RAUTE OYJ'S INTERIM REPORT JANUARY 1 - SEPTEMBER 30, 2004
1 (15)
RAUTE OYJ STOCK EXCHANGE BULLETIN
Translation October 27, 2004 at 9 a.m.
RAUTE OYJ'S INTERIM REPORT JANUARY 1 - SEPTEMBER 30, 2004
- Net sales MEUR 60.6 (55.1) and operating profit MEUR 4.8 (-7.6)
grew markedly. Net sales of the current business increased to MEUR
53.2 (35.8) and operating profit to MEUR 2.0 (-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 market prospects for 2005 are fairly positive.
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 smaller-scale modernization projects. Our customers'
2(15)
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."
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.
3(15)
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 four-fold compared to the
corresponding period in 2003.
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(15)
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.
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, 2004.
5(15)
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,
2004. 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 period
amounted to MEUR 12.0 (MEUR 11.0). Gearing stood at -37.2 percent
(-8.1 percent) and equity ratio at 49.2 percent (44.0 percent).
6(15)
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 7.83. 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, 2004. The corresponding matching
date is December 9, 2004.
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 above-
mentioned 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, 2004.
7(15)
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 wood-based 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 cost-effectiveness
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.
8(15)
RAUTE GROUP
(The figures have not been audited)
1.1.- 1.1.- 1.1.-
30.9.2004 30.9.2003 31.12.2003
1 000 1 000 1 000
INCOME STATEMENT EUR EUR EUR
NET SALES 60 628 55 138 97 608
Other operating income 3 497 726 983
Operating expenses -57 223 -60 637 -98 570
Depreciation and write downs -2 126 -2 794 -3 361
OPERATING PROFIT/LOSS 4 776 -7 567 -3 340
% of net sales 8 % -14 % -3 %
Financial items 190 161 1 065
PROFIT/LOSS BEFORE
EXTRAORDINARY ITEMS 4 966 -7 405 -2 274
% of net sales 8 % -13 % -2 %
Extraordinary items 0 0 0
PROFIT/LOSS BEFORE
TAXES 4 966 -7 405 -2 274
% of net sales 8 % -13 % -2 %
Income taxes *) -1 615 1 671 -429
Minority interests -33 0 0
PROFIT/LOSS FOR
THE PERIOD 3 318 -5 735 -2 703
% of net sales 5 % -10 % -3 %
*) Income taxes include the tax liability
estimated for the report period.
9(15)
1.1.- 1.1.- 1.1.-
NET SALES 30.9.2004 30.9.2003 31.12.2003
BY BUSINESS 1 000 1 000 1 000
SECTOR EUR % EUR % EUR %
Raute (Proforma) 53 230 88 35 835 64 66 658 68
Raute Precision 7 398 12 19 303 35 30 950 32
Total 60 628 100 55 138 100 97 608 100
1.1.- 1.1.- 1.1.-
OPERATING PROFIT/LOSS 30.9.2004 30.9.2003 31.12.2003
BY BUSINESS 1 000 1 000 1 000
SECTOR EUR % EUR % EUR %
Raute (Proforma) 1 983 42 -6 220 82 -2 683 80
Raute Precision *) 2 793 58 -1 347 18 -657 20
Total 4 776 100 -7 567 100 -3 340 100
*) Includes the capital gains of EUR 2,8 million on the sale
of Raute Precision Oy.
1.1.- 1.1.- 1.1.-
30.9.2004 30.9.2003 31.12.2003
NET SALES 1 000 1 000 1 000
BY MARKET AREA EUR % EUR % EUR %
Finland 11 540 19 8 499 15 13 190 14
Russia 8 153 13 4 825 9 6 497 7
Other European Countries 8 095 13 11 584 21 16 745 17
North America 10 309 17 13 437 24 20 587 21
South America 10 031 10 8 018 15 19 697 9
Asia 5 948 17 8 374 15 8 917 20
Oceania 6 084 10 0 1 10 076 10
Rest of the world 468 1 401 0 1 899 2
Total 60 628 100 55 138 100 97 608 100
10(15)
30.9.2004 30.9.2003 31.12.2003
GROUP 1 000 1 000 1 000
BALANCE SHEET EUR EUR EUR
ASSETS
Fixed assets
-intangible 1 839 1 697 1 548
-tangible 14 645 17 664 17 883
-investments 2 095 2 702 2 638
Current assets
-inventories 4 123 6 122 5 728
-receivables 14 469 16 300 22 200
-current assets in
marketable securities 11 731 10 036 11 500
-cash in hand and banks 2 510 997 2 012
TOTAL 51 413 55 517 63 510
LIABILITIES
Shareholders' equity 22 617 19 838 23 313
Minority interests 338
Obligatory provisions 1 878 1 594 1 985
Liabilities
-long-term liabilities 1 164 781 1 424
-advances received 4 727 10 435 7 060
-short-term liabilities 20 688 22 868 29 728
*)
TOTAL 51 413 55 517 63 510
*) The dividend of EUR 1,9 million to be paid in December 2004,
is included in the short-term liabilities.
Liquid assets 14 241 11 033 13 513
Interest bearing liabilities 5 694 9 421 9 275
11(15)
GROUP 1.1.- 1.1.- 1.1.-
CASH FLOW STATEMENT 30.9.2004 30.9.2003 31.12.2003
1 000 1 000 1 000
EUR EUR EUR
OPERATING CASH FLOW
Payments from sales 55 667 61 123 93 999
Payments from other
operating income 319 93 124
Cash paid to suppliers and
employees -54 928 -63 005 -94 270
Interest paid -714 -279 -385
Interest received 565 362 1 288
Dividends received 299 169 169
Income taxes paid -288 705 779
Cash flow before
extraordinary items (A) 920 -832 1 704
INVESTMENT CASH FLOW
Capital expenditure in
tangible
and intangible assets -1 299 -701 -1 398
Acquisition of subsidiaries 0 -104 -104
Disposal of subsidiaries 7 385 0 0
Proceeds from sale of
tangible
and intangible assets 178 77 125
Proceeds from sale
of investments 384 613 938
Investment cash flow (B) 6 648 -115 -439
FINANCIAL CASH FLOW
Change in short-term loans -3 685 -276 216
Repayment of long-term loans -252 -277 -501
Change in long-term and
short-term receivables -996 -33 -33
Dividends paid -1 907 -1 907 -1 907
Financial cash flow (C) -6 840 -2 493 -2 225
CHANGE IN FINANCIAL RESOURCES 728 -3 440 -960
(A+B+C) increase(+)/decrease(-
)
12(15)
CASH AND MARKETABLE
SECURITIES
at beginning of period 13 513 14 473 14 473
at end of period 14 241 11 033 13 513
KEY RATIOS 30.9.2004 30.9.2003 31.12.2003
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 32 63 39
- Raute (Proforma) 32 47 22
Overseas sales,
% of net sales 81,0% 84,6% 86,5%
Gross capital expenditure
in fixed assets EUR million
- Group 1,4 0,8 1,5
- Raute (Proforma) 1,4 0,7 1,2
Gross capital expenditure
in fixed assets
% of net sales 2,4 % 1,5 % 1,5 %
Personnel in books on average
- Group 600 774 783
- Raute (Proforma) 555 575 582
13(15)
Personnel effective on
average
- Group 598 707 707
- Raute (Proforma) 553 513 509
Earnings per
share, EUR 0,87 -1,50 -0,71
Equity to
share, EUR 5,93 5,20 6,11
Issue-adjusted number of shares,
1,000's 3 815 3 815 3 815
Issue-adjusted number of shares,
at the end of the period
1,000's 3 815 3 815 3 815
THE DEVELOPMENT OF THE
GROUP'S
QUARTERLY RESULTS 7 - 9 4 - 6 1 - 3 10 - 12
1.000 EUR 2004 2004 2004 2003
Net sales
- Raute (Proforma) 18 708 15 799 18 723 30 823
- Raute Precision 0 0 7 398 11 647
Total 18 708 15 799 26 121 42 470
Operating profit/loss
- Raute (Proforma) 683 787 513 3 537
- Raute Precision *) 0 0 2 793 690
Total 683 787 3 306 4 227
% of net sales 3,7 % 5,0 % 12,7 % 10,0 %
Financial items -42 159 73 904
Profit/loss before
extraordinary items 641 945 3 380 5 131
% 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
14(15)
30.9.2004 30.9.2003 31.12.2003
OFF BALANCE SHEET 1 000 1 000 1 000
COMMITMENTS EUR EUR EUR
Security for own debts
Pledged 123 123 123
Mortgages 12 623 10 926 10 926
Security for
Group's liabilities
Guarantees 5 053 2 485 4 675
Security for
others' liabilities
Guarantees 747
Other own liabilities
Leasing- and rents
liabilities
-for the current
accounting period 82 453 523
-for the following
accounting periods 100 1 493 1 108
Foreign exchange derivatives
*)
forward contracts
- nominal value 9 757 4 462 4 880
- market value 3 11 53
options, bought
- nominal value 4 029
- market value 2
Other own liabilities 448
*) Project deliveries in foreign currencies are protected by forward
foreign exchange contracts.
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
15(15)
DISTRIBUTION HEX Helsinki Exchanges
FURTHER INFORMATION
Mr. Tapani Kiiski, President and CEO, tel.
+358 3 829 3560, mobile +358 400 814 148
Ms. Arja Hakala, CFO, tel. +358 3 829 3293
