Componenta Corporation Interim Report 1 january - 30 september 2001

COMPONENTA CORPORATION INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2001 Componenta Group (formerly Componenta Holding Group) had net sales during the first nine months of EUR 147.6 million (Pro-forma net sales of EUR 168.3 million in the same period in the previous year, comparable Pro-forma net sales of EUR 149.1 million). The Group had an operating profit of EUR 7.2 (10.8) million and a profit after financial items of EUR 1.8 (4.6) million. The Group's profit declined from the figures for the previous year as the result of a decline in non-recurring income and an increase in the losses at the Alvesta and Osby production units. The profit after financial items for the current year is estimated to be EUR 3 - 6 million The Group's order book at the end of the review period stood at EUR 31.7 million (Pro-forma EUR 35.0 million on 1 January). Trading in the shares of Componenta Corporation (formerly Componenta Holding Corporation) commenced on the main list of the Helsinki Exchanges on 19 March 2001, after the company had carried out the exchange of its shares for those of what is now Componenta Finance Corporation (formerly Componenta Corporation). The income statement of Componenta Group includes the income statement of Componenta Finance Group for the entire review period, since the financial involvement in Componenta Finance Group covers the whole period. In this interim report, Componenta Group figures for comparison are presented as Pro-forma figures, so that the figures for 1 January - 30 September 2001 are compared with the corresponding period in the previous year and with the whole of 2000. Figures for comparison with the balance sheet and contingent liabilities on 30 September 2001 are presented for the situation on 1 January 2001. Markets Demand for heavy trucks in Europe has fallen from the high level at the end of last year. This fall in demand has been a consequence of the slowdown in economic growth in Europe. After a strong first half of the year, demand for components from Nordic manufacturers of machinery and equipment has weakened in the early autumn with the slowdown in economic growth. One exception is demand for wind generator components, which has remained good. Demand from manufacturers of off-road vehicles has been on the decline. Changes in group structure The name Componenta Corporation was adopted at an extraordinary shareholders' meeting held on 8 October 2001, replacing the name Componenta Holding Corporation. The fully owned subsidiary Componenta Corporation in turn changed its name to Componenta Finance Corporation. Both changes of name were registered in the Trade Register on 9 October 2001. Componenta Finance Corporation became a subsidiary of Componenta Corporation following the offer to exchange and purchase shares, which ended on 9 March 2001. Holders of 89.9 per cent of the shares of Componenta Finance Corporation exchanged their shares for shares in Componenta Corporation and Componenta Corporation purchased 6.1 per cent of the shares of Componenta Finance Corporation. Through a redemption offer, in accordance with the Securities Market Act, which ended on 23 April 2001, Componenta Corporation acquired 2.2 per cent of the shares of Componenta Finance Corporation. At the end of the redemption offer period, Componenta Corporation owned a total of 98.2 per cent of the shares of Componenta Finance Corporation. On 24 April 2001 Componenta Corporation decided to initiate the expropriation of the remaining shares of Componenta Finance Corporation, in accordance with the Companies Act. A court of arbitration decided on 12 September 2001 that Componenta Corporation has the undisputed right to redeem the remaining shares of Componenta Finance Corporation, and on the basis of this decision the ownership of Componenta Corporation in Componenta Finance Corporation rose to 100 per cent. A total of 63,941 Componenta Finance Corporation shares were expropriated, the equivalent of 0.62 per cent of the shares and voting rights. The court of arbitration decided on 20 September 2001 that the redemption price should be EUR 3.20. Trading in the shares of Componenta Finance Corporation was terminated on 12 September 2001 and the shares of Componenta Finance Corporation were delisted from the main list of the Helsinki Exchanges on 25 September 2001. In February Componenta sold its 50% holding in SEW-Componenta Oy to the other owner of the company, SEW-Eurodrive. At the end of March Componenta sold its 30% holding in Saint-Gobain Pipe Systems Oy to the French Saint-Gobain group, the company's majority shareholder. In June the Group purchased the shares of Wecometal Oy from the capital investment company Oy Wedeco Ab. Following this transaction the Group owns all the shares in Wecometal Oy. Wecometal, based in Pietarsaari, changed its name to Componenta Pistons Oy. Componenta Pistons Oy designs, manufactures and markets pistons for marine and power plant diesel engines. In June Componenta sold the shares of Componenta Prometek AB to the company's executive management. In June the Group also sold the business operations of Ärnkome Oy to a company owned by its executive management. Componenta continues to provide financing for both companies. In July the Group purchased the entire share stock of the Lempäälä-based company Nisamo Oy from its owner-managing director. The price for the company's shares and real estate relating to the business was EUR 3.5 million. The company changed its name to Componenta Nisamo Oy. Componenta Nisamo Oy has specialized in the manufacture of engine and power transmission components mainly for energy production. Its customers are Finnish companies with global operations. In August the Group sold 13 per cent of the share stock of its associated company Profiz Business Solution Oyj to the company's new managing director. Following this transaction Componenta has a 32 per cent holding in Profiz. Net sales The Group had net sales of EUR 147.6 (168.3) million. Net sales for ongoing operations totalled EUR 144.4 million. Exports and foreign operations accounted for 72% (77%) of the Group's net sales. Net sales by market areas were as follows: Finland 28%, other Scandinavian countries 52%, Central Europe 18% and other countries 2%. Result and financing Componenta Group made an operating profit of EUR 7.2 (10.8) million during the review period, and the result after financial items was EUR 1.8 (4.6) million. The result includes net profits from the sale of non- current assets and other non-recurring items, a net total of EUR 1.4 million. The Group's financial costs amounted to EUR 5.5 (6.2) million. The Group's net profit was EUR 2.0 million. The Group's profit fell from the previous year due to a decline in non- recurring income. Losses at the Alvesta and Osby production units have also increased. Compared to the whole of 2000, the divestment of loss- making operations improved the profit. The Group's liquidity remained good throughout the review period. The equity ratio including the preferred capital notes and the negative goodwill in shareholders' equity was 31.0% (29.6%, Pro-forma 1 Jan.). Including the preferred capital notes in shareholders' equity, the equity ratio was 25.3% (23.2% Proforma 1 Jan.). Cast and other components Net sales for cast and other components for the nine months totalled EUR 119.9 (121.6) million and the operating profit was EUR 6.1 (9.2) million. The order book at 30 September 2001 stood at EUR 26.3 (29.7) million. The decline in the operating profit was largely due to the loss- making performance of two Swedish production units and to the higher than expected maintenance and sub-contracting costs at the Pietarsaari unit, which reduced the operating profit for the core business from 8% to 5%. Deliveries of components to the heavy truck industry were at the same level as last year. Delivery volumes to the heavy truck sector remained high in relation to market developments, thanks to the contracts signed last year. Demand has passed its peak, however, and this has shown in a decline in delivery volumes. Component deliveries to manufacturers of machinery and equipment remained at the same level as last year. Sales to the off-road industry fell 7 per cent. The Group has adjusted its operations in response to the decline in demand from the heavy truck industry. This has meant actions including personnel reductions at units supplying the heavy truck industry. Restructuring programmes are underway at the loss-making Alvesta and Osby units, which have been impairing the Group's result. These programmes aim to raise production efficiency and correct the cost structure at the units. At the Alvesta foundry, product rationalization took place and in July a major investment of SEK 15 million was made in a cooling line for castings to raise productivity. As a part of restructuring programme it has been agreed after the negotiations with personnel representatives to decrease personnel by giving notice to about 25 persons. Concerning the Osby machine shop, the Board of Directors of Componenta decided at its meeting on 11 October 2001 to initiate negotiations with personnel with a view to shutting down the unit. Componenta Osby has had annual net sales of EUR 11 million (SEK 100 million) and has 90 employees. The machine shop has made considerable losses in recent years. With this decision Componenta is seeking for possibilities to adapt its cost structure in a situation where most of its customer segments are showing a decline due to the slowdown of the world economy. The target is to carry out the process by summer 2002. A possible shutting down of Componenta Osby AB will have no effect on the profit forecast of the Group for year 2001. Personnel reductions in the core business operations since the start of the year have involved lay-offs and redundancies affecting about 100 employees. For the end of the year it is estimated that the adjustments to operations will affect totally about 200 employees. The actions are partially structural, so their impact will mainly be seen in 2002. The restructuring programme at the Karkkila foundry was completed during the first half of the year, and the steps taken there have raised the unit's operating result to positive. Sales of geared components by Componenta Albin have matched expectations. In June Componenta Albin signed a long-term agreement for new generation four-wheel drive components for automobiles. The agreement will require capital expenditure to be made in the coming years at Albin to raise production capacity and boost efficiency. At the beginning of August the Group purchased the share stock of Nisamo Oy, a machine shop located in Lempäälä that makes components for power generation and wind generators, from its owner and managing director. The company, which employs about 50 people, upgrades heavy castings, from Componenta Suomivalimo and elsewhere, into ready to assemble components. As from the beginning of October, Suomivalimo and Nisamo were organized into a new supply chain that has customers mainly among manufacturers of machines for paper making, power generation and power transmission. The company has recorded fewer new orders for components for the heavy truck industry than last year. As a result of the structural changes in the heavy truck industry, customers are not starting new projects before they have drawn up their strategic policies for products and components. Other operations and associated companies Other operations had net sales during the review period of EUR 23.4 (26.0) million and an operating profit of EUR 0.5 (1.0) million. The order book at 30 September 2001 stood at EUR 5.6 (7.5) million. The decline in demand from the heavy truck industry also affected order volumes at Componenta Wirsbo. Demand for the aluminium and copper components made by Componenta Traryd has been strong and delivery volumes have risen. Componenta Group's share of the result of the associated companies was EUR -0.7 (-0.1) million. The loss was mainly due to one-time write-downs made in the 2000 financial statements of the Thermia Group that affect Componenta Group's result for 2001. Investments Investments in production facilities carried out during the review period totalled EUR 11.0 (12.1) million. The most significant of these investments were in the cooling line for castings at the Alvesta foundry, the machining centre at Främmestad, and the pressing line for forged components at Wirsbo. In addition to these, the Group invested in the shares of Componenta Pistons and Componenta Nisamo. Gross investments, including the purchase of Componenta Finance Corporation shares, totalled EUR 48.4 million. Componenta Group's investments in production facilities for the whole year are estimated to be about EUR 15 million. Share capital and shares Trading in the shares of Componenta Corporation commenced on the main list of the Helsinki Exchanges on 19 March 2001. At the end of the review period the company's share capital stood at EUR 19.2 million. The shares have a nominal value of 2 euros. At the end of the period on 30 September 2001 the quoted price of Componenta Corporation shares stood at EUR 2.39. The lowest quoted price during the review period was EUR 2.25 and the highest was EUR 3.40. The share capital had a market value of EUR 23 million. The volume of shares traded during the review period was equivalent to 7.4% of the share stock. Authorization for share issues and purchasing own shares The company's Board of Directors has no authorization for share issues or for purchasing the company's own shares. Exchange of Componenta Finance warrants Componenta Corporation offered corresponding Componenta Corporation warrants to holders of Componenta Finance Corporation warrants, on the condition that they surrender their Componenta Finance Corporation warrants to Componenta Corporation. A total of 567,847 Componenta Corporation warrants were subscribed. They entitle the warrant holders to subscribe to a total of 567,847 Componenta Corporation shares, or about 5.9 per cent of the number of Componenta Corporation shares at the end of the review period. Changes in Corporate Management As from 1 October 2001, Componenta Group's corporate management team consists of President and CEO Heikki Lehtonen, Senior Vice President and COO Yrjö Julin, CFO Sirpa Koskinen, Sales and Marketing Director Jari Leino, Director of Supply Chain 1 Bengt Christensson, Director of Supply Chain 2 Ilkka Manelius, Director of Supply Chain 3 Olli Karhunen, and Communications Manager Pirjo Aarniovuori. Prospects The terrorist attacks in the United States have increased economic uncertainty especially in the US markets, and will also have a negative impact on economic prospects in Europe. Their biggest impact will probably be to make consumers and company owners more cautious in their behaviour, which will weaken already sluggish economic growth and keep investments at a low level. It remains to be seen whether the attacks have only a short-lasting impact or whether economic behaviour becomes more cautious in the longer term. In any case, since the terrorist attacks forecasts for economic growth have become more pessimistic. In the heavy truck industry it is estimated that demand this year will be about 10% lower than in the previous year. The new orders for components signed in 2000 should, however, keep deliveries by Componenta Group in 2001 at almost the same level as in the previous year. Production by the Finnish general engineering industry has grown during the first half of the year thanks to a high level of export orders and strong domestic demand, but demand in this sector is also expected to decline towards the end of the year. Demand for off-road machines is also expected to slow down towards the end of the year. The strong growth in the construction of wind generators should continue in Europe and the USA. Experts in the field forecast that demand for wind generator components will triple by 2005. The Group's net sales in 2001 are estimated at about EUR 200 million. Taking into account the increased number of risk factors bringing uncertainty to its operating environment, Componenta Group's profit after financial items in 2001 is expected to be between EUR 3 million and EUR 6 million (2000 Pro-forma EUR 6.4 million). Componenta Group Proforma Proforma INCOME STATEMENT (MEUR) 1.1.- 1.1.- 1.1.- 30.9.2001 30.9.2000 31.12.2000 Net sales 147.6 168.3 225.7 Other operating income 3.6 6.4 7.4 Share of the associated companies' -0.7 -0.1 -0.5 result Operating expenses 136.8 156.6 208.7 Depreciation and write-downs 6.4 7.2 9.3 Operating profit 7.2 10.8 14.5 % of net sales 4.9 6.4 6.4 Financial income and expenses -5.5 -6.2 -8.0 Profit after financial items 1.8 4.6 6.4 Income taxes 0.2 - - Minority interest and conversion 0.0 - - difference Net profit 2.0 - - Proforma BALANCE SHEET (MEUR) 30.9.2001 1.1.2001 Assets Group goodwill 2.4 0.0 Non-current assets 153.5 155.6 Current assets Inventories 21.8 22.8 Receivables 49.3 56.1 Cash and bank accounts 2.0 4.9 Total current assets 73.0 83.8 Total assets 229.0 239.4 Liabilities and shareholders' equity Shareholders' equity Share capital 19.2 19.2 Other equity 13.9 11.5 Preferred capital notes 22.7 22.7 Total shareholders' equity 55.8 53.4 Minority interest 2.1 2.1 Negative goodwill 13.0 15.3 Liabilities Non-current liabilities Interest bearing 75.9 78.3 Interest free 1.8 3.7 Current liabilities Interest bearing 46.1 50.7 Interest free 34.3 35.8 Total liabilities 158.1 168.6 Total liabilities and 229.0 239.4 shareholders' equity KEY RATIOS Proforma 30.9.2001 1.1.2001 Equity ratio, % 15.4 13,8 Equity ratio, %, preferred capital notes and negative goodwill in equity 31.0 29.6 Equity per share, EUR 3.44 3.20 Net interest bearing debt, MEUR 111.4 110.7 Net interest bearing debt, MEUR, 134.1 133.4 preferred capital notes in debt Net gearing, %, preferred capital notes and negative goodwill in equity 157.2 156.1 Net gearing, % 380.8 405.3 Order book, MEUR 31.7 35.0 Investments in non-current assets, MEUR 48.4 28.2 (* Average number of personnel 1,854 1,986 Number of personnel at the end of the 1,855 1,936 period Share of export and foreign activities 72.0 77.0 in net sales, % Contingent liabilities, MEUR (** 77.0 43.3 (* Investments in year 2001 include the acquisition of Componenta Finance Corporation shares (** Contingent liabilities for year 2001 include 32.8 MEUR Componenta Finance Corporation shares which have been pledged. The amount of debts secured by the pledge is 3 MEUR. Proforma DERIVATIVE INSTRUMENTS 30.9.2001 1.1.2001 (MEUR) Nominal Current Nominal Current value value value value Interest derivatives Interest rate swaps 27.2 -0.4 32.3 0.4 Future agreements - - 9.0 -0.1 Currency derivatives Forward exchange 43.3 0.6 70.1 0.6 agreements Currency swaps - - 2.7 0.0 Derivative instruments are used to hedge the Group's foreign exchange and interest rate risks Corporate development by business group (MEUR) Proforma Proforma Net sales (MEUR) 1.1.-30.9.2001 1.1.-30.9.2000 1.1.-31.12.2000 Cast and other components 119.9 121.6 167.0 Other business 23.4 26.0 35.9 Divested operations 3.2 19.2 21.0 Others and internal sales 1.1 1.4 1.9 Componenta Group total 147.6 168.3 225.7 Proforma Proforma Operating profit (MEUR) 1.1.-30.9.2001 1.1.-30.9.2000 1.1.-31.12.2000 Cast and other components 6.1 9.2 12.9 Other business 0.5 1.0 1.4 Divested operations 0.1 -3.0 -3.3 Others and internal sales 0.5 3.7 3.4 Componenta Group total 7.2 10.8 14.5 Proforma Proforma Order book (MEUR) 30.9.2001 30.9.2000 1.1.2001 Cast and other components 26.3 29.7 27.7 Other business 5.6 7.5 6.5 Divested operations - 1.2 0.9 Others and internal sales -0.2 -0.1 -0.1 Componenta Group total 31.7 38.3 35.0 Corporate quarterly development (MEUR) Proforma Proforma Proforma Proforma 7-9/2001 4-6/2001 1-3/2001 10-12/2000 7-9/2000 4-6/2000 1-3/2000 Net sales 39.8 51.5 56.3 57.4 43.8 61.9 62,6 Operating profit -0.6 4.0 3.8 3.6 1.2 6.9 2.7 Net financial items -1.8 -1.7 -1.9 -1.8 -2.0 -2.2 -2.0 Profit/loss after -2.5 2.3 1.9 1.8 -0.8 4.7 0.7 financial items Quarterly development by business group Proforma Proforma Proforma Proforma Net sales (MEUR) 7-9/2001 4-6/2001 1-3/2001 10-12/2000 7-9/2000 4-6/2000 1-3/2000 Cast and other 33.1 41.6 45.2 45.4 35.1 43.6 42.9 components Other business 6.3 8.2 8.9 9.8 6.8 9.6 9.6 Divested operations 0.1 1.3 1.8 1.9 2.0 8.1 9.0 Others and internal 0.3 0.4 0.4 0.4 -0.1 0.5 1.0 sales Componenta Group 39.8 51.5 56.3 57.4 43.8 61.9 62.6 total Proforma Proforma Proforma Proforma Operating profit 7-9/2001 4-6/2001 1-3/2001 10-12/2000 7-9/2000 4-6/2000 1-3/2000 (MEUR) Cast and other -0.2 2.9 3.4 3.7 0.7 4.1 4.3 components Other business 0.0 0.2 0.3 0.5 -0.1 0.6 0.5 Divested operations 0.0 0.3 -0.2 -0.3 -0.2 0.2 -2.9 Others and internal -0.4 0.6 0.3 -0.4 0.8 2.0 0.8 sales Componenta Group -0.6 4.0 3.8 3.6 1.2 6.9 2.7 total Proforma Proforma Proforma Proforma Order book (MEUR) 30.9.2001 30.6.2001 31.3.2001 1.1.2001 30.9.200 30.6.200 31.3.200 0 0 0 Cast and other 26.3 25.9 27.0 27.7 29.7 27.7 24.8 components Other business 5.6 5.2 5.8 6.5 7.5 7.4 6.5 Divested operations - - 0.8 0.9 1.2 1.1 5.2 Others and internal -0.2 -0.1 -0.1 -0.1 -0.1 -0.1 -0.1 sales Componenta Group 31.7 31.0 33.5 35.0 38.3 36.1 36.4 total Componenta Corporation Largest registered shareholders on September 30, 2001 Share Shares Share of holde total r voting rights % 1 3,681,731 38.29 Lehto nen Heikk i Lehtonen Heikki 3,336,7 31 Helsingin Santapaperi Oy 340,000 Oy Högfors-Trading Ab 5,000 2 802,700 8.35 Etra Inves t Oy 3 457,600 4.76 Ilmar inen Mutua l Pensi on Insur ance Compa ny 4 437,800 4.55 Sampo Group Sampo Life Insurance 237,800 Company Ltd Sampo Industrial Insurance 200,000 company Ltd 5 272,400 2.83 Selig sson & Co Inves tment Fund Oyj 6 213,400 2.22 Feder ation of Finni sh Metal Engin eerin g and Elect rotec hnica l indus tries 7 178,823 1.86 Lehto nen Anna- Maria 8 150,000 1.56 Local Gover nment Pensi on Insti tutio n Finla nd 9 148,800 1.55 Finni sh Natio nal Fund for Resea rch and Devel opmen t (Sitr a) 10 135,100 1.41 Inkin en Simo- Pekka 11 132,800 1.38 Alfre d Berg Finla nd Inves tment Fund 12 131,040 1,36 Lehto nen Yrjö M 13 128,300 1.33 Alfre d Berg Portf olio Inves tment Fund 14 116,800 1,21 Insur ance Compa ny Suomi 15 114,200 1,19 Alfre d Berg Optim al Inves tment Fund 16 2,513,815 26.14 Other share holde rs Total 9,615,309 100.00 Helsinki, 12 October 2001 COMPONENTA CORPORATION Board of Directors Heikki Lehtonen President and CEO For further information please contact: Heikki Lehtonen President and CEO tel +358 9 225 021 Sirpa Koskinen CFO tel +358 9 225 021 Componenta is a metal sector company with international operations and production plants located in Finland and Sweden. The company's net sales exceed EUR 200 million and the group employs about 1,900 people. Componenta's shares are quoted on the Main List of the Helsinki Exchanges. The group's customers operate in the heavy truck, general engineering and off-road industries. Componenta specializes in supplying ready-to-install cast, geared and machined components directly to the customer's assembly line. Componenta Corporation World Trade Center Helsinki, Aleksanterinkatu 17 P.O. Box 1132, FIN-00101 Helsinki, Finland Tel. +358 9 225 021 Fax +358 9 2250 2721 http://www.componenta.com ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/10/12/20011012BIT00020/bit0001.doc http://www.waymaker.net/bitonline/2001/10/12/20011012BIT00020/bit0001.pdf