Kyro Corporation: INTERIM REPORT JANUARY-SEPTEMBER 2004
Kyro Corporation STOCK EXCHANGE RELEASE 3 November 2004 8.30 a.m.
INTERIM REPORT JANUARY-SEPTEMBER 2004
KYRO CORPORATIONS ORDER BOOK ROSE TO RECORD LEVEL
- Net sales EUR 154.1 (156.1) million; EUR 159.7 million and 2.3%
growth if calculated with foreign exchange rates from 2003
- Operating profit before amortisation of goodwill EUR 12.1 (14.7)
million
- Profit before taxes and minority interest was EUR 11.0 (13.0)
million, 7.1% (8.3%) of net sales.
- Financial position good, equity ratio 60.5% (59.3%)
- The Groups order book grew to a record level of EUR 87.4 (82.9)
million
- In October, Glastons machine orders increased the order book
further to EUR 93.0 million
- Kyros Board of Directors proposes a supplementary dividend of
EUR 0.10 euro per share and a bonus issue to be decided by an
Extraordinary Meeting of Shareholders
PRESIDENT AND CEO PENTTI YLIHELJOS COMMENT
Glaston Technologies order book continued to grow and is now at
a record level. The glass machine market is now active virtually
everywhere; only the turn for better in Central Europe remains
uncertain. A positive development, moreover, is that new orders
are once again directed at larger and higher specification
machines as well as at the comprehensive deliveries of our One-
Stop-Partner concept.
Glaston Technologies is making new investments in South America,
in China and in Russia as well as improving its distribution
elsewhere. The non-recurring cost impact of these investments will
rise this year to around EUR 2 million, and the results will
become evident from 2005. The negative impact of the strength of
the euro has been greater, but we have been able to compensate for
this by boosting operational efficiency and through Tamglass-
Bavelloni synergy benefits. We expect a strong final quarter to
follow the good order book and improved efficiency.
In order to develop our energy business we are seeking a partner.
The objective is to secure the further development of Kyro Power
while continuing our investment in the future of Glaston
Technologies.
KYRO GROUP STRUCTURE
Kyros main business area, Glaston Technologies, consists of the
Glass Machinery group, which operates worldwide, and the Glass
Processing group, which focuses on markets in Finland and
neighbouring countries.
The Glass Machinery group is the world market leader in glass
processing machines and the Glass Processing group is the leading
comprehensive supplier of glass processing products in Finland.
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, which
is the technology and market leader in safety glass machines,
Uniglass, which manufactures flat tempering machines, and Z.
Bavelloni, which is the leading supplier of glass pre-processing
machines and also produces stone processing machines.
The Glass Processing group consists of the units of Tamglass Glass
Processing, whose products are safety glass, balconies and
insulating glass elements and their installation.
Kyros second business area is Energy, wherein operate the
electricity and heat generating power plants of Kyro Power Oy.
NET SALES AND PROFIT
Kyro Groups net sales in the period under review totalled
EUR 154.1 (156.1) million. The strength of the euro against other
key billing currencies impacted on net sales and profitability. If
calculated at the foreign exchange rates from the corresponding
period in 2003, net sales would have been EUR 159.7 million, 2.3%
higher than in the previous year.
The Groups operating profit before amortisation of goodwill was
EUR 12.1 (14.7) million. This represented 7.9% (9.4%) of net
sales. Amortisation of goodwill was EUR 2.2 (2.3) million and
operating profit after amortisation amounted to EUR 10.0 (12.3)
million. Operating profit was weakened above all by the strength
of the euro. Furthermore, Glaston Technologies investments in
Bavellonis new Brazilian factory and in its sales and
distribution network constituted a non-recurring item totalling
approximately EUR 1.5 million.
Net financial items totalled EUR 1.0 (0.6) million. These include
interest, dividend and other financial income of EUR 2.5 (1.5)
million, and interest and other financial expenses of EUR 1.5
(0.9) million.
Profit before taxes and minority interest was EUR 11.0 (13.0)
million. This represented 7.1% (8.3%) of net sales. Profit for the
financial period was EUR 5.8 (6.9) million. Return on invested
capital stood at 9.5% (11.7)%. Earnings per share were EUR 0.15
(0.18) and equity per share EUR 3.26 (3.44).
The Groups order book continued to grow during the period under
review and was EUR 87.4 (82.9) million. Growth from the end of
June was 10%.
Order book at the end of October was EUR 93.0 million.
Net sales, operating profit and order book, EUR million
Net sales Operating profit* Orderbook
1-9/04 1-9/03 1-9/04 1-9/03 09/04 09/03
Glaston Technologies 133.6 134.8 10.4 12.1 64.7 60.3
Energy 20.6 21.3 4.0 4.3 22.7 22.6
Parent company, other operations
and eliminations -0.1 0.0 -2.2 -1.7
Group total 154.1 156.1 12.1 14.7 87.4 82.9
* Operating profit before amortisation of consolidated goodwill
FINANCING
The Groups financial standing is good. Equity ratio was 60.5%
(59.3%). Cash flow from business operations was EUR 1.9 (8.3)
million in the period under review. The Groups liquid funds and
securities totalled EUR 15.4 (28.8) million. During the period
under review, a total of EUR 12.0 million was paid in basic and
supplementary dividends; during the corresponding period in 2003,
only basic dividends totalling EUR 5.9 million were paid. Interest-
bearing net liabilities amounted to EUR 14.5 (6.7) million.
Gearing stood at 11.0% (4.9%). Equity per share was EUR 3.26
(3.44).
INVESTMENTS
Kyro Group investments during the period under review totalled
EUR 3.1 (60.2) million, most of which consisted of a new
production line for Glass Processing and maintenance investments.
PERSONNEL
At the end of the period under review, Kyro Group had 1,193
(1,143) employees, of whom 764 (716) worked outside Finland. The
average number of employees was 1,165 (1,143). The number of
employees rose principally due to the start up of Z. Bavellonis
factory in Brazil and the opening of a Tamglass-Bavelloni office
in Moscow.
Number of personnel on 30 September
2004 2003
Glaston Technologies 1,161 1,109
Energy 22 24
Kyro Corporation 10 10
Kyro Group, total 1,193 1,143
SHARES AND SHARE PRICES
A total of 4,227,421 (1,576,206) Kyro Corporation shares were
traded on the Helsinki Exchanges during the period under review,
representing 10.6% (4.0%) of the total number of shares. The
lowest price paid for a Kyro Corporation share on the Helsinki
Exchanges was EUR 6.80 and the highest price EUR 9.20; the average
price was EUR 6.99.
On 17 March 2004, the Annual General Meeting of the company
authorised the Board of Directors to 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% of the companys total share
capital at the moment of acquisition. The authorisation to acquire
the companys own shares is valid for one year from the decision
of the Annual General Meeting. The company had not exercised the
authorisation by 3 November 2004.
On 30 September 2004, Kyro Corporation held 164,952 of the
companys own shares acquired earlier, representing 0.4% of total
share capital.
KYRO CORPORATIONS EXTRAORDINARY MEETING OF SHAREHOLDERS
The Board of Directors of Kyro Corporation has decided to convene
an Extraordinary Meeting of Shareholders, which will be held on
Thursday, 25 November 2004 at 4 p.m. at Marina Congress Center in
Helsinki. The Board of Directors proposes to the Extraordinary
Meeting of Shareholders that a supplementary dividend of EUR 0.10
per share be paid for 2003. In addition, the Board of Directors
decided to propose to the Meeting of Shareholders a bonus issue in
which shareholders would have the right to subscribe for one new
share per one old share. The proposed bonus issue will double the
number of the corporationss shares and share capital.
CORPORATE GOVERNANCE
Kyro Oyj Abp adheres where applicable to the Helsinki Exchanges
recommendation on the corporate governance of listed companies,
which came into effect on 1 July 2004.
The Board of Directors of Kyro Corporation has established Audit
and Compensation Committees consisting of its own members. The
members of the Audit Committee are Lars Hammarén, Heikki Mairinoja
and Carl-Johan Numelin (chairman). The members of the Compensation
Committee are Klaus Cawén, Carl-Johan Numelin (chairman) and
Christer Sumelius.
IFRS ACCOUNTING POLICIES
Kyro Group will adopt accounting policies compliant with the
international IFRS standard during 2005. Financial statements and
interim reports for 2004 will be based on present accounting
principles, but the company will collect comparison data for 2005
during the transition period. The most significant differences
will be changes in the principles of sales recognition and the
replacement of goodwill amortisation with annual impairment
testing.
GLASTON TECHNOLOGIES
NET SALES, OPERATING PROFIT AND ORDER BOOK
Glaston Technologies net sales totalled EUR 133.6 (134.8) million
in the period under review. Net sales would have been around
EUR 5.6 million higher if calculated with foreign exchange rates
from 2003. Operating profit before amortisation of goodwill was
EUR 10.4 (12.1) million, representing 7.8% (9.0%) of net sales.
The strong euro was the factor that most weakened profitability.
Increased investment in the distribution network and Bavellonis
new factory in Brazil generated a non-recurring cost item of
approximately EUR 1.5 million. Investment in product development
also increased. Glaston Technologies synergy benefits and
efficiency measures have compensated for the impact on earnings of
foreign exchange rates and non-recurring costs.
During the period under review, the Glass Machinery groups net
sales reached the previous years level, while profitability was
slightly lower. The Glass Processing groups net sales and
profitability were nearly at the levels of the previous year.
The order book grew from the end of the second quarter by 14.3%
and stood at a record level of EUR 64.7 million (30 June 2004
EUR 56.6 million). In October, Glastons machine orders were EUR
17.6 million and Glastons order book grew to EUR 70.3 million.
GLASS MACHINERY GROUP
Markets and sales
Global demand for glass processing machines developed positively
during the period under review, but economic conditions and sector
restructuring in Central Europe meant that the emphasis was on
basic machines. Orders in August-October were clearly higher than
the previous year and interest has shifted towards larger and
higher specification machines.
A significant number of purchasing decisions will again be made at
the beginning of November at the Glasstec Fair in Germany and
immediately afterwards. Tamglass and Bavelloni will present an
extensive range of new and important products at the Fair.
Bavellonis machine manufacturing in Brazil is still at the
investment and start-up stage, but Bavelloni has already become
the market leader in terms of new orders in this important market.
The first machines produced at the Brazilian plant were delivered
during the third quarter of this year.
Machine and service product packages under the Tamglass-Bavelloni
One-StopPartner concept were delivered to, among other places,
Russia and Far East. As the industrys first supplier of
integrated factory packages, the One-StopPartner service model
provides a solid foundation to take advantage of market
developments.
Production and new products
The capacity utilisation rate at Glaston Technologies machine
factories was good. An efficient subcontracting network for the
manufacturing of safety glass machines and glass pre-processing
machines enables capacity to be increased quickly according to
demand.
Joint procurement of parts and components by Tamglass and
Bavelloni has generated cost savings.
A more extensive programme to develop new products and new
technology is under way in Tamglass and Bavelloni.
Maintenance services and tools
The rapid growth of Glaston Technologies maintenance business
continued in the third quarter, which further strengthens
indications of an increase in the sectors capacity utilisation.
Demand for options and second-hand machines in particular as well
as business based on maintenance contracts continued to grow.
Sales of glass grinding tools manufactured by Bavelloni are also
growing.
GLASS PROCESSING
In Finland office construction is still at a very low level, but
the renovation and residential construction sectors are highly
active. The Glass Processing groups delivery volume was slightly
lower than last year. Delivery volume for the entire year,
however, is expected to grow compared with 2003.
The Glass Processing group has delivered interesting comprehensive
projects, further strengthening its position as a supplier of
comprehensive architectural glass solutions. Tamglass Glass
Processing delivered tempered insulating glass to, among others,
the Scandic Hotel in Linköping and the Tapiola Swimming Hall in
Espoo. It also delivered external and internal glazing to two
luxury cruise ships currently under construction.
Tamglass Glass Processing presented a new balcony glazing system
and a range of fire glass products at the FinnBuild Fair, which
was held in Helsinki in September. The new glazing system will be
brought into production in the final quarter of this year.
ENERGY
Net sales, operating profit and order book
Net sales of the Energy business area totalled EUR 20.6 (21.3)
million in the period under review. Operating profit before
amortisation of goodwill was EUR 4.0 (4.3) million. The operating
profit represented 19.2% (20.0%) of net sales. Kyro Powers order
book (12 months) stood at EUR 22.7 (22.6) million.
Development of the energy market
The market price of electricity fell towards the end of Summer,
due to higher water reserves in the Nordic countries. The average
spot price of electricity at the end of September was lower than
in the previous year. In October, prices began to rise once again.
Kyro Powers hydroelectric power generation also rose at the end
of the Summer to normal levels. An extensive annual maintenance
project undertaken at the co-generation power plant in September
had an impact on the result for the period under review. The start
of emissions trading in 2005 will improve the competitiveness of
Kyro Powers gas and hydroelectric power plants.
Strengthening the operating conditions for energy business
At the beginning of October a study was initiated in order to
strengthen the energy business and to find a partner for Kyro
Power. Possible cooperation may also include ownership
arrangements. Kyros objective with this project is to improve
simultaneously the operational capability, service capacity and
development prospects of the energy business and to focus
resources on developing Glaston Technologies.
OUTLOOK FOR THE END OF THE YEAR
Kyro Groups basic business set-ups for the end of the year are
good.
Glaston Technologies is the world market leader in a growing
business sector. Its order book has grown further and the offer
book is good. Kyro Powers business is stable and profitable.
The leading market position and increasingly efficient operations
of the Glaston Technologies Glass Machinery group provide a good
basis for taking advantage of growth in the sector.
The strong euro and weak demand in Central Europe will reduce the
growth of Kyro Groups net sales and profitability in the current
year. Net sales and profit for the whole year are expected to be
at the previous years level.
Helsinki 3 November 2004
Kyro Corporation
Board of Directors
Additional information about Kyros financial reports can be
obtained from Kyro Group President & CEO Pentti Yliheljo and Chief
Financial Officer Vesa Hopia, tel. +358 3 372 3111.
Investor Kyro Corporation, Chief Financial Officer Vesa Hopia,
relations: tel. +358 40 841 5816. IR pages at the Internet
address
www.kyro.fi
Distribution: Helsinki Exchanges
Key media
KYRO GROUP 1-9/2004, INCOME STATEMENT AND BALANCE SHEET
Consolidated Income Statement, EUR million
1-9/04 1-9/03 1-12/2003
Net sales 154.1 156.1 226.7
Other operating income 0.8 0.8 1.6
Expenses 137.7 137.4 198.6
Depreciation before amortisation
of consolidated goodwill 5.1 4.9 6.8
Operating profit before amortisation
of consolidated goodwill 12.1 14.7 22.9
% of net sales 7.9 9.4 10.1
Amortisation of consolidated goodwill 2.2 2.3 3.1
Operating profit 10.0 12.3 19.8
% of net sales 6.5 7.9 8.7
Net financial income and expenses 1.0 0.6 0.6
Profit before taxes and
minority interest 11.0 13.0 20.4
Income tax -4.2 -5.2 -6.7
Minority interest -1.0 -0.8 -1.5
Profit for the financial period 5.8 6.9 12.2
Consolidated Balance Sheet, EUR million
30.9.2004 30.9.2003 31.12.2003
Fixed assets 112.6 118.8 118.6
Current assets
Inventories 42.5 39.3 32.2
Deferred tax receivable 8.8 7.1 8.3
Financial assets 70.3 79.1 86.9
Assets 234.2 244.4 246.1
Shareholders equity 129.7 137.4 135.9
Minority interest 3.2 1.8 2.2
Non-discretionary reserves 5.7 5.7 5.6
Liabilities
Interest-bearing liabilities 30.1 35.2 33.4
Non-interest-bearing liabilities 58.3 55.5 60.6
Deferred tax liability 7.1 8.9 8.4
Equity and liabilities 234.2 244.4 246.1
Cash Flow, EUR million
1-9/04 1-9/03 1-12/03
Cash flow from business operations
before financial items and taxes 9.9 12.3 25.6
Financial items -0.2 -0.6 -0.5
Taxes paid -7.8 -3.4 -5.5
Cash flow from business operations 1.9 8.3 19.6
Cash flow from investments -2.0 -1.3 -5.3
Acquisition of subsidiaries 0.0 -70.7 -69.4
Cash flow from investments -2.0 -72.0 -74.7
Dividends paid -12.0 -5.9 -11.7
Disposal of own shares 8.0 8.0
Change in net debt -3.6 34.0 30.3
Cash flow from financing -15.5 36.1 26.6
Change in liquid assets -15.6 -27.5 -28.5
Key figures 1-9/04 1-9/03 1-12/03
Earnings per share 0.15 0.18 0.31
Number of shares, 1,000 39,675 39,675 39,675
Number of own shares held, 1,000 165 165 165
Return on invested capital, % 9.5 11.7 14.1
Return on equity, % 6.7 7.7 10.3
Equity ratio, % 60.5 59.3 58.6
Gearing, % 11.0 4.9 3.2
Equity per share, EUR 3.26 3.44 3.41
Investments, EUR million 3.1 60.2 62.7
Personnel, average 1,165 1,143 1,150
Personnel at end of period 1,193 1,143 1,127
in Finland 430 427 421
Order book, EUR million 87.4 82.9 81.4
Contingent liabilities, EUR million
30.9.2004 30.9.2003 31.12.2003
Mortgages on company assets 0.4 0.4 0.4
Other liabilities 14.8 16.4 18.6
Derivative contracts
Value of underlying assets
Forward currency contracts 14.9 31.6 24.1
Electricity contracts 2.9 3.3 2.7
Market value
Forward currency contracts 14.5 30.9 22.7
Electricity contracts 2.8 3.5 2.5
NET SALES, OPERATING PROFIT BEFORE AMORTISATION OF CONSOLIDATED
GOODWILL AND ORDER BOOK BY QUARTER
Net sales, EUR million
1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
2003 2003 2003 2003 2004 2004 2004
Glaston Technologies 46.4 48.2 40.2 63.6 44.0 49.8 39.7
Energy 8.0 6.8 6.5 7.0 7.5 6.5 6.7
Parent company, other operations
and eliminations 0.0 0.0 -0.1 0.0 0.0 0.0 -0.1
Group total 54.4 55.1 46.6 70.6 51.5 56.3 46.3
Operating profit before amortisation of
consolidated goodwill, EUR million/EBITA%
1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
2003 2003 2003 2003 2004 2004 2004
Glaston Technologies 4.3 4.5 3.3 7.6 4.0 3.8 2.7
EBITA% 9.3 9.3 8.3 12.0 9.0 7.6 6.8
Energy 1.7 1.5 1.1 1.3 1.7 1.2 1.0
EBITA% 20.8 22.1 16.9 18.4 23.1 18.3 15.5
Parent company, other operations
and eliminations -0.8 -0.6 -0.4 -0.7 -0.8 -0.6 -0.8
Group total 5.2 5.4 4.0 8.2 4.9 4.4 2.9
EBITA% 9.6 9.9 8.6 11.7 9.5 7.7 6.3
Order book, EUR million
03/03 06/03 09/03 12/03 03/04 06/04 09/04
Glaston Technologies 63.6 54.0 60.3 58.8 48.9 56.6 64.7
Energy 22.0 22.2 22.6 22.6 22.7 22.7 22.7
Group total 85.6 76.2 82.9 81.4 71.6 79.3 87.4
Figures are unaudited.
