Interim Report 1 January - 30 September
Componenta Corporation Stock Exchange Release 15.10.2003 at 9.00 am
Interim Report 1 January - 30 September 2003
* Net sales during the first nine months were EUR 131.7 million
(net sales of EUR 136.3 million in the same period in the
previous year, a decline of 3%).
* Operating profit was EUR 5.3 (4.5) million and the result after
financial items EUR -0.6 (-2.2 million.
* Earnings per share were EUR 0.03 (0.02).
* The Group's operating profit improved on the previous year,
thanks to the programme of remedial action carried out, the
improved results of the associated companies and lower financing
costs.
* The Group's equity ratio, including the preferred capital note
in equity, was 31.8% (31.4% on 31 December 2002).
* Since the end of the Iraq war, which cast a shadow over the
global economy at the start of the year, the uncertainty
affecting demand has declined.
Markets and developments by customer sector
The Iraq war was a major factor affecting prospects for the global
economy at the start of 2003. With the end of the war and a
lessening of other destabilising factors, the conditions are right
for a start up of economic growth and investments by industry. The
decline in interest rates along with the decline in the prevailing
uncertainty creates conditions for improving the situation, but
probably not until next year.
Production of heavy trucks has remained at a satisfactory level in
Europe, even though volumes have fallen. Volumes supplied by
Componenta to heavy truck manufacturers in the third quarter were
at a similar level (-3%) to those in the same period last year.
Demand in the power and transmission industries in the third
quarter was 2% below the corresponding period in the previous
year. During the past six months, demand has improved in all
segments of the business sector (components for diesel and
electric engines and for wind generators).
Output by Nordic machinery and equipment manufacturers has
continued at a low level in 2003 as a result of poor investment
demand. Componenta's sales to the machine building industry in the
third quarter were significantly (+7%) above the corresponding
period in the previous year. The full review period was at the
same level as the previous year.
Componenta's deliveries to off-road manufacturers in the third
quarter were 17% down on the corresponding period in the previous
year. Sales for the full nine months were 5% below the previous year.
Net sales and order book
The Group had net sales in the review period of January -
September of EUR 131.7 (136.3) million. Net sales declined 3% from
the previous year. The Group's order book improved from the start
of the year and was similar to what it was as at the end of the
previous quarter. At the end of the review period the order book
stood at EUR 26.9 (28.4 million, EUR 24.9 million on 31 December 2002).
Exports and foreign operations accounted for 72% (72%) of net
sales. Componenta Corporation's net sales by market area were as
follows: Finland 28% (28%), other Nordic countries 52% (52%),
Central Europe 17% (18%) and other countries 3% (2%).
Net sales by customer sector were as follows: heavy truck industry
55% (55%), power and transmission 15% (14%), machinery and
equipment manufacturers 14% (14%), off-road 12 % (12%) and others 4% (5%).
Result
Componenta Group made an operating profit of EUR 5.3 (4.5) million
during the January - September period, and the result after
financial items was a loss of EUR 0.6 million (loss of EUR 2.2
million). The result includes one time items of EUR -0.4 (1.3)
million. These consist mainly of a write-down of part of the EUR
3.0 million receivables from SEW-Eurodrive. One-time income last
year consisted mainly of profit on sales.
The Group's operating profit improved on the previous year, thanks
to the programme of remedial action, the improved results of
associated companies and lower financing costs. The improvement of
operating profit was effected by high prices at the start of the
year for scrap steel and lower net sales and lower non-recurring
income than in the previous year.
Because of the continuing economic uncertainty, the Group has
initiated steps to further raise efficiency and to maintain the
positive cash flow, in addition to the restructuring programme
that started last year. Implementation of this programme has
progressed as planned.
During the third quarter a project was started aiming to merge the
operations of two of the Group's foundries that were operating at
low capacity usage and were loss-making. Combining the operations
of Alvesta and Karkkila will eliminate surplus capacity, remove
the need for duplicate investments, and will create a competitive
unit that operates with better capacity usage. This arrangement,
which is in line with the Group's corporate strategy, will have a
positive impact on the financial performance of the entire Group.
It has been estimated that it will give an annual improvement of
EUR 5 million in the result as from 2005.
The Group's net financial costs amounted to EUR 5.9 (6.7) million
and the net result was EUR 0.3 (0.2) million.
Income taxes in the review period were EUR 0.8 (2.4) million
positive, due to the reduction in deferred tax liability recorded
through the reversal of accelerated depreciation and to the tax
receivables for loss-making business units.
Earnings per share were EUR 0.03 (0.02).
The return on investment was 4.7% (3.8%) and the return on equity
was 0.8% (0.7%).
Financing
The Group's equity ratio was 19.2% (17.3%). Including the
preferred capital note in shareholders' equity, the equity ratio
was 31.8% (30.0%, 31.4% on 31 December 2002).
In March the company carried out an EUR 49 million financing
arrangement lasting until 2006. As part of its action to make more
effective use of capital, in March the Group started a programme
to sell its sales receivables. On the basis of this arrangement,
some of the sales receivables can be sold without any right of
recourse. The target for this programme is to reduce by half the
amount of capital tied up in sales receivables. By 30 September
2003 the company had sold sales receivables totalling EUR 8.7
million.
In March the Group repaid EUR 3.2 million, or 10%, of the
principal of the preferred capital note in accordance with the
terms for the note. On 30 September 2003 Componenta Corporation
had outstanding preferred capital note to the value of EUR 25.4
million.
The Group had EUR 23.2 million in non-utilised long-term credit
facilities at the end of the review period. The Group has a EUR 40
million commercial paper programme. The Group's interest-bearing
net liabilities, excluding the EUR 25.4 million preferred capital
note, totalled EUR 107.6 (125.1) million (EUR 116.5 million on 31
December 2002). Net gearing, including the preferred capital note
in shareholders' equity, was 167% (184%).
The cash flow from operations was EUR 14.5 (0.6) million, and of
this the change in net working capital was EUR 6.9 (-1.2) million.
The cash flow from investments was EUR -0.3 (-8.3) million.
Performance of business groups
The Cast and Other Components business group, which forms the
Group's core business, supplies ready to install cast and machined
components to the heavy truck industry, the power and transmission
industries, other machine building industry and the off-road
industry.
Cast and Other Components had net sales in the January - September
period of EUR 107.0 (112.3) million and an operating profit of EUR
6.5 (4.3) million. The order book stood at EUR 21.3 (22.5) million
on 30 September 2003 (EUR 19.6 million on 31 December 2002).
Net sales in the third quarter totalled EUR 31.3 (32.4) million
and the operating profit was EUR 1.5 (-0.4) million.
At the beginning of 2003, three major customers of Componenta
Främmestad simultaneously made significant changes to their
production strategies. To cut personnel costs and improve
competitiveness, negotiations were held at Componenta Främmestad
and a plan implemented which will result in the number of
personnel in Främmestad being reduced by 50 to 120 this year.
Componenta's Other Business consists of operations that are not
part of the company's core operations, such as the Wirsbo forges,
associated companies, the Group's support functions and service
units, as well as divested business.
Net sales for Other Business totalled EUR 24.7 (24.0) million in
January - September, with an operating loss of EUR -1.1 (profit of
EUR 0.2) million. The operating result includes EUR -0.4 million
in non-recurring items. The order book stood at EUR 5.6 (5.9)
million at the end of the review period (EUR 5.3 million on 31
December 2002).
Componenta Wirsbo's sales increased from the corresponding period
of the previous year. The unit's result has improved from the same
period of the previous year in consequence of the programme of
remedial action. In August the managing director of Componenta
Wirsbo resigned and Mr. Göran Jansson was appointed as the new
managing director as from 1 November 2003.
Componenta Group's share of the result of the associated companies
was EUR 0.8 (0.0) million. Thermia's net sales and result have
performed extremely well over the past nine months, which has
raised the result of the associated companies. The result was also
boosted by Keycast's improved result and by exchange rate gains at
Ulefos. The result was, however, significantly weakened by the
poorer operational result of Ulefos NV, which was mainly due to
the difficult state of the market in Norway. The associated
company has started remedial action at the company's factory in
Norway.
Events after the close of the period
At the beginning of October it was decided that the new foundry to
be formed from merging the operations in Alvesta and Karkkila will
be located in Karkkila. It was also decided to start personnel
negotiations in Alvesta concerning the termination of the
operations of Componenta Alvesta AB.
The new large, competitive foundry to be located in Karkkila will
serve customers especially in northern Europe. The new foundry
will have annual net sales of EUR 26 million and a clearly
positive operating result. The foundry will provide 50 - 70 new
jobs and will employ altogether 180 - 200 people. The criteria in
choosing the location were competitiveness, flexibility and net
investments.
Starting up the new foundry will require net capital expenditure
of EUR 6 million. The costs for running down the foundry to be
closed are estimated at EUR 3 million and the required write-down
of non-current assets at EUR 4 million.
Change in corporate structure
Componenta Corporation and its fully owned subsidiary Componenta
Finance Corporation signed a merger plan on 15 May 2003. According
to the terms of the merger plan, Componenta Finance Corporation,
including its assets and liabilities, will be merged with its
parent company without giving any consideration. The reason for
the merger is to simplify the corporate structure. The planned
date for registering the completion of the merger is 31 December
2003.
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 30
September 2003 the quoted price of Componenta Corporation shares
stood at EUR 3.00. The average price during the review period was
EUR 1.94, the lowest quoted price was EUR 1.39 and the highest EUR
3.40. The share capital had a market value of EUR 28.8 million at
the end of the review period (EUR 17.4 million on 31 December
2002) and the volume of shares traded during the review period was
equivalent to 14.2% of the share stock.
The Annual Meeting of Shareholders decided on 12 February 2003 to
pay a dividend of EUR 0.10 per share, in accordance with the
proposal of the Board of Directors. The dividend was paid on 24
February 2003.
The subscription period for the warrants issued by Componenta
Corporation in 2001 ended on 30 April 2003. The subscription
period for the Componenta Finance Corporation warrants from the
1997 bond with warrants and for the 1998 warrants ended on 30
April 2003. No shares were subscribed with these warrants.
On 29 September 2003, Componenta Corporation was informed by Etra-
Invest Oy that its holding of Componenta Corporation voting rights
and share capital had risen above 15% with a purchase of shares on
26 September 2003. Following this transaction, Etra-Invest Oy owns
1,484,900 Componenta shares and holds 15.44% of Componenta
Corporation's voting rights and share capital.
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.
Investments
Investments in production facilities during the review period
totalled EUR 0.8 (6.4) million. The Group's gross investments
totalled EUR 0.8 (7.5) million.
Changes in Group Management
Kimmo Virtanen started as the new CFO and a member of the
corporate executive team on 18 August 2003 after Sirpa Koskinen
left to work for another company on 7 May 2003.
Personnel
The Group's average number of employees during the review period
was 1,592 (1,711). On 30 September 2003 the Group had 1,589
(1,719) employees. 54.6% (52.5%) of the Group's personnel were in
Finland, 44.7% (47.0%) in Sweden and 0.7% (0.5%) in other
countries.
Prospects for the near future
Componenta's prospects for the near future are based on general
external financial indicators, order forecasts given by customers,
and on Componenta's order intake and order book.
Industry is expected to continue to postpone investment decisions.
The decline in uncertainty and the cut in interest rates create
the conditions for industrial investments to start up. The first
signs of an increase in investments are the starting up of smaller
investments to rationalize and modernize. Timing for decisions on
major investments are uncertain.
The decline in demand for heavy truck components, which has
continued for three years, is thought to have ended and demand
should start to pick up at the latest next year.
Demand for power and transmission components is expected to
improve towards the end of the year.
Demand in the Nordic machine building industry was better than
expected during the second and third quarters. The Group's
deliveries to off-road manufacturers failed to match expectations
in the second and third quarters and fell short of those in the
same period in the previous year. Sales to machine building
industry and to off-road industry during the final quarter are
expected to stay on the same level as last year.
Despite a few positive signals in recent months, the start up of
growth is still exposed to risk factors that may have an impact on
the forecasts given above.
Componenta Group's net sales in the final quarter of 2003 are
forecast to be similar to the corresponding period last year.
Thanks to the streamlining programme started last year, the
Group's cost structure is lighter than in the previous year. As a
result, the operational result excluding non-recurring items, is
expected to be better in the final quarter than in the previous
year and the cash flow from operations to be firmly positive. A
total of EUR 7 million will be recorded in the result for the year
for the one-time write-downs and costs for closing down operations
arising from the merger of the operations in Karkkila and Alvesta.
Income statement
MEUR 1.1.-30.9.2003 1.1.-30.9.2002 1.1.-31.12.2002
Net sales 131.7 136.3 180.8
Other operating income 0.6 2.5 3.1
Share of the associated
companies' result 0.8 0.0 0.2
Operating expenses 118.6 125.8 167.7
Depreciation,
amortization and write-down 9.2 9.1 12.3
Negative goodwill
recognized as income - -0.5 -2.9
Operating profit 5.3 4.5 7.0
% of net sales 4.1 3.3 3.9
Financial income and expenses -5.9 -6.7 -9.1
Result after
financial items -0.6 -2.2 -2.1
% of net sales -0.5 -1.6 -1.2
Income taxes 0.8 2.4 3.1
Minority interest
and conversion difference 0.0 0.0 0.0
Net profit 0.3 0.2 1.0
Balance sheet
MEUR 30.9.2003 30.9.2002 31.12.2002
Assets
Non-current assets 140.3 149.4 149.2
Current assets
Inventories 20.1 19.4 20.2
Receivables 41.7 54.4 45.6
Cash and bank accounts 1.0 3.4 2.9
Total current assets 62.8 77.2 68.8
Total assets 203.1 226.5 218.0
Liabilities and shareholders' equity
Shareholders' equity
Share capital 19.2 19.2 19.2
Other equity 17.8 18.0 18.5
Preferred capital note 25.4 28.6 28.6
Total shareholders' equity 62.4 65.8 66.3
Minority interest 2.0 2.1 2.1
Negative goodwill - 0.5 -
Provisions - - -
Liabilities
Non-current liabilities
Interest bearing 61.0 75.1 75.8
Interest free 0.0 0.0 0.0
Current liabilities
Interest bearing 47.6 53.4 43.7
Interest free 30.0 29.6 30.1
Total liabilities 138.6 158.2 149.6
Total liabilities and shareholders'
equity 203.1 226.5 218.0
Cash flow statement
MEUR 1.1.-30.9.2003 1.1.-30.9.2002 1.1.-31.12.2002
Cash flow from operations
Profit/loss before
extraordinary items -0.6 -2.2 -2.1
Depreciation,
amortization and write-down 9.2 8.6 9.4
Net financial income
and expenses 5.9 6.6 9.1
Other income and expenses,
adjustments to cash flow -1.2 -5.2 -3.5
Change in net working capital 6.9 -1.2 1.6
Cash flow from operations before
financing and income taxes 20.2 6.6 14.4
Net financial income
and expenses -5.7 -6.0 -7.9
Income taxes 0.0 0.0 0.0
Cash flow from operations 14.5 0.6 6.5
Cash flow from investing activities
Capital expenditure in
tangible and intangible assets -0.8 -6.4 -7.0
Proceeds from tangible and
intangible assets 1.2 0.7 3.6
Other investments
and loans granted -0.7 -2.9 -2.4
Proceeds from other investments
and repayments of loan
receivables 0.0 0.3 0.0
Cash flow from
investing activities -0.3 -8.3 -5.7
Cash flow from
financing activities
Dividends paid -1.0 -1.4 -1.4
Share issue - - -
Draw-down (+)/repayment (-) of
preferred capital note -3.2 -2.6 -2.6
Draw-down (+)/repayment (-) of
current loans 3.9 19.2 9.5
Draw-down (+)/repayment (-) of
non current loans -15.9 -5.6 -5.0
Cash flow from
financing activities -16.1 9.5 0.4
Increase (+)/decrease(-) in
cash and bank accounts -1.9 1.7 1.2
Key ratios
30.9.2003 30.9.2002 31.12.2002
Equity ratio, % 19.2 17.3 18.2
Equity ratio, %, preferred capital
note in equity 31.8 30.0 31.4
Earnings per share (EPS), EUR 0.03 0.02 0.11
Equity per share, EUR 3.85 3.87 3.92
Invested capital 173.1 196.9 187.8
Return on investment, % 4.7 3.8 4.4
Return on equity, % 0.8 0.7 2.5
Net interest bearing debt, MEUR 107.6 125.1 116.5
Net interest bearing debt, MEUR,
preferred capital note in debt 133.0 153.7 145.1
Net gearing, %, preferred capital
note in equity 166.9 184.4 170.5
Net gearing, %, preferred capital
note in debt 340.5 391.4 365.0
Order book, MEUR 26.9 28.4 24.9
Investments in non-current assets, MEUR 0.8 7.5 9.8
Investments in non-current assets,
% of net sales 0.6 5.5 5.4
Average number of personnel during
the period 1,592 1,711 1,705
Number of personnel at period end 1,589 1,719 1,616
Share of export and foreign
activities in net sales, % 71.6 72.1 72.0
Contingent liabilities, MEUR 61.2 56.3 59.7
Derivative instruments
MEUR 30.9.2003 30.9.2002 31.12.2002
Nominal Current Nominal Current Nominal Current
value value value value value value
Currency derivatives
Forward exchange
agreements 22.7 -0.2 35.3 -0.1 37.6 0.0
Currency swaps 1.7 0.0 2.6 0.0 3.0 0.0
Interest rate
derivatives
Interest rate
options 6.0 0.0 - - - -
Interest rate
swaps 24.0 -0.5 21.0 -0.4 21.0 -0.5
Derivative instruments are used to hedge the Group's foreign
exchange and interest rate risks.
Largest registered shareholders on September 30, 2003
Share of total
Shareholder Shares voting rights
1 Lehtonen Heikki 3,786,131 39.38%
Lehtonen Heikki 3,336,731
Helsingin Santapaperi Oy 340,000
Oy Högfors-Trading Ab 109,400
2 Etra-Invest Oy *) 1,419,200 14.76%
3 Ilmarinen Mutual Pension Insurance
Company 457,600 4.76%
4 Inkinen Simo-Pekka 422,044 4.39%
5 Sampo Life Insurance Company Limited 237,800 2.47%
6 Lehtonen Anna-Maria 178,823 1.86%
7 Local Government Pensions Institution 150,000 1.56%
8 Lehtonen Yrjö M 131,040 1.36%
9 Technology Industries of Finland 122,600 1.28%
10 Bergholm Heikki 100,000 1.04%
11 Other shareholders 2,610,071 27.14%
Total 9,615,309 100.00%
*) Etra-Invest Oy's share of the voting rights and share capital
of Componenta Corporation has exceeded 15% with a sale effected 26
September 2003. After this sale Etra-Invest Oy's shareholding in
Componenta Corporation is 15.44%.
The members of the Board of Directors own 40.4% of the shares. All
shares have equal voting rights. The members of the Board of
Directors hold 10.5% of the outstanding warrants. If all the
warrants were converted to shares, the holding of shares by the
members of the Board of Directors would decrease to 39.1%.
Group development by business group
Net sales, MEUR 1.1.-30.9.2003 1.1.-30.9.2002 1.1.-31.12.2002
Cast and Other Components 107.0 112.3 148.7
Other business 24.7 24.0 32.1
Componenta Group total 131.7 136.3 180.8
Operating profit,
MEUR 1.1.-30.9.2003 1.1.-30.9.2002 1.1.-31.12.2002
Cast and Other Components 6.5 4.3 5.8
Other business -1.1 0.2 1.2
Componenta Group total 5.3 4.5 7.0
Order book, MEUR 30.9.2003 30.9.2002 31.12.2002
Cast and Other Components 21.3 22.5 19.6
Other business 5.6 5.9 5.3
Componenta Group total 26.9 28.4 24.9
Group development by quarter
Q3/2003 Q2/2003 Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
MEUR
Net sales 38.2 47.2 46.3 44.5 39.1 50.1 47.1
Operating profit 0.9 2.8 1.6 2.5 0.3 3.1 1.1
Net financial
items -2.0 -1.9 -2.1 -2.4 -2.2 -2.4 -2.1
Profit/loss after
financial items -1.1 1.0 -0.5 0.1 -1.9 0.7 -1.0
Quarterly development by business group
Q3/2003 Q2/2003 Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
Net sales, MEUR
Cast and Other
Components 31.3 38.3 37.4 36.4 32.4 41.1 38.8
Other business 6.9 8.9 8.9 8.1 6.7 9.0 8.3
Componenta Group
total 38.2 47.2 46.3 44.5 39.1 50.1 47.1
Operating Q3/2003 Q2/2003 Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
profit, MEUR
Cast and Other
Components 1.5 2.9 2.1 1.5 -0.4 3.3 1.4
Other business -0.5 -0.1 -0.5 1.0 0.7 -0.2 -0.3
Componenta Group
total 0.9 2.8 1.6 2.5 0.3 3.1 1.1
Order book at Q3/2003 Q2/2003 Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
period end,
MEUR
Cast and Other
Components 21.3 20.4 21.7 19.6 22.5 23.8 22.9
Other business 5.6 6.1 5.4 5.3 5.9 6.1 5.3
Componenta Group
total 26.9 26.5 27.1 24.9 28.4 29.9 28.2
Helsinki, 15 October 2003
COMPONENTA CORPORATION
Board of Directors
FURTHER INFORMATION
Heikki Lehtonen
President and CEO
Tel. +358 9 225 021
Kimmo Virtanen
CFO
tel. +358 9 225 021
