Investors

PLC UUTECHNIC GROUP OYJ HALF YEAR REPORT 1.1. – 30.6.2017

PLC UUTECHNIC GROUP OYJ HALF YEAR REPORT, JULY 28, 2017 at 8.25 am.

Uutechnic Group’s turnover from 1.1.-30.6.2017 was 16.7 million euros (16.9 million) and its operating loss was -0.7 million euros (operating profit 1.1 million). Uutechnic Group’s order book at the end of June 2017 stood at 14.9 million euros (19.5 million). The earnings per share was

EUR -0.01 (0.01).

OUTLOOK

The Group seeks to be a globally known and preferred cooperation partner with a good financial standing in selected product and market segments. The Group pursues growth organically while also considering opportunities for growth through acquisitions.

The main objective for 2017 is to improve the Group’s profitability. Depart from previous announcement Uutechnic Group expects its revenue to be lower than in 2016 and the operating profit to remain at the last year’s level.

Group’s another key objective to grow and strengthen the mixing technology business has developed favorably. The order backlog of Mixing Technology business has more than doubled compared to the same period last year.     

BUSINESS REPORTING

Uutechnic Group focuses on improving the competitiveness of its customers by providing advanced process technology and a unique service concept worldwide. Its product range includes agitators, pressure vessels, process and storage tanks, reactors and heat exchangers, as well as different types of long welded and machined axially symmetrical parts, such as rolls, cylinders, pipes and cones.

The Group’s main industries are hydrometallurgy and mining, pulp, paper and food industries, as well as fertilizer industry and other chemical industries, and environmental technology.

Plc Uutechnic Group Oyj, the parent company of Uutechnic Group, is listed on Nasdaq Helsinki. The Group’s subsidiaries are wholly owned by the parent company. The parent company is responsible for the Group’s management, strategic planning, financial administration, IT, financing and HR management. The Group’s business operations are carried out by the subsidiaries: AP-Tela Oy, Japrotek Oy Ab, Uutechnic Oy and Stelzer Rührtechnik International GmbH.

All of the Group’s business operations are reported as one segment.

Mixing Technology business

In the Mixing Technology business line the first half of the year has proceeded as planned. Customer activity has been relatively high in all industries which has enabled high order intake. This is a good starting point for the second half of the year and due to strong order backlog the Mixing Technology business line is expected to grow clearly compared to last year.

Vessel business

In the Vessel business line order intake for the beginning of the year has been significantly lower than expected and the order backlog has not developed as planned. Quality issues with construction materials in a project delivered during reporting period caused unexpected costs. The company has taken actions to receive compensations from the material supplier.

In the Vessel business line co-determination negotiations were started in the second quarter of the year to improve cost efficiency and competitiveness. The negotiations ended after the reporting period on July 12th. It was decided that the number of personnel will be adjusted in accordance with the company’s financial situation and order backlog. Terminations of employment contracts will concern 11 persons maximum and temporary lay-offs may last more than 90 days. The goal to get 20 percent improve on the company’s competitive advantage will show partially on the second half of the year and fully in 2018.

Market situation in the Vessel business continues to be challenging.

Roll and Pipe business

In the Roll and Pipe business the beginning of the year was challenging due to weak starting point and low order intake. The operations and production capacity were adjusted with co-determination negotiations that ended on January. Since February order intake has progressed very well and order backlog is at good level even though lower than last year’s record high level. Development actions concerning production planning have improved production transparency, efficiency and outcome. Outlook for the second half of the year is positive.

NEW ORDERS AND ORDER BOOK 

During the reporting period, Uutechnic Group received new orders for 16.2 million euros (24.2 million euros). Order intake in the Mixing Technology business have grown significantly compared to last year but in the Vessel business order intake is fundamentally lower. In the Rolls and Pipes business order intake is lower than last year’s record high level but still at good level.

At the end of the reporting period Uutechnic Group’s order book stood at 14.9 million euros (19.5 million euros). The order back log extends until 2018.

TURNOVER AND PROFITABILITY

Turnover for the reporting period was 16.7 million euros (16.9 million euros) and operating loss was -0.7 million euros (operating profit 1.1 million euros). Finland represented 54.9 % of the Group’s turnover, including indirect exports. The rest of Europe accounted for 34.7 % of turnover, while Asia represented 9.5 %, South America 0.6 % and North America 0.3 %.

The Group’s turnover and operating profit did not develop as planned. The negative outcome is resulting from material issues in one of the Vessel businesses project. The company has taken actions to get compensations from the material supplier.

FINANCIAL STANDING AND LIQUIDITY

At the end of the reporting period, Uutechnic Group’s balance sheet stood at 24.4 million euros (25.8 million euros). The Group’s interest-bearing liabilities totaled 6.9 million euros. (5.3 million euros), including EUR 2.0 million in subordinated loans. The Group’s cash flow from operations for the financial year was -3.0 million euros (1.0 million euros).

At the end of the reporting period, the Group’s equity ratio was 82.7% (58.2%) net gearing was 66.0% (46.7%). Return of investment (ROI) was -4.9% (11.0%) and return on equity (ROE) was -8.2% (14.2%).

Non-current assets on Uutechnic Group’s balance sheet totaled 11.5 million euros (11.3 million euros).

EQUITY

The Group’s equity stood at EUR 9.6 million (10.2 million).

Loans granted by two shareholders, totaling EUR 2.0 million, were converted into unsecured subordinated loans in conjunction with a financing arrangement in 2015. These loans are subordinated loans in accordance with chapter 12 of the Limited Liability Companies Act, and their capital repayments and interest payments must meet the conditions provided in the Act. The loans will be repaid as a one-off payment on 31 December 2019. However, the company is entitled to pay early. The annual interest rate on the outstanding loan capital is 4%. Of the total loan capital, EUR 1 million involves a specific right of exchange. To the extent that loan capital remains unpaid on 31 December 2017, the creditors are entitled to convert the unpaid part of the capital, in part or in full, into shares in the company at a value of EUR 0.25 per share. This right of exchange is based on the authorization to issue shares that was approved by the company’s Annual General Meeting on 14 April 2015.

RESEARCH, PRODUCT DEVELOPMENT AND INVESTMENTS

During the first half of the year the Mixing Technology business line has launched productization project aiming for increasing efficiency by harmonized product structures and modern IT tools of for sales and product management. Concerning new products, one patent application was issued. Further on, one product development project for emerging to a market novel to Uutechnic has proceeded into a virtual prototyping phase.

The Group’s investments in fixed assets for the financial year totaled 0.1 million euros (0.7 million euros) and mainly consisted of minor investments in equipment.

PERSONNEL

At the end of the reporting period, Uutechnic Group had 193 (189) employees of whom 86 (77) were white collar and 107 (112) were blue collar. Of the employees, 129 worked in Finland and 64 in Germany.             

BOARD OF DIRECTORS, MANAGEMENT AND AUDITORS

On March 30, 2017 the Annual General Meeting re-elected Sami Alatalo (chairman), Hannu Kottonen, Kristiina Lagerstedt and Jouko Peräaho as board members of Plc Uutechnic Group Oyj. Hannu Kottonen and Kristiina Lagerstedt are independent of the company and its major shareholders.

Jouko Peräaho has served as the Group’s CEO since 9.3.2017. Martti Heikkilä served until 8.3.2017.

Ernst & Young, Authorised Public Accountants, served as the Group’s auditor, with Osmo Valovirta, APA, as the principal auditor.

The Company adheres to the Finnish Corporate Governance Code 2015 for listed companies (Nasdaq Helsinki). The Group publishes its Corporate Governance Statement as part of its annual report and on its website at www.uutechnicgroup.fi.

SHARES AND SHAREHOLDERS

The Annual General meeting of the company on 30 March 2017 decided, based on the Board’s proposal, that the right to the shares incorporated in the book-entry system and the rights that the shares carry have been forfeited with regard to the 3 480 shares being on the joint book-entry account in the name of the company and opened on the behalf of the shareholders whose rights have not been declared for registration during the registration period. Plc Uutechnic Group Oyj’s Board of Directors cancelled shares in question as announced in March 30th. After the cancellation the total number of the shares is 56 501 730, which represents 56 501 730 shares.

According to the book-entry security system, Plc Uutechnic Group Oyj had 1572 registered shareholders on 30 June 2017. The total number of shares owned directly or through controlled companies by the Board of Directors, CEO and Group management was 11 115 800 shares or 20.0% of all shares.

Plc Uutechnic Group Oyj is listed on the NASDAQ OMX Helsinki Oy exchange. The company’s stock symbol is UUTEC and its ISIN code is FI0009900708.

Plc Uutechnic Group Oyj has not paid dividends on the reporting period.

AUTHORISATION TO ISSUE SHARES

In accordance with the proposal of the Board of Directors, the Annual General Meeting of 30 March 2017 authorized the Board of Directors to resolve on the issue of at most 10.000.000 new shares or special rights entitling to shares.

REMARKABLE RISKS AND UNCERTAINTY FACTORS AND THEIR MANAGEMENT

The demand for Uutechnic Group’s products is dependent on trends and developments in the global economy and the Group’s customer industries, which poses a general external risk to its operations. The Group seeks to mitigate the risks arising from changes in demand by targeting its sales operations in line with current trends in various market areas and customer industries.

According to the Board of Directors of the Group’s parent company, other significant risks and uncertainty factors to which the Group is exposed are related to at least the following aspects:

• Turning the Group’s previously loss-making units into profitable units or maintaining the profitability of units requires further improvements in competitiveness and the achievement of sufficient operating volumes.
   
• The Group will continue to implement consolidation processes and pursue identified synergies to improve profitability. It is possible that not all of the identified synergies will be achieved, or that processes will fail.    
   
• The Group aims to grow organically as well as through acquisitions. There is no certainty that the Group will be able to find suitable candidates for acquisition, obtain the financing required for acquisitions or acquire businesses on satisfactory terms.    
   
• The acquisition prices paid in the context of business combinations and the goodwill generated by them also involve risks. The Group’s calculations to test goodwill are based on financial forecasts and assumptions prepared by the management.
   
• Part of the Group’s business operations consist of major or large project deliveries. Extensive and complicated projects involve the risk that the future costs and any other risks related to the delivery cannot be estimated sufficiently accurately in the bidding phase. In such cases, the result of the project may prove weaker than expected. In contracts for extensive projects, the claims for compensation for delayed delivery or deficient performance may be significant.
   
• Unfavorable changes in the financial markets may have an effect on the Group’s result and the availability of equity and debt financing on competitive terms. Uncertainty in the international economy may lead to payment delays and an increased risk of credit losses.

The Group seeks to protect itself against risks using all measures that can reasonably be implemented. These include, among other things, measures aimed at improving profitability and productivity, training for employees, guidelines and instructions, insurance policies, critical examination of the terms and conditions of commercial agreements and the systematic monitoring and development of operations.

LITIGATION

Japrotek Oy Ab has started legal actions at the lower court of justice in Sweden against material supplier due to faulty materials. Based on the current information, the company expects that the costs resulted from these actions will be received from the opponent.

EVENTS DURING THE REVIEW PERIOD

02.01.2017  Jussi Vaarno appointed as Vice Presindent

19.01.2017  AP-Tela Oy’s co-determination negotiations concluded

27.02.2017  Review of financial statements

08.03.2017  Financial statements published

08.03.2017  Invitation to the Annual General Meeting

08.03.2017  Changes in Uutechnic Group’s Business Model and Top Management

16.03.2017  Disclosure of Change in Shareholdings under Chapter 9, Section 10 of the Securities Markets Act

16.03.2017  Adjustment in announcement about Publication of Financial Statements 2017

30.03.2017  The decisions of the Annual General Meeting

30.03.2017  Change in the Number of the Treasury shares

13.04.2017  Change in the Number of the Treasury shares

28.04.2017  Business review from January to March 2017

29.05.2017  Japrotek Oy Ab started co-determination negotiations

29.06.2017  Change in Plc Uutechnic Group Oyj’s management team

EVENTS AFTER THE END OF THE REPORTING PERIOD

Japrotek Oy Ab’s co-determination negotiations concluded July 12 2017. It was decided that the number of personnel will be adjusted in accordance with the company’s financial situation and order back log. Terminations of employment contracts will concern 11 persons maximum and temporary lay-offs may last more than 90 days.

ACCOUNTING PRINCIPLES

This half year financial report was prepared in accordance with the IAS 34 standard. It does not include all of the notes or other information to be presented with financial statements. For this reason, the half year financial report should be read together with the financial statements for 2016.

The half year financial report was prepared in line with the accounting principles presented in the financial statements for 2016.

The information included in this half year financial report has not been audited. The figures are presented in thousands of euros (EUR 1,000), unless otherwise mentioned.

KEY FIGURES OF THE UUTECHNIC GROUP’S HALF YEAR REPORT

The figures are presented in thousands of euros (EUR 1,000), unless otherwise mentioned. The figures are unaudited.