ANNUAL ACCOUNTS INFORMATION January 1 ? December 31, 2004
LÄNNEN TEHTAAT PLC Stock exchange release Feb. 24, 2005 at 9;00 am
ANNUAL ACCOUNTS INFORMATION January 1 December 31, 2004
Net turnover by Lännen Tehtaat totalled EUR 473.8 (2003: 492.0)
million. The consolidated operating profit was EUR 8.7 (11.7) million
and profit before extraordinary items EUR 7.7 (8.4) million. Earnings
per share came to EUR 0.97(1.11). The Board will propose a dividend of
EUR 0.65 (0.65) per share to the Annual General Meeting.
Group structure
Several changes occurred in the Group structure during 2004. The most
significant of these were the acquisition of a majority holding in
Kuopion Kalatukku Oy and its incorporation into the Group in June, and
the exit of the Machinium Division from the Group in July, when
Machinium Ltd and its Swedish subsidiaries filed for bankruptcy.
Ateriamestarit Oy, the joint venture set up with Raisio Nutrition Ltd,
began operations in May. At the end of the year, the Group acquired
external minority shareholdings in its Agricultural Divisions animal
feeds business: the 25.0% minority holding in SIA Baltic Feed was
acquired in late November, and the 12.1% minority holding in the
Suomen Rehu Group was acquired in late December. Following this, the
Suomen Rehu Group is now wholly owned by Lännen Tehtaat.
The Food Division consists of Apetit and Lännen Sugar, both units of
Lännen Tehtaat plc, and Apetit Kala Oy (formerly Kuopion Kalatukku
Oy), which was incorporated into the Division in June. At the end of
the year, Tresko Fish Ltd and Kalatori Foods Oy were merged into
Apetit Kala Oy.
The Agricultural Division consists of the following companies: Suomen
Rehu Ltd and its subsidiary companies Lännen Rehu Oy and Hiven Oy in
Finland, SIA Baltic Feed in Latvia and Rehu Eesti Oü in Estonia; Avena
Nordic Grain Oy and its Russian subsidiary ZAO Avena St. Petersburg;
and Lännen Plant Systems and Harviala Oy.
Of the associated companies, Sucros Ltd, Ateriamestarit Oy and Ab
Silva Seafood Oy belong to the Food Division, while Movere Oy and
Farmit Website Oy are part of the Agricultural Division.
The Machinium Division, which was disengaged from the Lännen Tehtaat
Group in July, comprised Machinium Ltd as the parent company and the
following subsidiaries: Lännen Engineering Oy and Suomen Rakennuskone
Oy in Finland; SMA Construction AB and SMA Maskin AB, plus its
subsidiary SMA Maskinuthyrning AB, in Sweden; AS Balti Ehitusmasin-
Baltem in Estonia; SIA BCM Baltijas Celtniecibas Masina in Latvia; and
UAB Baltijos Statybines Masinos in Lithuania.
Net turnover
The Lännen Tehtaat Groups consolidated net turnover totalled EUR
473.8 (2003: EUR 492.0) million. The Food Division accounted for 28%
(23) of this figure, the Agricultural Division for 62% (58) and the
Machinium Division for 10% (19).
The Food Divisions net turnover was EUR 130.6 (114.9) million. The
increase on the previous years net turnover was entirely due to the
addition of Apetit Kala to the Division in June. Sales of Apetits
retail products were up slightly on the 2003 figure, whereas food-
industry sales and exports were down on the previous figures. From
June onwards, sales of sugar manufactured in Finland fell below their
previous years level. This was due to imports of sugar for the
Finnish retail trade from the Baltic States, following their accession
to the European Union in May.
Net turnover for the Agricultural Division was EUR 294.3 (282.6)
million. Net turnover in the animal feeds business was below the
previous years level and fell slightly short of the targeted figure.
Grain trade net turnover for Avena Nordic Grain was considerably
higher than in 2003. Other operations in the Agricultural Division
accounted for only a minor proportion of the Divisions net turnover.
For the period up to its exit from the Lännen Tehtaat Group, the
Machinium Divisions net turnover totalled EUR 48.9 million (2003 full
year: EUR 94.5 million).
Net turnover for the parent company Lännen Tehtaat plc was EUR 107.5
(115.0) million.
Profits
The consolidated operating profit for 2004 was EUR 8.7 (11.7) million
and profit before extraordinary items EUR 7.7 (8.4) million. These
figures were affected by the provision of EUR 4.0 million entered in
June to cover the realization of liabilities and other losses in the
bankruptcy of Machinium Ltd.
Direct taxes recorded in the profit and loss account came to EUR 1.4
(2.6) million.
After taxes and minority interests, the Groups profit for the
financial year came to EUR 6.0 (6.7) million.
The Food Divisions operating profit amounted to EUR 5.2 (6.5) million
in 2004. Apetits profitability fell short of the previous years
level due to low sales prices, higher raw material costs and the lower
margins resulting from the lower net turnover for food-industry sales
and exports. Profits were also affected by the lower profit
contribution (EUR 0.8 million) of the associated company Sucros. The
Divisions operating profit was boosted by Apetit Kala during the
second half of the year.
The Agricultural Divisions operating profit amounted to EUR 8.2 (8.3)
million. Profitability in the animal feeds business was almost at the
targeted level but was below the previous years figure. Profitability
was weakened by the drop in sales margins in the second and third
quarters as a result of high raw material prices. Grain trade
profitability was at the 2003 level.
The Machinium Division recorded an operating loss for the year: EUR
4.7 (-3.1) million.
Fourth-quarter net turnover and net profit
Net turnover in October-December was EUR 112.4 (129.2) million, of
which the Food Division accounted for EUR 37.8 (27.3) million and the
Agricultural Division for EUR 74.6 (73.4) million. The Machinium
Divisions fourth-quarter net turnover in 2003 was EUR 28.5 million.
Lännen Tehtaats fourth-quarter operating profit was EUR 5.2 (3.3)
million and its profit before extraordinary items EUR 5.2 (2.4)
million. The Food Division accounted for EUR 1.9 (1.8) million and the
Agricultural Division for EUR 3.3 (2.7) million of the operating
profit. In the fourth quarter of 2003, the Machinium Division made an
operating loss of EUR 1.2 million.
Financing
The Groups financing position changed significantly following the
exit of Machinium. Interest-bearing liabilities totalled EUR 46.2
(73.7) million at the end of the year, and financial assets amounted
to EUR 10.2 (13.1) million. At the end of the financial year,
commercial papers totalling EUR 13.0 (15.0) million had been issued
for short-term financing. Liquidity was secured by long-term committed
credit facilities; no credit facilities were used during the year. Net
financial expenses came to EUR 1.1 (3.3) million. The reduction on the
previous years figure was due to the repayment of high-interest
shareholder loans, the reduction in other debt capital, and the
increase in dividend yields. The equity ratio was 49% (40) at the end
of the year.
Annual General Meeting, share capital and shares
Lännen Tehtaat plcs Annual General Meeting on March 24, 2004 decided
to distribute a dividend of EUR 0.65 (0.30) per share.
The Annual General Meeting authorized the Board of Directors to decide
on increasing the share capital through a new issue and/or by taking a
convertible loan in one or more tranches. In the new issue and/or new
issue based on a convertible bond, the share capital may be increased
by a maximum of EUR 1,222,514, which would mean a maximum of 611,257
shares for subscription. The authorization remains valid for one year
from the date of the AGM. Increasing the share capital and/or taking a
convertible bond is permitted as an exception to the shareholders
right of pre-emption provided that there is a weighty financial reason
for such an exception.
In June, the Board of Directors used the authorization given by the
AGM to increase the companys share capital. The increase took the
form of a targeted share issue in which Antti Räsänen subscribed
195,000 Lännen Tehtaat plc shares in return for a contribution in
kind. The increase in share capital was entered in the Trade Register
on June 22, 2004. The new total number of shares is 6,317,576 and the
share capital EUR 12,635,152. Trading in the new shares on the
Helsinki Stock Exchange began on June 23, 2004.
The AGM also authorized the Board of Directors to decide on the
surrender of Lännen Tehtaat plc shares. Under this authorization, the
Board may surrender 65,000 previously purchased Lännen shares. The
shares may be surrendered in connection with corporate acquisitions or
for a similar purpose, or sold in public trading on the Helsinki Stock
Exchange. The authorization is valid for one year from the date of the
AGM.
The Board has not yet made use of the authorization. The 65,000 Lännen
Tehtaat plc shares in the companys possession represent 1.0% of the
total share capital and total votes.
Investment
Gross investment in non-current assets came to EUR 11.1 (9.5) million.
Investment by the Food Division totalled EUR 5.3 (1.7) million, and by
the Agricultural Division EUR 5.5 (7.1) million. The most significant
investments were the acquisition of a majority holding in Apetit Kala
Oy (formerly Kuopion Kalatukku Oy) through a share exchange in June,
and the minority shareholding purchase in connection with Suomen Rehu
Group. The purchase price of the Apetit Kala Oy shares was EUR 2.6
million, and the price of the minority shares in the animal feeds
business totalled EUR 2.9 million. The Groups other investments were
in productivity and replacement equipment.
Investment by the Machinium Division amounted to EUR 0.3 (0.7) million
up to the time it was disengaged from the Group.
R&D
The Groups product development expenses accounted for 0.6% (0.7) of
net turnover. In animal feeds, the emphasis in 2004 was on the
development of feeding that advances animal health and wellbeing,
feeding technologies that improve the profitability of livestock
production, and the special feeds business.
In food products, the development focus was on the Apetit products. A
new series of vegetable products designed to be steam-cooked in a
microwave was launched in the autumn. The Quick & Tasty fast-food
range, containing plenty of vegetables but little fat, was expanded to
include several new products, such as soups.
Environmental matters
Environmental protection and development expenses have been charged to
the profit and loss account.
Reform of the EUs sugar regime
In July 2004, the European Commission published its plans for changes
to the EU sugar regime. The proposed reform would lead to a cut in
sugar quotas, a reduction in sugar and sugar beet prices, and the
abandonment of country-specific quotas. The aim of the reform is to
cut sugar overproduction and reduce sugar prices in the EU. In the
form proposed, the plan is a threat to sugar beet growing and the beet
sugar industry in peripheral regions of the EU, including Finland.
Together with ten other EU Member States, Finland has proposed changes
to the Commissions plan that would take better account of the Unions
peripheral regions. The EU will also have to take into consideration
its own commitment to the impoverished ACP countries and India. Sugar
imported from these countries is given Community Preference in the EU,
and a higher price is given for their sugar than on the world market.
The reform would therefore also have a damaging effect on the
economies of developing countries.
The EU has appealed against the decision of the WTOs Dispute
Settlement Body concerning the trade dispute between the EU and the
main sugar-producing countries outside the EU. The EU is not likely to
issue proposals for new sugar regulations before the appeal process
has been concluded. New proposals are, however, likely to be issued
before the WTOs ministerial conference in December 2005.
Reform of the sugar regime in one form or another will probably be
introduced for the 2006 harvest. A drop in the price of sugar will
have a detrimental effect on the financial performance of the sugar
sector, including Lännen Tehtaat, in the years to come.
Transition to IFRS reporting
In 2005, the Lännen Tehtaat Group will begin reporting its financial
statements in accordance with the IFRS standards. This also applies to
the interim reports for 2005. The first-quarter interim report will be
published on May 3, 2005. In April, the Group will publish its 2004
figures recalculated and presented in accordance with the IFRS
standards. This will include the 2004 profit and loss account, balance
sheet and the transition calculations for the changeover from
financial statements produced under Finnish Accounting Standards (FAS)
to the IFRS financial statements.
IFRS reporting will be based on the consolidated balance sheet at
January 1, 2004, including the adjustments required for the IFRS
standards. The main impact on the Groups opening balance sheet
concerns the entry of Machiniums financial leasing agreements and the
capitalization of fixed costs of goods acquisition and manufacture
under valuation of inventories. The adjustments will increase the
opening balance sheet total by about 10%. There will be no significant
change in shareholders equity.
The transition to IFRS reporting will have some effect on the net
profit of the Lännen Tehtaat Group. The most significant change is the
elimination of goodwill amortization in the IFRS accounting. The
amount of goodwill amortization under the FAS reporting was EUR 3.1
million in 2004. The present value of cash flows generated via
impairment testing exceeds the book value of asset items that are
subject to testing. The profit effect of the other IFRS changes will
be smaller than that of eliminating goodwill amortization.
The timing of profit accrual will also change. Under the IFRS rules,
Lännens profits will primarily be generated in the final quarter,
when its harvested raw materials are processed into stocks of finished
and semi-finished goods. With prices of products held in stock being
higher than before, the sales margin for the first three quarters will
be reduced. This will affect the Groups food industry business and
partly also its animal feeds business, and especially the associated
company Sucros.
Outlook for 2005
The Food Divisions net turnover will be up in 2005 because it will
include the full years turnover for Apetit Kala. Frozen food sales as
a whole are expected to be in line with the general trend in the
market. However, sales of vegetables and frozen ready-made foods are
expected to grow. There will be no growth in the overall consumption
of sugar, and Sales of Lännen Sugars consumer products are likely to
be no higher than the 2004 level, due to sugar imports.
Net turnover in the animal feeds business is expected to be up on the
2004 level. A reorganization is planned in animal feed production,
which will give rise to non-recurring write-offs in 2005. The benefits
of this reorganization will be seen from 2006 onwards. Grain trade net
turnover will depend on the amount and quality of this years crops in
the main market areas.
The Lännen Tehtaat Groups net turnover for 2005 is expected to be at
the 2004 level. The transfer to IFRS reporting will affect the
consolidated balance sheet and net profit, as well as the timing of
profit accrual. Net profit for the first quarter will be very modest,
at around the same level as in 2004. Net profit for the full year is
expected to be better than in 2004, despite the costs of reorganizing
animal feeds production.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
EUR million
10-12/ 10-12/ 1-12/ 1-12/
2004 2003 2004 2003
Net turnover 112.4 129.2 473.8 492.0
Other operating income 0.5 0.8 3.4 2.1
Costs and expenses -105.7 -123.8 -495.5 -473.8
Depreciation -2.8 -3.5 -11.5 -11.8
Share of profits of
associated undertakings 0.8 0.6 2.5 3.2
Operating profit 5.2 3.3 8.7 11.7
Financial income and
expenses 0.0 -0.9 -1.1 -3.3
Profit before
extraordinary items 5.2 2.4 7.7 8.4
Extraordinary income
Extraordinary expenses
Profit before taxes
and minority interests 5.2 2.4 7.7 8.4
Income taxes -0.5 -0.7 -1.4 -2.6
Minority interests 0.2 0.3 -0.2 0.9
Profit for the period 4.9 2.0 6.0 6.7
PROPOSAL OF THE BOARD FOR THE DISTRIBUTION OF PROFIT
The Board of Directors proposes that Lännen Tehtaat plc pay a dividend
of EUR 0,65 per share.
CONSOLIDATED BALANCE SHEET
EUR million 2004 2003
Assets
Intangible assets 16.6 21.6
Tangible assets 69.4 65.6
Investments 22.8 21.9
Own shares 0.8 0.8
Stocks 46.0 80.2
Receivables 37.7 46.5
Marketable securities 0.5 0.5
Cash and cash equivalents 9.7 12.6
Total 203.5 249.7
Liabilities
Share capital 12.6 12.2
Other capital and reserves 84.9 82.8
Minority interests 1.6 4.9
Provisions 2.1 2.1
Long-term liabilities 27.2 48.3
Current liabilities 75.1 99.4
Total 203.5 249.7
CONSOLIDATED CASH FLOW STATEMENT
EUR million 2004 2003
Operations
Cash flow from operations 16.4 18.8
Change in working capital 24.0 -7.5
Net cash flow from
operations (A) 40.4 11.3
Investments
Investments in non-current
assets -6.5 -9.5
Tangible and intangible assets of
acquired Group undertakings -6.3
Tangible and intabgible assets of
relinquished subgroup 1.6
Proceeds from sales of
non-current assets 0.8 1.5
Net cash flow from
investments (B) -10.4 -8.0
Financing
Share issue 2.3
Change in loans -27.6 -3.0
Dividends paid -3.9 -1.8
Other changes in capital and
reserves and in minority
interests -3.6 -2.3
Net cash flow from
financing (C) -32.8 -7.1
Changes in liquid assets
(A+B+C) -2.8 -3.9
Liquid assets on Jan. 1 13.1 17.0
Liquid assets on Dec. 31 10.3 13.1
KEY INDICATORS 2004 2003
Earnings per share, EUR 0.97 1.11
Equity per share, EUR 15.47 15.29
Dividend per share, EUR 0.65 0.65
Return on investment, % (ROI) 6.7 7.7
Return on equity, % (ROE) 6.4 6.0
Equity ratio, % 48.5 39.5
Current ratio 1.3 1.4
Gross investments, EUR million 11.1 9.5
% of net turnover 2.3 1.9
Average number of personnel 1072 1161
Average number of shares in thousands 6160 6058
BUSINESS SEGMENT INFORMATION
NET TURNOVER
EUR million 10-12/ 10-12/ 1-12/ 1-12/
2004 2003 2004 2003
Food Division 37.8 27.3 130.6 114.9
Agricultural Division 74.6 73.4 294.3 286.6
Machinium Division 0.0 28.5 48.9 94.5
Total 112.4 129.2 473.8 492.0
OPERATING PROFIT
EUR million
Food Division 1.9 1.8 5.2 6.5
Agricultural Division 3.3 2.7 8.2 8.3
Machinium Division 0.0 -1.2 -4.7 -3.1
Total 5.2 3.3 8.7 11.7
AVERAGE PERSONNEL
Food Division 405 331
Agricultural Division 485 442
Machinium Division 182 388
Total 1072 1161
CONTINGENT LIABILITIES
EUR million 2004 2003
Debts against which mortgages
have been given
Pension loans 7.9
Loans from credit institutions 31.7 46.6
Mortgages given for debts
Real estate mortgages 34.9 32.6
Corporate mortgages 51.4 76.0
Shares pledged 3.6 3.6
Other securities given
Corporate Mortgages 0.2 6.9
Pledges 0.0 0.0
Leasing liabilities
Falling due during the following year 0.5 1.0
Falling due at later date 0.5 1.1
Contingent liabilities
for own commitments
Repurchasing commitments 0.2 19.0
Other commitments 0.5 2.4
Contingent liabilities on behalf of
associated undertakings
Guarantees 0.2
Other contingent liabilities
Redemption liability
of leased buildings 2.5 2.6
Outstanding derivative instruments
Forward currency contracts
Market value 0.1 -0.3
Value of underlying instruments 3.3 9.5
Interest rate swaps
Market value -0.7 -0.3
Value of underlying instruments 25.0 25.0
Raw material futures
Market value 0.1 -0.5
Value of underlying instruments 4.1 10.6
The data have not been audited.
LÄNNEN TEHTAAT PLC
Board of Directors
Erkki Lepistö
CEO
More details: Erkki Lepistö, tel. +358 10 402 4002
Distribution:
Helsinki Stock Exchange
Main media
www.lannen.fi
