23, 2010.

 

An extraordinary general meeting held on June 4, 2010, elected Rainer Häggblom and Reijo Järvinen to the Board in addition to the existing members.

 

The Board elected June 4, 2010 Seppo Jaatinen as chairman and Rainer Häggblom as vice-chairman.

 

Anssi Klinga was CEO throughout the 2009–2010 fiscal year.

The Group companies have been audited by certified public auditing firm Ernst & Young Oy, with Panu Juonala, CPA, as chief auditor.

 

The company follows the NASDAQ OMX Helsinki corporate governance code (2010) for Finnish listed companies. An account of the Group’s corporate governance has been published on the Group’s Web site.

 

Forecast of developments

 

The international market situation in the main sectors of Vaahto Group’s operation has improved clearly in the course of 2010. Demand is strong, particularly in the Asian and Chinese markets, and there are also clear signs of improvement in Europe.

 

Vaahto Group’s order book started increasing at the end of the period under review.

The order backlogs for both the service and project business of the Vaahto Pulp & Paper Machinery division enable profitable business operations. Likewise, the market outlook for the Vaahto Process Machinery division has improved clearly and the order book is already growing slightly.

 

For the current fiscal year, Vaahto Group’s result is forecast to improve significantly from the previous period’s figure, and the full-year result is expected to be positive.

 

Proposal for distribution of profits

 

Parent company funds available for distribution of profits total 3,475,392.45 euros, of which 77,972.73 euros represents a loss for the fiscal period.

 

The Board will propose to the Annual General Meeting that no dividends be paid and that the operating profit be transferred to the earnings account.

 

The Annual General Meeting

 

The Annual General Meeting of Vaahto Group Plc Oyj will be held on December 14, 2010 at 1.00 p.m. in the Sibelius Hall, Lahti.

 

Interim management statement

 

Instead of the interim report for the first three months of the accounting period, Vaahto Group Plc Oyj will disclose the interim management statement on January 14, 2011.

VAAHTO GROUP CONSOLIDATED FIGURES
CONSOLIDATED	2009/10	% of	2008/09	% of
STATEMENT OF	12	turn-	12	turn-
COMPREHENSIVE	months	over	months	over
INCOME, IFRS
1000 EUR
NET TURNOVER	35 160		75 694
Change in finished
goods and work
in progress	1 264		-3 109
Production
for own use	500		834
Other operating
income	4 901		401
Share of results of
affiliated companies	17		13
Material and
services	-17 548		-43 503
Employee benefits
expenses	-16 374		-19 708
Depreciations	-2 547		-2 423
Other operating
expenses	-8 230		-10 520
OPERATING PROFIT
OR LOSS	-2 857	-8,1	-2 320	-3,1
Financing income
and expenses	-984		-1 138
PROFIT BEFORE TAXES	-3 840	-10,9	-3 458	-4,6
Tax on income
from operations	812		915
PROFIT OR LOSS
FOR THE PERIOD	-3 028	-8,6	-2 543	-3,4
OTHER COMPREHENSIVE
INCOME:
Translation
differences	14		21
OTHER COMPREHENSIVE
INCOME, NET OF TAX	14		21
TOTAL COMPREHENSIVE
INCOME	-3 014		-2 522
Net profit or loss
attributable:
To equity holders
of the parent	-2 910		-2 481
To minority
interest	-118		-62
Total	-3 028		-2 543
Total comprehensive
income attributable:
To equity holders
of the parent	-2 896		-2 460
To minority
interest	-118		-62
Total	-3 014		-2 522
Earnings per share calculated on profit attributable
to equity holders of the parent:
EPS undiluted,
euros/share	-1,01		-0,86
EPS diluted,
euros/share	-1,01		-0,86
Average number of
shares (1000 shares):
undiluted	2 872		2 872
diluted	2 872		2 872
CONSOLIDATED	31.8.10		31.8.09
BALANCE SHEET,IFRS
1000 EUR
ASSETS
NON-CURRENT ASSETS:
Intangible assets	1 642		2 495
Goodwill	1 702		1 702
Tangible assets	10 923		16 012
Shares in affiliated
companies	62		50
Available for sale
investments	44		44
Non-current trade
and other
receivables	11		12
Deferred tax asset	2 172		1 225
NON-CURRENT ASSETS	16 557		21 540
CURRENT ASSETS:
Inventories	5 241		4 406
Trade receivables
and other
receivables	14 732		6 693
Current receivables
for revenue recognised
in part prior to
project completion	1 953		5 046
Tax receivable,
income tax	2		0
Cash and bank	560		12 400
CURRENT ASSETS	22 488		28 546
TOTAL ASSETS	39 045		50 086
CONSOLIDATED	31.8.10		31.8.09
BALANCE SHEET, IFRS
1000 EUR
EQUITY AND
LIABILITIES
SHAREHOLDERS’
EQUITY:
Share capital	2 872		2 872
Share premium
account	6		6
Contingency
reserve	1 995		1 995
Translation
differences	41		20
Retained earnings	1 864		4 781
Equity attributable
to equity holders
of the parent	6 778		9 673
Minority share	1 110		1 229
SHAREHOLDERS’
EQUITY	7 888		10 902
NON-CURRENT LIABILITIES:
Deferred
tax liability	549		528
Long-term
liabilities,
interest-bearing	3 042		6 928
Non-current
provisions	245		355
NON-CURRENT
LIABILITIES	3 836		7 812
CURRENT LIABILITIES:
Short-term
liabilities,
interest-bearing	15 068		6 679
Trade payables and
other liabilities	12 072		24 628
Tax liability,
income tax	182		65
CURRENT LIABILITIES	27 321		31 372
TOTAL EQUITY AND
LIABILITIES	39 045		50 086
KEY FIGURES, IFRS	2009/10		2008/09
Shareholders’
equity per share,
euros	2,36		3,37
Earnings per
share, euros	-1,01		-0,86
Solidity, %	21,8		23,2
Gross investments,
1000 EUR	776		3 656
Total average
number of
personnel	371		410
Order backlog at
the end of the fiscal
period, 1000 EUR	15 175		17 098
The amount of contract revenue recognized as revenue has
been deducted from the order backlog.
OTHER LIABILITIES	31.8.10		31.8.09
1000 EUR
Bank guarantees:
Bank guarantee
limits total	25 000		33 700
Bank guarantee
limits used	5 720		18 038
Lease liabilities,
excluded financial
lease liabilities:
Current lease
liabilities	220		251
Lease liabilities
maturing
in 1-5 years	287		425
Total	508		675
Other liabilities:
Granted guarantees	660		1 603
Guarantees granted
to secure bank
guarantees	17 600		31 000
Guarantees granted
to secure loans	2 910		1 040
Derivative contracts:
Currency forward agreements are as a rule used to hedge
against exchange rate risks. The currency forward agreements
have been used to protect receivables and future assets.
Interest rate agreements are used to hedge against the
changes of the interests.
The derivative agreements of the group are booked according
to IAS 39: Financial instruments. Derivative agreements are
initially recognized at their purchase cost which is
equivalent to the fair value and they are subsequently
remeasured at fair value.
Fair values	Nominal	Fair	Fair	Fair
of derivative	value	value,	value,	value
agreements		pos.	neg.	total
31.8.2010				arvo
1000 EUR
Currency forward
contracts	199	0	-14	-14
Currency option
contracts	1 315	0	-89	-89
Interest rate swap
agreements	4 930	0	-288	-288
Fair values of derivative agreements are determined by using
the market prices for the equivalent agreements on the day of
the closing of  the accounts. Fair values state for the income
or expenses the group would book if the derivative agreements
were closed at the end of the fiscal period.
CONSOLIDATED FLOW	2009/10		2008/09
OF FUNDS	12		12
STATEMENT, IFRS	months		months
1000 EUR
Flow of funds
from operations:
Profit before taxes	-3 840		-3 235
Adjustments	-1 337		3 199
Change in working
capital	-9 815		17 453
Financial income and
expenses and taxes	-1 055		-960
Flow of funds from
operations	-16 047		16 456
Flow of funds from
investments:
Investments in
tangible and
intangible assets	-776		-3 656
Income from sales
of tangible and
intangible assets	479		61
Payments of loans	1		1
Flow of funds from
investments	-295		-3 595
Flow of funds from
financial items:
Withdrawals of
short-term loans	6 172		5 000
Payments of
short-term loans	-869		-5 000
Withdrawals of
long-term loans	238		2 349
Payments of
long-term loans	-1 039		-3 207
Dividends	0		-333
Flow of funds from
financial items	4 502		-1 191
Change of liquid
funds	-11 840		11 670

 

 

Lahti November 11, 2010

 

VAAHTO GROUP PLC OYJ

 

Anssi Klinga

President (CEO)

 

Information:

Anssi Klinga

CEO, Vaahto Group Plc Oyj

tel. +358 50 4661470