Financial Statement 1 January - 31 December 2001

Financial Statement 1 January - 31 December 2001 Componenta Group had net sales of EUR 193.8 million (Proforma net sales for the previous year were EUR 225.7 million). The Group had an operating profit of EUR 8.3 (14.5) million and a profit after financial items of EUR 2.3 (6.4) million. The net result of the Group was EUR 7.4 million (-). Heavier losses than in the previous year at the Alvesta and Osby business units and a fall in one-time net income weakened the Group's profit. The equity ratio, including the preferred capital notes in equity, was 32.0% (23,2%). The Board of Directors proposes to the Annual Shareholders' Meeting that a dividend of EUR 0.15 per share be paid, the equivalent of 20 per cent of the net profit per share. The slowdown in growth in the world economy, the sharper than anticipated decline in several of the Group's customer sectors in the autumn, and heavier losses at the Alvesta and Osby units - all these factors weakened Componenta Group's result, which was poorer than the previous year despite the remedial steps taken. The Group's result also fell from the previous year's level because of the reduction in one-time net income. The EUR 6 million preferred capital note issued in December and the net result of the financial year improved the Group's equity ratio. During the review year Componenta Group continued the restructuring of the Group in accordance with its strategy, selling operations that were not part of the core business and investing in new units that support the core business. 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 made an exchange offer and public bid for the shares of what is now Componenta Finance Corporation (formerly Componenta Corporation). The income statement of Componenta Group includes the income statement figures of Componenta Finance Group for the whole year, because the financial interest in Componenta Finance Group covers the whole year. Componenta Group figures for comparison are presented as Proforma figures, with the actual figures for 2001 being compared with the figures for Componenta Finance Group figures for 2000. The figures for comparison in the balance sheet and for contingent liabilities are the corresponding figures for the situation on 1 January 2001. Markets Demand for heavy trucks fell in Europe by more than 10 % from the previous year. This was a consequence of the slowdown in economic growth in Europe. Demand for components from Nordic manufacturers of machinery and equipment slackened towards the end of the year after a strong start to the year. An exception to this was wind turbine generator components, for which demand continued to grow strongly. Changes in Group structure The name Componenta Corporation was adopted at an Extraordinary Shareholders' Meeting on 8 October 2001, replacing the name Componenta Holding Corporation. The one hundred per cent owned subsidiary Componenta Corporation changed its name to Componenta Finance Corporation. Both name changes were registered in the Trade Register on 9 October 2001. Componenta Finance Corporation became a subsidiary of Componenta Corporation as a result of the exchange offer and public bid for shares which ended on 9 March 2001, when 89.9 per cent of the shares of Componenta Finance Corporation were exchanged for shares in Componenta Corporation, and Componenta Corporation purchased 6.1 per cent of the shares of Componenta Finance Corporation. Under the offer to redeem shares in the period 23 March - 23 April 2001, in accordance with the Securities Markets Act, Componenta Corporation acquired 2.2 per cent of the shares of Componenta Finance Corporation. By the conclusion of the redemption offer, 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 Componenta Finance Corporation shares, in accordance with the Companies Act. On 12 September 2001 a court of arbitration confirmed that Componenta Corporation had the undisputed right to expropriate the remaining Componenta Finance Corporation shares, and on the basis of this decision the ownership of Componenta Corporation in Componenta Finance Corporation rose to one hundred 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. A court of arbitration decided on 20 September 2001 that the redemption price was to 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. The purchase of the shares of Componenta Finance Corporation created negative goodwill of EUR 39.7 million at Componenta Group. The group goodwill of EUR 24.4 million, which Componenta Finance Group had on 1 January 2001, was used at the consolidation to offset part of this negative goodwill, and the remainder of EUR 15.2 million was booked as negative goodwill in the liabilities and shareholders' equity in the balance sheet. This negative goodwill will be recognized as income according to plan in five years. 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 Saint- Gobain, the company's French majority shareholder. In June the Group purchased the 80.25% of the shares of Wecometal Oy owned by the capital investment company Oy Wedeco Ab. Following this transaction the Group owned all the shares of Wecometal. The company, which is based in Pietarsaari, changed its name to Componenta Pistons Oy. Componenta Pistons 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 as stipulated in the sale agreements. In July the Group purchased the entire share stock of the Lempäälä-based company Nisamo Oy. 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 has specialized in the manufacture of engine and power transmission components for energy production, for Finnish customers 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 president. Following this transaction Componenta has a 32 per cent holding in Profiz. Net sales and order book The Group had net sales of EUR 193.8 (225.7) million. The fall in net sales was due to the divestment of operations and to extremely weak economic development towards the end of the year. The business operations that continued in the Group, excluding the business units purchased during the year, had net sales of EUR 187.0 (204.7) million, a decline of 9% from the previous year. Exports and foreign operations accounted for 72% (77%) of net sales. Componenta Group's net sales by market area were as follows: Finland 28%, Sweden 50%, Central Europe 18% and other countries 4%. The Group's order book stood at EUR 26.5 (35.0) million on 31 December 2001. The Cast and Other Components business group accounted for EUR 158.4 (167.0) million of net sales, other business for EUR 30.6 (35.9) million and divested operations for EUR 3.2 (21.0) million. Result Componenta Group recorded an operating profit of EUR 8.3 (14.5) million in the review period and a profit after financial items of EUR 2.3 (6.4) million. The net result was EUR 7.4 million. The profit includes a net total of EUR 1.2 (3.9) million from the net profit from the sale of fixed assets and from other non-recurring items. In addition, provisions of EUR 3 million for closing down the Osby business unit and one-time write-downs of EUR 6.2 million for non-current and current assets cut into the profit. The Group's result is improved by recognizing EUR 12.3 million of negative goodwill as income, with EUR 9.2 million of this being used to offset the provisions and write-downs mentioned above. The Group's financing costs were EUR 6.0 (8.0) million. Financing costs do not include interest of EUR 1.6 million on the preferred capital notes of Componenta Finance Corporation for the period 19 March - 31 December 2001, because Componenta Finance Group has no distributable funds. The Board of Directors of Componenta Corporation has decided on preparations for an offer to the holders of the preferred capital notes of Componenta Finance Corporation to exchange their holding to a new preferred capital note issued by Componenta Corporation. The Group's income taxes were EUR 5.0 million positive, of which EUR 3.6 million comes from recognizing deferred tax liability as a result of the reversal of the untaxed reserves of group companies. In addition, a change of EUR 1.6 million has been recorded in deferred tax credit, most of which is due to the confirmed losses of Finnish companies, taking into account the potential performance of the Finnish companies in the near future. Recognizing a significant amount of negative goodwill as income has an impact on the taxes for the net profit shown for the financial period. The Group's profit fell from the previous year due to weaker demand, a smaller amount of non-recurring net income, and the increase in the losses made by the Alvesta and Osby business units. The removal from the Group of loss-making units sold earlier improved the Group's profit compared to 2000. The Cast and Other Components business group had net sales of EUR 158.4 (167.0) million and an operating profit of EUR 7.1 (12.9) million. The order book stood at EUR 22.0 (27.7) million on 31 December 2001. The decline in operating profit from the previous year was due to the decrease in comparable net sales and to the increased losses from two Swedish business units, which reduced the operating profit percentage for the core business from 8% to 4%. Component deliveries to the heavy truck industry fell short of the previous year's level. Delivery volumes to the truck sector remained high in proportion to market development, thanks to the contracts signed the previous year. Delivery volumes in the final quarter were, however, significantly lower than in the previous year. The Group modified its operations in consequence of the fall in demand from the heavy truck industry, which meant reductions in personnel at units supplying that industry. Deliveries of components to manufacturers of machinery and equipment remained at the same level as the previous year, even though demand fell towards the end of the year. Delivery volumes were improved by the sales figures for the new units, Componenta Pistons and Componenta Nisamo, in the second half of the year and because of the high demand early in the year. In the final quarter, excluding the figures for the newly purchased units, deliveries were 18% lower than in the previous year. Sales to the off-road industry were 8% lower than the previous year. The decline was due both to the weaker market and to a reorganization of products at loss-making units. Steps were taken to adjust personnel levels at the units supplying the general engineering industry, except for the new units that mainly serve the energy sector. A restructuring programme is underway at the loss-making Alvesta foundry, which has been weakening the Group's profit. In addition to the reorganization of products, in July a major EUR 1.6 million (SEK 15 million) investment in a cooling line for castings was made at the company to raise productivity. As part of the remedial programme at Alvesta, personnel negotiations took place and personnel reductions have been agreed on, making about 65 people redundant, as the unit switches to extended one shift production during the spring of 2002. As for the loss-making Osby machine shop, Componenta's Board of Directors decided at its meeting on 11 October 2001 to initiate negotiations with personnel at the unit with a view to terminating operations at the machine shop. Componenta Osby has had annual net sales of EUR 11 million (SEK 100 million) and employed 90 people. The negotiations were completed on 8 November 2001. The entire personnel has been given notice of redundancy, and production at Osby will be terminated in April or May 2002. About 60% of Osby's production will be transferred to other Componenta units in Sweden. By closing down the unit, Componenta is looking for ways to adjust the Group's total costs in a situation where most customer segments are experiencing a downward turn as a result of the uncertainty in the world economy. Personnel reductions affecting core businesses took place right from the start of the year, and towards the end of the year negotiations about reducing the number of personnel were started at almost all units. The personnel reductions will total 250 - 300 man-years, including the redundancies at Osby and Alvesta. The reductions will include lay-offs and redundancies. The actions are in part structural, and for that reason their impact will mainly be felt in 2002. The remedial programme at the Karkkila foundry was completed in the first half of the year and the steps taken there have raised the operating result and made it positive. Componenta Albin's sales of geared components matched expectations. In June Componenta Albin signed a long-term contract for new generation four wheel drive clutch components for cars. Thanks to this contract, investments to raise production capacity and improve efficiency will be carried out in the next few years at Albin. In June the business group was strengthened by purchasing the shares of the Pietarsaari-based piston manufacturer Wecometal Oy. The company changed its name to Componenta Pistons Oy. 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 turbine generators. 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, both these units were organized into a new supply chain that has customers mainly among manufacturers of machines for paper, power and transmission industry. The company has signed fewer new orders for components than last year for the heavy truck industry. As a result of the structural changes in the sector, customers are not starting new projects before they have drawn up their strategic policies for products and components. The company signed more new orders for components for the general engineering industry than in the previous year. In addition, towards the end of the year Componenta signed a major contract to supply components for wind turbine gears, with deliveries to take place between 2002 and 2004. Net sales for Other Business totalled EUR 30.6 (35.9) million in the review period and the operating profit was EUR 0.4 (1.4) million. The order book stood at EUR 4.6 (6.5) million on 31 December 2001. The decline in demand from the automotive industry also affected order volumes at Componenta Wirsbo. Demand in Sweden for the aluminium and copper components made by Componenta Traryd was strong and delivery volumes rose. Divested operations made an operating loss of EUR 0.3 (3.3) million. Divested operations in 2001 include the net sales and operating result for five months for Componenta Prometek and for six months for Ärnkome. Componenta Group's share of the result of the associated companies was EUR -0.5 (-0.5) million. Poorer results by Keycast and Ulefos reduced the Group's share. In contrast, Thermia's result improved significantly on the previous year. However, the Group's share was reduced by one-time write-downs made in the 2000 financial statements of the Thermia Group that affected Componenta Group's result for 2001. Other and internal items contributed EUR 1.1 (3.4) million to the operating profit. Investments Total gross investments for the financial year, including the purchase of Componenta Finance Corporation shares, totalled EUR 53.1 (28.2) million. The most significant investments in production facilities 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, which is still to be completed. In addition to these, the Group invested in the shares of Componenta Pistons and Componenta Nisamo. Componenta Group's investments in production facilities for the whole year totalled EUR 15.6 (16.5) million. Financing The Group's liquidity remained strong throughout the review year. The Group's equity ratio was 18.7% (13.8% Proforma on Jan 1). Including the negative goodwill and preferred capital notes in equity, the equity ratio was 32.3% (29.6%, Proforma Jan 1) and when including the preferred capital notes in equity the equity ratio was 32.0% (23.2%, Proforma Jan 1). The EUR 6 million preferred capital notes issued in December raised the equity ratio. At the end of the financial year the Group had unused committed credit facilities of EUR 44.0 million. The Group has a EUR 40 million commercial paper programme and made active use of this during the year. The Group's interest-bearing net liabilities, excluding the EUR 28.7 (22.7) million preferred capital notes, were EUR 105.3 million (EUR 110.7 million, Proforma Jan 1). Personnel The Group's average number of employees during the year was 1,810 (1,986). The Group had 1,741 (1,936) employees on 31 December 2001. 50.8% (47.9%) of the Group's personnel were in Finland, 48.7% (51.7%) in Sweden and 0.5% (0.4%) in other countries. Board of Directors Componenta's Annual Shareholders' Meeting on 29 January 2001 elected Olli Reenpää, Juhani Mäkinen, Jouko Koskinen, Antti Lehtonen and Heikki Lehtonen to the Board of Directors. The Board chose Olli Reenpää as its chairman and Jouko Koskinen as vice chairman. 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 19,230,618, consisting of 9,615,309 shares each with a nominal value of 2 euros. At the end of the period on 31 December 2001 the quoted price of Componenta Corporation shares stood at EUR 2.15. The lowest quoted price during the review period was EUR 2.11 and the highest was EUR 3.40. The share capital had a market value at the end of 2001 of EUR 20.7 million. The volume of shares traded during the review period was equivalent to 9.4% of the share stock. The company raised its share capital three times during the review period with special share issues. The most significant of these was the issue in connection with the offer to exchange and purchase shares made to shareholders of Componenta Finance Corporation. As a result of this share issue, the share capital rose to EUR 19,230,618 and the number of shares rose to 9,615,309. The company's Board of Directors has no authorization for any further share issues and is not authorized to buy the company's shares. 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. Preferred capital note Componenta Corporation issued a preferred capital note with a principal of EUR 6 million in December 2001. The preferred capital note was subscribed in whole by Ilmarinen Mutual Pension Insurance Company. The loan period began on 21 December 2001 and the preferred capital note will mature on 19 March 2009. Announcements in 2001 in accordance with section 9, chapter 2 of the Securities Market Act According to a statement issued on 30 April 2001, Etra Invest Oy's share of the voting rights and share capital of Componenta Corporation exceeded 5 per cent, rising to 5.5 per cent. According to a statement issued on 12 June 2001, the combined holding in Componenta Corporation of investment funds under the control of Alfred Berg Rahastoyhtiö Oy fell below 5 per cent. Events in early 2002 Componenta increased its holding in the associated company Thermia AB from 30% to 36% with a share purchase agreement on 22 January 2002. Annual Shareholders' Meeting The Annual Shareholders' Meeting of Componenta Corporation, as stipulated in the Articles of Association, will be held on 12 February 2002 at 3.30 pm differing from the earlier informed time. Publication of Annual Report Componenta Corporation will publish its 2001 Annual Report during week 6, 4 - 8 February 2002. Prospects for 2002 Global economic growth slowed down rapidly towards the end of 2001, and the economy and demand for investments are expected to recover at the earliest in the second half of 2002. Because of the uncertainty in the global economy, growth is expected to be weaker than in the previous year in the USA and in the European Union area. The first quarter of the year in particular is expected to be slack. In the heavy truck industry it is estimated that demand in 2002 will decline from the previous year. European heavy truck manufacturers are expected to try to reduce their stocks in 2002 by cutting back production. The heavy truck markets are not expected to recover until 2003. The decline in capacity usage at industrial companies will result in a decrease in the need for investment. Output by the Finnish general engineering industry in the first half of 2001 was strong thanks to the high level of export orders and strong domestic demand, but Componenta Group began to see the impact of the cut back in investment activity in terms of weaker demand in the second half of the year. Demand will probably continue to be weak in 2002 and not start to pick up until 2003. The strong growth in the construction of wind turbine generators should continue in Europe and the USA. Experts in the field forecast that demand for wind turbine generator components will triple by 2005. Weaker demand in almost all Componenta Group's customer sectors will be reflected in the Group's net sales for 2002, which are expected to be lower than in 2001. The Group's result after financial items is estimated to be a loss in the first quarter of 2002. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/01/24/20020124BIT00100/bit0001.doc The Full Report http://www.waymaker.net/bitonline/2002/01/24/20020124BIT00100/bit0001.pdf The Full Report