INTERIM REPORT for January 1 - September 30, 2004
LÄNNEN TEHTAAT PLC STOCK EXCHANGE RELEASE November 2, 2004 9;00 a.m.
INTERIM REPORT for January 1 - September 30, 2004
Lännen Tehtaats net turnover for January-September 2004 was EUR 361.4
million (Jan-Sep 2003: EUR 362.8 million). Consolidated operating
profit amounted to EUR 3.5 million (EUR 8.4 million) and profit before
extraordinary items was EUR 2.4 million (EUR 6.0 million). Without the
Machinium Division and the related costs of its exit, the operating
profit would have been EUR 8.2 million and profit before extraordinary
items EUR 7.1 million. Profit after taxes and minority interests was
EUR 1.1 million (EUR 4.7 million). Earnings per share amounted to EUR
0.17 (EUR 0.78).
Net turnover
Lännen Tehtaats net turnover for January-September 2004 was EUR 361.4
million (Jan-Sep 2003: EUR 362.8 million). Net turnover for the Food
Division was EUR 92.8 million (EUR 87.6 million) and for the
Agricultural Division EUR 219.7 million (EUR 209.2 million). Net
turnover for the Machinium Division up to the time of its exit from
the Group in July was EUR 48.9 million (nine-month figure in 2003: EUR
66.0 million). The Machinium Division exited from the Lännen Tehtaat
Group in July.
Financial performance
Profitability in the Groups main operating sectors fell short of the
figures for the same period last year. The nine-month operating profit
for the Food Division was EUR 3.3 million (EUR 4.7 million) and for
the Agricultural Division EUR 4.9 million (EUR 5.6 million).
Consolidated operating profit amounted to EUR 3.5 million (EUR 8.4
million) and profit before extraordinary items was EUR 2.4 million
(EUR 6.0 million). Without the Machinium Division and the related
costs of its exit, the operating profit would have been EUR 8.2
million and profit before extraordinary items EUR 7.1 million.
Profit after taxes and minority interests was EUR 1.1 million (EUR 4.7
million). Earnings per share amounted to EUR 0.17 (EUR 0.78).
Taxes for the period came to EUR 0.9 million (EUR 1.9 million).
Third-quarter net turnover and financial performance
Net turnover for July-September totalled EUR 107.1 million (EUR 113.5
million). Net turnover for the Food Division was EUR 38.3 million (EUR
31.2 million) and for the Agricultural Division EUR 68.8 million (EUR
62.8 million).
Consolidated operating profit came to EUR 4.1 million (EUR 3.8
million) and profit before extraordinary items was EUR 3.6 million
(EUR 2.9 million). The Machinium Divisions exit from the Group
improved the operating result by EUR 1.2 million. The third-quarter
operating profit for the Food Division totalled EUR 1.1 million (EUR
1.7 million) and for the Agricultural Division EUR 1.8 million (EUR
2.6 million).
Financing
The Groups financing position has altered considerably as a
consequence of the exit of Machinium. Consolidated interest-bearing
liabilities at the end of the period amounted to EUR 42.6 million (EUR
72.1 million) and financial assets totalled EUR 8.7 million (EUR 9.3
million). Machiniums interest-bearing liabilities on June 30, 2004
were EUR 17.0 million and its financial assets EUR 3.8 million. The
consolidated balance sheet total on September 30 was EUR 201.1 million
(EUR 246.7 million) and the equity ratio 48% (39%). Commercial papers
were used for short-term financing, and liquidity was secured with
long-term committed credit facilities. No credit facilities were used
during the period. Overall, the Groups financing position remained
good throughout the period, with the exception of the Machinium
Division.
Investment
Investment during the review period totalled EUR 6.3 million (EUR 7.4
million). The most significant investment was the acquisition of a
majority holding in Apetit Kala Oy (earlier Kuopion Kalatukku Oy)
through a share exchange in June. The acquisition price of the shares
was EUR 2.6 million. The Groups other investments were productivity
and replacement investments.
Own shares
The Board of Directors has not yet used the authorization granted by
the AGM to surrender Lännen Tehtaat shares held by the company. The
65,000 Lännen Tehtaat shares in the companys possession represent 1.0
per cent of the share capital and the votes.
Share trading
The volume of stock-exchange trading in Lännen Tehtaat shares during
the period was 1,390,750 shares (138,927), or 22.5% (2.3%) of all
Lännen Tehtaat shares. The highest share price was EUR 14.50 (EUR
9.90) and the lowest EUR 11.00 (EUR 8.20).
Expiry of warrant subscription period
The warrant bond issued to corporate and unit management in May 1997
was repaid on April 30, 2002. The validity of the warrants under the
warrant bond expired on October 31, 2004. No warrants have been used
to subscribe shares.
Transition to IFRS reporting
In 2005, the Lännen Tehtaat Group will begin reporting its financial
statements in accordance with the IAS/IFRS standards. The interim
reports for 2005 will be produced in accordance with the IFRS
reporting standards.
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 consolidated balance sheet concerns
the entry of financial leasing agreements and the capitalization of
fixed costs of goods acquisition and manufacture under valuation of
inventories. The adjustments will increase the balance sheet total by
almost 10%. There will be no significant change in shareholders
equity.
In the transition to IFRS reporting, the main change affecting profit
concerns the amortization of goodwill within the Group. Under the IFRS
standards, the present value of cash flows generated via impairment
testing in the different units will exceed the book value of asset
items that are subject to testing, including goodwill. As a
consequence, the goodwill amortization made under the current
accounting rules in 2004 will be eliminated in the IFRS accounting,
thus improving the profit level. Goodwill amortization in January-
September was EUR 2.1 million. Based on present information, the
profit effect of the other IFRS changes will be smaller than that of
eliminating goodwill amortization.
BUSINESS DIVISIONS
Food Division
Net turnover for the Food Division in January-September was EUR 92.8
million (EUR 87.6 million). The increase on last years figure was
almost entirely from the addition of Apetit Kala to the Division in
June. Sales to industry and the hotel, restaurant and catering sector
were below the level achieved in the same period last year. Following
the Baltic States accession to the European Union in May and their
subsequent export of sugar to the Finnish retail market, sales of
Finnish-produced sugar since June have fallen considerably on last
years figures.
Operating profit for the Food Division was EUR 3.3 million (EUR 4.7
million). The decrease compared with last years figure was due
particularly to the drop of EUR 1.0 million in the profit contribution
of Lännen Tehtaats associated company Sucros Ltd. Apetits
profitability fell short of last years performance on account of
lower sales prices and higher raw-material costs.
Agricultural Division
Net turnover for the Agricultural Division in January-September was
EUR 219.7 million (EUR 209.2 million). Net turnover in the animal
feeds business was slightly short of the target and was below last
years level. Grain trade net turnover for Avena Nordic Grain was at
the targeted level and exceeded last years figure. Other operations
in the Agricultural Division accounted for only a small proportion of
the Divisions net turnover.
Agricultural Division operating profit was EUR 4.9 million (EUR 5.6
million). Profitability in the animal feeds business fell short of the
target and was below last years level. This was partly attributable
to the reduction in sales margins in the second and third quarters as
a result of the high raw-material prices. Grain trade profitability
was at the same level as last year.
Machinium Division
The Division accumulated EUR 48.9 million (nine-month figure in 2003:
EUR 66.0 million) in net turnover before its exit.
Delay in the reform of the EU sugar regime
In July, the European Commission published plans for reform of the EU
sugar regime. The proposed reform would lead to a cut in sugar quotas,
a drop in the price of sugar and sugar beet and the abandonment of
country-specific quotas. The aim of the reform is to cut the
overproduction of sugar and achieve a reduction in the price of sugar
within the EU.
In the form proposed, the plan would be a threat to beet cultivation
and the beet sugar industry in peripheral parts of the EU, such as
Finland.
A reduction in the price of sugar as a result of the sugar regime
reform would have a negative effect on the future financial
performance of Lännen Tehtaat and the sugar sector.
The main sugar-producing countries outside the EU have submitted
complaints about the EUs existing sugar export subsidy and about
exceeding export quotas. In mid-October, the WTOs Dispute Settlement
Body issued its decision on the matter. From the EU standpoint this
was a negative ruling, and the EU intends to appeal. The EU is not
likely to issue new sugar regulations during the appeal process, which
will continue into next year. The existing EU sugar regime remains
valid until mid-2006.
Outlook for the rest of the year
Food Division
The Food Division will see a growth in its net turnover, thanks to the
acquisition of Kuopion Kalatukku. Frozen food sales are expected to
follow the general trend in the market. Total sugar consumption will
not grow, and it is expected that sales of Lännen Sugars consumer
products will be significantly lower than in 2003, due to sugar
imports.
Agricultural Division
In the Agricultural Division, net turnover in the animal feeds
business is expected to rise to almost the level of last year. Grain
trade net turnover is expected to exceed the 2003 level.
Lännen Tehtaat Group
Consolidated net turnover for the full year will be lower than in 2003
as a result of the exit of Machinium. Nevertheless, the addition of
Apetit Kala (Kuopion Kalatukku) will have helped to boost net turnover
for the year to a forecast level of about EUR 470 million.
Lännen Tehtaats profit for 2004 is expected to be below the 2003
figure, mainly due to the one-off costs of the exit of Machinium from
the Group. The seasonal variation in Lännen Tehtaats business and the
exclusion of Machiniums losses mean that the final-quarter profit
will be the best of the year and above last years figures.
Lännen Tehtaat has separated from the Machinium Division, which was
outside its core business. The resulting group structure will enable
Lännen Tehtaat to use all its resources for developing its core
sectors.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
EUR million
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2004 2003 2004 2003 2003
Net turnover 107.1 113.5 361.4 362.8 492.0
Other operating income 0.3 0.5 2.9 1.3 2.1
Costs and expenses -101.1 -108.7 -353.8 -350.0 -473.8
Depreciation -2.9 -2.8 -8.7 -8.3 -11.8
Share of profits of
associated undertakings 0.7 1.3 1.7 2.6 3.2
Operating profit 4.1 3.8 3.5 8.4 11.7
Financial income and
expenses -0.5 -0.9 -1.1 -2.4 -3.3
Profit before
extraordinary items
and taxes 3.6 2.9 2.4 6.0 8.4
Extraordinary income
Extraordinary expenses
Income taxes 0.3 -0.8 -0.9 -1.9 -2.6
Minority interests -0.9 0.1 -0.4 0.6 0.9
Profit for the
financial period 3.0 2.2 1.1 4.7 6.7
Income tax is based on the taxable profit for the period.
CONSOLIDATED BALANCE SHEET
EUR million
Sep 30, Sep 30, Dec 31,
2004 2003 2003
Assets
Intangible assets 17.7 17.8 21.6
Tangible assets 70.0 71.1 65.6
Investments 22.0 21.2 21.9
Own shares 0.8 0.8 0.8
Stocks 43.5 71.6 80.2
Receivables 38.5 54.9 46.5
Marketable securities 0.5 1.5 1.5
Cash and cash equivalents 8.1 7.8 11.6
Total 201.1 246.7 249.7
Liabilities
Share capital 12.6 12.2 12.2
Other capital and reserves 80.4 80.8 82.8
Minority interests 4.6 5.3 4.9
Provisions 2.3 0.1 2.1
Long-term liabilities 35.0 65.0 48.3
Current liabilities 66.2 83.3 99.4
Total 201.1 246.7 249.7
CONSOLIDATED CASH FLOW STATEMENT
EUR million
1-9/ 1-9/ 1-12/
2004 2003 2003
Operations
Cash flow from operations 9.8 12.0 18.8
Change in working capital 27.5 -5.0 -7.6
Net cash flow from
operations (A) 37.3 7.0 11.2
Investments
Investments in non-current
assets -11.5 -7.6 -9.5
Proceeds from sales of
non-current assets 2.3 1.3 1.5
Net cash flow from
investments (B) -9.2 -6.3 -8.0
Financing
Change in loans -30.8 -4.7 -3.0
Share issue 2.3
Dividends paid -3.9 -1.8 -1.8
Other changes in capital and
reserves and in minority
interests -0.1 -1.9 -2.4
Net cash flow from
financing (C) -32.5 -8.4 -7.2
Changes in liquid assets
(A+B+C) -4.4 -7.7 -4.0
Liquid assets on Jan 1 13.0 17.0 17.0
Liquid assets on Sep 30 8.6 9.3 13.0
KEY INDICATORS
Sep 30, Sep 30, Dec 31,
2004 2003 2003
Earnings per share, EUR 0.17 0.78 1.11
Equity per share, EUR 14.76 14.95 15.29
Equity ratio, % 48.4 39.0 39.5
Gross investments, EURm 6.3 7.4 9.5
% of net turnover 1.7 2.0 1.9
BUSINESS SEGMENT INFORMATION
NET TURNOVER
EUR million
7-9/ 7-9/ 1-9/ 1-9/ 1-12/
2004 2003 2004 2003 2003
Food Division 38.3 31.2 92.8 87.6 114.9
Agricultural Division 68.8 62.8 219.7 209.2 282.6
Machinium Division 19.5 48.9 66.0 94.5
Total 107.5 113.5 361.5 362.8 492.0
OPERATING PROFIT
EUR million
Food Division 1.1 1.7 3.3 4.7 6.5
Agricultural Division 1.8 2.6 4.9 5.6 8.3
Machinium Division 1.2 -0.5 -4.7 -1.9 -3.1
Total 4.1 3.8 3.5 8.4 11.7
AVERAGE PERSONNEL
1-9/ 1-9/ 1-12/
2004 2003 2003
Food Division 403 325 331
Agricultural Division 444 440 442
Machinium Division 244 386 388
Total 1091 1151 1161
CONTINGENT LIABILITIES
EUR million Sep 30, Sep 30, Dec 31,
2004 2003 2003
Securities given for debts
Real estate mortgages 35.1 37.6 32.6
Corporate Mortgages 68.4 54.9 76.0
Shares pledged 3.6 43.4 3.6
Other securities given
Pledges 0.0 0.0 0.0
Corporate Mortgages 0.2 8.3 6.9
Leasing liabilities 0.8 2.0 2.1
Contingent liabilities
for own commitments
Guarantees 0.0
Repurchasing commitments 0.2 17.6 19.0
Other commitments 0.5 1.1 2.4
Contingent liabilities on behalf
of associated undertakings
Guarantees 0.1 0.4
Contingent liabilities on behalf of
others
Redemption liability
of leased buildings 2.5 2.6 2.6
Guarantees 1.0
Outstanding derivative instruments
Forward currency contracts
Market value 0.0 0.3 -0.3
Value of underlying instruments 2.6 6.3 9.5
Interest rate swaps
Value of underlying instruments 25.0 25.0 25.0
Commodity derivate contracts
Market value 0.0 0.0 -0.5
Value of underlying instruments 4.0 9.5 10.6
The data in this interim report have not been audited.
LÄNNEN TEHTAAT PLC
Board of Directors
More details: Erkki Lepistö, President & CEO, tel. +358 2 8397 4001
Distribution:
Helsinki Exchanges
Main media
www.lannen.fi
