INTERIM REPORT for January 1-March 31, 2005
Lännen Tehtaat plc Stock exchange release May 5, 2005 9;00 a.m.
INTERIM REPORT for January 1-March 31, 2005
. Lännen Tehtaat transferred to IFRS reporting, which means most of the profit
will accumulate at the end of the year.
. Net turnover totalled EUR 94.0 million in January-March (2004: EUR 123.9
million).
. The net turnover of the continuing business operations was EUR 94.0 million in
January-March (EUR 103.2 million).
. The operating loss of continuing business operations before non-recurring
expenses was EUR -0.4 million (EUR 2.3 million).
. Operating profit for continuing business operations was EUR -3.6 million (EUR
2.3 million) taking into account non-recurring expenses. A total of EUR 3.2
million in write-downs of fixed assets and provisions for expenses was entered
in the income statement as a result of the decision to close down the Suomen
Rehu factory at Vaasa.
. A majority shareholding was acquired in Mildola Oy. The transaction was
approved by the competition authorities on May 2, 2005.
Transfer to IFRS accounting
Lännen Tehtaat transferred to IFRS reporting on January 1, 2005. Information
about the effects of the transfer on the opening balance sheet for the
comparative year 2004 and the results and balance sheets for the interim report
periods was given in a stock exchange release on April 27, 2005. The activities
in the comparative profit and loss accounts for 2004 have been divided into
continuing and discontinued operations. The Machinium Division, which was
disengaged from the Group in July 2004, has been presented as discontinued
operations.
The release also gave information about the new segment division and reporting.
The primary system of segment reporting is based on the divisions. Fundamental
changes compared with before are the separation of the Animal feeds business and
Grain trading into their own business segments from the earlier Agricultural
Division, and the establishment of an Other Operations segment, which comprises
Lännen Plant Systems, Harviala Oy and the corporate administration. The Food
Division, the former Food Group, remains unchanged. The secondary system of
segment reporting is geographical, by market area, i.e. Finland, other EU Member
States and other countries.
This interim report has been drawn up in line with IFRS bookkeeping and valuation
principles.
Presentation method of turnover and financial-performance comparison
The net turnover and financial performance are compared in terms of the entire
group and in terms of continuing operations in the report section of the interim
report. In the first quarter of 2005 there are only continuing operations.
However, the profit calculation for the comparative period and for the
comparative year 2004 is divided into continuing and discontinued operations.
Information about discontinued operations in the comparative period is mentioned
separately in the text. The table section in the report shows a profit and loss
account for continuing and discontinued operations separately and continuing and
discontinued operations combined.
Net turnover
The Lännen Tehtaat net turnover in January-March was EUR 94.0 million (2004: EUR
123.9 million) and the net turnover for continuing operations EUR 94.0 million
(EUR 103.2 million). The net turnover of the discontinued operations in the
comparative period was EUR 20.7 million
Financial performance
The loss before non-recurring items for the period under review came to EUR -0.4
million (EUR 0.8 million). The operating loss before non-recurring items for
continuing operations was EUR -0.4 million (EUR 2.3 million). The loss for
discontinued operations was EUR -1.5 million for the comparative period.
The loss before taxes and non-recurring items was EUR -1.2 million and EUR -4.4
million after non-recurring items (EUR -0.6 million). The loss after taxes was
EUR -3.4 million (EUR -0.9 million). The decision to close down the Suomen Rehu
factory at Vaasa hampered the result, causing a total of EUR 3.2 million in write-
downs to fixed assets and provisions for expenses.
Financing
The Group's interest-bearing liabilities at the end of the period under review
totalled EUR 48.2 million (EUR 97.7 million) and the financial assets EUR 11.0
million (EUR 17.6 million). The consolidated balance sheet total was EUR 205.7
million (EUR 269.7 million) and the equity ratio 48% (35%). The balance sheet of
the discontinued operations was included in the balance sheet for the comparative
period: the financial assets were EUR 2.3 million and the interest-bearing
liabilities, including financial leasing, EUR 37.6 million. Commercial papers
were used for short-term financing and liquidity was secured with long-term
committed credit facilities. No credit facilities were used in the period under
review. The Group's financing position was good throughout the entire period
under review.
Investment and corporate acquisitions
Investment during the period under review, which was mainly in productivity and
replacement, amounted to EUR 0.3 million (EUR 1.4 million).
At the beginning of March, Suomen Rehu Oy, which is part of the Group, acquired
65% of the shares in the food company Mildola Oy for EUR 3.9 million, thus
raising its holding in Mildola to 82.5%. The transaction required the approval of
the competition authorities to become effective and this approval was given on
May 2, 2005. At the beginning of April, Lännen Tehtaat plc sold its Lännen Plant
Systems unit. Neither transaction will have a fundamental effect on the financial
performance of the Lännen Tehtaat Group in 2005.
Decisions of the Annual General Meeting
The Annual General Meeting on March 31, 2005 approved the distribution of a
dividend of EUR 0.65 (EUR 0.65) per share for 2004. The total amount payable as
dividend, EUR 4.1 million, was transferred in the accounts from profit funds to
non-interest-bearing current liabilities at the end of March. The dividend was
paid on April 12, 2005.
The Annual General Meeting authorized the Board of Directors to decide on
increasing the share capital by means of a new issue and/or taking out a
convertible loan in one or several instalments. In a new issue and/or a new issue
based on a convertible bond, the share capital can be increased by a maximum of
EUR 1,263,514, with a maximum issue of 631,757 shares for subscription. The
authorization is valid for one year from the Annual General Meeting. The share
capital can be increased and/or a convertible bond taken out regardless of the
shareholders' subscription rights, if there is a pressing financial reason for
the company to do so.
The Board of Directors was also authorized to decide on the surrender of the
company's own shares. According to this authorization the Board of Directors can
surrender 65,000 previously purchased Lännen shares. They can be surrendered in
connection with corporate acquisitions or for some other purpose or in public
trading on the Helsinki Stock Exchange. The authorization is valid for one year
from the Annual General Meeting.
The company owns 65,000 of its own shares, which represents 1.0% of the company's
share capital and voting rights.
Share trading
The volume of stock exchange trading in the company's shares during the period
under review was 888,808 shares (313,574), which was 14.1% of the total share
capital (5.1%). The highest price for the shares was EUR 13.70 (EUR 12.50) and
the lowest EUR 11.90 (EUR 11.00). The share trading totalled EUR 11.7 million
(EUR 3.7 million).
BUSINESS SEGMENTS
Food
The Food segment's net turnover was EUR 32.0 million (EUR 25.1 million). The
growth came from Apetit Kala, which became part of the Group at the end of June
2004. Retail sales of Apetit frozen foods were at the same level as in the
comparative period. Retail sales of jams and marmalades fell. Sales to the hotel,
restaurant and catering sector and to industry fell short of the comparative
period. Sales of sugar fell considerably short of the comparative period, mainly
because of imports from the Baltic States
Operating profit for the Food business operations was EUR -1.1 million (EUR 0.1
million). Profitability failed to match expectations and the comparative period
because of the poor profitability of the fish operations. Changing the Kalatori
and Kesäpöytä product brands to the Apetit brand caused non-recurring expenses.
The introduction of the new production line in Kerava increased production costs
at the start-up stage. In other respects the segment's profitability was at the
level of the comparative period.
Feed
The net sales of the Feed business operations fell short of the comparative
period and were EUR 44.0 million (EUR 47.1 million). The fall is a result of the
effect on sales prices of raw material prices that were lower than in the
previous year and a reduction in the volumes of poultry and pig feeds.
Profitability without the non-recurring expenses of EUR 3.2 million for the
closure of the factory at Vaasa was just below that of the comparative period.
Operating profit, not including non-recurring expenses, was EUR 1.7 million, and
EUR -1.5 million (EUR 2.2 million) including non-recurring expenses.
Suomen Rehu has been exporting to Russia on a small scale. Surveys have been
started to chart the possibilities of feed production in Northwest Russia.
Grain Trading
The Grain Trading business operations' net sales amounted to EUR 16.3 million
(EUR 29.6 million). Grain trading has been slow at the beginning of the year
because of the small harvest in the autumn and the large amount of fodder grain.
Net sales at the beginning of the year fell well below those of the comparative
period, when the number of consignments abroad was unusually large. Reduced sales
also had an effect on financial performance, the operating profit being EUR 0.1
million (EUR 1.0 million).
EUR 0.5 million of the reduction in operating profit is a timing differential
caused by the introduction of IFRS. The derivative instruments recorded at fair
value and taken out to protect raw material positions had a negative effect of
EUR 0.2 million on the financial performance for January-March 2005 and a
positive effect of EUR 0.3 million for January-March 2004. The reporting of
derivative instruments made after the beginning of 2005 has been arranged so that
hedge accounting can be applied to the instruments, which will reduce the
susceptibility of Grain Trading's financial performance to fluctuations.
Other Operations
The Other Operations segment's net turnover totalled EUR 1.7 million (EUR 1.3
million) and the operating loss was EUR -1.0 million (EUR -0.9 million).
Reform of the EU sugar regime
The reform of the EU sugar regime will proceed in the way mentioned in the notes
to the year-end accounts published at the end of February. The proposed decision
of the Commission will be announced in June. The reform of the regime is likely
to be implemented in time for the 2006 harvest.
Prospects for the end of the year
Net turnover for the Food business operations will rise when Apetit Kala's net
turnover for a full year is included in the food segment. Frozen food sales are
expected to be in line with the general market trend. However, sales of
vegetables and ready-made frozen foods are expected to increase. There will be no
growth in the overall consumption of sugar. The proportion of domestic sugar is
expected to go down. Because of sugar imports, sales of Lännen Sugar's consumer
products are likely to be no higher than the 2004 level. In order to improve the
poor profitability of the Apetit Kala operations, a programme to improve
efficiency and eliminate costs has been started.
The sales volume of the Feed business operations is expected to remain at the
same level as in 2004. The net turnover will be affected by raw-material prices.
The non-recurring restructuring costs of animal feed production (closing down of
the Vaasa factory) will weaken the financial performance of Feed's business
operations for 2005. The full benefit of this reorganization will be seen in
2007.
Grain Trading's net turnover will depend on the amount and quality of this year's
harvests in the main market areas. It is thought, however, that the small harvest
of last autumn will lead to a reduced net turnover compared with 2004.
The Lännen Tehtaat overall consolidated net turnover will decrease against 2004.
The net turnover for continuing business operations will increase on 2004.
Under the IFRS rules, the prices of goods in stock will be higher than under the
previous accounting practice and most of the profit will accumulate in the final
quarter, when its harvested raw materials are processed into stocks of finished
and semi-finished goods.
Operating profit before non-recurring items in animal feed production will be
better than in 2004. Operating profit after non-recurring items will be poorer
than in 2004. as will profit before taxes. The annual operating profit and profit
before taxes for continuing operations are expected to remain below the 2004
figures in 2005 as a result of non-recurring expenses in animal feed production
and poor profitability in the fish business.
The next interim report for the period January 1-June 30, 2005 will be published
on August 11, 2005.
CONSOLIDATED INCOME STATEMENT
EUR million
Continuing Discontinued Total
operations operations
1-3/ 1-3/ 1-12/ 1-3/ 1-3/ 1-12/ 1-3/ 1-3/ 1-12/
2005 2004 2004 2005 2004 2004 2005 2004 2004
3 3 12 3 3 12 3 3 12
mths mths mths mths mths mths mths mths mths
Net turnover 94.0 103.2 424.9 20.7 48.9 94.0 123.9 473.8
Other operating
income 0.6 1.5 2.9 0.1 1.2 0.6 1.6 4.1
Operating expenses -93.4 -100.5 -405.0 -22.0 -52.8 -93.4 -122.5-457.8
Depreciation
and reduction in
value -4.8 -1.9 -8.1 -0.3 -0.6 -4.8 -2.2 -8.7
Operating profit/loss -3.6*) 2.3 14.7 -1.5 -3.3 -3.6*) 0.8 11.4
Financial income
and expenses -0.3 -0.9 -1.1 -0.3 -0.4 -0.3 -1.2 -1.5
Share of profit of
associate companies -0.5 -0.2 2.7 -0.5 -0.2 2.7
Profit/loss
before taxes -4.4 1.2 16.3 -1.8 -3.7 -4.4 -0.6 12.6
Income taxes 1.0 -0.3 -2.1 0.0 0.0 1.0 -0.3 -2.1
Profit/loss for the
financial period -3.4 0.9 14.2 -1.8 -3.7 -3.4 -0.9 10.5
Income taxes is based on the taxable profit for the period.
Attributable to:
Equity holders of
the parent -3.1 0.8 14.1 -1.1 -3.7 -3.1 -0.3 10.4
Minority
interest -0.3 0.1 0.1 -0.7 0.0 -0.3 -0.6 0.1
Earnings per
share, EUR -0.49 0.12 2.30 -0.49 -0.05 1.68
Diluted earnings per
share, EUR -0.49 0.12 2.30 -0.49 -0.05 1.68
*) Includes non-recurring expenses of EUR 3.2 million for the closure of the
factory at Vaasa.
NET TURNOVER BY BUSINESS SEGMENT
EUR million
1-3/2005 1-3/2004 1-12/2004
3 mths 3 mths 12 mths
Food Division 32.0 25.1 130.6
Feed Division 44.0 47.1 194.8
Grain Trading Division 16.3 29.6 91.0
Other operations 1.7 1.3 8.5
Continuing operations total 94.0 103.1 424.9
Discontinued operations 20.7 48.9
Total 94.0 123.9 473.8
OPERATING PROFIT/LOSS BY BUSINESS SEGMENT
1-3/2005 1-3/2004 1-12/2004
3 mths 3 mths 12 mths
Food Division -1.1 0.1 4.1
Feed Division -1.5*) 2.2 11.7
Grain Trading Division 0.1 1.0 0.9
Other operations -1.0 -0.9 -2.0
Continuing operations total -3.6 2.3 14.7
Discontinued operations -1.5 -3.3
Total -3.6 0.8 11.4
*) The operating profit was EUR 1.7 million excluding non-recurring expenses of
EUR 3.2 million.
NET TURNOVER BY GEOGRAPHICAL SEGMENT
EUR million
1-3/2005 1-3/2004 1-12/2004
3 mths 3 mths 12 mths
Finland 83.2 85.8 383.2
Other EU
member states 7.6 20.8 59.6
Other countries 3.2 17.3 31.0
Total 94.0 123.9 473.8
CONSOLIDATED BALANCE SHEET
EUR million
Mar 31. Mar 31. Dec 31.
2005 2004 2004
ASSETS
Non-current assets
Tangible assets 66.2 84.1 70.1
Goodwill 17.4 17.6 17.4
Other intangible assets 2.3 3.6 2.5
Investments in
associate companies 23.0 22.2 23.5
Available-for-sale
financial assets 3.0 2.6 2.8
Deferred tax assets 3.0 2.4 2.2
114.9 132.5 118.5
Current assetsInventories 47.8 76.0 49.5
Receivables 31.5 43.1 37.2
Financial assets at fair value
through profit or loss 0.5 0.5 0.5
Cash and cash equivalents 11.0 17.6 9.7
90.8 137.2 96.9
Total assets 205.7 269.7 215.4
EQUITY AND LIABILITIES
Equity attributable to the
equity holders of the parent 97.3 91.7 104.3
Minority interest 2.2 3.3 2.5
Total equity 99.5 95.0 106.8
Non-current liabilities
Long-term borrowings 23.0 66.4 23.1
Deferred tax liabilities 7.0 6.6 7.5
Non-current provisions 1.0 1.0 1.0
Non-current liabilities total 31.0 74.0 31.6
Current liabilities
Trade payables and other
liabilities 49.0 68.3 52.7
Short-term borrowings 25.2 31.4 23.3
Other provisions 1.0 1.0 1.0
Current liabilities total 75.2 100.7 77.0
Liabilities total 106.2 174.7 108.6
Total equity and liabilities 205.7 269.7 215.4
CONSOLIDATED CASH FLOW STATEMENT
EUR million
1-3/2005 1-3/2004 1-12/2004
3 mths 3 mths 12 mths
Cash flows from
operating activities 4.2 4.5 28.8
Cash flow from
investing activities -0.7 -1.0 -10.6
Cash flows from
financing activities -2.2 1.6 -21.0
Net increase/decrease in cash
and cash equivalents 1.3 5.1 -2.8
Cash and cash equivalents
at beginning of the period 10.2 13.1 13.0
Cash and cash equivalents
at end of the period 11.5 18.1 10.2
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
A = Share capital
B = Share issue premium
C = Net unrealised gains
D = Other reserves
E = Own shares
F = Translation differences
G = Retained earnings
H = Subordinated loans
I = Equity attributable to equity holders of the parent company
J = Minority interest
K = Shareholders' equity total
A B C D E F G H I J K
Shareholders' equity
at Dec 31
2003, FAS 12,2 21,4 0,9 7,3 0,8 -0,5 52,1 1,7 95,1 4,9 100,0
Transition to IFRS
standards 0,9 -0,8 0,0 2,1 -1,7 0,6 -0,6 0,0
Shareholders' equity
at Jan 1 2004, IFRS 12,2 21,4 0,9 7,3 0,0 -0,5 54,3 0,0 95,7 4,3 99,9
Available-for-sale
financial assets:
gains/losses from
fair value measurement 0,1 0,1 0,1
removed from equity and
reported in income
statement -0,2 -0,2 -0,2
Translation differences -0,3 -0,3 -0,3
Dividend distribution -3,9 -3,9 -3,9
Other changes 0,5 0,5 -0,5 0,0
Result of the period -0,3 -0,3 -0,5 -0,9
Shareholders' equity
at Mar 31 2004, IFRS 12,2 21,4 0,8 7,3 0,0 -0,8 50,7 0,0 91,7 3,3 95,0
Shareholders' equity
at Jan 1 2005, IFRS 12,6 23,4 1,1 7,3 0,0 -0,3 60,2 0,0 104,3 2,5 106,8
Available-for-sale
financial assets:
gains/losses from
fair value measurement 0,1 0,1 0,1
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 Mar 31 2005, IFRS 12,6 23,4 1,2 7,3 0,0 -0,2 53,1 0,0 97,3 2,2 99,5
RECONCILIATION OF SHAREHOLDERS' EQUITY IN THE COMPARATIVE PERIOD
EUR million
Shareholders' equity at Mar 31
2004, FAS 91.5
+ minority interest
(IAS 1, difference in presentation) 3.9
IFRS 3 Goodwill 0.8
IAS 1 Subordinated loan -1.7
IAS 2 Inventories 2.7
IAS 12 Deferred tax assets 2.0
IAS 12 Deferred tax liabilities -2.3
IAS 16 Tangible assets -0.7
IAS 17 Finance leases -1.6
IAS 19 Pension liability -0.7
IAS 28 Investments in associate
companies 1.3
IAS 32 Own shares -0.8
IAS 39 Shares in listed companies 1.1
IAS 39 Derivatives -0.5
Shareholders' equity at
Mar 31 2004, IFRS 95.0
RECONCILIATION OF RESULT IN COMPARATIVE PERIOD
EUR million
Profit/loss for the period. FAS 0.0
+ minority interest
(IAS 1, difference in presentation) -0.6
IFRS 3 Reversal of goodwill
amortizations 0.8
IAS 2 Inventories -0.7
IAS 12 Deferred tax assets -0.1
IAS 12 Deferred tax liabilities 0.1
IAS 17 Finance leases 0.0
IAS 19 Pension liability 0.0
IAS 28 Investments in associate
companies -0.6
IAS 38 Intangible assets 0.0
IAS 39 Derivatives 0.3
Profit/loss for the period, IFRS -0.9
KEY INDICATORS
31 Mar 31 Mar 31 Dec
2005 2004 2004
Shareholders' equity
per share, EUR 15.90 15.68 17.08
Equity ratio, % 48.4% 35.3% 49.6%
Investments, EUR million 0.3 1.4 11.1
Average number of personnel.
continuing operations 974 727 890
Average number of personnel,
discontinued operations - 391 182
CONTINGENT LIABILITIES
EUR million 31 Mar 31 Mar 31 Dec
2005 2004 2004
Mortgages given for debts:
Real estate mortgages 35.1 32.5 34.9
Corporate mortgages 51.4 75.8 51.4
Shares pledged 3.6 3.6 3.6
Other securities given:
Pledges 0.0 0.0 0.0
Corporate mortgages 0.2 6.9 0.2
Leasing liabilities 0.8 1.5 0.9
Contingent liabilities for
own commitments:
Repurchasing commitments 0.2 0.2
Other commitments 0.5 2.1 0.5
Contingent liabilities on
behalf of the associate
companies
Guarantees 0.2 0.2
Other contingent liabilities:
Redemption liability of
leased buildings 2.5 2.5
OUTSTANDING VALUES OF DERIVATIVE INSTRUMENTS
Forward currency contracts 2.0 6.7 3.3
Commodity derivative instruments 4.0 6.9 4.2
Interest rate swaps 25.0 25.0 25.0
The data in this interim report have not been audited.
Säkylä, May 3, 2005
LÄNNEN TEHTAAT PLC
Board of Directors
More details: Erkki Lepistö, CEO, tel. +358 10 402 00
Distribution:
Helsinki Stock Exchange
Main media
www.lannen.fi
