KCI KONECRANES GROUP FULL YEAR 2004: SOLID GROWTH
KCI KONECRANES PLC STOCK EXCHANGE RELEASE 11 February, 2005 10.00 a.m. 1(21)
KCI KONECRANES GROUP FULL YEAR 2004: SOLID GROWTH
Full year 2004 Results:
New orders: up 20 % (with constant currencies +24%) indicating market and market
share growth. Trend accelerating: Q4/04 +41 % over Q4/03.
Sales will follow: now +9.5 % (constant currencies +12.3 %)
EBIT up 9.7 %.
Restructuring lifted profits with approx. EUR 10 million.
The declining US dollar burdened profits with same amount, thus eliminating
restructuring gains.
Future: strong growth in all aspects.
Stig Gustavson proposed Chairman, Pekka Lundmark as President & CEO, as of 17
June.
Board's dividend proposal 1.05 EUR/share.
Million EUR 1-12/ % 1-12/ % Change Change %
SALES 04 03 % at comp.
currency
rates
Maintenance Services 344.6 338.8 1.7 4.9
Standard Lifting
Equipment 231.2 212.3 8.9 12.0
Special Cranes 214.1 178.6 19.9 21.6
Internal Sales -62.0 -65.2 -5.0 -1.1
Sales total 728.0 100 664.5 100 9.5 12.3
Operational EBITA 39.4 5.4 37.4 5.6 5.3
Operating income before
restructuring 37.4 5.1 34.1 5.1 9.7
Restructuring costs -0.0 -12.6
Operating income 37.4 5.1 21.5 3.2 74.1
Financial income and
expenses -3.6 -2.6 39.7
Income before taxes and
extraordinary items 33.7 4.6 18.9 2.8 78.9
Extraordinary items -0.0 -8.1
Taxes -10.7 -4.0
Net income 23.0 3.2 6.7 1.0 243.9
Earnings per share (EUR)
1.64 0.88 86.4
Dividend per share (EUR)
1.05(1 2.00(2
ORDERS RECEIVED
Maintenance Services 308.4 269.0 14.7 18.5
Standard Lifting
Equipment 246.6 220.3 11.9 15.5
Special Cranes 243.7 184.9 31.8 34.0
Internal Orders -61.9 -62.4 -0.8 2.4
Orders received total 736.9 611.9 20.4 23.8
Order book at end of
period 298.8 211.2 41.5 48.2
1) Board's proposal
2) 1 EUR by decision of ordinary and 1 EUR of extraordinary general meeting
Fourth Quarter performance
Million EUR 10-12/ % 10-12/ % Change
SALES 04 03 %
Maintenance Services 105.1 99.6 5.6
Standard Lifting
Equipment 73.4 64.5 13.9
Special Cranes 81.7 45.1 81.0
Internal Sales -19.9 -15.9 24.6
Sales total 240.4 100 193.2 100 24.4
Operational EBITA 21.2 8.8 18.0 9.3 17.4
Operating income before
restructuring 20.6 8.6 16.9 8.7 21.8
Restructuring costs -0.0 -5.6
Operating income 20.6 8.6 11.3 5.8 82.4
Financial income and -2.1 -0.8 148.4
expenses
Income before taxes and
extraordinary items 18.5 7.7 10.4 5.4 77.1
Extraordinary items 0.0 0.1
Taxes -5.7 -4.0
Net income 12.8 5.3 6.5 3.4 95.3
Earnings per share (EUR) 0.91 0.46 97.8
ORDERS RECEIVED
Maintenance Services 81.5 59.8 36.3
Standard Lifting
Equipment 58.9 56.0 5.3
Special Cranes 86.1 50.6 70.1
Internal Orders -14.0 -15.6 -9.8
Orders received total 212.6 150.9 40.9
Comment on 2004:
The Group developments in 2004 were good: The orders intake, starting to increase
already in 2003, remained strong, even accelerating through the year. Efficiency
improvements supported stronger margins, however the declining US-dollar
eliminated the effect of the restructuring savings. Two acquisitions were made,
further supporting future growth.
Future prospects:
Market picture remains mixed: In America, investments into production equipment
are improving but not buoyant, in Europe and Scandinavia markets are on a low
level, in Asia-Pacific there is real growth. The good order intake indicates
market share gains.
The Group entertains a positive view on the immediate future. 2005 started with a
high order backlog. New orders continue on high level. USD development expected
to continue to burden results.
On both of its main markets, industry and harbours, the Group's cranes and
maintenance are positioned in the premium segment. Going forward, the Group's
growth is supported by both market growth and a growing share for the chosen
segment.
General business development
(Numbers in brackets are corresponding values in 2003 unless otherwise
indicated.) The turn to growth in orders and order book, which took place in
2003, continued and strengthened during the year. The order intake grew to EUR
736,9 million (611,9) or 20.4 %. At constant currencies the growth was 23.8 %.
At yearend 2004 the total value of the order backlog was EUR 298.8 million
(211.2) or 41.5 % higher than at the end of the previous year. At constant
currencies both orders and order backlog stood at record high levels.
External and internal factors contribute to the positive development. The market
development in all main markets was positive; the growth continued in Asia,
especially in China, and in Eastern Europe. There was a turn to improving market
sentiments in North America as the industry capacity utilization ratios improved.
The decline in the Western and Central European markets indicated a levelling-
off. Among various industries the strongest development took place in primary
metal industries and related mining, transportation and power industries as well
as in harbours.
The main internal contributors to the positive development were related to the
sales and marketing, R&D, personnel development and restructuring actions.
Group sales and operating income turned to growth in 2004. Determined work to
improve profitability will continue.
Sales
Group sales was EUR 728.0 million (664.5), which means 9.5 % increase compared to
2003. The growth was 12.3 % at constant currencies. All Business Areas
contributed to the growth. Counted in constant currencies the strongest growth
occurred in Asia and Australia, but there was growth also in America and in
Europe as a whole.
Profitability
The Group's operating income was EUR 37.4 million (21.5), which is EUR 15.9
million or 74.1 % more than in 2003. The operating margin was 5.1 % (3.2).
Excluding EUR 12.6 million restructuring costs, which burdened operating income
in 2003, the growth was 9.7 % and the operating margin stayed at previous year's
level. Various actions were taken to improve the Group's cost competitiveness.
The profitability was burdened by the declining US dollar exchange rate. The
growth in operating income is mainly attributable to the sales growth.
There is a more detailed analysis on profitability in the review by Business
Area.
The operating income before goodwill amortizations (EBITA) was EUR 39.4 million
(24.8) and the operating income before depreciations and amortizations (EBITDA)
was EUR 52.0 million (38.0). The corresponding operating income margins were as
follows: EBITA 5.4 % (3.7) and EBITDA 7.1 % (5.7).
The net of financing income and costs was a cost of EUR 3.6 million (2.6). The
growth in financing costs was mainly caused by higher working capital financing
due to the growth and acquisitions.
The Group's income after financing items was EUR 33.7 million (18.9). Income
taxes were EUR 10.7 million (4.0) corresponding to an effective tax rate of
approximately 31.8 % (37.0) for the year.
Group net income or the income after taxes was EUR 23.0 million (6.7) and
earnings per share (EPS) 1.64 (0.88) accordingly.
The Group's return on capital employed was 15.9 % (10.8) and the return on equity
was 14.8 % (7.5). The improvement in capital return ratios is mainly due to
improved results.
Both sales and operating income grew during the year towards the yearend. This
seasonal pattern is typical for the Group. The sales during the last quarter
reached 240.4 million, which is record high and the operating income at EUR 20.6
million also set a new record for operational income in one quarter.
Cash flow and balance sheet
The free cash flow was EUR 39.1 million (32.7), which is 19.6 % more than it was
one year ago. The cash flow from operations (after the change in working capital)
was EUR 4.2 million (24.2), which is clearly less than year ago. This is due to
increase in working capital (especially work in progress, other inventories and
accounts receivables) as a consequence of the fast growth.
In total EUR 33.8 million (17.3) of cash was used to cover capital expenditures
including acquisitions. Thereby the cash flow before financing was EUR -29.6
million (+6.9). The capital expenditures excluding acquisitions were EUR 7.9
million (15.2). The comparable number in 2003 includes the acquisition of own
shares to the amount of EUR 5.5 million.
The parent company paid EUR 28.1 million (13.3) in dividends. This amount
includes also an extraordinary dividend of EUR 14.1 million (1 euro/share) paid
in 2004 on the basis of the confirmed 2003 balance sheet.
The Group's interest bearing debt was EUR 123.9 million (57.1), and the interest
bearing net debt was EUR 103.3 million (43.8). Gearing was 67.2 % (27.8) and the
solidity ratio was 34.3 (42.6).
The Group's EUR 100 million committed back-up financing facility was totally
unused at the yearend.
Currencies
The continued strengthening of the euro (especially against the US dollar) had a
certain effect on the Group's euro nominated orders, sales and operating income
development (translational effect). At constant currencies orders grew by 23.8 %
(reported growth 20.4 %), sales 12.3 % (reported growth 9.5 %) and operating
income 77.7 % (reported growth 74.1 %). Compared to the previous year operating
income in euros was effected negatively by approx. EUR 0.5 million because of
this translational effect.
The transactional effect through export from the euro-area in other currency
areas (especially to US dollar areas) had a much greater influence on the
operating income compared to the translational effect. This has been explained in
more detail in the General business development section and in the Review by
Business Area.
The average consolidation rates of some important currencies developed in
accordance wit table 1 (currency/euro):
Table 1 Average Average Change
rate 2004 rate 2003 %
USD 1.2437 1.13154 -9.02
CAD 1.616 1.5822 -2.09
GBP 0.6786 0.6922 2.00
CNY (Chinese
Yuan) 10.358 9.4309 -8.95
SGD 2.1011 1.9712 -6.18
SEK 9.1244 9.1271 0.03
NOK 8.3666 8.0059 -4.31
AUD 1.6912 1.7385 2.80
The Group continued its currency risk management policy of hedging. Hedging was
mainly carried out through forward exchange transactions. The ultimate goal for
the hedging policy is to minimise currency risk relating to order book margins.
Additionally, hedging allows time to take necessary actions in case of notable
and relatively permanent exchange rate changes.
Capital expenditure
The Group's capital expenditures to tangible assets excl. fixed assets and
goodwill of acquired operations were EUR 9.3 million (8.6). These capital
expenditures consist mainly of machines, equipment and information technology and
their nature is mainly related to replacement investments. Capital expenditures
to intangible assets (excl. acquired operations), shares in joint venture
companies or minority holdings amounted to EUR 2.4 million (3.7). In total these
capital expenditures were EUR 11.8 million (12.4), which is approx. EUR 0.7
million less compared to corresponding depreciation.
Research and development
Product development
Total direct R&D costs in the Group were EUR 8.5 million (7.9), up with 7.6 %
from the previous year. This represents approx. 3.5 % of the production value of
the related production and is on the previous year's level.
The development of a new heavy hoisting trolley for ladle handling in steel mills
was completed. Also the first deliveries of the new hoisting trolley took place
in 2004.
The main emphasis in R&D is now on the development of maintenance technologies
with a specific focus on heavy duty crane applications in process industries and
in harbours.
Human resource development
The Group invested in personnel training and development approx. 8,000 training
days. On average this corresponds to approx. two training days per every
employee. The training programs continued on all levels of the organisation
including technical and sales training, special training for middle management
and experts (KCI Academy's 7th run) as well as top executive development. The
development of a new top management program continued in 2004, now with the
London Business School.
Personnel
At the end of 2004 the Group employed 4511 (4350) persons. The acquisition of SMV
Lifttrucks AB and personnel increases in the new markets, especially in China,
increased the number of employees. On the other hand, efficiency improvement
actions decreased the number of Group's own personnel.
Review by Business Area
Maintenance Services
Maintenance Services sales was EUR 344.6 million (338.8), which is an increase of
1.7 % over 2003. The growth was 4.9 % counted at comparable currency rates. The
operating income was EUR 23.3 million (22.4) and the operating income margin 6.8
% (6.6).
There was a clear growth in sales and improvement in profitability in the
Maintenance Services field operations, especially relating to industrial crane
maintenance (approx. 80 % of total Maintenance Services). The maintenance
contract base grew both in terms of value and equipment quantity. The retention
rate of the contract base increased clearly although the churn rate still stayed
at relatively high level. These developments together with sales growth in field
services contributed positively to results.
Both sales and operating income decreased in harbour crane maintenance and
modernisation activities (approx. 20 % of total Maintenance Services). Partly
this is a sales periodising issue relating to large projects, which have
increased the order backlog by almost 80 % during the year. Partly this was a
reflection of disalignment between resources needed and resources existing. This
resulted changes in personnel and also cuts in the employment, which burdened
profitability.
The drop in the value of US dollar related currencies had a negative
translational effect, approx. EUR 0.5 million, on operating income.
The quarterly operating income margins improved towards the yearend. Q4/2004
operating income on sales was 10.3 % (10.1).
The total order intake in Maintenance Services was EUR 308.4 million (269.0), up
14.7 % and at comparable currency rates 18.5 %. Orders grew both in field
operations and modernisations. The maintenance contract base included 224,825
lifting equipment at yearend. This is up by 7.2 % compared to 209,769 equipment
at the end of 2003.
The number of employees in Maintenance Services at yearend was 2685 (2622).
Standard Lifting Equipment
Standard Lifting Equipment sales was EUR 231.2 million (212.3). The growth was
8.9 % or 12 % counted at constant currencies. The operating income was EUR 21.0
million (17.6), which is EUR 3.4 million or 19.5 % higher than in 2003. The
operating income margin was 9.1 % (8.3).
The profitability improvement was based on sales growth and lower unit costs. The
negative impact of the stronger euro was approx. EUR 6 million. The purchase
price increases and difficulties in getting certain materials and components also
affected operating income negatively to some extent. The Group has aimed to
transfer material price increases to sales prices in full.
Quarterly operating income margins improved toward the yearend and were better in
each quarter compared to corresponding quarters in 2003. The operating income
margin during the last quarter was 10.4 % (9.9).
The order intake was EUR 246.6 million (220.3), up by 11.9 % or 15.5 % at
constant currencies. The yearend value of the order backlog was 25.9 % higher
compared to year ago. At constant currencies the order backlog grew approx. by
one third.
The total number or employees at yearend was 1028 (1000). The employment number
increased clearly in our Asian operations, but decreased in Europe.
Special Cranes
Special Cranes sales was EUR 214.1 million (178.6). The growth was 19.9 % and at
constant currencies 21.6 %.
Both industrial cranes, harbour and shipyard cranes contributed to the growth.
The increase in the production of hoisting trolleys and crane components was
approx. 20 %. The acquisition of SMV Lifttrucks AB of Sweden has been
consolidated into Group numbers from the beginning of November 2004. The products
of SMV: container reach stackers, heavy lift trucks and other products form an
integral part of the Special Cranes Business Area. The acquisition added approx.
EUR 12 million in Special Cranes sales.
The operating income in Special Cranes was EUR 16.0 million (13.1). The growth
was 22.1 %. At constant currencies rates the growth was at the same level. The
operating income margin was 7.5 % (7.3).
The growth in operating income is attributable to the sales growth and to the
results of the efficiency improvement program. The cost reductions due to the
program were sufficient to compensate for the negative impact of the weaker
dollar. The purchase price increases on certain raw materials and components have
been managed by binding fixed price supply agreements or by passing on cost
increases to sales prices. The acquisition of SMV contributed also positively to
the operating income.
As the year progressed both sales and operating income improved.
Orders received were EUR 243.7 million (184.9). The year on year growth was 31.8
% or at constant currencies 34.0 %. The primary factors behind this growth are
the strong demand in Asia and in the global primary metals industry. These
developments also fuelled the activity in the mining sector, transportation and
power generation. Also SMV Konecranes AB contributed to the growth.
The order backlog developed very positively. The growth from the end of previous
year was 41.0 %.
The total number of employees at year end was 675 (614). Excluding the
acquisition of SMV Konecranes AB and a headcount increase in our China operations
the number of employees decreased.
Group costs and consolidation items
Group level fixed costs, which are not charged directly to the Business Areas,
consist mainly of costs relating to R&D, personnel development, development of
sourcing activities, treasury and legal functions, development of the Group's
structure (M&A) and management. In total these costs were EUR 20.5 million
(29.5). The corresponding figure in 2003 included a EUR 12.6 million one-off cost
relating to Group's restructuring program. Therefore the comparable underlying
costs grew by approx. EUR 3.6 million.
The Group has intensified its sales and marketing activities, development of
production and sourcing activities in addition to product development. Also more
resources were used for planning and preparing activities related to mergers and
acquisitions.
Consolidation items (=amortisation of group goodwill, share of associated
companies' result and the elimination of internal profit) were EUR -2.4 million (-
2.0). The growth is largely due to increasing eliminations of internal profits.
Risk management and insurances
Risk management is part of the control system of the company. The purpose of risk
management is to ensure that the risks related to the business operations of the
company are identified and controlled. Risk management is a continuous and
systematic activity, which aims to protect from personal injury, safeguard the
assets of all Group Companies and the whole Group and to ensure stable and
profitable financial performance. For a more detailed description of the Group's
risk management policies and principles see Corporate Governance information on
the Group's website or annual report.
The Group continuously reviews its insurance policies as part of its overall risk
management. Insurances are used to provide sufficient cover to all risks that are
economically or otherwise reasonably insurable. With increasing insurance
premiums the Group has intensified the use of other risk management methods
within its units without lowering its level of protection.
Litigations
In 2004 the co-operation between the Italian associated company Prim S.p.A. and
KCI Konecranes Plc and its subsidiaries was terminated. The termination of this
co-operation led to several lawsuits between the Group and Prim S.p.A. and its
shareholders. Several proceedings are continuing, but the Group does not believe
that these legal processes will have a material effect on the financial position
of the Group.
The Group has earlier announced that Morris Materials Handling, Inc., one of KCI
Konecranes' competitors in North America, filed a lawsuit against KCI Konecranes
Plc and Konecranes Inc. (KCI Konecranes' US subsidiary) in the United States
District Court, Eastern District of Wisconsin, alleging violation of Morris's
intellectual property rights and acts of unfair competition under several causes
of action. The process continues and is now in the discovery phase. The Group has
issued counterclaims against Morris Material Handling, Inc. The Group does not at
the moment have reason to expect the case to have a material effect but decided
to include it in the report since Morris Materials Handling, Inc. has
communicated in public about the process. For the sake of clarity this litigation
concerns the Morris Material Handling, Inc., which is registered in the USA, not
the UK based company Morris Material Handling Limited that the Group acquired at
the end of 2004.
At the end of year 2004 there were no pending legal processes or business claims
that the Group evaluates to have a material effect.
Group structure and important events
The Group made two acquisitions during the fourth quarter. The acquisition of SMV
Lifttrucks AB, Swedish reach stacker and heavy lift trucks maker, was closed on
29 October 2004. SMV Lifttrucks AB is complementing the Group's product offering
especially for harbours, terminals and warehouses. The name of the company was
changed to SMV Konecranes AB and it has been consolidated into the Group figures
as of 29 October 2004. The Group closed the acquisition of Morris Material
Handling Ltd and its affiliated companies on December 31, 2004. Morris Material
Handling Ltd is a leading UK cranes and hoist manufacturer with a strong focus on
after market services. Morris Material Handling Ltd financials will be
consolidated from January 1, 2005 on. The value of the acquired shares is
included in the Group's yearend balance sheet. They are reported under "other
shares".
On April 29, 2004 the Group purchased the assets of Dwight Foote, Inc. This
Hartford, Connecticut based operation will strengthen the Group's position as
crane and service provider in the northeastern U.S. market.
Three subsidiaries in the Special Cranes Business Area were merged to one legal
entity in order to simplify the Group's legal structure and save administrational
costs. The merged companies were Konecranes Components Corporation, KCI
Erikoisnosturit Oy and Konecranes VLC Corporation. The merge was effected on
December 31, 2004 and the surviving entity has changed its name to KCI Special
Cranes Corporation. Operationally Konecranes VLC (harbour and shipyard cranes)
and Process Crane companies were merged to form a unified Special Cranes Business
Area under one management. This change was effected as of January 1, 2005.
Suomen Nosturitarkastus Oy and Pirkanmaan Tehdaspalvelu Oy were merged into
Konecranes Service Corporation as of December 31, 2004. The merger of Gruaz
Mexico S.A. de C.V. into Konecranes Mexico S.A. de C.V. was effected January 1,
2005.
In May 2004 the Group established a wholly-owned subsidiary Konecranes S.r.l. in
Italy in order to provide the Italian market with a whole range of Group products
and to lay ground for a maintenance services network. In the beginning of June
KCI Konecranes and the Kanoo Group established a joint venture company, Crane
Industrial Services LLC, in the UAE. The joint venture will offer customers in
the Gulf region an easy access to a complete range of overhead lifting solutions
including crane maintenance services for all industries and harbours.
The Group continued its efficiency improvement program. In March, 2004 KCI Motors
Oy completed labour negotiations on motor production outsourcing. At yearend
materially all motors were subcontracted. In May the Group made a decision to
double its manufacturing capacity in China. The new production site will be
located next to the existing factory in Shanghai. The production range will cover
lifting equipment with higher capacities. The site expansion is estimated to be
completed in mid 2005 and it will initially create approx. 100 new jobs. The
Special Crane manufacturing site in Orleans, France was closed and the operation
now concentrates on marketing, sales and procurement of cranes.
In April 15, 2004 KCI Konecranes celebrated its 10th anniversary with a jubilee
seminar in Hyvinkää, Finland. The event was attended by some 180 persons from 20
countries including customers, suppliers, press, investors and analysts, board
members and present and former Konecranes and KONE top managers.
Important appointments
The Board of Directors appointed Mr. Pekka Lundmark, M.Sc. (Eng.), 41, to the
position of Group Executive Vice President as of August 10, 2004. The Board
further declared its intention to appoint Mr. Lundmark to the position of Group
President and CEO, as the successor of Mr. Stig Gustavson in due time.
Mr. Mikko Uhari was appointed President, Special Cranes Business Area, following
the operational merger between Harbour and Shipyard cranes (VLC) and Process
Cranes. The appointment was effective as of January 1, 2004.
New Country Executive positions were created, effective as of January 1, 2004.
The Country Executives' role involves co-ordination of marketing, sales, service
and administration in the respective country or market area. Altogether six
Country Executives were appointed to cover the Group's existing main markets.
Share capital, share price performance and trading volume
Pursuant to KCI Konecranes Plc's 1997 bonds with warrants, 1 400 new shares were
subscribed for with the warrants and registered in the Finnish Trade Register on
December 28, 2004. As a result of the subscriptions, the company's registered
share capital increased by EUR 2 800 to EUR 28 620 060 and the total amount of
shares increased to 14,310,030.
KCI Konecranes Plc's share price increased by 17.79 % during 2004 and closed at
EUR 32.51(27.60). The year high was EUR 35.50 (29.39) and the year low EUR 27.20
(17.20). During the same period the HEX All-Share Index increased by 3.25%, the
HEX Portfolio Index by 14.64 % and the HEX Metal & Engineering index by 28.86 %.
The total market capitalisation was at year-end EUR 465.2 (394.9) million,
including 210, 650 own shares held by the company, the 39th largest market value
of companies listed on Helsinki Exchanges.
The trading volume totalled 15,924,725 shares of KCI Konecranes Plc, which
represents 111.3 % of the total amount of outstanding shares. In monetary terms
the trading was EUR 490.4 million, which was the 26th largest trading volume of
all companies listed on Helsinki Stock Exchange.
The company's own shares
On 29 October 2004, KCI Konecranes transferred 53,450 of the company's own shares
as partial consideration in the acquisition of SMV Lifttrucks AB. At the end of
2004, KCI Konecranes Plc held 210,650 of the company's own shares with a
nominal value of 421,300 euros. The shares were bought back between February 20
and March 5, 2003 at an average price of EUR 20.75 per share.
Extraordinary shareholders' meeting
An extraordinary general meeting of KCI Konecranes Plc held on 10 December 2004
decided to pay an extraordinary dividend of one euro per share, based on the
approved balance sheet for the fiscal year 2003, as proposed by the company's
Board of Directors. The Board emphasised the extraordinary nature of the proposed
additional dividend.
Dividend proposal
The Board of Directors proposes to the AGM that a dividend of EUR 1.05 per share
will be paid for the fiscal year 2004. The dividend will be paid to shareholders,
who are entered in the share register on the record date March 15, 2005. Dividend
payment date is March 22, 2005.
Helsinki, 11 February, 2005
Board of Directors
Formal statement
Certain statements in this report are forward looking and are based on
management's expectation at the time they are made. Therefore they involve risks
and uncertainties and are subject to change due to changes in general economic or
industry conditions.
Adoption of IFRS Accounting principles
The first published IFRS-closing of accounts of the Group will be prepared from
financial year 2005.
The main changes to the Group's accounting principals as a result of the
implementation of IFRS standards are:
Replacement of Goodwill amortization by goodwill impairment testing.
Valuation and periodizing of defined benefit pension plans.
Application of fair values in derivative financial instruments.
Treatment of own shares.
Recognition of deferred taxes of all IFRS-adjustments.
Valuation and measurement of equity-settled, share-based payments.
The Group has applied already during previous years the percentage of completion
(POC) -method in revenue recognition and accounting for leases according to IFRS.
The 2004 opening balance with a reconciliation between Finnish GAAP and IFRS and
the comparative statement of income and balance sheet will be published on 19
April 2005, before the publication of Q1/ 2005 interim report.
Important orders
Here are some examples on orders received during October-December 2004. The list
illustrates our reach, both in terms of customer base and geographical coverage.
KCI Konecranes won a prestigious contract for a comprehensive refurbishment of
five cranes within the BAE Systems Submarine build facility at Barrow-in-Furness,
England. These cranes were originally supplied by Konecranes (UK) Ltd in the
1980s.
KCI Konecranes finalised the agreement with Russian steelmaker OAO Magnitogorsk
Metallurgicheski Kombinat (MMK) regarding the supply of 26 cranes to its plant in
Magnitogorsk, Southern Ural, Russia.
Al Rajhi Steel Industries ordered, through Konecranes local partner, seven steel
mill cranes for an expansion project in Saudia Arabia.
Maschinenfabrik Herkules GmbH (Germany) ordered two steel mill cranes with full
automation for their mill in Angan, China.
Codelco Norte of Chile ordered, through Konecranes' local partner, three process
cranes to be used in copper production at their plant in Chuquicamata, Chile. The
cranes feature a very high degree of automation and will serve as a valuable
reference for other similar projects in South America.
Toyota ordered a heavy-duty process crane for its new stamping plant in
Velenciennes, France.
Norwegian paper giant Norske Skog's mill in Albury, New South Wales, Australia
ordered a heavy-duty paper mill crane part of the mill's expansion. The business
environment in Australia is booming with activities especially in the paper and
steel sectors.
Chelan County Public Utility District No 1, in Wenatchee, Washington, USA ordered
several power station cranes for its Rock Island Powerhouse Upgrade Project.
Austrian Energy & Environment AG bought a fully automated crane for handling
wooden shreds at the BMKW Bischofferode project (end customer Stadtwerke Leipzig)
in Germany. For the same project Metz Anlagentechnik GmbH of Germany ordered a
gantry crane with grab for wood handling.
Beijing Heavy Motors ordered the winches and key components for several new
cranes to be used for manufacturing and sampling of heavy diesel engines in
shipyards, through its local partner.
DEVELOPMENT BY BUSINESS AND MARKET AREAS
Order Intake by Business Area
2004 % of 2004 2003 % of 2003
MEUR total MEUR total
Maintenance Services 308.4(1 39 269.01) 40
Standard Lifting
Equipment 246.6 31 220.3 33
Special Cranes 243.7 30 184.9 27
./. Internal -61.9 -62.4
Total 736.9(1 100 611.9(1 100
1) Excl. Service Contract Base
Order Book (2
2004 2003
MEUR MEUR
Total 298.8 211.2
2) Percentage of completion deducted
Sales by Business Area
2004 % of 2004 2003 % of 2003
MEUR total MEUR total
Maintenance Services 344.6 44 338.8 46
Standard Lifting
Equipment 231.2 29 212.3 29
Special Cranes 214.1 27 178.6 25
./. Internal -62.0 -65.2
Total 728.0 100 664.5 100
Operating Income by Business Area (MEUR)
2004 2003
Operating % of 2004 Operating % of 2003
Income total Income total
sales sales
Maintenance Services 23.3 6.8 22.4 6.6
Standard Lifting
Equipment 21.0 9.1 17.6 8.3
Special Cranes 16.0 7.5 13.1 7.3
Group costs -20.5 -29.5
Consolidation items -2.4 -2.0
Total 37.4 21.5
Sales by Market
2004 % of 2003 % of
MEUR 2004 MEUR 2003 total
total
Nordic and Eastern
Europe 140.9 19 165.1 25
EU (excl. Nordic) 222.5 31 178.6 27
Americas 215.1 30 221.3 33
Asia-Pacific 149.4 20 99.6 15
Total 728.0 100 664.5 100
Personnel by Business Area (at the End of the Period)
2004 % of 2003 % of 2003
2004 total
total
Maintenance Services 2,685 59 2,622 60
Standard Lifting
Equipment 1,028 23 1,000 23
Special Cranes 675 15 614 14
Group Staff 123 3 114 3
Total Company 4,511 100 4,350 100
FINANCIAL PERFORMANCE
Statement of Income 2004 2003
MEUR MEUR
Sales 728.0 664.5
Other operating income 2.3 2.1
Share of result of participating interest
undertakings -0.5 -0.3
Depreciation and reduction in value -14.6 -16.5
Other operating expenses -677.9 -628.4
Operating profit 37.4 21.5
Financial income and expenses1) -3.6 -2.6
Income after financing items 33.7 18.9
Extraordinary items 0.0 -8.1
Taxes -10.7 -4.0
Net income 23.0 6.7
1)Financial income and expenses 2004 2003
MEUR MEUR
Dividend income 0.2 0.0
Interest income from current assets 1.3 1.1
Other financial income 0.4 1.0
Interest expenses -4.8 -4.2
Other financial expenses -0.7 -0.6
Total -3.6 -2.6
Investments
2004 2003
MEUR MEUR
Total (excl. Acquisitions) 11.8 12.4
CONSOLIDATED BALANCE SHEET
ASSETS 31.12.2004 31.12.2003
Non-current assets MEUR MEUR
INTANGIBLE ASSETS
Intangible rights 6.6 5.4
Goodwill 12.2 13.9
Group goodwill 23.5 5.4
Advance payments 3.7 7.9
46.1 32.6
TANGIBLE ASSETS
Land 3.8 3.9
Buildings 18.1 18.9
Machinery and equipment 31.1 31.3
Advance payments and construction in progress 1.8 1.0
54.9 55.0
INVESTMENTS
Participating interests 3.1 3.5
Other shares and similar rights of ownership 8.6 1.5
Own shares 4.4 5.5
16.0 10.4
Current assets
INVENTORIES
Raw materials and semi-manufactured goods 50.2 36.6
Work in progress 55.4 33.0
Advance payments 3.2 2.9
108.8 72.4
LONG-TERM RECEIVABLES
Loans receivable 0.2 0.1
Other receivables 0.0 0.3
0.2 0.4
SHORT-TERM RECEIVABLES
Accounts receivable 146.6 126.4
Amounts owed by participating interest
undertakings 1.3 2.0
Other receivables 14.1 11.3
Deferred tax assets 5.6 6.0
Deferred assets 79.5 72.4
247.1 218.3
CASH IN HAND AND AT BANKS 20.4 13.2
Total current assets 376.5 304.2
TOTAL ASSETS 493.4 402.2
SHAREHOLDERS' EQUITY AND LIABILITIES 31.12.2004 31.12.2003
MEUR MEUR
Equity
Share capital 28.6 28.6
Share premium account 22.3 21.8
Reserve for own shares 4.4 5.5
Equity share of untaxed reserves 2.8 3.4
Translation difference -6.4 -5.9
Retained earnings 83.3 103.2
Net income for the period 23.0 6.7
157.9 163.4
Minority share 0.1 0.1
Provisions 15.4 20.3
Liabilities
LONG-TERM DEBT
Bonds 0.0 25.0
Pension loans 1.0 1.5
Other loans 3.8 4.0
Deferred tax liability 2.5 2.0
7.3 32.5
CURRENT LIABILITIES
Loans from credit institutions 2.8 1.3
Bonds 25.0 0.0
Pension loans 0.5 0.5
Advance payments received 41.1 26.2
Accounts payable 64.1 49.6
Amounts owed to participating interest 0.0 0.1
undertakings
Other short-term liabilities 105.3 37.3
Accruals 73.9 70.9
312.7 185.9
Total liabilities 320.0 218.4
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 493.4 402.2
31.12.2004 31.12.2003
Net Interest bearing liabilities MEUR MEUR
Long- and short-term interest bearing
liabilities -123.9 -57.1
Cash and cash equivalents and other interest
bearing assets 20.6 13.3
Total -103.3 -43.8
Contingent Liabilities and Pledged Assets (MEUR)
CONTINGENT LIABILITIES 2004 2003
For own debts
Mortgages on land and buildings 5.9 5.9
For own commercial obligations
Pledged assets 0.3 0.8
Guarantees 101.5 159.5
For associated company's debt
Guarantees 0.8 0.8
For others
Guarantees 0.1 0.1
OTHER CONTINGENT AND FINANCIAL LIABILITIES
Leasing liabilities
Next year 6.8 6.7
Later on 15.7 11.6
Other liabilities 1.2 1.3
Total 132.3 186.7
Leasing contracts follow the normal practices
in corresponding countries.
Total by Category
Mortgages on land and buildings 5.9 5.9
Pledged assets 0.3 0.8
Guarantees 102.4 160.4
Other liabilities 23.7 19.6
Total 132.3 186.7
Notional Amounts of Derivative Financial Instruments (MEUR)
2004 2003
Foreign exchange forward contracts 538.5 441.7
Interest rate swap 25.0 25.0
Total 563.5 466.7
Derivatives are used for currency and interest rate hedging only. The notional
amounts do not represent amounts exchanged by the parties and are thus not a
measure of the exposure. A clear majority of the transactions relate to closed
positions, and these contracts set off each other. The hedged order book
represents approximately one third of the total notional amounts.
CONSOLIDATED CASH FLOW 2004 2003
MEUR MEUR
Operating income 37.4 21.5
Depreciation 14.6 16.5
Financing income and expenses -1.7 2.6
Taxes -11.1 -8.6
Other adjustments (1 -0.2 0.7
Free Cash flow 39.1 32.7
Increase (-), decrease (+) in current assets -32.6 -26.3
Increase (-), decrease (+) in inventories -38.1 -2.7
Increase (+), decrease (-) in current
liabilities 35.8 20.6
Cash flow from operations 4.2 24.2
Capital expenditure and advance payments to
machines -9.1 -9.1
Capital expenditure and advance payments to
intangible and financial assets -0.3 -1.3
Fixed assets of acquired companies -25.9 -2.1
Purchase of own shares 0.0 -5.5
Disposals of fixed assets 1.6 0.7
Investments total -33.8 -17.3
Cash flow before financing -29.6 6.9
Change of long-term debt, increase (+),
decrease (-) -25.5 -0.6
Change of short-term interest-bearing debt,
increase (+), decrease (-) 90.9 6.0
Dividend paid -28.1 -13.3
External financing 37.2 -7.9
Correction items (2 -0.4 -1.1
Net financing 7.2 -2.0
Cash and bank deposit at beginning of period 13.2 15.2
Cash and bank deposit at end of period 20.4 13.2
Change of cash 7.2 -2.0
1) Other adjustments includes items such as the effect of the result of
participating
interest undertakings, the profit / loss from disposal of assets and the finance
lease installments.
2) Translation difference in cash in hand and at banks.
KCI KONECRANES GROUP 2000-2004
Business development 2004 2003 2002 2001 2000
Order intake MEUR 736.9 611.9 598.9 679.1 764.4
Order book MEUR 298.8 211.2 206.0 279.7 308.8
Net sales MEUR 728.0 664.5 713.6 756.3 703.0
of which outside MEUR 653.5 599.4 634.2 679.2 644.2
Finland
Export from Finland MEUR 273.4 258.9 256.9 263.5 217.8
Personnel on average 4,369 4,423 4,396 4,434 4,244
Capital expenditure MEUR 11.8 12.4 13.9 11.3 14.7
as a percentage of net
sales % 1.6 1.9 1.9 1.5 2.1
Research and
development costs MEUR 8.5 7.9 8.2 7.7 6.9
as % of Standard
Lifting Equipment 1) % 3.7 3.7 4.0 3.1 2.7
as % of Group net sales % 1.2 1.2 1.1 1.0 1.0
Profitability
Net sales MEUR 728.0 664.5 713.6 756.3 703.0
Income from operations
(before goodwill MEUR 39.4 24.8 40.9 59.4 43.7
amortization)
as percentage of net % 5.4 3.7 5.7 7.9 6.2
sales
Operating income MEUR 37.4 21.5 37.6 55.3 39.6
as percentage of net % 5.1 3.2 5.3 7.3 5.6
sales
Income before
extraordinary items MEUR 33.7 18.9 36.5 52.4 34.0
as percentage of net % 4.6 2.8 5.1 6.9 4.8
sales
Income before taxes MEUR 33.7 10.7 36.5 52.4 34.0
as percentage of net % 4.6 1.6 5.1 6.9 4.8
sales
Net income MEUR 23.0 6.7 24.6 35.3 23.4
as percentage of net % 3.2 1.0 3.4 4.7 3.3
sales
Key figures and balance
sheet
Shareholders' equity MEUR 157.9 163.4 173.2 180.2 155.3
Balance Sheet MEUR 493.4 402.2 397.1 455.9 450.0
Return on equity % 14.8 7.5 14.2 22.0 16.4
Return on capital % 15.9 10.8 17.8 24.3 19.4
employed
Current ratio 1.2 1.5 1.6 1.6 1.4
Solidity % 34.3 42.6 45.5 41.4 35.8
Gearing % 67.2 27.8 19.1 28.9 57.7
Shares in figures
Earnings per share EUR 1.64 0.88 1.69 2.40 1.59
Equity per share EUR 10.89 11.24 12.11 11.75 10.06
Cash flow per share EUR 0.30 1.72 4.54 2.93 - 0.29
Dividend per share EUR 1.05* 2.00** 0.95 0.90 0.71
Dividend/earnings % 64.0 227.3 56.2 37.5 44.7
Effective dividend
yield % 3.2 7.2 4.1 3.2 2.6
Price/earnings 19.8 31.4 13.8 11.9 17.0
Trading low / EUR 27.20/ 17.20/ 19.80/ 25.00/ 25.10/
high 29.39 36.83 38.46 39.90
35.50
Average share price EUR 30.79 22.49 28.74 31.72 32.67
Year-end market
capitalization MEUR 458.4 387.6 333.2 427.5 405.0
Number traded (1000) 15,925 12,662 11,939 8,581 7,379
Stock turnover % 112.9 90.2 83.4 57.2 49.2
* The Board's proposal to the AGM
**1 EUR by decision of ordinary and 1 EUR of extraordinary general meeting
1) R&D serves mainly Standard Lifting Equipment
CALCULATION OF KEY FIGURES
Return on equity = ((Income before extraordinary items - taxes) : (Equity - own
shares (average during the period)) x 100
Return on capital employed = ((Income before taxes + interest paid + other
financing cost) : (Total amount of equity and liabilities - non-interest bearing
debts - own shares (average during the period)) x 100
Current ratio = Current assets : Current liabilities
Solidity = ((Shareholders' equity - own shares) : (Total amount of equity and
liabilities - advance payment received - own shares)) x 100
Gearing = ((Interest-bearing liabilities - liquid assets - loans receivable) :
(Shareholders equity + minority share - own shares)) x 100
Earnings per share = (Net income +/- extraordinary items) : (Number of shares -
number of own shares)
Equity per share = (Shareholders' equity in balance sheet - own shares) : (Number
of shares - number of own shares)
Cash flow per share = Cash flow from operations : (Number of shares - number of
own shares)
Effective dividend yield = (Dividend per share : Share price at the end of
financial year) x 100
Price per earnings = Share price at the end of financial year : Earnings per
share
Year-end market capitalization = Number of shares (excluding own shares)
multiplied by the share price at the end of year
Average number of personnel = Calculated as average of number of personnel in
quarters
Note!
The numbers are rounded to nearest EUR 0,1 million. The key figures are
calculated from exact data.
Dividend proposal
The Board of Directors propose to the AGM that a dividend of EUR 1.05 per share
will be paid for the fiscal year 2004. The dividend will be paid to persons
shareholders, who are entered as shareholders in the share register on the record
date March 15, 2005. Dividend payment date is March 22, 2005.
Analyst and press briefing
An analyst briefing will be arranged today at 12.00 noon in Helsinki, Finland
(address: Helsinki World Trade Center, Marski Hall, Aleksanterinkatu 17).
Teleconference
An international teleconference will be arranged today on 11 February, 2005 at
4.00 Finnish time (2.00 p.m. London time). The dial-in number is +44-(0)20 7162
0181 (Please call in at 3.50 p.m.). The graphics of the presentation are attached
to the report on the Internet. A replay of the teleconference will be available
for two working days at +44-(0)20 7031 4064, code 631239.
Internet
This report is also available on the Internet at www.kcigroup.com. An audio
recording of Mr Gustavson's presentation at the teleconference will be available
on the Internet later on February 11.
Annual General Meeting
The Annual General Meeting 2005 will be held on 10 March, 2005 at 11.00 a.m. at
Group headquarters (address: Koneenkatu 8, 05830 Hyvinkää, Finland). A press
release on the decisions made at the AGM will be published upon conclusion of the
meeting.
The proposals for the AGM 2005 will be published on 11 February, 2005.
Next report
Interim report, 1st quarter, will be published on 3 May, 2005 at 10.00 a.m.
Finnish time (8.00 a.m. London time).
Graphics
A graphical presentation of this report is available on the Internet at
www.kcigroup.com.
KCI KONECRANES PLC
Franciska Janzon
IR Manager
FURTHER INFORMATION
Mr Stig Gustavson, President & CEO, tel. +358-20 427 2000,
Mr. Pekka Lundmark, Group Executive Vice President, tel. +358-20 427 2005
Mr Teuvo Rintamäki, Chief Financial Officer, tel. +358-20 427 2040,
Ms Franciska Janzon, IR Manager, tel. +358-20 27 2043
DISTRIBUTION
Helsinki Stock Exchange
Media
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KCI KONECRANES PLC
