GLASTON TECHNOLOGIES ORDERS AND ORDER BOOK GROWING STRONGLY
KYRO CORPORATION STOCK EXCHANGE RELEASE 17 AUGUST 2005 3 P.M.
GLASTON TECHNOLOGIES ORDERS AND ORDER BOOK GROWING STRONGLY
- The Group's net sales according to IFRS were EUR 124.5 (120.7) million and
operating profit was EUR 10.8 (13.2) million
- Profit before taxes EUR 10.2 million, representing 8.2% of net sales
- In the current year, the Group's net sales and operating profit by quarter will
be weighted more towards the end of year than in 2004
- Earnings per share were EUR 0.08 (0.12)
- Equity ratio was 60.6% (57.4%) and equity per share EUR 1.56 (1.54).
- The order book rose to a new quarterly record to stand at EUR 145.3 (120.3)
million on 30 June
- New machine orders in January-June EUR 91.4 (64.9) million, up 41% from the
previous year
- In the current year, Kyro is aiming for better net sales and operating profit
than in 2004
KYRO GROUP STRUCTURE
Kyro's 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 group's 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
processing products in Finland. Its products sold under Tamglass brand are
safety, insulating and balcony glasses and balcony systems.
Kyro's second business area is Energy, which consists of the electricity and heat
generating plants of Kyro Power Oy.
Net sales and profit
The Kyro Group's net sales in the period under review totalled EUR 124.5 (120.7)
million. The Group's operating profit was EUR 10.8 (13.2) million. This
represented 8.7% (10.9%) of net sales. In the comparison year, 2004, operating
profit according to IFRS was exceptionally high due to certain projects with
particularly good profitability falling within the first quarter.
The direct effect of the strengthening of the euro was minor. Indirectly, the
strong eurozone has reduced orders and created price pressures, thereby weakening
profitability outside the euro zone. The location of Tamglass machine
manufacturing in different currency areas has compensated, however, for the
impact of foreign exchange rates. In the current year, the Group's net sales and
operating profit will be weighted more towards the end of year than in the early
part of this year and in 2004.
During the early part of the year, the Group focused to an exceptionally large
extent on developing its operations. These projects are aimed at improving
financial performance in future, but their cost weakened the result in the period
under review. The biggest projects are the development of Glaston's operational
and sales organisation, the improvement of Bavelloni's operations and cost-
efficiency as well as the construction of a service centre for the Group's
financial management.
Net financial items totalled EUR -0.6* (1.0) million. The difference is explained
by the fact that other financial items include unrealised foreign exchange losses
on the Group's internal loan balances of EUR 0.8 million. 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
1.9 (2.2) million as well as interest and other financial expenses of EUR 2.5
(1.1) million. During the period, 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 10.2* (14.2) million. This represented 8.2*% (11.8%)
of net sales. Profit for the financial period was EUR 6.6* (9.5) million. Return
on invested capital stood at 15.3%* (19.1%). Earnings per share were EUR 0.08*
(0.12).
The Group's order book on 30 June was EUR 145.3 (120.3) million.
* Figures are not directly comparable with the previous year due to the
introduction of IAS 39.
Net sales, operating profit and order book, EUR million
Net Net Oper-ati Oper- Order Order
sales sales ng ating book: book:
profit profit
Net sales 1-6/05 1-6/04 1-6/05 1-6/04 1-6/05 1-6/04
Glaston Technologies 111.3 106.7 10.8 11.7 122.1 97.6
Energy 13.1 14.0 3.0 2.9 23.2 22.7
Parent company, other 0.1 0.0 -3.0 -1.5
operations and
eliminations
Group, total 124.5 120.7 10.8 13.2 145.3 120.3
Financing
Liquid funds and securities totalled EUR 6.7 (22.5) million. Interest-bearing
liabilities amounted to EUR 15.8 (29.2) million and interest-bearing net debt to
EUR 8.6 (6.6) million. The ratio of net debt to shareholders' equity (gearing)
stood at 7.0% (5.4%). Equity per share was EUR 1.56 (1.54). Equity ratio was
60.6% (57.4%).
Cash flow from business operations was EUR 10.6 (11.3) million.
Investments
Investments totalled EUR 5.1 (2.7) million. This figure includes capitalised
product development costs of EUR 1.6 million and Glass Processing's new
production line and glass processing machines as well as repair and maintenance
investments.
Personnel
At the end of the period under review, the Kyro Group had 1,240 (1,173)
employees. The number of Group employees working abroad was 778 (723). The
average number of employees was 1,210 (1,140). The number of employees grew
relative to both the comparison period and the first quarter of the current year.
Personnel numbers increased from last year mainly due to the start-up of new
production and sales companies.
Number of employees 30 June
2005 2004
Glaston Technologies 1,207 1,139
Energy 23 23
Parent company 10 11
Kyro Group 1,240 1,173
Shares and share prices
A total of 14,965,295 (6,941,114) Kyro Corporation shares were traded in the
period under review, representing 18.9% (8.7%) of the total number of shares. The
lowest price paid for a Kyro Corporation share on the Helsinki Exchanges was EUR
3.79 and the highest price EUR 4.60. The average price was EUR 4.41.
Changes in the holdings of the largest shareholders
The Kyro Group's largest shareholder, the GWS Group, announced on 16 May 2005
that it had increased its holding from 21.2 per cent to 33.1 per cent. Lars
Hammarén announced on 16 May 2005 that his shareholding had fallen from 5.6 per
cent to 0 per cent.
Acquisition and disposal of own shares
The Annual General Meeting on 15 March 2005 authorised the Board of Directors to
acquire the company's 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 company's 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 per cent of the company's
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 company's own shares are valid
for a period of one year from the decision of the Annual General Meeting on 15
March 2005.
On 30 June 2005 Kyro Corporation held a total of 329,904 (329,904) of its own
shares, acquired on the basis of previous authorisations. During the period under
review, 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 policies. This
interim report uses IFRS figures from 2004 as comparative data.
The most significant changes to the Group's 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 Group's
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 Group's
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 company's 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 111.3 (106.7) million in the period
under review. Operating profit was EUR 10.8 (11.7) million, representing 9.7%
(11.0%) of net sales. Glaston Technologies' order book grew further and on 30
June 2005 stood at EUR 122.1 (97.6) million, up 20%. The order book was EUR 114.5
(93.5) million on 31 March 2005.
The Glass Machinery group's net sales for the first six months of the year grew
due to a good second quarter. Profitability was close to last year's level,
despite an exceptionally high level of profitability in the first quarter of the
comparison year 2004. The direct effect of the strengthening of the euro was to
reduce net sales by EUR 1.1 million in the period under review. A strong euro
generates price pressures for both the customer and the seller outside the
eurozone and thus reduces volume 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's business operations and sales as well as the
improvement Bavelloni's operations and cost-efficiency.
In the current year, the Glass Machinery group's net sales and operating profit
will be weighted more towards the end of year than in 2004.
The Glass Processing group's net sales were at the previous year's level. Net
sales grew in the second quarter in comparison with the first quarter.
Profitability, however, was weaker than the previous year, due to a tightening of
competition, Tamglass Finton's restructuring and efficiency measures aimed at
increasing market share and the start-up costs of Glass Processing's new
production lines. The order book rose from the previous year and was at a good
level.
Glass Machinery Group
Market and sales
Demand for safety glass and pre-processing machines in the main market areas
strengthened compared to the corresponding period last year. Clearly more orders
for architectural glass machines were received than last year. Demand for
automotive glass machines continued to the good. The order intake for pre-
processing machines was also slightly higher than in the comparison period.
Demand for safety glass and pre-processing machines strengthened, particularly in
North America. Demand in the EMA (Europe, Middle East, Africa) area is
approximately at the previous year's level. A positive sign, however, is the
revival of demand in Central Europe in all of Glaston's product areas. The Asian
market continued its positive trend, with the exception of China where demand
fell slightly from the first quarter of the year.
Tamglass and Bavelloni were strongly represented, for example, at the China Glass
2005 Fair in Shanghai in April and at the MirStekla Fair in Moscow in June. Both
fairs were a commercial success for Glaston.
Glass Processing Days
In June the ninth Glass Processing Days conference was held in Tampere. This
leading event for glass industry professionals attracted 850 participants from 60
countries. A glass industry exhibition was also arranged in connection with the
conference. A total of 35 exhibitors from 11 countries presented their products
and services.
In April, before the Tampere conference, Tamglass and Bavelloni, as in 2004, held
a local Glass Processing Days sister conference in Shanghai, China in connection
with the China Glass Fair.
Both conferences were a success as forums for developing the glass industry and
establishing customer relationships.
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 Bavelloni's business operations and the One-Stop-Partner concept, and will
improve and enhance the efficiency of customer service. Development investments
continued in the second quarter.
Production and new products
Overall, the capacity utilisation rate at Glaston Technologies' machine factories
was good. In the latter part of the year, the delivery and installation load for
safety glass machines will be exceptionally large.
The operations of Bavelloni's new Brazilian company are still at the development
stage, while Glaston Technologies' new factory in China is at the planning stage.
This factory will lead to an increase in machine production and an expansion of
product range at Tamglass. Bavelloni will also begin to manufacture its own
products in China.
Glaston's machine manufacturing is flexible, because it is based on its own
assembly and a strong subcontracting network.
Maintenance services and tools
The maintenance contract book for safety glass machines grew in the first half of
the year at a record rate, by more than 10 per cent. The order book for machine
options remained good. Due to the high level of the order book, a large amount of
after-sales resources is currently committed to installation and training
projects.
Pre-processing machine maintenance business grew from the corresponding period
last year. This was due mainly to good spare parts sales. The volume of tool
business was at the previous year's level.
Glaston's maintenance network were expanded further through the opening of new
operating locations in the USA and Estonia.
Glass Processing Group
Glass Processing invested heavily in developing its production. During the period
under review, new insulating glass and grinding lines were taken into use. The
insulating glass line will strengthen significantly the group's capability and
capacity to deliver an increased number of construction projects. The
installation capacity of the balcony business has been strengthened.
Glass Processing is developing with its customers a network, which will aim to
deliver new, more efficient customer solutions.
The aim of a project currently under way with MSK Group and Valtra is to create
consistent working practices, jointly develop new products and improve logistics.
Energy
Net sales, operating profit and order book
Net sales in the first six months totalled EUR 13.1 (14.0) million. Second
quarter net sales and operating profit were significantly impaired by a forest
industry labour dispute, which halted the energy purchases of main customers for
nearly seven weeks in May-June. Due to a good first quarter, however, operating
profit rose to EUR 3.0 (2.9) million.
Development of the energy market
The price of emission rights continued to rise in the second quarter. The peak to
date - 30 euros per tonne of carbon dioxide - was reached in late June/early
July. The price was more than three times the price forecast before emissions
trading began. After the period under review, the price level has continued to
fluctuate and was around 22 euros per tonne in mid-August.
The impact of emissions trading is also apparent in the market prices of
electricity. During the period under review, the electricity price was clearly
higher than in previous years, despite a more favourable water situation in the
Nordic countries. In July-August the electricity price has risen further.
Energy production
The combination power plant was shut down for seven weeks during the period under
review due to the above-mentioned dispute. The shutdown was utilised by
completing most of the annual maintenance during this period.
Development of the energy business
The Kyro Power partner project continues.
Events after the review period
There have been no reportable events of significance after the review period.
Future outlook
Kyro Group's position as it enters 2005 is fundamentally sound. Its order and
offer books are at a high level.
The industry's most extensive customer service network, widest product range and
the One-Stop-Partner concept create for Glaston Technologies good opportunities
to respond better to customers' needs. 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
successful realisation of the large order book will under the IFRS system depend
more than previously on the preparedness of customers to receive installations.
Helsinki, 17 August 2005
Kyro Corporation
Board of Directors
Further information:
Additional information about Kyro's financial statements can be obtained from
Kyro's President and CEO Pentti Yliheljo and Chief Financial Officer Vesa Hopia,
tel. +358 3 382 3111.
Investor relations:
Kyro Corporation, Chief Financial Officer Vesa Hopia, tel. +358 3 382 3111;
website IR pages www.kyro.fi.
Distribution: Helsinki Exchanges, key media
KYRO GROUP 1-6/2005, INCOME STATEMENT AND BALANCE SHEET
1-6/2005 1-6/2004 1-12/2004
Consolidated Income Statement, EUR
million
Net sales 124.5 120.7 231.4
Other operating income 0.9 0.4 1.1
Operating expenses 110.4 103.8 203.6
Depreciation 4.2 4.1 8.4
Operating profit 10.8 13.2 20.5
% of net sales 8.7 10.9 8.8
Net financial income and expenses -0.6 1.0 2.1
Profit before taxes and minority 10.2 14.2 22.5
interest
Income tax -3.7 -4.6 -7.9
Profit for the financial period 6.5 9.6 14.7
Distribution of profit for financial
period
To parent company shareholders 6.6 9.5 14.5
To minority -0.1 0.1 0.2
Profit for the financial period 6.5 9.6 14.7
Earnings per share, EUR 0.08 0.12 0.18
Consolidated Balance Sheet, EUR million 30.6.200 30.6.2004 31.12.2004
5
Assets
Non-current assets 121.4 118.7 118.4
Inventories 65.5 63.1 63.3
Trade and other receivables 54.2 52.4 54.8
Assets recognised at fair value
through profit and loss 0.1
Financial securities 10.5 5.3
Cash and cash equivalents 6.5 12.0 6.2
Assets, total 247.8 256.6 248.0
Shareholders' equity and liabilities,
total
Shareholders' equity 123.0 121.7 121.6
Minority interest 0.2 0.5 0.5
Shareholders' equity, total 123.2 122.1 122.2
Provisions 8.4 6.3 6.8
Non-current interest-bearing liabilities 0.6 1.2 0.7
Non-current non-interest-bearing 8.6 9.0 8.3
liabilities
Current interest-bearing liabilities 15.2 28.0 19.6
Current non-interest-bearing liabilities 91.7 90.0 90.4
Shareholders' equity and liabilities, 247.8 256.6 248.0
total
Cash flow calculation
1-6/2005 1-6/2004 1-12/2004
Cash flow from business operations 10.6 11.3 15.7
Cash flow from investments -5.5 -2.4 -6.5
Net cash flow from financing -4.5 -17.7 -23.7
Change in liquid assets 0.6 -8.8 -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 invested, % 15.3 19.1 11.7
Return on equity, % 10.6 15.6 11.9
Equity ratio, % 60.6 57.4 59.3
Gearing, % 7.0 5.4 7.1
Equity per share, EUR 1.56 1.54 1.54
Investments, EUR million 5.1 2.7 6.8
Personnel at end of year 1,240 1,173 1,208
Personnel, average 1,210 1,140 1,175
Order book, EUR million 145.3 120.3 135.5
Contingent liabilities, EUR million 30.6.200 30.6.2004 31.12.200
5 4
Company mortgages 0.2 0.4 0.4
Other own liabilities 13.8 16.4 14.8
Derivatives contracts
Value of underlying assets
Forward currency contracts 16.4 19.0 17.6
Electricity contracts 10.6 1.8 2.3
Fair value
Forward currency contracts
Positive fair value 0.1 0.1 0.6
Negative fair value -0.5 -0.2 0.0
Electricity contracts
Positive fair value 0.0 0.5
Negative fair value -2.0 -0.3 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
Glaston Technologies 52.8 53.9 47.1 49.3 50.7 60.6
Energy 7.5 6.5 6.7 7.7 8.0 5.1
Parent company, other 0.0 0.0 -0.1 0.0 0.1 0.1
operations and
eliminations
Group, total 60.3 60.4 53.7 57.0 58.7 65.8
Operating profit 1-3/04 4-6/04 7-9/04 10-12/04 1-3/05 4-6/05
Glaston Technologies 7.1 4.6 5.0 1.7 4.5 6.2
Operating profit, % 13.5 8.5 10.5 3.4 9.0 10.3
Energy 1.7 1.2 1.0 1.7 2.0 1.1
Operating profit, % 23.1 18.3 15.5 22.3 25.1 20.5
Parent company, other -0.8 -0.6 -0.8 -1.3 -1.4 -1.6
operations and
eliminations
Group, total 8.0 5.1 5.2 2.1 5.1 5.7
Operating profit, % 13.3 8.5 9.8 3.6 8.7 8.7
Order book 3/04 6/04 9/04 12/04 03/05 6/05
Glaston Technologies 93.5 97.6 100.8 111.0 114.5 122.1
Energy 22.7 22.7 22.7 24.5 24.6 23.2
Group, total 116.2 120.3 123.5 135.5 139.1 145.3
EUR million Shareholder Share Translat Fair Retaine Minorit Total
s' equity premiu ion valu d y
m fund differen e earning interes
ces fund s t
Shareholders' 12.7 25.3 0.0 83.6 0.5 122.2
equity
1.1.2005
IAS 39, 0.5 0.5 1.0
Financial
instruments,
recognition
and valuation
Change in 1.4 1.4
translation
difference
Recognitions -2.1 -2.1
to fair value
fund
Dividend -5.5 -5.5
distribution
Other changes -0.3 -0.3
Profit for 6.6 -0.1 6.5
financial
period
Shareholders' 12.7 25.3 1.4 -1.6 85.1 0.2 123.2
equity
30.6.2005
EUR million Shareholder Share Translat Fair Retaine Minorit Total
s' equity premiu ion valu d y
m fund differen e earning interes
ces fund s t
Shareholders' 6.3 31.6 0.7 85.1 0.4 124.1
equity
1.1.2004
Change in 0.2 0.2
translation
difference
Dividend -11.9 -11.9
distribution
Profit for 9.5 0.1 9.6
financial
period
Shareholders' 6.3 31.6 0.8 82.8 0.5 122.1
equity
30.6.2004
Profit for the financial period, reconciliation calculation
EUR million 4-6/2004 1-6/2004 1-12/2004
Profit for the financial period before 1.8 4.9 11.8
minority interest, FAS
Impacts of transferring to IFRS:
Change of revenue recognition policy 1.1 4.7 -0.6
Inclusion of fixed expenses in -0.2 -0.3 0.4
inventories
Capitalisation of product development 0.3 0.6 1.9
expenses
Cancellation of amortisation of goodwill 0.7 1.5 2.9
Employee benefits 0.0 -0.2 0.2
Share-based payments 0.2 -0.2 -1.3
Lease agreements 0.0 0.0 -0.1
Income tax -0.4 -1.3 -0.4
IFRS adjustments, total 1.7 4.9 2.9
Profit for the financial period, IFRS 3.5 9.6 14.7
Distribution of profit for financial
period
To parent company shareholders 3.5 9.5 14.5
To minority 0.0 0.1 0.2
3.5 9.6 14.7
Shareholeders' equity, reconciliation
calculation
EUR million 1.1.2004 30.6.200 31.12.2004
4
Shareholders' equity, FAS 135.9 129.0 130.5
Impacts of transferring to IFRS:
Change of revenue recognition policy -21.5 -16.9 -20.8
Inclusion of fixed expenses in 2.8 2.5 1.7
inventories
Capitalisation of product development 3.1 3.7 4.5
expenses
Cancellation of amortisation of goodwill 1.5 2.9
Employee benefits 0.5 0.3 -0.2
Share-based payments -0.2 -0.4
Lease agreements -0.1 -0.1 -0.1
Financial instruments -1.2 -1.2 -1.0
Other adjustments 0.1 0.1 0.1
Income tax 4.4 3.2 3.9
IFRS adjustments, total -12.1 -7.4 -8.8
To parent company shareholders 123.7 121.7 121.6
Minority interests, FAS 2.2 3.0 4.1
IFRS adjustments -1.8 -2.5 -3.6
To minority 0.4 0.5 0.5
Shareholders' equity, IFRS
124.1 122.1 122.2
Figures are unaudited
