Interim Report 1 January - 31 March 2003
Componenta Corporation Stock Exchange Release 14.4.2003 at 9.30 am
Componenta Corporation
Interim Report 1 January - 31 March 2003
* Net sales during the first quarter were EUR 46.3 million (net
sales of EUR 47.1 million in the same period in the previous
year, a decline of nearly 2%).
* Operating profit of EUR 1.6 (1.1) million and loss after
financial items of EUR 0.5 million (loss of EUR 1.0 million).
* Earnings per share were EUR -0.04 (-0.06).
* The improvements in the Group's operating profit and result
after financial items from the previous year were mainly due
to the savings programme carried out, despite higher prices
for scrap steel and lower net sales.
* The Group's equity ratio, including the preferred capital note
in equity, was 29.3% (31.4% on 31 December 2002).
* The Iraq war cast a shadow over the global economy and
increased the uncertainty about demand.
Markets and development by customer sector
The Iraq war has played a major role when considering prospects
for the global economy. The war has caused further delays in any
recovery in economic growth and investments by industry.
Economic problems in the euro area are also slowing the economic
growth.
Demand for and production of heavy trucks remained at a
satisfactory level in Europe. Volumes supplied by Componenta to
heavy truck manufacturers in the first quarter were almost at
the same level as in the same period last year, and showed a
slight increase from the final quarter of 2002.
Demand in the power and transmission industries fell 8 per cent
in the first quarter from the level achieved in the
corresponding period of the previous year, but rose some five
per cent from the final quarter of that year. The poor
performance was mainly due to low demand for wind turbine
generator components. The general uncertainty about economic
development has brought decision making on capital expenditure
on wind turbine generator projects to a standstill in Europe and
the USA.
Output by Nordic machinery and equipment manufacturers has
continued at a low level in 2003 as a result of poor demand for
investments. Companies in the sector have seen their order books
decline. Componenta's sales to the machine building industry in
the first quarter of 2003 were some 16 per cent below the
corresponding period in the previous year. However, sales rose
slightly compared to the final quarter of the previous year.
Componenta's deliveries to off-road manufacturers increased by
10 per cent from the corresponding period in the previous year.
Sales rose 13% on the final quarter in that year.
Net sales and order book
The Group had net sales in the review period of January - March
of EUR 46.3 (47.1) million. Net sales declined nearly 2% from
the previous year. The Group's order book improved from the
start of the year and stood at the end of the review period at
EUR 27.1 (28.2) million (EUR 24.9 million on 31 December 2002).
Exports and foreign operations accounted for 74% (75%) of net
sales. Componenta's net sales by market area were as follows:
Finland 26% (25%), other Nordic countries 55% (54%), Central
Europe 17% (19%) and other countries 2% (2%).
Net sales by customer sector were as follows: the heavy truck
industry accounted for 57% (55%) of net sales, power and
transmission for 13% (14%), machine building for 13% (15%), off-
road for 14% (12%) and others for 3% (4%).
Result
Componenta Group made an operating profit of EUR 1.6 (1.1)
million during the first quarter of the year, and the result
after financial items was a loss of EUR -0.5 (-1.0) million. The
result does not include net profits from the sale of non-current
assets or any other non-recurring items.
The Group's operating profit and result after financial items
improved from the previous year mainly because of the programme
of remedial action, and in spite of higher prices for scrap
steel and lower net sales.
Because of the continuing economic uncertainty, the Group is
taking steps to further raise efficiency and to maintain the
positive cash flow, in addition to the programme of remedial
action already started. Implementation of this programme has
progressed as planned.
The Group's net financial costs amounted to EUR 2.1 (2.1)
million and the net result was EUR -0.4 (-0.6) million.
Income taxes in the review period were EUR 0.1 million positive,
due to the reduction in deferred tax liability recorded through
the reversal of accelerated depreciation.
Earnings per share were EUR -0.04 (-0.06).
The return on investment was 4.0% (3.0%) and the return on
equity was -4.1% (-5.7%).
Financing
The Group's equity ratio was 17.6% (17.3%). Including the
preferred capital note in shareholders' equity, the equity ratio
was 29.3% (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, the Group started a programme to
sell its trade receivables in March. 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. At 31 March 2003 the amount of sold trade
receivables totalled EUR 1.7 million.
In March the Group repaid 10% of the original principal of the
preferred capital note, EUR 3.1 million, in accordance with the
terms for the note. On 31 March 2003 Componenta Corporation's
preferred capital note amounted to EUR 25.5 million.
The Group had committed credit facilities of EUR 21 million at
the end of March. The Group has a EUR 40 million commercial
paper programme. The Group's interest-bearing net liabilities,
excluding the EUR 25.5 million preferred capital note, totalled
EUR 120.0 (120.2) million (EUR 116.5 million on 31 December
2002). Net gearing, including the preferred capital note in
shareholders' equity, was 188.3% (179.1%).
The cash flow from operations was EUR 0.2 (-0.5) million, of
which the change in net working capital was EUR -2.5 (-3.8)
million. The cash flow from investments was EUR -0.2 (-1.7)
million. The change in cash and bank accounts during the review
period was EUR -0.6 (-0.3) 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 industry, machine building industry and the off-
road industry.
Cast and Other Components had net sales in the first quarter of
EUR 37.4 (38.8) million and an operating profit of EUR 2.1 (1.4)
million. The order book stood at EUR 21.7 (22.9) million on 31
March 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 mean an annual reduction of
some SEK 75 million in production at Främmestad. Deliveries of
the products affected by these reductions will cease at the end
of 2003, in accordance with the contracts for them, and not as
announced previously. The reasons for the reductions affecting
Främmestad are the uncertain state of the world economy and
increasing global competition. Because of these, some customers
have decided to make components in their own production plants
instead of outsourcing the production, and others are purchasing
more components from low cost countries, such as Brazil. To cut
personnel costs and to improve competitiveness, notice of
possible redundancy was given to 50 persons at Componenta
Främmestad. Decisions on the actual number of redundancies and
the timing for them will be made at a later date.
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 8.9 (8.3) million in
the first quarter and the operating loss was EUR -0.5 (-0.3)
million. The order book stood at EUR 5.4 (5.3) million on 31
March 2003 (EUR 5.3 million on 31 December 2002).
Componenta Wirsbo's sales grew on the corresponding period of
the previous year. The unit's result improved when compared to
the final quarter of the previous year in consequence of the
programme of remedial action.
Componenta Group's share of the result of the associated
companies was EUR -0.2 (-0.4) million. The result was improved
by Keycast's improved result and exchange rate gains at Ulefos.
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 2003 the quoted price of Componenta Corporation
shares stood at EUR 1.80. The average price during the review
period was EUR 1.60, the lowest quoted price was EUR 1.39 and
the highest EUR 1.95. The share capital had a market value of
EUR 17.3 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 7.5% 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.
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 0.3 (1.0) million. The Group's gross investments
totalled EUR 0.3 (2.1) million.
Board of Directors, Group Management and Auditors
Componenta's Annual Shareholders' Meeting on 12 February 2003
elected Heikki Bergholm, Juhani Mäkinen, Matti Tikkakoski and
Heikki Lehtonen to the Board of Directors. The Board elected
Heikki Bergholm as its Chairman and Juhani Mäkinen as Vice
Chairman.
Kari Miettinen, CPA, was elected as principal auditor and the
authorised public accounting firm PricewaterhouseCoopers Oy as
deputy auditor.
Sirpa Koskinen, Componenta's CFO and a member of the corporate
executive team, leaves to work for another company at the
beginning of May.
Personnel
The Group's average number of employees during the review period
was 1,597 (1,729). On 31 March 2003 the Group had 1,626 (1,748)
employees. 53.0% (51.7%) of the Group's personnel were in
Finland, 46.4% (47.8%) in Sweden and 0.6% (0.5%) in other
countries.
Prospects for the near future
Componenta's prospects for the near future are based on general
financial indicators, order forecasts given by customers and on
Componenta's order intake and order book.
The duration of the crisis in Iraq and how it will be resolved
have a major impact on any recovery in the economic growth.
Uncertainty keeps growth slow in the global economy and
postpones industrial investment decisions.
Demand for heavy truck components is expected to remain at a
satisfactory level. The uncertainty about general economic
trends may, however, also have an impact on demand for heavy
truck components in 2003.
Deliveries of wind turbine generator components will increase in
the second quarter from the first. Demand in the Nordic machine
building industry will remain poor and the start of any recovery
is expected to be postponed again, even though demand is
believed to have stopped falling.
The Group's deliveries to off-road manufacturers rose in the
first quarter of the year and this positive trend is expected to
continue during 2003.
During the current quarter the Group is expecting a solution to
the issue concerning the price of SEW-Componenta shares, which
is an object of a dispute. The result may differ from the level
expected and recorded by the Company.
Thanks to the remedial programme started last year, the Group's
cost structure is lighter than in the previous year. Componenta
Group's net sales in the second quarter of 2003 are forecast to
be lower than in the corresponding period last year. As a result
of the remedial programme, the result after financial items is
expected to be slightly positive in the second quarter.
Income statement
MEUR 1.1.-31.3.2003 1.1.-31.3.2002 1.1.-31.12.2002
Net sales 46.3 47.1 180.8
Other operating income 0.1 0.1 3.1
Share of the associated
companies' result -0.2 -0.4 0.2
Operating expenses 41.6 42.9 167.7
Depreciation, amortization and
write-down 3.0 3.1 12.3
Negative goodwill
recognized as income - -0.2 -2.9
Operating profit 1.6 1.1 7.0
% of net sales 3.4 2.2 3.9
Financial income and expenses -2.1 -2.1 -9.1
Result after financial items -0.5 -1.0 -2.1
% of net sales -1.1 -2.2 -1.2
Income taxes 0.1 0.5 3.1
Minority interest
and conversion difference 0.0 0.0 0.0
Net profit -0.4 -0.6 1.0
Balance sheet
MEUR 31.3.2003 31.3.2002 31.12.2002
Assets
Non-current assets 145.6 151.1 149.2
Current assets
Inventories 19.8 20.1 20.2
Receivables 49.5 50.5 45.6
Cash and bank accounts 2.3 1.5 2.9
Total current assets 71.7 72.0 68.8
Total assets 217.2 223.1 218.0
Liabilities and shareholders'
equity
Shareholders' equity
Share capital 19.2 19.2 19.2
Other equity 16.9 17.2 18.5
Preferred capital note 25.5 28.6 28.6
Total shareholders' equity 61.7 65.0 66.3
Minority interest 2.1 2.1 2.1
Negative goodwill - 0.6 -
Provisions - 0.9 -
Liabilities
Non-current liabilities
Interest bearing 63.0 75.4 75.8
Interest free 0.0 0.0 0.0
Current liabilities
Interest bearing 59.4 46.3 43.7
Interest free 31.2 32.8 30.1
Total liabilities 153.5 154.5 149.6
Total liabilities and
shareholders' equity 217.2 223.1 218.0
Consolidated cash flow statement
MEUR 1.1.-31.3.2003 1.1.-31.3.2002 1.1.-31.12.2002
Cash flow from operations
Profit/loss before
extraordinary items -0.5 -1.0 -2.1
Depreciation, amortization
and write-down 3.0 2.9 9.4
Net financial income
and expenses 2.1 1.5 9.1
Other income and expenses,
adjustments to cash flow 1.7 2.0 -3.5
Change in net working capital -2.5 -3.8 1.6
Cash flow from operations before
financing and income
taxes 3.8 1.6 14.4
Net financial income
and expenses -3.6 -2.1 -7.9
Income taxes 0.0 0.0 0.0
Cash flow from operations 0.2 -0.5 6.5
Cash flow from investing activities
Capital expenditure in tangible
and intangible assets -0.3 -1.0 -7.0
Proceeds from tangible and
intangible assets 0.0 0.6 3.6
Other investments
and loans granted 0.0 -1.2 -2.4
Proceeds from other investments
and repayments of loan
receivables 0.1 0.0 0.0
Cash flow from
investing activities -0.2 -1.7 -5.7
Cash flow from financing activities
Dividends paid -1.0 -1.4 -1.4
Share issue - - -
Draw-down (+)/repayment (-) of
preferred capital note -3.1 -2.6 -2.6
Draw-down (+)/repayment (-) of
current loans 15.7 12.0 9.5
Draw-down (+)/repayment (-) of
non current loans -12.3 -6.0 -5.0
Cash flow from
financing activities -0.6 1.9 0.4
Increase (+)/decrease(-) in cash
and bank accounts -0.6 -0.3 1.2
Key ratios
31.3.2003 31.3.2002 31.12.2002
Equity ratio, % 17.6 17.3 18.2
Equity ratio, %, preferred capital
note in equity 29.3 30.1 31.4
Earnings per share (EPS), EUR -0.04 -0.06 0.11
Equity per share, EUR 3.76 3.79 3.92
Invested capital 186.1 190.3 187.8
Return on investment, % 4.03 3.03 4.38
Return on equity, % -4.10 -5.70 2.50
Net interest bearing debt, MEUR 120.0 120.2 116.5
Net interest bearing debt, MEUR
preferred capital note in debt 145.5 148.8 145.1
Net gearing, %, preferred capital
note in equity 188.3 179.1 170.5
Net gearing, %, preferred capital
note in debt 380.4 386.1 365.0
Order book, MEUR 27.1 28.2 24.9
Investments in non-current assets, MEUR 0.3 2.1 9.8
Investments in non-current assets,
% of net sales 0.7 4.5 5.4
Average number of personnel during
the period 1,597 1,729 1,705
Number of personnel at period end 1,626 1,748 1,616
Share of export and foreign
activities in net sales, % 74.0 75.0 72.0
Contingent liabilities, MEUR 59.7 55.9 59.7
Derivative instruments
MEUR 31.3.2003 31.3.2002 31.12.2002
Nominal Current Nominal Current Nominal Current
value value value value value value
Currency derivatives
Forward exchange
agreements 26.0 0.1 39.6 -0.6 37.6 0.0
Currency swaps 14.0 0.1 - - 3.0 0.0
Interest derivatives
Interest rate
swaps 16.0 -0.6 18.0 0.1 21.0 -0.5
Derivative instruments are used to hedge the Group's foreign
exchange and interest rate risks.
Componenta Corporation
Largest registered shareholders on 31 March 2003
Share of
total voting
Shareholder Shares rights %
1 Lehtonen Heikki 3,681,731 38.29
Lehtonen Heikki 3,336,731
Helsingin Santapaperi Oy 340,000
Oy Högfors-Trading Ab 5,000
2 Etra-Invest Oy Ab 1,209,600 12.58
3 Ilmarinen Mutual Pension Insurance Company 457,600 4.76
4 Sampo Group 437,800 4.55
Sampo Life Insurance Company Ltd 237,800
If Insurance Company Ltd 200,000
5 Inkinen Simo-Pekka 419,044 4.36
6 Lehtonen Anna-Maria 178,823 1.86
7 Local Government Pension Institution Finland 150,000 1.56
8 Lehtonen Yrjö M 131,040 1.36
9 Federation of Finnish Metal Engineering and
Electrotechnical Industries MET 122,600 1.28
10 Investment Fund Alfred Berg Finland 95,100 0.99
11 Bergholm Heikki 90,000 0.94
12 Finnish National Fund for Research and
Development (Sitra) 87,000 0.90
13 Lehtonen Antti 83,000 0.86
14 Investment Fund Alfred Berg Optimal 77,000 0.80
15 The Finnish Cultural Foundation 75,000 0.78
16 Other shareholders 2,319,971 24.13
Total 9,615,309 100.00
The members of the Board of Directors own 39.3% of the shares.
All shares have equal voting rights.
The members of the Board of Directors hold 8.2% 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 37.5%.
Development by business group
Net sales, MEUR 1.1.-31.3.2003 1.1.-31.3.2002 1.1.-31.12.2002
Cast and Other Components 37.4 38.8 148.7
Other Business 8.9 8.3 32.1
Componenta Group total 46.3 47.1 180.8
Operating profit,
MEUR 1.1.-31.3.2003 1.1.-31.3.2002 1.1.-31.12.2002
Cast and Other Components 2.1 1.4 5.8
Other Business -0.5 -0.3 1.2
Componenta Group total 1.6 1.1 7.0
Order book, MEUR 31.3.2003 31.3.2002 31.12.2002
Cast and Other Components 21.7 22.9 19.6
Other Business 5.4 5.3 5.3
Componenta Group total 27.1 28.2 24.9
Development by quarter
MEUR Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
Net sales 46.3 44.5 39.1 50.1 47.1
Operating profit 1.6 2.5 0.3 3.1 1.1
Net financial items -2.1 -2.4 -2.2 -2.4 -2.1
Profit/loss after
financial items -0.5 0.1 -1.9 0.7 -1.0
Quarterly development by business group
Net sales, MEUR Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
Cast and Other Components 37.4 36.4 32.4 41.1 38.8
Other Business 8.9 8.1 6.7 9.0 8.3
Componenta Group total 46.3 44.5 39.1 50.1 47.1
Operating profit, MEUR Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
Cast and Other Components 2.1 1.5 -0.4 3.3 1.4
Other Business -0.5 1.0 0.7 -0.2 -0.3
Componenta Group total 1.6 2.5 0.3 3.1 1.1
Order book at period end,
MEUR Q1/2003 Q4/2002 Q3/2002 Q2/2002 Q1/2002
Cast and Other Components 21.7 19.6 22.5 23.8 22.9
Other Business 5.4 5.3 5.9 6.1 5.3
Componenta Group total 27.1 24.9 28.4 29.9 28.2
Helsinki, 14 April 2003
COMPONENTA CORPORATION
Board of Directors
Further information:
Heikki Lehtonen
President and CEO
tel. +358 9 225 021
