Year-end report 2000

Year-end report 2000 · Sales were down 17 per cent to MSEK 2,808 (3,394). The decrease is attributable to the sale of Forest & Timber operations to Scaninge Holding AB. · Profit before tax rose 53 per cent to MSEK 750 (490), including items affecting comparability of MSEK 317 (-). Excluding these, profit dropped 12 per cent to MSEK 433 (490). · Profit after tax corresponds to earnings per share of SEK 9.15 (5.40). · The Group's net debt was dramatically reduced as a result of the Scaninge transaction. The equity ratio at year-end 2000 was 53 per cent (39). · The Board proposes a dividend of SEK 4.30 (3.30) per share of which SEK 1:00 per share is bonus. Changed Group structure Graninge AB (publ) - Graninge - is now a pure-play energy company following the sale of Forest & Timber operations. Prior to the sale, the shareholders in Graningeverkens AB were offered the chance to exchange their shares for shares in Graninge AB. The offer, which was accepted by shareholders representing 99.94 per cent of the shares in Graningeverken, paved the way for the sale of the shares in that company to Scaninge Holding AB. In preparation for the sale, all assets and liabilities attached to energy operations in Graningeverken were transferred to other companies in the Graninge Group. Scaninge Holding AB is owned jointly by Svenska Cellulosa AB SCA and Graninge. At the same time that Scaninge Holding acquired the shares in Graningeverkens AB - which changed name to Scaninge Timber AB - SCA contributed forest assets and a sawmill. Scaninge Timber is one of Europe's ten biggest sawmill groups, with an annual production capacity of 750,000 cubic meters of sawn timber. In the consolidated financial statements, Scaninge is reported as an associated company. Income and profit, Group The Group's sales after deduction of power tax amounted to MSEK 2,808 (3,394), a decrease of 17 per cent owing to the sale of Forest & Timber to Scaninge Holding AB. Sales in the Group's power and energy operations rose 2 per cent to MSEK 2,201 (2,166), an increase that is entirely attributable to the addition of Graninge Kalmar Energi. Sales for comparable units were unchanged. Profit after net financial items is reported at MSEK 750 (490), an increase of 53 per cent. Profit includes items affecting comparability of MSEK 317 (0). The sale of Forest & Timber gave rise to capital gain of MSEK 387 after deduction of costs related to the sale. Graninge received total compensation of MSEK 2,870, which exceeds the book value of the assets by close to MSEK 1,400. The reported capital gain corresponds to SCA's equity share in the company. Added to this is a net amount of MSEK 61 in refunded pension premiums from SPP, after MSEK 19 was used to defray the cost of pension commitments. Aside from the above, profit was charged with an MSEK 131 write-down of the shares in Bråvalla Kraft AB and Oy Alholmens Kraft AB as a precautionary measure. Profit before tax excluding items affecting comparability amounted to MSEK 433 (490), down 12 percent on the previous year. In the fourth quarter, operating profit was MSEK 596 (1,016) and profit before tax was MSEK 132 (135). Bonus to the shareholders The Group's reported profit corresponds to SEK 9.15 (5.40) per share after tax. The Board proposes that the shareholders should be paid a dividend of SEK 4.30 (3.30), of which SEK 1.00 (-) per share is a special nonrecurring bonus. The Board feels that the shareholders should be given a share of the capital gain arising through the Scaninge transaction. Electricity operations - three spring floods provide record production Production in the Group's hydroelectric plants reached an all-time high of 3,584 (3,074) GWh, 17 per cent higher than normal year production of around 3,000 GWh. Of this amount, the Finnish plants accounted for 345 (279) GWh. This unprecedented production volume was attributable an unusually abundant spring flood and extensive precipitation, with annual run-off roughly to equivalent to three spring floods. With the exception of a few isolated weeks, run-off in the last eight months of the year was significantly higher than normal - for certain periods three times the normal level. After heavy rains in the autumn the reservoirs were 80 per cent full at year-end, around 15 per centage points higher than normal. Deliveries of electricity to contract and non-contract customers grew 10 per cent to 6,118 GWh (5,551) and retail distribution increased by 20 per cent to 4,620 GWh (3,836). Compared with 1999, the average price has fallen due to the expiration of older contracts at the same time that fierce competition in the deregulated electricity market has kept margins tight. The prices offered to small customers are not sustainable in the long-term, since they provide no coverage for the risks faced by electricity sellers in the deregulated market. This was particularly evident in 2000 when shortcomings in transmission capacity arose between the Nordic countries and the spot price for electricity - which should be the same throughout the Nordic market - came to vary between the Nordic countries for extended periods of time. Since price hedging of purchased power is normally settled against the common spot price, the year's price area differences led to considerable added costs for Swedish electricity sellers with no production of their own. Graninge, which sells more electricity than it produces in its own power plants, was also affected. However, this was compensated by record high production in the hydroelectric plants. Operating profit in electricity operations - which include power production, electricity sales and trading - was MSEK 282 (344), down 18 per cent on the year-earlier figure. Network operations - new connections Power transmission on the Group's distribution networks totalled 3,034 GWh (2,990), a 1 per cent increase. Of the transmitted volume, 672 (498) GWh pertained to customers who buy electricity from suppliers other than Graninge. An agreement was signed to open three Internet hotels in Järfälla, which will significantly increase the transmission load in the network. Work on new connections is underway and is expected to be completed during 2001. Operating profit in network operations totalled MSEK 215 (192), an improvement of 12 per cent. Heating operations - volume growth through acquisitions Deliveries of district heating and so-called ready heating - where Graninge is responsible for both operation and financing - amounted to 963 (846) GWh, an increase of 14 per cent that includes deliveries of heating to another supplier. Excluding these deliveries, actual district heating sales during the past year rose 18 per cent to 708 GWh (602), which is interesting in view of the year's lower heating requirement due to unseasonably warm weather. The increase is explained by the consolidation of Graninge Kalmar Energi for the full year, continued growth in sales to customers in existing networks, densification and certain supplementary network extensions. The past year was warmer than normal. Expressed in so-called degree days, the difference relative to 1999 was 20 per cent. Operating profit in heating operations was MSEK 43 (41), up 5 per cent on the preceding year. Forest & Timber - high raw material costs The European market for sawn timber products was comparatively strong during the year, with vigorous construction activity in virtually all countries except Germany. The robust market made it possible to raise prices on sawn timber products by 3 per cent during the first half of the year. For processed timber, primarily planed products, the increase was 9 per cent. However, the improved margins were not sufficient to attain satisfactory profitability in sawmill operations due to exceptionally high raw material costs during the year. Production in Graninge's four sawmills rose by 8 per cent to 303 (280) tm3 during January - June and sawn timber deliveries during the same period totalled 278 (294) tm3. Of the sawn volume 93 (74) tm3 was further processed, mainly through planing. The cutting volume in the first half of the year was 378 (350) tm3, of which 287 (256) in the Group's own forest. As of mid-year, Forest & Timber is part of the newly formed Scaninge Timber AB. Scaninge's profit for the second half of the year is consolidated in the amount of MSEK 0. The very rainy autumn made it periodically difficult to transport sawlogs and the sawmills could not be operated at full capacity. All in all, operating profit in Forest & Timber for the full year was MSEK 30 (62) including Graninge's share in the associated company's loss for the second half of the year. Lower investment The Group's investments in new plant and equipment totalled MSEK 228 (358), of which MSEK 25 (32) was attributable to Electricity, MSEK 111 (89) to Networks and MSEK 58 (26) to Heating. Investments in Forest & Timber during the first half of the year amounted to MSEK 34 (211). In April 2000, Graninge AB and the Fortum power group in Finland agreed on an exchange of hydropower assets. Graninge took over Fortum's 31.7 per cent stake in Gulsele Kraft AB and transferred a 60-year right to hydropower from Finnish Kemijoki Oyj to Fortum. The transaction traces back to the sale of Graninge's shares in Gullspångs Kraft to Fortum in 1997, when payment was made partly in the form of power rights in Kemijoki. Strong financial position The sale of Forest & Timber to Scaninge reduced the Group's net debt by close to half. The Group's total net debt decreased by MSEK 1,953 to MSEK 2,191 (4,144) at year-end. The Group's visible equity ratio on the same date was 53 (39) per cent. Kramfors, 16 February 2001. Graninge AB (publ) Board of Directors ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/02/16/20010216BIT00900/bit0001.doc The full year-end report http://www.bit.se/bitonline/2001/02/16/20010216BIT00900/bit0002.pdf The full year-end report