Vaahto Group Interim Management Statement 1 January – 16 May 2014
VAAHTO GROUP PLC OYJ STOCK EXCHANGE RELEASE 16.5.2014 at 10:00
VAAHTO GROUP INTERIM MANAGEMENT STATEMENT 1 JANUARY – 16 MAY 2014
Turnover from Vaahto Group’s continuing operations for January 1, 2014 to March 31, 2014 was 5.4 million euros (compared with 9.6 million euros for the corresponding period in the previous fiscal year), with an operating profit of 0.1 million euros (0.2 million euros). The Group’s order book for continuing operations on March 31, 2014 totaled 6.5 million euros (17.6 million euros). Turnover and order book stayed behind reference period due to challenging market situation and postponed investment decisions by customers. There are already signs of upturn in the markets. At the beginning of May Japrotek Oy Ab has received new orders. The most significant delivery consists of tanks and digester to Valmet AB in Sweden.
Vaahto Process Technology
Vaahto Process Technology -division’s turnover for January 1, 2014 – March 31, 2014 was 4.4 million euros (8.1 million euros), with an operating profit of 0.2 million euros (0.3 million euros).
Vaahto Process Technology -division is divided into two separate business areas: Japrotek Vessels and Stelzer Mixing Technology. Japrotek Vessels designs and manufactures demanding vessel structures for process-industry and complete vessel and agitator combinations. Stelzer Mixing Technology focuses on the mixing technology for process-industry and related maintenance services.
The market situation for Japrotek Vessels business area remains difficult. Offer book is at good level but delay in investment decisions by customers affects order book. However, there are signs of upturn in the markets and investment decisions have already slightly increased.
The market situation for Stelzer Mixing Technology business area has remained good and order book continued to grow during the first quarter.
In February 2014, Vaahto Group Plc Oyj announced a plan to strengthen its strategy by focusing on Process Technology’s operations.
Vaahto Paper Technology
Turnover from Vaahto Paper Technology -division’s continuing operations for January 1, – March 31, 2014 was 1.0 million euros (1.5 million euros) with an operating loss of 0.1 million euros (operating loss of 0.2 million euros). The main reason for the negative result of the Vaahto Paper Technology -division was the low level of activity.
In February 2014, Vaahto Group Plc Oyj announced to divest or discontinue operations of the unprofitable Paper Technology business in its entirety. The Board of Directors is considering various options for the discontinued Paper Technology business, the primary option being a sale of the business. The Service unit of Vaahto Paper Technology Oy is presented in the financial statements for 2013 as discontinued operations. Also the remaining part of the Vaahto Paper Technology Ltd’s Project unit, which was sold during the fiscal period of 2013, is shown as discontinued operations. AP-Tela Oy, which belongs to Paper Technology -division, is shown under continuing operations.
Directed share issue
The board of directors of Vaahto Group Plc has in its meeting of 10 March 2014 decided to issue up to 2,000,000 new shares in a directed share issue based on an authorization by the general meeting of shareholders on 10 April 2013.
In the share issue the 10 largest shareholders had a subscription right. The basis for the deviation from the pre-emptive subscription right was, according to the decision to issues shares, the strengthening of the company’s financial standing and the securing of the continuance of the company’s operations. In the share issue Hannu Laakkonen subscribed for 1,000,000 shares and Mikko Laakkonen subscribed for 1,000,000 shares. The subscription price per share for all the shares was 0.52 euro. The subscription price was determined on the basis of bids received by the company.
The issued new shares have been registered with the Trade Register on 31 March 2014. Subsequent to the share issue, the total number of shares in the company and the number of votes carried by the shares is 5,977,360. The issued new shares are 33.5 % of the total amount of shares of the company. The issued new shares carry shareholder rights in the company from the date of registration with the Trade Register.
The subscribers have given the company an undertaking not to sell, transfer, donate, or otherwise dispose of the shares issued in the share issue within 180 calendar days from the registering of the shares with the trade register. The company will apply for the listing of the shares at the latest within one year from the issuance of the shares. In connection with the application, the company will publish a listing prospectus in accordance with the Finnish Securities Market Act and the EU Prospectus Regulation.
Financing and liquidity
The financing negotiations of Vaahto Group were concluded on December 2013 and the final agreement provides the Group companies with a grace period for receivables of credit institutions for 2014.
Conditions of the financing agreement for 2014 were met during the first quarter: Company raised 1 M euros in new equity by means of a share issue and the financiers waived loan repayments amounting to 1 M euros. Also, certain conditions related to project contract were met and financiers waived loan repayments for 2 M euros. The total waiver of loan group received was 3 M euros: 2.7 M euros for the parent company and 0.3 M euros for Vaahto Paper Technology Ltd.
Negotiations with Group’s main financiers on financial restructuring are scheduled for fall 2014.
Due to the depreciation of subordinated loans granted to Vaahto Paper Technology Ltd, in fiscal year 2013 the equity of Vaahto Group Plc Oyj was negative 4.3 M euros. Waiver of the loans and the issue of the new shares during the first quarter, have positive impact on the equity of the parent company. However, equity for the review period remains 0.8 M euros negative.
Authorization of the Board of Directors to decide on a share issue
The Annual General Meeting on April 15, 2014 authorized the Board to decide on an issue of new shares as well as option rights and other special rights entitling to shares referred to in Chapter 10 Section 1 of the Finnish Companies Act in one or several lots. The number of new shares issued would be no more than 10,000,000, including shares to be issued based on the special rights.
The authorization is in effect until May 31, 2015, unless the General Meeting amends or cancels the authorization before that.
Vesa Alatalo was appointed as CEO from 16 January 2014 onward. Ari Viinikkala served as CEO until 15 January 2014.
Outlook for the fiscal year of 2014
Demand for Vaahto Group’s products and its financial situation both are highly dependent on global economic developments and other trends affecting its customer industries. Vaahto Paper Technology’s market situation remains uncertain. The market situation for Vaahto Process Technology is expected to be more stable.
Vaahto Group’s financing situation remains tight and involves significant risks. Negotiations with the credit institutions, planned divestments within the Paper Technology business together with the authorization of the Board of Directors to decide on a share issue are strengthening the strategy of the group focusing on Process Technology business and improving financial position and liquidity of the company.
Continuity of the operations requires that the company in 2014 reaches the result and profitability objectives set in the management forecasts and is able to obtain additional financing, strengthen its equity and renegotiate the payment terms for its liabilities. Negotiations with Group’s main financiers on financial restructuring are scheduled for fall 2014.
Operating profit for the fiscal year 2014 is expected to be positive for the Vaahto Group’s continuing operations.
Interim report January 1 – June 30, 2014
Vaahto Group will publish an Interim Report covering six months of operations on August 22, 2014.
Lahti 16, May 2014
VAAHTO GROUP PLC OYJ
The Board of Directors
CEO, Vaahto Group Plc Oyj
tel. +358 40 726 8923
Vaahto Group is a globally operating high technology company serving process industry in the fields of pulp and paper machinery and process machinery.