GLASTON TECHNOLOGIES? MACHINE ORDERS GREW BY NEARLY A THIRD
Kyro Corporation STOCK EXCHANGE RELEASE 4 November 2005, 8.30 a.m.
GLASTON TECHNOLOGIES MACHINE ORDERS GREW BY NEARLY A THIRD
Key figures in January-September
- The Groups net sales according to IFRS in January-September were EUR 184.1
(174.4) million and operating profit was EUR 17.1 (18.4) million
- Profit before taxes was EUR 16.1 (19.4) million, representing 8.7% (11.1%)
of net sales
- Earnings per share were EUR 0.13 (0.16)
- Equity ratio was 61.5% (58%), equity per share EUR 1.61 (1.58)
- New machine order intake 1-9/2005 totalled EUR 130.0 (100.9) million,
growth 29%
- Order book was 15% higher than the previous year: EUR 142.4 million (123.5)
on 30 September
- In the current year, Kyro is aiming for better net sales and operating
profit than in 2004
Kyro Group structure
Kyros business areas are Glaston Technologies and Energy. The main business
area, Glaston Technologies, consists of the Glass Machinery Group and the Glass
Processing Group.
The Glass Machinery Group is the world market leader in glass processing
machines. The Glass Machinery Groups products are glass pre-processing
machines as well as safety glass machines for the architectural and automotive
industries. The group consists of Tamglass, the technology and market leader in
safety glass machines, Uniglass, which manufactures flat tempering machines,
and the leading supplier of glass pre-processing machines Z. Bavelloni, which
also produces stone processing machines.
The Glass Processing Group focuses on markets in Finland and neighbouring
countries and is the leading comprehensive supplier of architectural glass
products in Finland. The products sold under its Tamglass brand are safety,
insulating and balcony glasses and balcony systems.
Kyros second business area is Energy, which consists of the electricity and
heat generating plants of Kyro Power Oy.
Net sales and profit
Kyros net sales in the period under review totalled EUR 184.1 (174.4) million.
The Groups operating profit was EUR 17.1 (18.4) million. This represented 9.3%
(10.5%) of net sales. Operating profit in the comparison year was exceptionally
high, with certain large projects being scheduled for the first quarter.
The direct impact of the continuing strength of the euro on net sales is minor.
Indirectly, the strong euro has reduced orders and created price pressures,
thereby weakening profitability outside the eurozone. As far as Tamglass is
concerned, the location of its machine manufacturing in different currency
areas has compensated for the negative impact of foreign exchange rates.
Operational development investments initiated early in the year have continued.
These include various Glaston Technologies development projects, the
establishment of a service centre for the Groups financial management and the
development of IT systems. The projects are aimed at improving profit in
future, but their cost has weakened the result for the period significantly.
Net financial items totalled EUR -1.0* (1.0) million. The difference is
explained by the fact that other financial items includes unrealised foreign
exchange losses of EUR 0.9 million on the Groups internal loan balances. In
addition, classification and valuation rules for financial assets according to
IAS 39 were adopted from the beginning of 2005, as a result of which unrealised
increases in the value of financial securities amounting to EUR 0.7 million at
the time of adoption, adjusted for taxes, were recognised directly in
shareholders' equity.
Net financial items include interest, dividend and other financial income of
EUR 2.0 (2,5) million, and interest and other financial expenses of EUR 3.0
(1.5) million. In January-September, Kyro realised its remaining investment
portfolio, from which a profit of EUR 0.4 million was recognised during the
period.
Profit before taxes was EUR 16.1* (19.4) million. This represented 8.7*%
(11.1%) of net sales. Profit for the financial period was EUR 10.6* (12.8)
million. Return on invested capital stood at 17.5*% (17.2)%. Earnings per share
were EUR 0.13* (0.16).
The Groups order book on 30 September was EUR 142.4 (123.5) million.
*Figures are not directly comparable with the previous year due to the
introduction of IAS 39.
Business areas net sales, operating profit and order book, EUR million
Net Net Opera- Opera- Order Order
sales sales ting ting book book
profit profit
Net sales 1-9/05 1-9/04 1-9/05 1-9/04 30.9.05 30.9.04
Glaston Technologies 164.1 153.8 16.6 16.7 119.4 100.8
Energy 19.9 20.7 4.6 4.0 23.0 22.7
Parent company, 0.2 -0.1 -4.1 -2.3
other operations
and eliminations
Group, total 184.1 174.4 17.1 18.4 142.4 123.5
Financing
Liquid funds and securities totalled EUR 5.3 (15.5) million. Interest-bearing
liabilities amounted to EUR 14.5 (30.6) million and interest-bearing net debt
to EUR 9.2 (15.1) million. The ratio of net debt to shareholders equity
(gearing) stood at 7.2% (12.0%). Equity per share was EUR 1.61 (1.58). Equity
ratio was 61.5% (58.0%).
Cash flow from business operations was EUR 12.2 (4.3) million.
Investments
Investments were EUR 7.8 (5.5) million. This includes Glass Processings new
production line and glass processing machines, repair and maintenance
investments, as well as capitalisation of product development expenses
according to IFRS of EUR 2.7 million.
Personnel
The Kyro Group had 1,214 (1,193) employees on 30 September 2005. The number of
Group employees working in Finland was 443 (430), while the number working
abroad was 771 (763). The average number of employees was 1,208 (1,165). The
average number of employees grew compared with the corresponding period last
year, but fell compared with the second quarter following the ending of
seasonal worker employment. Personnel numbers have grown mainly due to the
start-up of new production and sales companies.
Number of employees on 30 September
2005 2004
Glaston Technologies 1,183 1,161
Energy 23 22
Parent company 8 10
Kyro Group 1,214 1,193
Shares and share prices
A total of 16,151,459 (8,454,842) Kyro Corporation shares were traded in the
period under review, representing 20.4% (10.6%) of the total number of shares.
The price of Kyro Corporation share on the Helsinki Exchanges varied between
EUR 3.79 and EUR 4.60. The average price was EUR 4.40.
Acquisition and disposal of own shares
The Annual General Meeting on 15 March 2005 authorised the Board of Directors
to acquire the companys own shares for the purpose of using them as
consideration in possible acquisitions, to finance investments or in other
industrial arrangements or to be disposed of in other ways or to be
invalidated.
According to the authorisation, the Board of Directors may acquire the
companys own shares using assets available for distribution of profits,
provided that the combined nominal value of the acquired shares together with
any shares already in the possession of the company corresponds to a maximum of
5 percent of the companys total share capital at the moment of acquisition.
Shares can be acquired or sold in public trading on the Helsinki Exchanges at
the market value of the shares at the time in question.
The authorisations to acquire and dispose of the companys own shares are valid
for a period of one year from the decision of the Annual General Meeting on 15
March 2005.
On 30 September 2005, Kyro Corporation held a total of 329,904 (329,904) of its
own shares, acquired on the basis of previous authorisations. In July-September
the company acquired none of its own shares.
Adoption of International Financial Reporting Standards (IFRS)
Kyro Group has adopted the International Financial Reporting Standards (IFRS)
in its financial reporting from the beginning of 2005. Interim reports have
also been prepared in accordance with IFRS recognition and valuation
principles. This interim report uses IFRS figures from 2004 as comparative
data.
The most significant changes to the Groups result and balance sheet arise from
a change in revenue recognition policies, the capitalisation of product
development expenses, the accounting of subsidiaries share options and the
replacement of goodwill amortisation with annual impairment testing. The Kyro
Groups preprocessing line and safety glass machine deliveries are recognised
according to IFRS when delivery and installation have been performed and
accepted. The sales recognition policy under IFRS increases the order book of
the Groups Glaston Technologies business area. Compared with the previous
recognition policy under FAS, safety glass machine projects remain in the order
book for a few months longer, i.e. until the deliveries have been installed,
tested and accepted.
On 6 April 2005, Kyro published a separate stock exchange release on the
effects of the adoption of IFRS on the result and balance sheet.
The financial statements treatment of emissions trading, which started at the
beginning of 2005, follows the IFRS accounting practice, which permits the
recognition of emissions trading at acquisition cost. As of 1 January 2005, the
Kyro Group has applied classification and valuation rules for financial assets
as well as hedge accounting of foreign currency and electricity derivatives in
accordance with the IAS 32 and IAS 39 standards. The impact of the IAS 39
standard on the companys shareholders equity was EUR 1.0 million on the date
of adoption, 1 January 2005.
Glaston Technologies
Net sales, operating profit and order book
Glaston Technologies net sales totalled EUR 164.1 (153.8) million in the
period under review. Operating profit was EUR 16.6 (16.7) million, representing
10.1% (10.8%) of net sales. Glaston Technologies order book fell slightly
compared with the second quarter, but rose from the previous year to stand at
EUR 119.4 (100,8) million on 30 September, representing 18.5% growth.
During the period under review, the Glass Machinery Groups net sales have
grown compared with previous year due good second and third quarters.
Profitability is slightly higher than the previous year, despite the
exceptionally good profitability of the first quarter. A strong euro imposes
price pressures on both the customer and the seller outside the eurozone and
thus reduces volumes and profitability.
Profitability was also affected by the cost of a number of operational
development projects currently under way. The most significant of the projects
are the development of Glaston Technologies´ business operations and sales, the
improvement of Bavelloni's operations and cost-efficiency, the start-up of
Bavellonis manufacturing in China and Brazil as well as the establishment of a
service centre for the Groups financial management and the development of IT
systems.
The net sales of the Glass Processing Group marginally exceeded the previous
years level, but the groups profitability was, however, weaker than the
previous year. This was due, among other things, to restructuring and
efficiency measures aimed at increasing Tamglass Fintons market share as well
as to the start-up costs of Glass Processings new production lines.
Glass Machinery Group
Market and sales
Demand for safety glass machines strengthened further in the third quarter. The
order intake for pre-processing machines is also at a higher level than the
previous year. More than one third additional new architectural glass machine
orders were received than in the corresponding quarter last year. Demand for
automotive glass machines also continued to be better than the previous year.
Demand for safety glass and pre-processing machines is good, above all in North
America, where investment in high technology architectural glass machines in
particular has been active throughout the year. New orders in the in the EMA
(Europe, Middle East, Africa) area grew in the third quarter by nearly half
compared with the previous year. In Central Europe investment picked up in all
of Glaston Technologies product areas. Fewer new orders were received from the
Asian market compared with the corresponding period last year, but for the
whole year new orders are at a higher level than in 2004.
Joint operational and sales organisation
The strategic business areas and sales groups of Tamglass and Bavelloni were
merged at the beginning of 2005. This will support the development of Tamglass
and Bavellonis business operations as well as the One-Stop-Partner concept,
and will improve and enhance the efficiency of customer service. The merged
sales organisation is now operating according to plan, ensuring that customers
receive a better service. The strengthening of the organisational structure and
the development of systems related to the merger will continue.
In September, Tamglass and Bavelloni participated in the Glass Build America
Fair. In October, Glaston Technologies had a prominent presence in the largest
fair of the year, Vitrum 2005 in Milan. The fairs were a commercial success and
led to the agreement of deals with a total value of around EUR 15 million.
Production and new products
The capacity utilisation rate at Glaston Technologies machine factories has
been good this year. The delivery and installation load for safety glass
machines will be exceptionally high in the latter part of the year. Volume
fluctuations are evened out by Glaston Technologies own assembly and a strong
subcontracting network on four continents.
Bavelloni will start manufacturing its products in China this autumn. Glaston
Technologies new factory will start operating at the beginning of 2006. The
opening of the factory will enable Tamglass and Bavelloni to increase their
machine production and widen their product range. The operations of Bavellonis
new Brazilian company are as planned, although still at the development stage.
During the period under review, Glaston Technologies brought to the market new
products that complemented the One-Stop-Partner concept. In connection with the
Glass Build America and Vitrum 2005 fairs, Tamglass launched the worlds
fastest flat tempering machine, the Tamglass SonicTM. Bavellonis new launch
was an automatic, integrated pre-processing line. This can be combined with
both SonicTM, intended for high-tech coated glass, and other Tamglass flat
tempering machine. The line and the machines are suitable for the pre-
processing and tempering of large architectural glasses as well as smaller
furniture and window glass.
Maintenance services and tools
In the period under review, the maintenance contract book for safety glass
machines grew at a record rate, amounting to 14 percent since the beginning of
the year. The order book and demand for accessories continue to be good, with
the focus being on slightly smaller accessories and updates compared with the
previous year.
As a consequence of the record high order books of the period under view,
significant resources will be allocated to installations in the latter part of
the year. Installation and maintenance resources have been increased in line
with demand.
Sales of spare parts have been in line with expectations during the review
period. The spare parts service has been improved by raising the level of
stocks.
The tool business invested heavily in its production in order to speed up
deliveries and improve global availability. Sales resources allocated to tools
have also been boosted to meet the new manufacturing capacity.
Glass Processing Group
The use of glass in construction is still growing. In spite of tight
competition, Glaston Technologies Glass Processing Group managed to increase
its volume in the period under review, with insulating glass deliveries being
particularly active. Glass Processing launched in August a new railing system
for balcony glazing, the Tamglass ProTM.
Glass Processings most significant projects during the review period were
tempered, silk-screen-printed façade glass for Intelligate, built in the area
of the Turku Science Park, and glazing for the Jumbo shopping centre in Vantaa.
The Glass Processing Group continues to produce innovative glazing solutions in
collaboration with its customers. During the period under review, the group
developed glazings with the boat maker Marino for the companys new boat model.
Energy
Net sales, operating profit and order book
The net sales of Kyro Power totalled EUR 19.9 (20.7) million in January-
September. Operating profit rose to EUR 4.6 (4.0) million euros, despite a
forest industry labour dispute that considerably reduced second-quarter net
sales and operating profit. Kyro Powers order book at the end of the review
period was EUR 23.0 (22.7) million.
Development of the energy market
The current year has shown that emissions trading has transformed the energy
markets forecasting and pricing based on rain and the Nordic countries water
situation.
The impact of the high price level in emissions trading is evident also in the
market price of electricity. In July and August the market price in Finland was
higher than at any time since 1998, because at the beginning of July the price
of emissions rights reached its highest level to date, at nearly 30 euros per
tonne. Later on, the price level of emissions rights has remained in the range
20-23 euros. In September the area price of electricity in Finland fell by
almost 15 percent from its August level, but even so was higher than the
September prices of previous years.
Prices on the electricity derivatives market have also been higher than prices
in previous years and prices in the second quarter of 2005.
Energy production
Following the forest industry labour dispute, which was resolved at the end of
June, Kyro Powers power plants have operated continuously. The water situation
in the Nordic countries has turned clearly for the better due to September
rains. The water situation has not been this favourable since summer 2001.
Development of the energy business
The Kyro Power partner project is continuing on a concrete level. On 3
November, 2005, Kyro Power has signed a letter of intent concerning the sale of
its hydropower business. A separate stock exchange release regarding the matter
has been issued today.
Events after the review period
Kyro Power´s letter of intent concerning the sale of its hydropower business
was signed on 3 November, 2005.
Future outlook
Kyro Groups position as it enters 2005 is fundamentally sound. Its order and
offer books are at a high level.
The industrys most extensive customer service network, widest product range
and the One-StopPartner concept create for Glaston Technologies good
opportunities to fulfil customers needs better than before. Glaston
Technologies is striving to strengthen its position in the market, enhance its
operations and exploit synergies.
Kyro is aiming for better net sales and operating profit than last year. The
success of Glaston Technologies for the rest of the year is determined by the
realisation of Decembers record high order book. In the IFRS system, this
depends more than before on the customers preparedness to receive orders. Once
carried out, the sale of Kyro Power´s hydropower business has a notable
positive result impact.
Helsinki, 4 November 2005
Kyro Corporation
Board of Directors
Further information:
Additional information about Kyros financial statements can be obtained from
Kyros President and CEO Pentti Yliheljo and Chief Financial Officer Vesa
Hopia, tel. +358 3 382 3111.
Investor relations:
Kyro Corporation, IR & Communications Manager Emmi Watkins, tel. +358 3 382
3010, IR pages at the Internet address www.kyro.fi.
Distribution: Helsinki Exchanges, key media
Consolidated Income Statement, 1-9/2005 1-9/2004 1-12/2004
EUR million
Net sales 184.1 174.4 231.4
Other operating income 1.9 0.8 1.1
Operating expenses 162.5 150.5 203.6
Depreciation 6.4 6.3 8.4
Operating profit 17.1 18.4 20.5
% of net sales 9.3 10.5 8.8
Net financial income and expenses -1.0 1.0 2.1
Profit before taxes and minority 16.1 19.4 22.5
interest
Income tax -5.5 -6.5 -7.9
Profit for the financial period 10.5 12.9 14.7
Distribution of profit financial
period
To parent company shareholders 10.6 12.8 14.5
To minority -0.1 0.1 0.2
Profit for financial period 10.5 12.9 14.7
Earnings per share, EUR 0.13 0.16 0.18
Consolidated Balance Sheet, 30.9.2005 30.9.2004 31.12.2004
EUR million
Assets
Non-current assets 121.4 118.3 118.4
Inventories 69.9 63.5 63.3
Trade and other receivables 59.3 56.1 54.8
Assets recognised at fair value
through profit and loss 0.1
Financial securities 10.3 5.3
Cash and cash equivalents 5.2 5.1 6.2
Assets, total 255.9 253.3 248.0
Shareholders equity and liabilities
Shareholders equity 127.3 124.7 121.6
Minority interest 0.2 0.6 0.5
Shareholders equity, total 127.5 125.2 122.2
Provisions 9.1 6.9 6.8
Non-current interest-bearing 0.7 1.2 0.7
liabilities
Non-current non-interest-bearing 10.4 8.9 8.3
liabilities
Current interest-bearing liabilities 13.8 29.4 19.6
Current non-interest-bearing 94.4 81.6 90.4
liabilities
Shareholders equity and 255.9 253.3 248.0
liabilities, total
Cash Flow Statement 1-9/2005 1-9/2004 1-12/2004
Cash flow from business operations 12.2 4.3 15.7
Cash flow from investments -7.3 -4.4 -6.5
Net cash flow from financing -5.8 -15.5 -23.7
Change in liquid assets -0.9 -15.6 -14.6
Key figures
Number of shares, 1,000 79,350 79,350 79,350
- of which outstanding 79,020 79,020 79,020
Return on capital employed, %: 14.8 17.5 15.7
Return on equity, % 11.3 13.8 11.9
Equity ratio, % 61.5 58.0 59.3
Gearing, % 7.2 12.0 7.1
Equity/share, EUR 1.61 1.58 1.54
Investments, EUR million 7.8 5.5 6.8
Personnel at end of year 1,214 1,193 1,208
Personnel, average 1,208 1,165 1,175
Order book, EUR million 142.4 123.5 135.5
Contingent liabilities, 30.9.2005 30.9.2004 31.12.2004
EUR million
Company mortgages 0.2 0.4 0.4
Other liabilities 15.0 14.1 14.8
Derivatives contracts
Value of underlying assets
Forward currency contracts 16.1 14.5 17.6
Electricity contracts 10.9 2.8 2.3
Fair value
Forward currency contracts
Positive fair value 0.0 0.4 0.6
Negative fair value -0.2 0.0 0.0
Electricity contracts
Positive fair value 0.0 0.1 0.5
Negative fair value -1.9 0.0 0.0
Business areas net sales, operating profit and order book, EUR million
Net sales 1-3/04 4-6/04 7-9/04 10-12/04 1-3/05 4-6/05 7-9/05
Glaston Technologies 52.8 53.9 47.1 49.3 50.7 60.6 52.8
Energy 7.5 6.5 6.7 7.7 8.0 5.1 6.8
Parent company, other 0.0 0.0 -0.1 0.0 0.1 0.1 0.1
operations and
eliminations
Group, total 60.3 60.4 53.7 57.0 58.7 65.8 59.6
Operating profit 1-3/04 4-6/04 7-9/04 10-12/04 1-3/05 4-6/05 7-9/05
Glaston Technologies 7.1 4.6 5.0 1.7 4.5 6.2 5.8
Operating profit, % 13.5 8.5 10.5 3.4 9.0 10.3 11.1
Energy 1.7 1.2 1.0 1.7 2.0 1.1 1.5
Operating profit, % 23.1 18.3 15.5 22.3 25.1 20.5 22.4
Parent company, other -0.8 -0.6 -0.8 -1.3 -1.4 -1.6 -1.1
operations and
eliminations
Group, total 8.0 5.1 5.2 2.1 5.1 5.7 6.3
Operating profit, % 13.3 8.5 9.8 3.6 8.7 8.7 10.5
Order book 03/04 06/04 09/04 12/04 03/05 06/05 09/05
Glaston Technologies 93.5 97.6 100.8 111.0 114.5 122.1 119.4
Energy 22.7 22.7 22.7 24.5 24.6 23.2 23.0
Group, total 116.2 120.3 123.5 135.5 139.1 145.3 142.4
Statement of change in consolidated shareholders equity, EUR million
EUR million Share Share Trans- Fair Retai- Minority Total
capital premium lation value ned interest
fund diffe- fund ear-
rences ings
Shareholders 12.7 25.3 0.0 83.6 0.5 122.2
equity 1.1.2005
IAS 39, Financial
instruments,
recognition
and valuation 0.5 0.5 1.0
Change in 1.5 1.5
translation
difference
Recognitions to -1.9 -1.9
fair value fund
Dividend -5.5 -5.5
distribution
Other changes -0.3 -0.3
Profit for the 10.6 -0.1 10.5
financial period
Shareholders 12.7 25.3 1.5 -1.4 89.2 0.2 127.5
equity 30.9.2005
EUR million Share Share Trans- Fair Retai- Minority Total
capital premium lation value ned interest
fund diffe- fund ear-
rences ings
Shareholders 6.3 31.6 0.7 85.1 0.5 124.1
equity 1.1.2004
Change in 0.1 0.1
translation
difference
Dividend -11.9 -11.9
distribution
Profit for the 12.8 0.1 12.9
financial period
Shareholders 6.3 31.6 0.7 82.8 0.6 125.2
equity 30.9.2004
Profit for financial period
reconciliation statement
EUR million 7-9/2004 1-9/2004 1-12/2004
Profit for financial period before 1.1 5.8 11.8
minority interest, FAS
Impact of transfer to IFRS:
Change in revenue recognition policy 2.3 7.0 -0.6
Inclusion of fixed expenses in 0.1 -0.2 0.4
inventories
Capitalisation of product development 0.3 0.9 1.9
expenses
Cancellation of amortisation of 0.7 2.2 2.9
goodwill
Employee benefits 0.1 -0.1 0.2
Share-based payments -0.3 -0.6 -1.3
Lease agreements 0.0 0.0 -0.1
Income tax -1.0 -2.3 -0.4
IFRS adjustments, total 2.1 7.0 2.9
Profit for financial period, IFRS 3.3 12.9 14.7
Distribution of profit for financial
period
To parent company shareholders 3.3 12.8 14.5
To minority 0.0 0.1 0.2
3.2 12.9 14.7
Shareholders equity reconciliation 1.1.2004 30.9.2004 31.12.2004
statement, EUR million
Shareholders equity, FAS 135.9 129.7 130.5
Impact of transfer to IFRS:
Change in revenue recognition policy -21.5 -14.6 -20.8
Inclusion of fixed expenses in 2.8 2.2 1.7
inventories
Capitalisation of product development 3.1 4.0 4.5
expenses
Cancellation of amortisation of 2.2 2.9
goodwill
Employee benefits 0.5 0.4 -0.2
Share-based payments -0.2 -0.6
Lease agreements -0.1 -0.1 -0.1
Financial instruments -1.2 -1.0 -1.0
Other adjustments 0.1 0.1 0.1
Income tax 4.4 2.3 3.9
IFRS adjustments, total -12.1 -5.0 -8.8
To parent company shareholders 123.7 124.7 121.6
Minority interests, FAS 2.2 3.2 4.1
IFRS adjustments, total -1.8 -2.7 -3.6
To minority 0.4 0.6 0.5
Shareholders equity, IFRS 124.1 125.2 122.2
Figures are unaudited.
