Componenta Corporation Interim report 1 January - 31 March 2002

Componenta Corporation Interim report 1 January - 31 March 2002 Componenta Group had net sales during the first quarter of 2002 of EUR 47.1 million (net sales of EUR 56.3 million in the same period in the previous year). The Group had an operating profit of EUR 1.1 (3.8) million and a loss after financial items of EUR 1.0 million (profit of EUR 1.9 million). The earnings per share were EUR -0.06 (0.17). The Group's equity ratio, including the preferred capital notes in equity, was 30.1%, (32.0% on 31 December 2001). Net sales and the profit after financial items are estimated to improve in the second quarter of the year. The Group's order book at the end of the review period stood at EUR 28.2 million (EUR 26.5 million on 31 December 2001). Markets According to the latest economic forecasts, the impact of the events towards the end of last year on growth in 2002 appears to be less serious than was feared. Demand for investment goods is not expected to start to pick up until the second half of the year. The uncertainty prevailing among Componenta's customer sectors about developments in the world economy has shown itself in the first part of the year as weak demand. The fall in demand for heavy trucks, which had already started the previous year, continued in Europe in the first part of the year. Demand for components from Finnish machinery and equipment manufacturers has declined with the decrease in order books. Because of the long through-put times for orders, any recovery in economic growth will only show in the sector after a delay. Demand from European off- road manufacturers has also continued to be weak. In addition, the uncertainty in the energy markets in the USA has postponed deliveries of wind turbine generator components. Net sales The Group had net sales of EUR 47.1 million (EUR 56.3 million). The Group's order book at the end of the review period stood at EUR 28.2 (33.5) million (EUR 26.5 million on 31 December 2001). Exports and foreign operations accounted for 75% (74%) of net sales. Componenta Group's net sales by market area were as follows: Finland 25%, other Nordic countries 54%, Central Europe 19% and other countries 2%. Result and financing Componenta Group made an operating profit of EUR 1.1 (3.8) million during the review period, and the loss after financial items was EUR 1.0 million (profit of EUR 1.9 million). The result does not include net profits from the sale of non-current assets or other non-recurring items (in the corresponding period in 2001 these accounted for EUR 1.0 million). The Group's financial costs amounted to EUR 2.1 (1.9) million. The Group's net result was EUR - 0.6 (1.6) million. The preferred capital notes issue and exchange that took place during the review period and are effective until 2009 at the latest, considerably reinforce the Group's financing structure. The Group had EUR 28 million in unused committed credit facilities at the end of the review period. Including the preferred capital notes and the negative goodwill in shareholders' equity, the equity ratio was 30.4% (31.0%). Including the preferred capital notes in shareholders' equity, the equity ratio was 30.1% (25.5%). Cast and Other Components The Cast and Other Components business group supplies ready to install cast and machined components to the heavy truck industry, the power and transmission industries, machine building industry and the off-road industry. Cast and Other Components had net sales in the review period of EUR 38.8 (45.2) million and an operating profit of EUR 1.4 (3.4) million. The order book stood at EUR 22.9 (27.0) million on 31 March 2002 (EUR 22.0 million on 31 December 2001) . Component deliveries to the heavy truck industry were 11% down on the corresponding period in the previous year. However, delivery volumes remained at the level of the final quarter of last year. Deliveries to customers in the energy and power transmission industries were 14% up on the first quarter last year. Componenta Nisamo, which was acquired last summer, helped in the increase. Deliveries of wind turbine generator components failed to reach the planned level, however, as uncertainty in the energy markets in the USA caused component deliveries to be postponed from the first to the second quarter of the year. Deliveries in the review period only reached the level of the final quarter last year. Component deliveries to manufacturers of machinery and equipment and to the off-road industry both fell by about 20 per cent compared to the corresponding period last year, but remained at the same level as at the end of last year. Some of the decline in net sales was a consequence of the product rationalisation connected to the remedial action at the Alvesta foundry and of the closing down of operations at the Osby unit. The restructuring programme at the Alvesta foundry, which has been weakening the Group's result, has been completed. During the review period the unit's operating result started to improve, but was still slightly loss-making. The closing of the Osby machine shop has gone according to plan and production ended in the unit in March. The transfer of products to Componenta's other units in Sweden have largely been completed. Operations in Osby will cease entirely in May. The costs of closing the Osby unit were recorded already in Componenta Group's result for 2001. Sales of geared components at Componenta Albin have grown as expected from the end of the previous year and exceeded the level of the first quarter last year. The investment in the machining centre carried out at Albin early in the year will raise the unit's production capacity and boost the efficiency of its operations. Other Business and associated companies Componenta's Other Business comprises mainly the Wirsbo forges and the Traryd metal foundry. Net sales for Other Business totalled EUR 7.9 (8.9) million in the review period and the operating profit was EUR 0.3 (0.3) million. The order book stood at EUR 5.4 (5.8) million on 31 March 2002 (EUR 4.6 million on 31 December 2001). The fall in demand from the heavy truck industry also affected the volumes of forged products supplied by Componenta Wirsbo, and these were lower than in the corresponding period of the previous year. Demand for the aluminium and copper components made by Componenta Traryd was strong, however, and the unit's sales rose from the previous year's level. Componenta's associated companies have been formed by merging companies that used to belong to the Group with partner companies. In January Componenta raised its holding in the associated company Thermia AB from 30 per cent to 36 per cent. Componenta Group's share of the result of the associated companies was EUR -0.4 (-0.7) million. The result was raised by the better than forecast result for 2001 from Thermia, which is recorded in Componenta's result for 2002. The result was reduced by the result from Ulefos NV, which was poorer than the previous year in the first quarter of the year. Investments Investments in production facilities during the review period totalled EUR 1.0 (4.3) million. The most significant of these were the new production lines at Albin and Nisamo and the pressing line for forged components at Wirsbo, which was started last year. In addition to these production investments, the Group raised its holding in Thermia AB. The Group's gross investments totalled EUR 2.1 (36.5) million. Componenta Group's investments in production facilities for the whole year are estimated to be EUR 7.5 million at most. Share capital and shares The shares of Componenta Corporation are quoted on the main list of the Helsinki Exchanges. 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 review period on 31 March 2002 the quoted price of Componenta Corporation shares stood at EUR 2.38. The lowest quoted price during the review period was EUR 2.13 and the highest was EUR 2.70. The share capital had a market value of EUR 22.9 million. The volume of shares traded during the review period was equivalent to 2.8% of the share stock. The Annual Shareholders' Meeting of Componenta Corporation decided to pay a dividend in accordance with the Board's proposal. The dividend of EUR 0.15 per share was paid on 22 February 2002. 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. Preferred capital notes Componenta Corporation offered holders of the preferred capital notes issued in 1997 by its subsidiary Componenta Finance Corporation the opportunity to exchange their notes for new preferred capital notes issued by Componenta Corporation. The subscription period was 4 February - 15 February 2002. As a result of the offer, 99.4% of the Componenta Finance Corporation preferred capital notes were exchanged for new notes issued by Componenta Corporation. The preferred capital notes issued by Componenta Corporation had a principal of EUR 25,101,000 and the loan period is 15 February 2002 - 19 March 2009. Annual interest is paid on the loan, at a rate 4% above the 12-month Euribor interest rate. The company will repay 10% of the principal annually and the first instalment was repaid on 19 March 2002. Componenta Corporation also has the right to pay off more than 10% of the loan on the annual interest payment date. The preferred capital notes issued by Componenta Finance Corporation were in their entirety in the possession of Componenta Corporation by the end of March. One of the preferred capital notes was listed on the Helsinki Exchanges and trading in this preferred capital note was terminated on 25 March 2002. Including the preferred capital notes issued in December 2001, Componenta Corporation has preferred capital notes with a total value of EUR 28,590,900, after the repayment on 19 March 2002. Board and Management The Annual Shareholders' Meeting on 12 February 2002 elected Heikki Bergholm as a new member of the Board of Directors, as Jouko Koskinen stood down. The members of Componenta Corporation's Board of Directors are Olli Reenpää, Juhani Mäkinen, Heikki Bergholm, Antti Lehtonen and Heikki Lehtonen. The Board elected Olli Reenpää as its Chairman and Juhani Mäkinen as Vice Chairman. Componenta Group's corporate executive team consists of President and CEO Heikki Lehtonen, Senior Vice President and COO Yrjö Julin (until 30 April 2002), CFO Sirpa Koskinen, Sales and Marketing Director Jari Leino, Director of Supply Chain 1 Bengt Christensson, Director of Supply Chain 2 Lauri Huhtala, Director of Supply Chain 3 Olli Karhunen, and Communications Manager Pirjo Aarniovuori. Prospects Several industrial sectors have unused capacity, which may reduce the immediate need for capital expenditure by industry if the anticipated recovery in the world economy takes place. If the forecast economic growth is realised and capacity usage by industry rises, investments in machinery and equipment will probably increase towards the end of the year. The expected recovery in economic growth will probably not start to affect Componenta's customer sectors until the second half of the year. Componenta's order intake and order books have already shown an increase from the level at the start of the year, especially in the heavy truck, energy and power transmission sectors. Demand from the heavy truck industry is estimated to decline during 2002. Production by the Nordic machine building industry is expected to decline in 2002 from the previous year's level, despite the anticipated recovery in demand in the second half of the year. Construction of wind turbine generators is forecast to return to its previous growth path in the second quarter of the year. On the basis of the order book and total orders received, Componenta Group's net sales and result in the second quarter of the year are expected to improve on the first quarter. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/04/15/20020415BIT00100/wkr0001.doc The full report http://www.waymaker.net/bitonline/2002/04/15/20020415BIT00100/wkr0002.pdf The full report