Interim Report 1 January - 30 June 2003
Componenta Corp. Stock Exchange Release 11.7.2003 at 11.00 am
Interim Report 1 January - 30 June 2003
* Net sales during the first six months were EUR 93.5 million (net
sales of EUR 97.2 million in the same period in the previous year, a
decline of 4%).
* Operating profit of EUR 4.4 (4.2) million and a profit after
financial items of EUR 0.5 million (loss of EUR 0.3 million).
* Earnings per share were EUR 0.09 (0.03).
* The Groups operating profit remained at the same level as the
previous year, thanks mainly to the programme of remedial
action carried out and despite the high prices for scrap steel and
lower net sales than in the previous year. Lower financing costs
also contributed to the improvement in the Groups
result.
* The Group's equity ratio, including the preferred capital note in
equity, was 31.3% (31.4% on 31 December 2002).
* The Iraq war cast a shadow over the global economy during the
first half of the year, and since the war ended the
uncertainty affecting demand has continued.
Markets and developments by customer sector
The Iraq war has been a major factor affecting prospects for the
global economy. The war and other destabilising factors have caused
further delays in any recovery in economic growth and investments by
industry. The fall in interest rates since the end of the war and a
possible decline in the prevailing uncertainty create conditions for
improving this state of affairs, 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 second quarter were
considerably lower (-8%) than in the same period last year.
Exceptionally poor demand for truck brake components contributed to
this, in addition to the factors mentioned above.
Demand in the power and transmission industries picked up as
expected in the second quarter and was 3 per cent up on the
corresponding period in the previous year. Sales for the first half
of the year were, however, down on the same period in the previous
year. The poor performance at the start of the year was mainly due
to low demand for wind generator components. During the review
period, demand has improved in all segments of the business sector
(components for diesel and electric engines and for wind turbine
generators).
Output by Nordic machinery and equipment manufacturers has continued
at a low level in 2003 as a result of poor investment demand.
Componentas sales to the machine building industry in the second
quarter of 2003 were at the same level as in the corresponding
period in the previous year. Sales fell 2 per cent compared with the
first half of the previous year.
Componentas deliveries to off-road manufacturers in the second
quarter fell 9 per cent from the corresponding period in the
previous year. Sales for the first half of the year were similar to
those in the previous year.
Net sales and order book
The Group had net sales in the review period of January - June of
EUR 93.5 (97.2) million. Net sales declined 4% from the
previous year. The Groups order book improved from the start of the
year, remaining the same as at the end of the previous quarter. At
the end of the review period the order book stood at EUR 26.5 (29.9)
million (EUR 24.9 million on 31 December 2002).
Exports and foreign operations accounted for 72% (73%) of net sales.
Componenta Corporation's net sales by market area were as follows:
Finland 28% (27%), other Nordic countries 52% (53%), Central Europe
17% (17%) and other countries 3% (3%).
Net sales by customer sector were as follows: heavy truck industry
55% (54%), power and transmission 14% (14%), machinery and equipment
manufacturers 14% (14%), off-road 13 % (12%) and others 4% (5%).
Result
Componenta Group made an operating profit of EUR 4.4 (4.2) million
during the first six months of the year, and the profit after
financial items was EUR 0.5 million (loss of EUR 0.3 million). The
result includes a one time item of EUR 0.3 million for the
outstanding amount in the sale of SEW-Componenta decided by the
Court of Arbitration. By the end of the review period SEW-Eurodrive
had not paid the sum of more than EUR 2.6 million, including
interest, that the court decided it should pay. According to the
terms of the decision of the Court of Arbitration, interest of 8.4%
is charged on the unpaid item.
The Groups operating profit remained at the same level as in the
previous year, mainly because of the programme of remedial action
and in spite of the high prices for scrap steel at the start of the
year and lower net sales than in the previous year. These factors
and lower financing costs contributed to the improvement in the
Groups result.
Because of the continuing economic uncertainty, the Group has taken
other steps to further raise efficiency and to maintain the positive
cash flow, in addition to the restructuring programme already
started. Implementation of this programme has progressed as planned.
The Group's net financial costs amounted to EUR 4.0 (4.5) million
and the net result was EUR 0.8 (0.3) million.
Income taxes in the review period were EUR 0.4 million positive, due
to the reduction in deferred tax liability recorded through the
reversal of accelerated depreciation.
Earnings per share were EUR 0.09 (0.03).
The return on investment was 5.6% (5.1%) and the return on equity
was 4.3% (1.3%).
Financing
The Groups equity ratio was 19.0% (17.5%). Including the preferred
capital note in shareholders' equity, the equity ratio was 31.3%
(30.1%, 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 trade receivables. On the basis of this arrangement, some
of the trade 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 trade receivables. By 30 June 2003 the company
had sold trade receivables totalling EUR 5.6 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 June 2003 Componenta Corporations preferred capital
note amounted to EUR 25.4 million.
The Group had committed credit facilities of EUR 22.3 million at the
end of the review period. The Group has a EUR 40 million commercial
paper programme. The Groups interest-bearing net liabilities,
excluding the EUR 25.4 million preferred capital note, totalled EUR
109.7 (122.9) million (EUR 116.5 million on 31 December 2002). Net
gearing, including the preferred capital note in shareholders
equity, was 169% (181%).
The cash flow from operations was EUR 11.4 (-1.0) million, and of
this the change in net working capital was EUR 4.5 (-3.5) million.
The cash flow from investments was EUR -1.0 (-4.3) million. The
change in cash funds during the review period was EUR -2.3 (-0.5)
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 first half of the
year of EUR 74.5 (79.9) million and an operating profit of EUR 5.0
(4.7) million. The order book stood at EUR 20.4 (23.8) million on 30
June 2003 (EUR 19.6 million on 31 December 2002).
At the beginning of 2003, three major customers of Componenta
Främmestad simultaneously made significant changes to their
production strategies. The changes will mean an annual reduction of
some SEK 75 million in production at Främmestad. Deliveries of the
products affected by these reductions will not cease until the end
of 2003, in accordance with the contracts for them. 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.
Componentas Other Business consists of operations that are not part
of the companys core operations, such as the Wirsbo forges,
associated companies, the Groups support functions and service
units, as well as divested business.
Net sales for Other Business totalled EUR 19.0 (17.3) million in the
first half of the year and the operating loss was EUR 0.6 (loss of
EUR 0.5) million. The order book stood at EUR 6.1 (6.1) million at
the end of the review period (EUR 5.3 million on 31 December 2002).
Componenta Wirsbos sales increased from the corresponding period of
the previous year. The units result has slightly improved from the
same period of the previous year in consequence of the savings
programme.
Componenta Group's share of the result of the associated companies
was EUR 0.1 (-0.1) million. The result was boosted by Keycasts
improved result and exchange rate gains at Ulefos. The result was
weakened by the poorer operational result of Ulefos
NV due to the difficult state of the market in Norway. The
associated company has started remedial action at the companys
factory in Norway.
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 Componenta Corporation 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 June
2003 the quoted price of Componenta Corporation shares stood at EUR
2.03. The average price during the review period was EUR 1.67, the
lowest quoted price was EUR 1.39 and the highest EUR 2.19. The share
capital had a market value of EUR 19.5 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 9.1% 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 Ltd warrants from the 1997 bond with
warrants and for the 1998 warrants ended on 30 April 2003. No shares
were subscribed with these warrants.
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 0.6 (3.7) million. The Group's gross investments
totalled EUR 0.6 (4.8) million.
Changes in Group Management
Sirpa Koskinen, Componentas CFO and a member of the corporate
executive team, left to work for another company on 7 May 2003.
Kimmo Virtanen, M.Sc. (Econ.), has been appointed CFO and a member
of the corporate executive team at Componenta Group as from 18
August 2003.
Personnel
The Group's average number of employees during the review period was
1,596 (1,722). On 30 June 2003 the Group had 1,614 (1,752)
employees. 54.6% (54.1%) of the Group's personnel were in Finland,
44.9% (45.4%) in Sweden and 0.6% (0.5%) in other
countries.
Prospects for the near future
Componentas prospects for the near future are based on general
external financial indicators, order forecasts given by customers,
and on Componentas order intake and order book.
Industrial investment decisions are expected to be postponed again.
The cut in interest rates creates the conditions for industrial
investments to start up.
The decline in demand for heavy truck components, which has
continued for three years, is thought to have ended.
Demand for power and transmission components is expected to continue
to improve in the second half of the year. Demand in the Nordic
machine building industry was better than expected during the second
quarter.
The Groups deliveries to off-road manufacturers failed to match
expectations in the second quarter and fell short of those in the
same period in the previous year. Despite this, the previous
positive trend in sales is expected to continue during the second
half of the year.
Despite some positive signs recently, numerous factors put the start
up of growth at risk, which can affect the above mentioned
estimates.
Thanks to the streamlining programme started last year, the Groups
cost structure is lighter than in the previous year. Componenta
Group's net sales in the third quarter of 2003 are forecast to be
almost the same as in the corresponding period last year. As a
result of the streamlining programme, the operational result after
financial items, excluding nonrecurring items, is forecast to be
loss-making, even though significantly better than in the previous
year. The cash flow from operations is forecast to be clearly
positive in the third quarter.
Income statement
MEUR 1.1.-30.6.2003 1.1.-30.6.2002 1.1.-31.12.2002
Net sales 93.5 97.2 180.8
Other operating income 0.4 0.5 3.1
Share of the associated
companies' result 0.1 -0.1 0.2
Operating expenses 83.5 87.7 167.7
Depreciation, amortization
and write-down 6.1 6.2 12.3
Negative goodwill
recognized as income - -0.4 -2.9
Operating profit 4.4 4.2 7.0
% of net sales 4.7 4.3 3.9
Financial income and expenses -4.0 -4.5 -9.1
Result after financial items 0.5 -0.3 -2.1
% of net sales 0.5 -0.3 -1.2
Income taxes 0.4 0.6 3.1
Minority interest and
conversion difference 0.0 0.0 0.0
Net profit 0.8 0.3 1.0
Balance sheet
MEUR 30.6.2003 30.6.2002 31.12.2002
Assets
Non-current assets 142.2 150.8 149.2
Current assets
Inventories 20.2 21.5 20.2
Receivables 44.3 52.1 45.6
Cash and bank accounts 0.7 1.2 2.9
Total current assets 65.2 74.9 68.8
Total assets 207.4 225.7 218.0
Liabilities and shareholders'equity
Shareholders' equity
Share capital 19.2 19.2 19.2
Other equity 18.2 18.1 18.5
Preferred capital note 25.4 28.6 28.6
Total shareholders' equity 62.8 65.9 66.3
Minority interest 2.1 2.1 2.1
Negative goodwill - 0.5 -
Provisions - - -
Liabilities
Non-current liabilities
Interest bearing 61.6 78.9 75.8
Interest free 0.0 0.0 0.0
Current liabilities
Interest bearing 48.8 45.2 43.7
Interest free 32.1 33.0 30.1
Total liabilities 142.5 157.2 149.6
Total liabilities and
shareholders' equity 207.4 225.7 218.0
Consolidated cash flow statement
MEUR 1.1.-30.6.2003 1.1.-30.6.2002 1.1.-31.12.2002
Cash flow from operations
Profit/loss before
extraordinary items 0.5 -0.3 -2.1
Depreciation,
amortization and write-down 6.1 5.8 9.4
Net financial income
and expenses 4.0 4.5 9.1
Other income and
expenses,adjustments to
cash flow 0.5 -2.2 -3.5
Change in net
working capital 4.5 -3.5 1.6
Cash flow from operations
before financing and income
taxes 15.6 4.2 14.4
Net financial income
and expenses -4.2 -5.2 -7.9
Income taxes 0.0 0.0 0.0
Cash flow from operations 11.4 -1.0 6.5
Cash flow from investing
activities
Capital expenditure
in tangible and
intangible assets -0.6 -3.7 -7.0
Proceeds from tangible and
intangible assets 0.0 0.7 3.6
Other investments
and loans granted -0.4 -1.3 -2.4
Proceeds from other investments
and repayments of loan
receivables 0.0 0.0 0.0
Cash flow from
investing activities -1.0 -4.3 -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 5.1 11.0 9.5
Draw-down (+)/
repayment (-) of non
current loans -13.7 -2.1 -5.0
Cash flow from
financing activities -12.7 4.8 0.4
Increase (+)/decrease(-)
in cash and bank accounts -2.3 -0.5 1.2
Key ratios
30.6.2003 30.6.2002 31.12.2002
Equity ratio, % 19.0 17.5 18.2
Equity ratio, %, preferred
capital note in equity 31.3 30.1 31.4
Earnings per share (EPS), EUR 0.09 0.03 0.11
Equity per share, EUR 3.89 3.88 3.92
Invested capital 175.3 192.6 187.8
Return on investment, % 5.6 5.1 4.4
Return on equity, % 4.3 1.3 2.5
Net interest bearing debt, MEUR 109.7 122.9 116.5
Net interest bearing debt, MEUR,
preferred capital note in debt 135.1 151.5 145.1
Net gearing, %, preferred capital
note in equity 169 181 171
Net gearing, %, preferred capital
note in debt 342.2 384.9 365.0
Order book, MEUR 26.5 29.9 24.9
Investments in non-current
assets, MEUR 0.6 4.8 9.8
Investments in non-current
assets, % of net sales 0.6 4.9 5.4
Average number of personnel
during the period 1,596 1,722 1,705
Number of personnel at period end 1,614 1,752 1,616
Share of export and foreign
activities in net sales, % 72.0 73.0 72.0
Contingent liabilities, MEUR 61.5 53.2 59.7
Derivative instruments
MEUR 30.6.2003 30.6.2002 31.12.2002
Nomi- Nomi- Nomi-
nal Current nal Current nal Current
value value value value value value
Currency derivatives
Forward exchange
agreements 26.3 0.2 36.9 0.0 37.6 0.0
Currency swaps 0.9 0.0 0.4 0.0 3.0 0.0
Interest rate derivatives
Interest rate
options 6.0 0.0 - - - -
Interest rate
swaps 24.0 -0.7 18.0 -0.1 21.0 -0.5
Derivative instruments are used to hedge the Group's foreign
exchange and interest rate risks.
Largest registered shareholders on 30 June 2003
Share of
total voting
Shareholder Shares 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 Ab 1,209,600 12.58%
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 If P&C Insurance Company 200,000 2.08%
7 Lehtonen Anna-Maria 178,823 1.86%
8 Local Government Pensions
Institution 150,000 1.56%
9 Lehtonen Yrjö M. 131,040 1.36%
10 Technology Industries of
Finland 122,600 1.28%
11 Other shareholders 2,719,671 28.28%
Total 9,615,309 100.00%
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.-30.6.2003 1.1.-30.6.2002 1.1.-31.12.2002
Cast and Other
Components 74.5 79.9 148.7
Other business 19.0 17.3 32.1
Componenta Group
total 93.5 97.2 180.8
Operating profit,
MEUR 1.1.-30.6.2003 1.1.-30.6.2002 1.1.-31.12.2002
Cast and Other
Components 5.0 4.7 5.8
Other business -0.6 -0.5 1.2
Componenta Group
total 4.4 4.2 7.0
Order book, MEUR 30.6.2003 30.6.2002 31.12.2002
Cast and Other Components 20.4 23.8 19.6
Other business 6.1 6.1 5.3
Componenta Group total 26.5 29.9 24.9
Group development by quarter
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
MEUR 2003 2003 2002 2002 2002 2002
Net sales 47.2 46.3 44.5 39.1 50.1 47.1
Operating profit 2.8 1.6 2.5 0.3 3.1 1.1
Net financial items -1.9 -2.1 -2.4 -2.2 -2.4 -2.1
Profit/loss after
financial items 1.0 -0.5 0.1 -1.9 0.7 -1.0
Quarterly development by business group
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
Net sales, MEUR 2003 2003 2002 2002 2002 2002
Cast and Other
Components 37.1 37.4 36.4 32.4 41.1 38.8
Other business 10.1 8.9 8.1 6.7 9.0 8.3
Componenta Group total 47.2 46.3 44.5 39.1 50.1 47.1
Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
Operating profit, MEUR 2003 2003 2002 2002 2002 2002
Cast and Other
Components 2.9 2.1 1.5 -0.4 3.3 1.4
Other business -0.1 -0.5 1.0 0.7 -0.2 -0.3
Componenta Group total 2.8 1.6 2.5 0.3 3.1 1.1
Order book at period Q2/ Q1/ Q4/ Q3/ Q2/ Q1/
end, MEUR 2003 2003 2002 2002 2002 2002
Cast and Other
Components 20.4 21.7 19.6 22.5 23.8 22.9
Other business 6.1 5.4 5.3 5.9 6.1 5.3
Componenta Group total 26.5 27.1 24.9 28.4 29.9 28.2
Helsinki, 11 July 2003
COMPONENTA CORPORATION
Board of Directors
Further information:
Heikki Lehtonen
President and CEO
tel. +358 9 225 021
