INTERIM REPORT FOR JANUARY 1 - MARCH 31, 2006
Lännen Tehtaat plc Stock Exchange Release May 9, 2006 at 8;30 a.m.
INTERIM REPORT FOR JANUARY 1 - MARCH 31, 2006
. Consolidated net sales increased by 3% to EUR 97.0 million in January-March
(2005: EUR 94.0 million).
. Net sales of all continuing divisions increased.
. Operating profit/loss excluding non-recurring items improved by EUR 1.1 million
to EUR 0.7 (-0.4) million.
. Operating loss after non-recurring items EUR -0.5 (-3.6) million.
. Profit/loss before taxes EUR 1.1 (-4.4) million.
. Earnings per share EUR 0.03 (-0.49).
. Clearer definition for structure continued.
. Programme to cut overheads implemented.
This interim report has been drawn up according to the IFRS recognition and
valuation principles. This interim report does not comply with all of the
requirements of IAS 34, Interim Financial Reporting.
The information in the report is unaudited.
Key indicators, EUR million
1-3/2006 1-3/2005
Net sales 97.0 94.0
Operating profit/loss excluding non-
recurring items 0.7 -0.4
Operating profit/loss after non-
recurring items -0.5 -3.6
Profit/loss before taxes,
excluding non-recurring items -0.2 -1.2
Profit/loss before taxes,
after non-recurring items 1.1 -4.4
Profit/loss after taxes 0.4 -3.4
Earnings per share, EUR 0.03 -0.49
NET SALES AND PROFITS
Lännen Tehtaat's net sales in January-March totalled EUR 97.0 (94.0) million. The
net sales of the Food Division fell with the termination of sugar sales at the
end of 2005. The net sales of the Feed segment and Grain Trading rose.
Lännen Tehtaat's operating profit excluding non-recurring items during the period
under review was EUR 0.7 (-0.4) million. The financial performance in all of the
divisions improved. The loss before taxes and excluding non-recurring items was
EUR -0.2 (-1.2) million and after non-recurring items EUR 1.1 (-4.4) million. The
profit after taxes was EUR 0.4 (-3.4) million.
During the period under review the Group sold the investments it had made in the
shares of other quoted companies, realizing a profit of EUR 2.4 million, which
has been recorded under financial income.
BUSINESS SEGMENTS
The net sales of the Food Division totalled EUR 26.2 (32.0) million. The
comparable net sales of the Food Division in January-March went up by 8 per cent,
if the effect of the terminated sugar sales, EUR 7.7 million, is eliminated from
the net sales of the comparison period. The net sales of the Apetit Frozen Foods
business unit rose slightly. The net sales of retail products went up by 2 per
cent over the comparison period. The growth was greatest in the strategic focal
groups of ready-made frozen foods. Sales of frozen vegetables sold under the
Apetit brand went well. Sales of jam went down. Apetit Kala's net sales rose by
14 per cent compared with the corresponding period one year earlier, the focus
being on consumer-packaged fish products. Shop-in-shop sales showed strong
growth.
The operating loss of the Food Division excluding non-recurring items was EUR
-0.4 (-1.1) million and after non-recurring items EUR -0.5 (-1.1) million.
Financially, the Apetit Frozen Foods business unit performed at a similar level
to the comparative period, while Apetit Kala's performance was considerably
better than that in the comparative period. The non-recurring expenses of EUR 0.1
million are related to reductions in the division's personnel.
The net sales of the Feed business totalled EUR 52.9 (44.0) million. The effect
of Mildola on the growth in the segment's net sales was EUR 7.2 (-) million. The
comparable net sales went up by 4%. The growth in net sales was attributable to
an increase in sales volumes and rise in sales prices.
The operating profit of the Feed segment excluding non-recurring items was EUR
2.0 (1.7) million and after non-recurring items EUR 1.5 (-1.5) million. Mildola
had a positive effect on the financial performance. The profitability of feed
sales suffered in the early part of the year from high raw-material prices, the
effect of which could not be passed on entirely to sales prices. Non-recurring
costs of EUR 0.5 million comprise provisions made for reductions in personnel.
The net sales of Grain Trading rose by 8 per cent. The net sales during the first
quarter totalled EUR 21.5 (19.7) million. Grain Trading's volume rose from the
level in the comparative period. Market prices were also higher. The operating
profit amounted to EUR 0.4 (0.1) million. Derivate instruments to which hedge
accounting could not be applied had an adverse effect of EUR 0.2 million on the
result in the comparative period.
At the end of this reporting period, following the sale of the entire
shareholding in Harviala Ltd, the Other Operations segment comprises only
operations that are common to the Group and unallocated to the segments. The
segment's net sales were EUR 0.0 (1.8) million. The net sales of the Lännen Plant
Systems business unit are included in the comparative year.
The segment's operating loss was EUR -1.9 (-1.0) million, the main constituent of
which is non-recurring expenses of EUR 0.6 million caused by the sale of the
shares in Harviala Ltd.
FINANCING AND CASH FLOW
The Group's financing situation and liquidity remained good. The cash flow from
operations after interest and taxes stood at EUR 4.7 (4.2) million. The net cash
flow from investment was EUR 2.7 (-0.7) million.
At the end of the period under review the Group had interest-bearing liabilities
amounting to EUR 41.9 (48.2) million and liquid assets of EUR 14.7 (11.0)
million. Net interest-bearing liabilities totalled EUR 27.2 (37.2) million. The
consolidated balance sheet total was EUR 211.6 (205.7) million. The equity ratio
was 52.4% (48.4%). Commercial papers issued for the Group's short-term financing
stood at EUR 17.0 (15.0) million at the end of the review period. Liquidity is
secured with long-term committed credit facilities, none of which were used
during the financial period.
INVESTMENT AND CHANGES IN THE GROUP STRUCTURE
The gross investment in non-current assets during the period under review
amounted to EUR 1.2 (0.3) million. Investment by the Food Division totalled EUR
0.2 million and by the Feed segment EUR 0.9 million. The most significant
investment was associated with the extension to the Lännen Rehu factory at Säkylä
and a loading station for bulk feed at Suomen Rehu's Seinäjoki factory. Other
investment concerned mainly productivity and replacements.
ZAO Scandic Feed, a joint venture company owned equally by Lännen Tehtaat and
Raisio, acquired control of ZAO Tosno Feed Factory, which produces and markets
feeds. The factory is situated near St Petersburg in Russia. The final
implementation of the transaction is still subject to clearance by the Russian
competition authorities.
At the end of March Lännen Tehtaat plc sold its entire shareholding in Harviala
Ltd to Saarioisten Taimistot Oy, recording a loss of EUR 0.6 million on the
transaction. Harviala Ltd has been included in the consolidated income statement
until the end of February.
Suomen Rehu Ltd's Latvian subsidiary, SIA Baltic Feed, established a subsidiary
in Lithuania. The new company, UAB Baltijos Pasarai, will engage in the direct
sale of feed in Lithuania.
IMPORTANT EVENTS AFTER THE REVIEW PERIOD
Lännen Tehtaat plc's associated company Sucros Ltd has brought to a conclusion co-
determination talks with the personnel on the closure of the sugar beet factory
at Salo, and the Board of Directors of Sucros Ltd at a meeting held on April 4,
2006 decided to close down the factory after the production season this year. In
accordance with the EU decision on the reduction of the sugar quota, Sucros Ltd
will be seeking restructuring assistance from a fund set up by the EU for the
purpose. The combination of the assistance and write-downs realized in closing
the factory and other costs associated with the closure are not expected to have
an impact on Lännen Tehtaat's share of the profit in 2006.
In a transaction carried out on April 13, 2006 Suomen Rehu Ltd acquired from
Maatalouskesko Oy the 17.5 per cent interest held by the latter in Mildola Oy,
thus making Suomen Rehu Ltd the sole owner of Mildola Oy.
Lännen Tehtaat is planning the start of ethanol production as part of the
development of the Agricultural Division's operations. Lännen Tehtaat has carried
out a feasibility study of the conditions for starting the production of ethanol
for fuel purposes in western and southwestern Finland. Studies show that the best
conditions for this kind of production lie in the region. The region has adequate
potential for cultivating barley as the raw material for the ethanol plant. There
is also plenty of pig farming in the region, which will be important in terms of
utilizing the animal feed created as a by-product at the plant. There are also a
number of feed factories that will be able to use some of the by-products from
the plant as raw material for the feed. The study shows that it will be possible
to produce ethanol for fuel in Finland profitably if it is integrated with the
animal feed industry.
The feasibility study has planned for the production plant to be located at
Säkylä, on the Iso-Vimma industrial estate. Such a location would enable use of
Lännen Rehu's drying facilities during processing of the by-products. Following
the preliminary studies, Lännen Tehtaat has decided to conduct an environmental
impact assessment for investment in the factory at Säkylä, which is required in
order for the ethanol plant to be built.
DIVIDEND FOR 2005
The Annual General Meeting held by Lännen Tehtaat plc on March 29, 2006 approved
the distribution of a dividend of EUR 0.73 (EUR 0.65) per share for 2005. The
total amount of the dividend, EUR 4.6 million, was taken out of retained earnings
and recorded under interest-free short-term liabilities in the balance sheet at
the end of March. The dividend was paid on April 10, 2006.
BOARD OF DIRECTORS' AUTHORIZATIONS
The Annual General Meeting authorized the Board of Directors to raise the share
capital by new share issues and/or to issue a convertible bond. The
authorizations are valid one year, until March 29, 2007. In a new share issue
and/or an issue through a convertible bond, the share capital can be raised by a
maximum total of EUR 1,263,514 in such a way that a maximum of 631,757 shares
with a nominal value of EUR 2.00 are offered for subscription.
The Board of Directors was authorized to diverge from the shareholders' pre-
emptive subscription right to new shares and/or to convertible bonds if the
company's financial status so requires. The authorization also covers the right
to decide on the subscription prices, those entitled to subscribe shares,
subscription terms, terms concerning a convertible bond and other terms and
aspects related to a new share issue and/or issue of a convertible bond.
The Board of Directors was also authorized to decide on the surrender of the
company's own shares. The authorization concerns the 65,000 company shares
acquired using the authorization granted by the AGM on April 5, 2001. The Board
is authorized to decide to whom and in what order the company's own shares are
surrendered. The shares can be surrendered in one or more tranches. The Board may
decide to surrender the Company's own shares otherwise than in proportion to the
pre-emptive right of shareholders.
So far the Board has not used the authorization given by the Annual General
Meeting to increase the share capital or surrender the company's own shares.
SHARES
During the period under review 658,741 (888,808) company shares were traded on
the Stock Exchange, i.e. 10.4 (14.1) per cent of the total stock. The highest
share price was EUR 23.42 (13.70) and the lowest EUR 17.90 (11.90). The share
turnover for the period totalled EUR 13.3 (11.7) million. The market
capitalization on March 31, 2006 was EUR 144.8 (85.9) million.
PERSONNEL AND ORGANIZATION
The average number of personnel during the period under review was 956 (974). The
number fell in the Food Division and Other Operations segment. In the Feed
segment it increased mainly as a result of Mildola becoming part of the Group.
SEASONALITY OF OPERATIONS
The transfer to IFRS reporting has had a material impact on the accrual of Lännen
Tehtaat's profits over the financial year. As a result of seasonal production and
valuation of inventories in accordance with IAS 2, most of the Group's annual
profit accrues during the final quarter.
Because of the harvest production the seasonal nature of the operations features
most strongly in the Food Division and in the operations of the associated
company Sucros. There is also some seasonal fluctuation in the Feed segment.
Apetit Kala's sales depend on seasonal holidays. A major portion of the entire
year's profit depends on the success of Christmas sales.
Grain Trading's net sales fluctuate annually and quarterly, depending on supply
and demand and on grain prices in Finland and on other markets. Grain Trading
accounts for 20-25 per cent of the Lännen Tehtaat's consolidated net sales. A
fluctuation in its net sales has a considerable impact on the entire Group's net
sales.
PROSPECTS FOR THE END OF THE YEAR
The Food Division's net sales will fall from last year because of the absence of
sugar sales. The net sales of the continuing food business operations will
increase, and the financial performance will be much better because of the
improvement in Apetit Frozen Foods' cost-effectiveness and Apetit Kala's growth.
Increased demand for fish has raised the raw fish prices on world markets. This
rise is expected to slow down the improvement in Apetit Kala's financial
performance starting from the second quarter.
The study started in the autumn into bringing about a significant expansion in
the Group's food business both in Finland and in northern parts of the Baltic Rim
continued.
Investment by the Feed segment will continue by extending and modernizing SIA
Baltic Feed's factory in Latvia. Approval from the Russian competition
authorities for the acquisition of the Tosno feed plant by the joint venture
company ZAO Scandic Feed is expected in the early summer. The closure of the feed
factory at Vaasa and the transfer of production to other feed factories will take
place in stages during the summer.
Net sales for the entire year by the Feeds business will grow, most of the growth
coming from the acquisition of Mildola. As a result of the improved cost-
effectiveness and Mildola's inclusion, the operating profit for the whole year is
expected to be better than last year's disregarding the non-recurring items.
Grain Trading's net sales are expected to be around EUR 100 million and the
financial performance slightly better than last year.
Consolidated net sales will exceed EUR 400 million, but be lower than last year's
because of the absence of sugar sales. The operating profit for the entire year
disregarding the non-recurring items is expected to be somewhat better than last
year's equivalent figure because of the fish operations' better financial
performance, productivity measures and improved cost-effectiveness
Net sales in the second quarter are expected to be similar to those of the first.
The financial performance is expected to be on the same level as that in the
second quarter of last year disregarding the non-recurring items.
CONSOLIDATED INCOME STATEMENT
EUR million
1-3/ 1-3/ 1-12/
2006 2005 2005
3 mths 3 mths 12 mths
Net sales 97.0 94.0 433.0
Other operating income 0.6 0.6 10.9
Operating expenses -96.0 -93.4 -416.3
Depreciation -2.1 -2.1 -8.3
Impairments - -2.7 -3.0
Operating profit/loss -0.5 -3.6 16.3
Financial income and expenses 2.0 -0.3 -1.2
Share of profit of associate
companies -0.4 -0.5 -0.1
Profit/loss before taxes 1.1 -4.4 14.9
Income taxes -0.6 1.0 -3.5
Profit/loss for the
financial period 0.4 -3.4 11.4
The income taxes are based on the result for the period.
Attributable to:
Equity holders of the parent 0.2 -3.1 11.3
Minority interests 0.2 -0.3 0.1
Earnings per share, EUR 0.03 -0.49 1.81
Diluted earnings per share, EUR 0.03 -0.49 1.81
NET SALES BY BUSINESS SEGMENT
EUR million
1-3/ 1-3/ 1-12/
2006 2005 2005
3 mths 3 mths 12 mths
Food Division 26.2 32.0 149.5
Feed segment 52.9 44.0 205.1
Grain Trading segment 21.5 19.7 86.6
Other operations segment 0.0 1.8 7.1
Intra-group sales -3.6 -3.5 -15.3
Consolidated 97.0 94.0 433.0
OPERATING PROFIT/LOSS BY BUSINESS SEGMENT
EUR million
1-3/ 1-3/ 1-12/
2006 2005 2005
3 mths 3 mths 12 mths
Food Division -0.5 -1.1 9.6
Feed segment 1.5 -1.5 9.4
Grain Trading segment 0.4 0.1 1.4
Other operations segment -1.9 -1.0 -4.1
Consolidated -0.5 -3.6 16.3
NET SALES BY GEOGRAPHICAL SEGMENT
EUR million
1-3/ 1-3/ 1-12/
2006 2005 2005
3 mths 3 mths 12 mths
Finland 82.2 83.2 382.8
Other EU member states 11.1 7.6 34.2
Other countries 3.7 3.2 16.0
Consolidated 97.0 94.0 433.0
CONSOLIDATED BALANCE SHEET
EUR million
March 31,2006 March 31,2005 Dec. 31,2005
ASSETS
Non-current assets
Tangible assets 71.6 66.2 72.2
Goodwill 17.4 17.4 17.4
Other intangible assets 1.6 2.3 1.7
Investment in associated companies 20.9 23.0 21.3
Available-for-sale investments 0.3 3.0 3.2
Receivables 7.0 - 6.9
Deferred tax assets 1.2 3.0 1.3
120.0 114.9 123.9
Current assets
Inventories 45.0 47.8 54.5
Receivables 31.9 31.5 42.5
Financial assets at fair value
through profit or loss - 0.5 -
Cash and cash equivalents 14.7 11.0 11.2
91.6 90.8 108.2
Total assets 211.6 205.7 232.2
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the parent 106.8 97.3 112.4
Minority interests 3.9 2.2 3.7
Total equity 110.7 99.5 116.1
Non-current liabilities
Long-term borrowings 14.0 23.0 16.0
Deferred tax liabilities 6.9 7.0 7.4
Non-current provisions 0.9 1.0 0.9
Non-current liabilities total 21.8 31.0 24.3
Current liabilities
Trade payables and other
liabilities 50.2 49.0 60.9
Short-term borrowings 27.9 25.2 29.9
Current provisions 0.9 1.0 0.9
Current liabilities total 79.0 75.2 91.7
Liabilities total 100.9 106.2 116.1
Total equity and liabilities 211.6 205.7 232.2
CONSOLIDATED CASH FLOW STATEMENT
EUR million
1-3/2006 1-3/2005 1-12/2005
3 mths 3 mths 12 mths
Cash flows from operating
activities 4.7 4.2 17.8
Cash flows from investing
activities 2.7 -0.7 -8.0
Cash flows from financing
activities
Change in net debt -4.0 -2.2 -4.5
Dividends paid - - -4.1
Net increase/decrease in cash
and cash equivalents 3.5 1.3 1.0
Cash and cash equivalents
at beginning of the period 11.2 10.2 10.2
Cash and cash equivalents
at end of the period 14.7 11.5 11.2
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
EUR million
A = Share capital
B = Share premium account
C = Net unrealised gains
D = Other reserves
E = Translation differences
F = Retained earnings
G = Equity attributable to equity holders of the parent company
H = Minority interest
I = Shareholders' equity total
A B C D E F G H I
Shareholders'
equity at
Jan 1., 2005 12.6 23.4 1.1 7.3 -0.3 60.2 104.3 2.5 106.8
Available-for-sale
financial assets:
gains/losses
from fair value
measurement 0.1 0.1 0.1
Taxes related to
items entered into
equity and removed
from equity -
Translation
differences 0.1 0.1 0.1
Dividend
distribution -4.1 -4.1 -4.1
Result of the
period -3.1 -3.1 -0.3 -3.4
Shareholders'
equity at
March 31,2005 12.6 23.4 1.2 7.3 -0.2 53.1 97.3 2.2 99.5
Shareholders'
equity at
Jan 1,2006 12.6 23.4 1.8 7.3 -0.2 67.5 112.4 3.7 116.1
Available-for-sale
financial assets:
gains/losses
from fair value
measurement -2.1 -2.1 -2.1
Cash flow hedges:
gains/losses
recorded in
equity 0.7 0.7 0.7
Taxes related to
items entered into
equity and removed
from equity 0.4 0.4 0.4
Transition
differences
Dividend
distribution -4.6 -4.6 -4.6
Result of the period 0.2 0.2 0.2 0.4
Shareholders'
equity at
March 31, 2006 12.6 23.4 0.8 7.3 -0.2 63.0 106.8 3.9 110.7
KEY INDICATORS
March 31, 2006 March 31, 2005 Dec 31, 2005
Shareholders' equity
per share, EUR 17.71 15.90 18.56
Equity ratio, % 52.4 % 48.4 % 50.0 %
Investments, EUR million 1.2 0.3 11.7
Average number of personnel 956 974 1033
Average number of shares, 1 000 6 253 6 253 6 253
CONTINGENT LIABILITIES
EUR million
March 31, 2006 March 31, 2005 Dec 31, 2005
Mortgages given for debts:
Real estate mortgages 40.7 35.1 40.7
Corporate mortgages 51.4 51.4 51.4
Share pledged 3.6 3.6 3.6
Other securities given for own
commitments
Real estate mortgages 0.0 0.1 0.1
Pledges 0.0 0.0 0.0
Leasing liabilities 1.3 0.8 1.3
Non-cancellable other leases,
minimum lease payments 2.0 1.7 2.1
Contingent liabilities for own
commitments:
Repurchasing commitments 0.1 0.2 0.1
Contingent liabilities on behalf
of the associate companies:
Repurchasing commitments 0.1 0.2 0.1
Other contingent liabilities:
Redemption liability of
leased buildings - 2.5 -
OUTSTANDING VALUES OF DERIVATIVE INSTRUMENTS
Forward currency contracts 0.6 2.0 1.5
Commodity derivative instruments 3.4 4.0 5.0
Interest rate swaps 25.0 25.0 25.0
LÄNNEN TEHTAAT PLC
Board of Directors
More details: Matti Karppinen, CEO, tel. +358 10 402 00
Distribution:
Helsinki Stock Exchange
Main media
www.lannen.fi
