Interim report for Graninge AB (publ) January - June 2001

Interim report for Graninge AB (publ) January - June 2001 · Net sales for the first half of the year totalled MSEK 1,213, a decrease of 31 per cent attributable to the sale of Forest &Timber operations. For comparable units net sales improved by 7 per cent. · Profit before tax is reported at MSEK 365, up 28 per cent on mid- year 2000. Profit after depreciation in electricity operations rose 65 per cent. · A further step towards concentration on core operations was taken when the Group reduced its stake in Scaninge Holding. · The acquisition of Birka Energi's shares in Gulsele Kraft AB will provide the Group with 130 GWh on an annual basis. Among other acquisitions can be mentioned the power transmission network in Upplands Väsby with 18,000 customers. Income and profit The Group's net sales for the first half of the year amounted to MSEK 1,213 (1,769), down 31 per cent compared with the corresponding period of last year. The decrease is attributable to the sale of the Group's forest properties, forestry operations and sawmills to Scaninge Holding AB at mid-year 2000. For comparable units - now comprising electricity, network and district heating operations - net sales improved by 7 per cent. Profit after net financial items is reported at MSEK 365 (285), which represents an increase of 28 per cent. Profit for the first half of 2000 included MSEK 61 in refunded pension premiums from the insurance company SPP. Excluding the refund, profit improved by 63 per cent. This earnings growth is mainly a result of high energy production in the hydropower plants, energy that could be sold at significantly better prices than in 2000. During the spring, Graninge reduced its stake in Scaninge by selling off a portion of its shares in the company. The sale gave rise to a loss in the Parent Company. The loss is tax deductible, which means that profit for the year will not be subject to taxation. The period's profit corresponds to earnings per share of SEK 5.50 (3.10). The Group reported net sales of MSEK 514 (768) for the second quarter and a profit after net financial items of MSEK 157 (132). Electricity operations - improved earnings The Norwegian mountains were covered by heavy snowpack at the beginning of 2000 and by February anticipation of an abundant spring flood had forced down prices on the spot market to levels normally seen only in the summer. This year, the situation was reversed. A meagre supply of snow and a dramatic increase in domestic consumption has compelled the Norwegians to resort to extensive net power imports. To a large extent, it has been possible to meet the Norwegians' needs through increased hydropower production in Sweden. Not only were the reservoirs well filled at the beginning of the year after the heavy rainfall last autumn, but run-off has also been higher than normal. The conditions for production were especially good on the rivers where Graninge's power plants are located. Aggregate production in the Group's Swedish power plants amounted to 1,614 (1,406) GWh, an increase of 15 per cent compared with the preceding year and 13 higher than normal. The production situation in Finland was also favourable and the Group's Finnish hydropower plants generated a total of 204 (204) GWh, which is on par with the preceding year but 29 per cent higher than normal. The substantial Norwegian imports have driven up prices on the spot market, a trend that has also spread to the forward market. The current price of contracts for delivery during autumn 2001 is around NOK 200/MWh, 40 per cent higher than at year-end. This price trend has burdened consumers with increasingly high electricity prices. On several occasions, Graninge has raised its rates for both contract customers and deliveries on a non-contractual basis. Nonetheless, profitability in consumer sales remains unsatisfactory, particularly in relation to the associated risks. During the spring a number of electricity sellers either went bankrupt or were taken over by bigger players. Graninge's total power deliveries amounted to 3,032 (3,202) GWh. Of this amount, deliveries of electricity to consumers in Sweden and Finland accounted for 2,338 (2,413) GWh, down 3 per cent. The decrease should be seen in light of weak profitability in the consumer segment. Electricity operations reported a profit after depreciation of MSEK 251 (152) for the first half of the year, up 65 per cent on the year-earlier figure. Second quarter profit reached MSEK 110 (76), an improvement of 45 per cent. Profit for the preceding year included MSEK 61 in refunded pension premiums. Return on capital employed was 13 (8) per cent. Network operations - higher volumes, stronger earnings The Group's network operations include management, operation and main tenance of local power transmission networks. The networks are concentrated in three regions of Sweden, including the northern part of the greater Stockholm area. In addition, there are several smaller overlying regional networks in Sweden and Finland. The networks in the Stockholm area are showing particularly strong growth. Energy transmission on the local networks during the first half of the year amounted to 1,721 (1,609) GWh, up 7 per cent on the year before. The increase should be seen against the background of an unusually warm winter season in 1999/2000. Work is underway to connect a number of new corporate customers, above all in Järfälla, but has not yet had any appreciable impact on sales. A total of 1,820 (1,682) GWh was transmitted on the Group's regional net works as a result of high production in the hydropower plants connected to the grid. Network operations reported a profit after depreciation of MSEK 133 (107) for the first six months of the year, which is 24 per cent better than in the corresponding period of 2000. Second quarter profit was MSEK 50 (28), an increase of 79 per cent. Return on capital employed was 12 (9) per cent. District heating operations - up to a more normal level After last year's relatively warm weather, the year's district heating deliveries have risen to a more normal level. In addition, the number of new customers has increased sharply. Total deliveries for the first six months of the year amounted to 549 (477) GWh, an increase of 15 per cent. District heating operations have felt the effects of rising oil prices, since oil is used for peak loads during the winter. However, the effects of the tariff adjustments made to cover higher costs will not be visible until the full-year figures. District heating operations posted a profit after depreciation of MSEK 49 (29) for the first half of the year, an increase of 69 per cent. Second quarter profit was MSEK 35 (5). Profit included a capital gain of MSEK 29 (-) on the sale of Graninge Roslags Energi Värme. Return on capital employed was 13 (7) per cent. Acquisitions and restructuring On 1 July Graninge took over the Municipality of Upplands Väsby's power transmission network. The transaction, worth MSEK 191, included 18,000 customers. Graninge has thus strengthened its position in the Stockholm region, where the company now has around 115,000 network customers. As of 1 July, Graninge has obtained an additional 130 GWh of hydropower through the acquisition of Birka Energi's shares in Gulsele Kraft AB. The purchase price of MSEK 318 includes a one-year option to purchase power. The jointly owned company Graninge Kalmar Energi has acquired 50 per cent of the shares in Sävsjö Energi AB for a price of MSEK 20. Sävsjö has 3,500 network customers and is also producer and seller of district heating. In order to obtain ownership of all shares in Kainuun Sähkö Oyj, Graninge has made an offer to the remaining shareholders. The offer will expire on 31 August. An agreement has been signed with Närvärme Sverige AB for the sale of the shares in Graninge Roslags Energi Värme AB. The sale will provide total proceeds of MSEK 60. Graninge and SCA have signed an agreement for a changed ownership ratio in the jointly owned company Scaninge Holding AB. The agreement will tie Scaninge closer to SCA in order to secure the potential synergies in both forestry and sawmill operations. According to the agreement, Graninge will sell its shares in Scaninge for MSEK 70. After the share capital has been written down Scaninge will carry out a new share issue to Graninge for a nominal MSEK 4.5, enabling Graninge to retain 50 per cent of the votes in the company while decreasing its share of capital to 40.6 per cent. SCA has the right to acquire Graninge's shares at nominal value during a predetermined period. The sale of the shares - including Graninge's portion of Scaninge's loss for the first half of the year - was charged to consolidated profit in the amount of MSEK -20. With this agreement Graninge has obtained close to SEK 2.4 billion for Forest & Timber operations, including certain tax effects. Investments and net financial items, parent company The Group's investments in new plant and equipment during the first six months of the year totalled MSEK 62, a decrease of MSEK 63. Last year's figure included Forest & Timber. The decrease for comparable units was 32 per cent. Net financial items are reported at MSEK -48 (-101). Consolidated net debt per 30 June was MSEK -1,976, down MSEK 2,080 on the year-earlier figure due to the sale of Forest & Timber. Net sales for the parent company during the first six months of the year totalled MSEK 47 (23) and profit are reported at MSEK -751 (-12). Sollefteå, 22 August 2001 Lars Enslöf Managing Director & CEO ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/08/22/20010822BIT01010/bit0001.doc The full report http://www.waymaker.net/bitonline/2001/08/22/20010822BIT01010/bit0001.pdf The full report