KYRO GROUP INTERIM REPORT 1-6/2004
Kyro Corporation STOCK EXCHANGE RELEASE 12 August 2004, 8.30 a.m.
KYRO GROUP INTERIM REPORT 1-6/2004
ORDER BOOK GROWS
- Net sales EUR 107.8 (109.5) million; using unchanged 2003 foreign
exchange rates gives EUR 112.8 million with 3% comparable growth
- Operating profit before amortisation of goodwill EUR 9.2 (10.6)
million
- Profit before extraordinary items EUR 8.8 (9.2) million, 8.2%
(8.4%) of net sales
- Earnings/share EUR 0.12 (0.12), equity/share EUR 3.24 (3.38)
- Equity ratio 59.7% (57.3%) on 30 June 2004
- Glastons orders boosted the Groups order book by 11% from the end
of March to EUR 79.3 million (31 March 2004: EUR 71.6 million)
- Glass processing machine maintenance and tool business grew by 19%
from the corresponding period in 2003
PRESIDENTS COMMENTARY
The order book of Kyros main business area Glaston Technologies grew
in the second quarter. This alongside the maintenance business and the
demand for tools strengthens our expectations that a market upturn in
the glass processing industry is approaching. In the Far East and
America volumes are already growing. In Central Europe economic
conditions and the post-cyclical nature of glass processing lead to a
demand emphasis on basic machines this year.ö
Glastons offer book suggests that order volumes will develop
positively also at the end of the year. Long-term growth in processed
glass and new glass products requires higher efficiency from glass
processors, which will create a basis for demand for higher
specification machines and for comprehensive product packages.ö
Glaston Technologies is the leading glass processing machinery
company whose comprehensive deliveries improve the productivity of
glass processors. Our projects for synergy and development are
proceeding according to plan and are already bringing in cost savings.
In the current year increasing efficiency has compensated for the
negative impact of foreign exchange rates on profits. In the future we
are aiming to improve relative profitability.ö
KYRO GROUP STRUCTURE
Kyros main business area, Glaston Technologies, consists of the Glass
Machinery group, which operates world-wide, and the Glass Processing
group, which focuses on markets in Finland and neighbouring countries.
The Glass Machinery group is the leading supplier of glass processing
machines in the world 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
glass 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, Bavelloni, which 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 and their installation.
Kyros second business area is Energy, which consists of the
electricity and heat generating plants of Kyro Power Oy.
NET SALES AND PROFIT
Kyro Group net sales in the period under review totalled EUR 107.8
(109.5) million. Net sales would have been EUR 112.8 million if
calculated at foreign exchange rates from the corresponding period in
2003. The euro remained strong against other key billing currencies.
This reduced growth of both net sales and profitability. In the period
under review, the euro was 11% higher against the US dollar compared
to the corresponding period last year.
The Groups operating profit before amortisation of goodwill was EUR
9.2 (10.6) million. This represented 8.6% (9.7%) of net sales. The
Groups amortisation of goodwill was EUR 1.5 (1.6) million and
operating profit after amortisation amounted to EUR 7.7 (9.0) million.
Net financial items totalled EUR 1.1 (0.2) million. These include
interest, dividend and other financial income of EUR 2.2 (1.2)
million, and interest and other financial expenses of EUR 1.1 (1.0)
million.
Profit before extraordinary items was at the previous years level,
namely EUR 8.8 (9.2) million. This represented 8.2% (8.4%) of net
sales. Profit for the financial period was EUR 4.7 (4.6) million.
Return on invested capital stood at 11.3% (12.6)%. Earnings per share
were EUR 0.12 (0.12) and equity per share EUR 3.24 (3.38).
The Groups order book grew from the end of the first quarter and was
EUR 79.3 million on 30 June 2004 (EUR 71.6 million on 31 March 2004;
EUR 76.2 million on 30 June 2003).
Figure 1. Net sales, operating profit and order book, EUR million.
Net sales Operating profit* Order book
1-6/04 1-6/03 1-6/04 1-6/03 06/04 06/03
Glaston Technologies* 93.8 94.6 7.7 8.8 56.6 54.0
Energy 14.0 14.9 2.9 3.2 22.7 22.2
Parent company, other
operations and eliminations -1.4 -1.3
Group total 107.8 109.5 9.2 10.6 79.3 76.2
* Operating profit before amortisation of consolidation goodwill
FINANCING
The Groups financial standing is good. Equity ratio on 30 June 2004
was 59.7% (57.3%). Cash flow from business operations was EUR 16.3
(14.3) million in the period under review. The Groups liquid funds
and securities totalled EUR 22.5 (30.4) million on 30 June 2004.
During the period under review, a total of EUR 11.9 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 liabilities amounted to EUR 28.4 (33.8) million.
Gearing stood at 4.6% (2.7%).
INVESTMENTS
In the period under review, Kyro Group investments totalled EUR 1.8
(61.5) million, most of which consisted of product development
investments in glass processing and maintenance investments.
PERSONNEL
At the end of the period under review, Kyro Group had 1,173 (1,170)
employees, of whom 723 (729) were working abroad. The average number
of employees was 1,140 (1,143). The number of employees grew in
Bavellonis Brazilian unit and declined in Italy.
Figure 2. Personnel 30 June
2004 2003
Glaston Technologies 1,139 1,134
Energy 23 26
Kyro Corporation 11 10
Kyro Group 1,173 1,170
SHARES AND SHARE PRICES
A total of 3,470,557 (1,043,086) Kyro Corporation shares were traded
on the Helsinki Exchanges in the period under review, representing
8.7% (2.6%) of the total number of shares. The lowest price paid for a
Kyro Corporation share on the Helsinki Exchanges was EUR 7.19 and the
highest price EUR 9.20. The average price during the period under
review was EUR 7.81
IFRS ACCOUNTING POLICIES
Kyro Group will adopt accounting policies compliant with the
international IFRS standard from the beginning of 2005. Financial
statements and interim reports for 2004 will be based on Finnish
accounting principles but the company will simultaneously collect
comparison data for 2005 during the transition period.
GLASTON TECHNOLOGIES
Net sales, operating profit and order book
Glaston Technologies net sales totalled EUR 93.8 (94.6) million. Net
sales of the business area would have been around EUR 5.0 million
higher if calculated using the foreign exchange rates from the
corresponding period in 2003. Operating profit before amortisation of
goodwill was EUR 7.7 (8.8) million, representing 8.3% (9.3%) of net
sales.
The Glass Machinery groups net sales were at the previous years
level and operating profit was nearly at the level of the
corresponding period last year. The Glass Processing groups net sales
and operating profit were at the previous years level.
The strength of the euro had a substantial negative impact on
profitability. This is particularly evident in Bavellonis pre-
processing machines, which are manufactured in the Euro zone but are
sold to an increasing extent outside the zone. Glastons synergy and
efficiency projects have partly compensated for the impact on
profitability of foreign exchange rates. Moreover, investments in
Bavellonis new Brazilian factory and in strengthening Glaston
Technologies distribution network also had an impact on
profitability.
Glaston Technologies order book grew from the end of March by 16% and
on 30 June 2004 stood at EUR 56.6 million (31 March 2004, EUR 48.9
million; 30 June 2003, EUR 54.0 million). The offer book level is
good.
Glass processing machine market
Global demand for glass processing machines is showing signs of
growth. Glass pre-processing machine order volume has already grown.
At this stage of the economic cycle, the emphasis of orders is still
on basic machines.
In the United States demand has been growing this year. In the UK,
Italy and Spain as well as in several Far Eastern markets the level of
demand for glass processing machines is good. In South America, Brazil
continues to be the focus for glass processing machine investments.
The market in Central Europe is being weakened at present by economic
conditions and by related restructuring in the sector.
Glaston Technologies is enhancing and supplementing its local customer-
service and agent network. Tamglass and Bavelloni have opened joint
sales and service units in Shanghai and Moscow. They have also merged
their offices in Europe and Asia. Consolidation and the new units will
improve customer service and sales of comprehensive deliveries under
the One-Stop-Partner concept and boost cross-selling of individual
products.
In the second quarter, Glaston Technologies participated in glass
industry trade fairs in China, Brazil and Russia. The One-Stop-Partner
concept was well received at these fairs.
The start-up of Bavellonis machine manufacturing in Brazil has
elevated the company to the position of the countrys leading supplier
of glass pre-processing machines. In other important market areas,
too, Glaston Technologies has strengthened its position.
Machine production
The capacity utilisation rate at machine factories was good. The joint
procurement of parts and components begun by Tamglass and Bavelloni
last year is producing cost savings. Bavellonis machine manufacturing
operation in Brazil started up in the second quarter.
Maintenance services and tools
Glaston Technologies maintenance and tool business grew 19% in euro
terms from the corresponding period last year, which is indicative of
the increased utilisation rate of glass processing machines. There has
also been a clear revival in the supply and sales of second-hand
machines.
Demand for machine accessories and upgrade packages has grown, as
processors modernise their machines for the processing of coated
glass, among other things.
The product range of Bavelloni-made tools intended for glass pre-
processing has been expanded and sales are growing, despite the trend
in foreign exchange rates.
Glass processing
Office construction remained at a low level in Finland, but the market
for renovations and residential construction is buoyant. Prices of raw
glass and glass products have risen due to, among other things, the
high price of energy. The Glass Processing group has strengthened its
position as a comprehensive supplier of architectural glazing, and as
a result the groups delivery volumes grew in the second quarter.
The Glass Processing group has received a number of significant
comprehensive delivery projects. Tamglass Glass Processing will
deliver tempered insulating glass, for example, to Bauhaus Pirkkala
and to the Scandic Hotel Helsingborg. In addition, the Puijo Tower
glazing project was concluded in the second quarter.
Tamglass Glass Processing opened its new insulating glass line at the
beginning of the year and is continuing to boost production by
renewing its glass pre-processing lines in the third quarter.
Subcontracting of balcony production has started according to plan.
ENERGY
Net sales, operating profit and order book
The net sales of the Energy business area totalled EUR 14.0 (14.9)
million in the period under review. Operating profit before
amortisation of goodwill was 2.9% (3.2%) of net sales, representing
20.9% (21.4%) of net sales. The decline in net sales and operating
profit was partly due to the lower market price of electricity. Kyro
Powers order book (12 months) stood at EUR 22.7 (22.2) million.
Development of the energy market
Since May the market price of electricity has again been rising. The
average spot price of electricity rose in June to its highest value
since the beginning of the year. The rise in price on the derivatives
market also continued.
Emissions trading, which begins in 2005, has influenced the
electricity market to some extent. The start of emissions trading will
improve the competitiveness of environmentally friendly energy
production plants like Kyro Powers gas and hydroelectric power
plants. Kyro Powers gas and hydroelectric power plants have operated
with no disruptions.
FUTURE OUTLOOK
The Kyro Groups basic business set-ups for the current year are good.
Glaston Technologies is the world market leader in a growing business
sector. Kyro Powers business is stable and profitable.
Glaston Technologies order book has started to grow and the offer
book is good.
The Glass Machinery groups leading market position as well as
production based on subcontracting provide a capability to benefit
from growth.
The present exchange rate of the euro and market weakness in Central
Europe, however, will reduce growth of the Kyro Groups net sales and
profitability in the current year. Net sales and profit for 2004 are
expected to be in line with the previous years figures.
Helsinki, 12 August 2004
Kyro Corporation
Board of Directors
Additional information about Kyros financial reports can be obtained
from Kyros President and CEO Pentti Yliheljo and Chief Financial
Officer Vesa Hopia, tel. +358 3 372 3111.
Investor Kyro Corporation, Mika Nevalainen, Vice President,
relations: Corporate Communications tel. +358 400 882 024,
IR pages at the internet address www.kyro.fi
Distribution: Helsinki Exchanges
Key media
KYRO GROUP 1-6/2004, INCOME STATEMENT AND BALANCE SHEET
Consolidated Income Statement, EUR million
1-6/04 1-6/03 1-12/2003
Net sales 107.8 109.5 226.7
Other operating income 0.4 0.3 1.6
Expenses 95.6 95.9 198.6
Depreciation and amortisation
of goodwill 3.4 3.2 6.8
Operating profit before amortisation
of goodwill 9.2 10.6 22.9
% of net sales 8.6 9.7 10.1
Amortisation of consolidated
goodwill 1.5 1.6 3.1
Operating profit 7.7 9.0 19.8
% of net sales 7.2 8.3 8.7
Net financial items 1.1 0.2 0.6
Profit before extraordinary
items 8.8 9.2 20.4
Income taxes -3.3 -4.1 -6.7
Minority interest -0.7 -0.5 -1.5
Profit for the financial period 4.7 4.6 12.2
Consolidated Balance Sheet, EUR million
30.6.2004 30.6.2003 31.12.2003
Fixed assets 113.9 122.8 118.6
Current assets
Inventories 39.0 39.1 32.2
Deferred tax receivable 8.2 7.8 8.3
Financial assets 72.0 80.3 86.9
Assets 233.2 250.0 246.1
Shareholders equity 129.0 135.2 135.9
Minority interest 3.0 1.6 2.2
Non-discretionary reserves 5.6 5.3 5.6
Liabilities
Interest-bearing liabilities 28.4 33.8 33.4
Non-interest-bearing liabilities 59.9 65.4 60.6
Deferred tax liability 7.2 8.7 8.4
Equity and liabilities 233.2 250.0 246.1
Cash Flow, EUR million
1-6/04 1-6/03 1-12/03
Cash flow from operations
before financial items and taxes 16.3 14.3 25.6
Financial items 0.0 -0.4 -0.5
Taxes paid -5.9 -1.8 -5.5
Cash flow from business operations 10.4 12.2 19.6
Cash flow from investments -1.5 -1.5 -5.3
Acquisition of subsidiaries 0.0 -72.1 -69.4
Cash flow from investments -1.5 -73.5 -74.7
Dividends paid -12.0 -5.9 -11.7
Disposal of own shares 7.4 8.0
Change in net debt -5.7 34.5 30.3
Cash flow from financing -17.7 36.0 26.6
Change in liquid assets -8.8 -25.4 -28.5
Key figures 1-6/04 1-6/03 1-12/03
Earnings per share 0.12 0.12 0.31
Number of shares, 1,000 39,675 39,675 39,675
Number of own shares held, 1,000 165 248 165
Return on invested capital, % 11.3 12.6 14.1
Return on equity, % 8.1 7.7 10.3
Equity ratio, % 59.7 57.3 58.6
Gearing, % 4.6 2.7 3.2
Equity per share, EUR 3.24 3.38 3.41
Investments, EUR million 1.8 61.5 62.7
Personnel, average 1,140 1,143 1,150
Personnel at end of period 1,173 1,170 1,127
in Finland 450 441 421
Order book, EUR million 79.3 76.2 81.4
Contingent liabilities, EUR million
30.6.2004 30.6.2003 31.12.2003
Mortgage on company asset 0.4 0.7 0.4
Other liabilities 17.2 18.8 18.6
Derivatives contracts
Value of underlying assets
Forward currency contracts 19.0 30.8 24.1
Electricity contracts 1.8 2.6 2.7
Market value
Forward currency contracts 19.1 30.7 22.7
Electricity contracts 2.1 2.6 2.5
NET SALES, OPERATING PROFIT BEFORE AMORTISATION OF CONSOLIDATED
GOODWILL AND ORDER BOOK BY QUARTER, EUR million
Net sales
1-3/03 4-6/03 7-9/03 10-12/03 1-3/04 4-6/04
Glaston
Technologies 46.4 48.2 40.2 63.6 44.0 49.8
Energy 8.0 6.8 6.5 7.0 7.5 6.5
Parent company, other operations
and elim. 0.0 0.0 -0.1 0.0 0.0 0.0
Group total 54.4 55.1 46.6 70.6 51.5 56.3
Operating profit before amortisation
of consolidated goodwill/EBITA%
1-3/03 4-6/03 7-9/03 10-12/03 1-3/04 4-6/04
EUR million
Glaston
Technologies 4.3 4.5 3.3 7.6 4.0 3.8
EBITA% 9.3 9.3 8.3 12.0 9.0 7.6
Energy 1.7 1.5 1.1 1.3 1.7 1.2
EBITA% 20.8 22.1 16.9 18.4 23.1 18.3
Parent company, other operations
and elim. -0.8 -0.6 -0.4 -0.7 -0.8 -0.6
Group total 5.2 5.4 4.0 8.2 4.9 4.4
EBITA% 9.6 9.9 8.6 11.7 9.5 7.7
Order book
03/03 06/03 09/03 12/03 03/04 06/04
EUR million
Glaston
Technologies 63.6 54.0 60.3 58.8 48.9 56.6
Energy 22.0 22.2 22.6 22.6 22.7 22.7
Group total 85.6 76.2 82.9 81.4 71.6 79.3
Figures are unaudited.
