RAISIO GROUP INTERIM REPORT 1 January-30 September 2004
Raisio Group plc Stock Exchange Release 4 Nov 2004 at 11.00 Finnish time
RAISIO GROUP INTERIM REPORT 1 January30 September 2004
Continued Favourable Profit Development in Raisios Ongoing Business
Operations
-Raisio Groups turnover in the third quarter was EUR 113.0 million
(comparable turnover EUR 113.3 million in Q3/2003). Strong growth of
Raisio Life Sciences continued.
-Operating result for the third quarter amounted to EUR 3.0 million
(comparable operating result EUR 0.3 million).
-Raisio Chemicals was divested in June 2004. It is included in the
figures of the interim report for the January to May period in 2004
and for the entire year 2003.
-The Groups full-year operating result, excluding one-off items, is
expected to improve considerably from the previous year and to show a
profit. One-off items included, operating profit will total some EUR
200 million.
Key Figures
1-9/2004 1-9/2003 2003
Turnover, EUR million 514.8 644.4 860.5
Operating result, EUR million 199.1* -7.2 -14.3
Result before taxes, EUR million 193.4* -16.4 -27.2
Earnings per share, EUR 1.17* -0.11 -0.16
Gearing, % -48.1 132.5 127.9
Cash flow from business operations,
EUR million 38.7 35.5 77.0
*Excluding one-off items: operating result EUR 8.1 million, result
before taxes EUR 4.4 million and earnings per share EUR 0.04
CEO Rabbe Klemets:
Our performance in the third quarter showed that our business
operations are moving in the right direction. Ingredients and milling
in particular have clearly improved their performance. Vegetable oil
pressing margins are extremely low, which strains our otherwise
solidly performing feed business. The diagnostics business continues
to show a loss, but the effect of the corrective measures is expected
to be seen in the results towards the year-end.
Rationalisation measures continued in other operations, too. The
streamlining of Group Administration and Service Functions was
completed in October.
The implementation of our new strategy began with investments in
research and development. We will focus on developing nutrition
solutions that promote cardiovascular health and weight management,
prevent type 2 diabetes, and improve intestinal health. The new
research centres for food and diagnostics have started operations in
Turku Science Park and in Viikki campus in Helsinki. The introduction
of new types of products can be expected in the course of next year.
RESULTS AND FINANCING
Raisio Group recorded a turnover of EUR 113.0 million (EUR 218.7
million) in the third quarter. The comparison figure includes EUR
105.4 million worth of turnover from Raisio Chemicals, which was
divested in June 2004. Turnover from Raisio Life Sciences increased
by almost 40 per cent while Raisio Nutritions turnover saw a slight
decline. Turnover from outside Finland represented 35.2% in the third
quarter, or EUR 39.8 million.
The Groups operating result for the third quarter was EUR 3.0
million (EUR 3.2 million). The comparison figure includes EUR 2.9
million worth of Raisio Chemicals operating profit. Both Raisio
Nutrition and Raisio Life Sciences were able to improve their
results.
Turnover in the January to September period totalled EUR 514.8
million (EUR 644.4 million). Turnover for ongoing business
operations was EUR 331.1 million (EUR 326.4 million).
The January to September operating result was EUR 199.1 million (EUR
-7.2 million) while the result excluding one-off items amounted to
EUR 8.1 million (EUR -2.0 million). Operating result for ongoing
business operations excluding one-off items was EUR 4.5 million (EUR
-6.8 million).
One-off items 1-9/2004, EUR million
Raisio Raisio Items not Total
Nutrition Life allocated to
Sciences business operations
Impact on operating result -20.6 -8.6 +220.1 191.0
Financial expenses -2.0 -2.0
The third quarters result before taxes was EUR 3.4 million (EUR -1.0
million). The January to September result before taxes was EUR 193.4
million (EUR -16.4 million) and one-off items excluded EUR 4.4
million (EUR -11.2 million).
Research and development costs amounted to EUR 1.7 million (EUR 4.4
million, comparable costs EUR 1.6 million) in the third quarter and
to EUR 12.0 million in the January to September period (EUR 15.3
million). Research and development costs for the ongoing business
operations amounted to EUR 5.6 million (EUR 4.9 million) in the
January to September period.
Net financial items amounted to EUR 0.4 million (EUR -4.2 million) in
the third quarter. Net financial items in the January to September
period totalled EUR -5.6 million (EUR
-9,2 million). Part of the funds from the divestment of Raisio
Chemicals was used to repay loans, which diminished interest rate
expenses. Part of the funds was invested and thus generated interest
income. Exchange rate losses in the amount of EUR 0.9 million were
recorded in the January to September period compared with gains of
EUR 0.3 million in the comparison period.
A total of EUR 7.5 million of deferred tax claims not recorded
earlier were now entered under taxes, once the possibility to utilise
these funds was ensured.
In the third quarter, earnings per share were EUR 0.05 and EUR 0.04
in the January to September period.
The Groups interest-bearing debts decreased by EUR 239.9 million in
the January to September period as a result of loan instalments and
early repayments, and the debts transferred in connection with the
Chemicals divestment. At the end of September, interest-bearing debts
stood at EUR 72.5 million.
At the end of September, the gearing ratio was -48.1 per cent (127.9%
on 31 December 2003), and the equity ratio was 70.6 per cent (32.2%
on 31 December 2003). Extra dividends totalling EUR 19.8 million have
subsequently been paid, on 12 October 2004.
Working capital decreased to EUR 55.5 million from EUR 110.4 million
at the turn of the year as a result of capital employment and capital
management enhancement measures, and the divestment of Raisio
Chemicals. Working capital will increase some EUR 10 million towards
the year-end as the sale of receivables has been decided to cease.
Cash flow from business operations in the third quarter amounted to
EUR 23.0 million (EUR 37.6 million) and to EUR 38.7 million in the
January to September period (EUR 35.5 million). Gross investments
totalled EUR 4.3 million (EUR 14.7 million) in the third quarter and
EUR 24.3 million in the January to September period (EUR 47.6
million). The largest single investments in the continuing business
operations involved a new production line at the Vihanti food potato
factory in Finland and a margarine production plant in Russia.
Raisio Group considers the sales profit of EUR 223.1 million from the
divestment of Raisio Chemicals to be tax-free as concerns the shares
in accordance with the new corporate and capital tax legislation.
Consequently, no tax on the sales profit was recorded in the
financial statements. In accordance with the previous legislation,
the capital gains tax would have amounted to approximately EUR 70
million.
BUSINESS AREAS
Raisio Nutrition
Raisio Nutrition recorded a turnover of EUR 102.4 million (EUR 108.5
million) in the third quarter. The decrease in turnover could be
attributed to the declined sales volume in the margarine business in
the Swedish market, and to the fall in the world market price of
malt.
Turnover in the January to September period totalled EUR 302.0
million (EUR 313.5 million).
Raisio Nutrition Turnover, EUR million
1-9/2004 1-9/2003 2003
Food 162.4 173.6 232.2
Margarine 89.0 97.7 130.8
Milling 53.8 56.0 75.3
Food Potato 16.3 16.4 21.2
Others 10.3 10.1 14.4
Internal Sales in Food -7.0 -6.6 -9.5
Animal Feeds 122.9 121.2 163.8
Malt 20.8 21.8 26.4
Grain Starch 12.5 11.7 15.0
Internal Sales -16.6 -14.8 -19.5
Total 302.0 313.5 417.9
Raisio Nutrition booked an operating result of EUR 2.8 million (EUR
1.3 million) for the third quarter due to the favourable development
in food business operations. While the losses in the Swedish
margarine business shrank, the rundown of the factory and maintenance
costs continued to tax the results. Tough competition in the malt
markets and high raw material prices reflected on the financial
performance. An exceptionally high world market price for soy, low
soy oil export prices in the European markets and higher sea freight
charges hampered the performance of the oil milling business.
The January to September operating result was EUR -17.6 million (EUR
-2.5 million) and one-off items excluded, it was EUR 3.0 million (EUR
-2.5 million).
The loss-making grain starch business was discontinued at the end of
August.
At the Vihanti food potato factory, a production line utilising a new
production technology innovation was started in October, enabling the
industrial-scale aseptic production of mashed potatoes. This ready-to-
heat mashed potato product is designed for the catering business.
Similar technology has previously enabled the manufacture of mainly
liquid products.
Raisio Life Sciences
The turnover of Raisio Life Sciences grew by almost 40% and amounted
to EUR 11.7 million (EUR 8.5 million) in the third quarter. The
growth could be attributed to the favourable development in the sale
of ingredients, particularly in the international markets. Turnover
from the diagnostics business remained on a par with the comparison
period. During the period, yoghurt drinks with new flavours were
introduced to the Belgian, French and UK markets, and Benecol olive
spread and Benecol milk drink to the Finnish market. At the beginning
of October, Raisios business partners introduced the Benecol yoghurt
drink to the Italian and Icelandic markets, and Benecol soft chews to
the US market. The Benecol ingredient is currently sold in 19
countries in 11 different product applications.
Turnover in the January to September period totalled EUR 37.1 million
(EUR 23.0 million). The figures for the comparison period include the
food diagnostics company Diffchamb from the beginning of April.
Raisio Life Sciences Turnover, EUR million
1-9/2004 1-9/2003 2003
Ingredients 30.9 18.4 27.0
Diagnostics 6.2 4.6 7.0
Total 37.1 23.0 34.0
Raisio Life Sciences booked an operating result of EUR 0.7 million
(EUR -2.0 million) for the third quarter. Ingredient sales developed
favourably, but the losses from the diagnostics business and the
investments in product development taxed the results. Measures
designed to improve the operative profitability of the diagnostics
business include cost cuts, which will begin to show results in the
last quarter.
The January to September operating result was EUR -6.5 million (EUR -
5.2 million), and with one-off items excluded EUR 2.1 million (EUR -
5.2 million).
Owing to larger ingredient deliveries, the stanol ester plant
capacity extension in Raisio will begin in November.
At a competitors initiative, the European Patent Office questioned
Benecols stanol ester patent in oral opposition proceedings held in
2001. Raisio appealed this position and the proceedings resumed in
Munich at the end of September. The Patent Offices Board of Appeal
set the dispute aside and transferred the proceedings to the first
Instance. Raisio believes that a final decision regarding the patent
coverage will be made in 3 to 5 years.
A scientific study conducted for a doctoral thesis at the Helsinki
University in October confirms the safety and effectiveness of the
Benecol ingredient in lowering cholesterol and sterol levels.
PERSONNEL AND GOVERNANCE
Raisio Group employed 1,452 people at the end of September (2,735 on
31 December 2003), 32% of whom worked outside Finland (45% on 31
December 2003). The divestment of Raisio Chemicals was the principal
reason for the decrease in the number of personnel.
Raisio Nutrition employed 1,217 and Raisio Life Sciences 182 people
at the end of September.
Mr Jyrki Paappa was appointed Group Chief Financial Officer and a
member of the Executive Committee effective 1 September 2004.
DECISIONS MADE AT THE EXTRAORDINARY GENERAL MEETING
At Raisio Group plcs extraordinary general meeting held on 30
September 2004, a decision was made to approve the Boards proposal
and pay an extra dividend of EUR 0.12 for each restricted and free
share for the financial year ended on 31 December 2003. The dividend
was paid on 12 October 2004 to all shareholders included in the
shareholders register on the dividend matching date 5 October 2004.
The Board of Directors proposed amendments to sections 1, 3, 6, 7,
8, 10, 14, 15 and 19 of the Articles of Association were approved.
The proposed amendments have been disclosed in their entirety in a
stock exchange release issued on 20 August 2004, which is available
at www.raisiogroup.com.
This was the first proceeding in accordance with 19§ of the Articles
of Association. If the proposal is approved at the Annual General
Meeting in 2005 without changes to its contents, the new Articles of
Association should be entered into the Trade Register and thereby be
effective in April 2005.
SHARES AND SHAREHOLDERS
The number of Raisio Group plc free shares traded on the Helsinki
Exchanges between January and September totalled 91.5 million (28
million in Jan-Sep/2003). The value of share trading was EUR 145.9
million and the average share price was EUR 1.59. The closing price
on 30 September 2004 was EUR 1.98. The price of series V shares rose
by 59.7% from the beginning of the year.
A total of 1,086,363 restricted shares were traded in the January to
September period (405,470 in Jan-Sep 2003). The value of share
trading was EUR 1.8 million and the average share price was EUR 1.64.
The closing price on 30 September 2004 was EUR 1.95. The price of the
Series K share rose by 54.8% from the beginning of the year.
On 30 September 2004, Raisio Group had 44,741 registered
shareholders. Of all shares, 10.2% were in foreign ownership (5.8% on
31 December 2003) with the corresponding value for free shares being
12.9% (7.4% on 31 December 2003).
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
Preparation for the adoption of the IFRS standard compliant
accounting system has progressed as planned. Raisio Group will adopt
IFRS compliant accounting methods in 2005. IFRS compliant figures for
2004 will be disclosed in the spring of 2005.
EVENTS AFTER THE PERIOD UNDER REVIEW
The mandatory codetermination talks started in September to
streamline the Groups administration and service functions were
completed on 18 October 2004. In Finland, 23 jobs in Group
Administration and subsidiary service functions will be cut and 16
jobs abroad. A three million euro rationalisation provision was made
in the January to June interim report to cover the one-off expenses
associated with the rationalisation. The streamlining is expected to
generate annual savings of some EUR 2 million.
Raisio Group, which previously had a 20% interest in Camelina Ltd.,
acquired the companys remaining share capital at a purchase price of
EUR 1.2 million on 22 October 2004. Camelina Ltd. has been engaged in
the contract farming of the Camelina sativa oil plant in Finland
since 1999. The plant-based Omega 3 extracted from Camelina offers
new opportunities for a number of product applications.
OUTLOOK
Owing to the restructuring process, Raisio Groups turnover will be
significantly smaller than a year earlier. The full years turnover
is expected to amount to approximately EUR 620 million.
Full year operating result, excluding one-off items, is expected to
improve considerably from the previous year and to show a profit. One-
off items included, operating profit will total some EUR 200 million.
Raisio, 4 November 2004
Raisio Group plc
Board of Directors
Further information:
Taru Narvanmaa, Executive Vice President, Communications and Investor
Relations, tel. +358 50 590 9398
Jyrki Paappa, Chief Financial Officer, tel. +358 50 5566 512
Raisio Group plc, P.O.Box 101, FI-21201 Raisio, Finland
tel. +358 2 443 2111, www.raisiogroup.com
Press- and analyst meeting will be held on 4 November 2004 at 15.00
in Helsinki. English conference call will be held at 16.30 Finnish
time.
The figures in this interim report are not audited.
CONSOLIDATED INCOME STATEMENT
(EURm) 1-9/2004 1-9/2003 2003
Turnover 514.8 644.4 860.5
Other income from business operations 229.1 2.9 8.0
Expenses from business operations -485.0 -614.4 -822.6
Depreciation of goodwill and
write-downs -28.9 -3.8 -5.1
Other depreciation and write-downs -30.4 -36.2 -54.8
Share of associated companies
results -0.5 -0.1 -0.3
Operating result 199.1 -7.2 -14.3
% of turnover 38.7 -1.1 -1.7
Financial income 5.0 3.5 4.1
Financial expenses -10.6 -12.7 -17.0
Result before extraordinary items
and taxes 193.4 -16.4 -27.2
% of turnover 37.6 -2.5 -3.2
Extraordinary items 0.0 0.0 0.0
Result before taxes 193.4 -16.4 -27.2
% of turnover 37.6 -2.5 -3.2
Income taxes 1.5 -0.7 1.4
Minority interest -1.3 -0.7 -0.9
Consolidated result for the period 193.6 -17.8 -26.7
% of turnover 37.6 -2.8 -3.1
CONSOLIDATED BALANCE SHEET
(EURm) 30.9.2004 30.9.2003 31.12.2003
Non-current assets
Intangible assets 9.3 24.7 23.4
Goodwill 15.0 66.7 65.3
Tangible assets 126.5 284.9 277.2
Investments 9.1 13.0 12.6
Current assets
Inventories 57.6 118.2 117.7
Deferred tax assets 12.9 14.5 20.3
Accounts receivable 34.6 118.3 86.8
Other receivables 29.9 40.5 37.1
Securities under financial assets 253.9 17.7 14.1
Cash in hand and at banks 6.4 9.5 20.5
Assets 555.2 708.1 675.0
Share capital 27.8 27.8 27.8
Other shareholders equity 348.4 179.3 166.2
Minority interest 14.7 23.6 23.2
Deferred tax liability 12.7 20.5 22.0
Non-current liabilities 27.1 252.7 235.0
Accounts payable 21.2 59.7 75.2
Other current liabilities 103.3 144.4 125.5
Liabilities 555.2 708.1 675.0
CONSOLIDATED SOURCE AND APPLICATION OF FUNDS
(EURm)
1-9/2004 1-9/2003 1-12/2003
Cash flow before change in
working capital 33.7 32.4 44.4
Change in working capital 16.2 14.3 50.7
Financial items and taxes -11.2 -11.2 -18.2
Cash flow from business operations 38.7 35.5 77.0
Investments -24.4 -48.4 -65.8
Proceeds from sales of fixed assets 403.2* 2.7 3.6
Cash flow from investments 378.8 -45.7 -62.2
Change in non-current loans 193.7 -4.0 -18.1
Change in current liabilities 3.9 1.5 -1.0
Change in loan receivables -1.1 0.0 0.1
Dividend paid -1.9 -3.6 -3.5
Cash flow from financial operations -192.7 -6.0 -22.6
Unallocated items 1.0 1.2 0.3
Change in liquid funds 225.7 -15.0 -7.5
Liquid funds at beginning of period 34.6 42.2 42.2
Liquid funds at end of period 260.3 27.2 34.6
* Includes a payment of intra-Group interest-bearing net liabilities
received in connection with the divestment of Raisio Chemicals.
FINANCIAL INDICATORS
30.9.2004 30.9.2003 31.12.2003
Return on equity, ROE, % 85.5 -9.4 -10.9
Return on investment, ROI, % 54.8 -0.8 -1.8
Interest-bearing liabilities
at end of period, EURm 72.5 333.1 312.5
Gross investments, EURm 24.3 47.6 63.7
% of turnover 4.7 7.4 7.4
R & D expenditure, EURm 12.0 15.3 21.1
% of turnover 2.3 2.4 2.5
Personnel average 2,198 2,834 2,822
Equity ratio, % 70.6 32.7 32.2
Gearing, % -48.1 132.5 127.9
Earnings/share, EUR 1.17 -0.11 -0.16
Earnings/share excl. one-off items,EUR 0.04
Cash flow from operations/share, EUR 0.23 0.22 0.47
Equity/share, EUR 2.28 1.25 1.17
Average number of shares during
the period, in 1000s
Free shares 130,414 129,767 129,768
Restricted shares 34,735 35,382 35,381
Total 165,149 165,149 165,149
Market capitalization of shares at
end of period, EURm
Free shares 258.5 136.3 160.9
Restricted shares 67.4 38.9 44.6
Total 325.9 175.2 205.5
CONTINGENT LIABILITIES
(EURm) 30.9.2004 30.9.2003 31.12.2003
Assets given as security
For the company
Mortgages on real estate 56.6 72.7 72.4
Securities pledged 0.0 4.3 4.0
Corporate mortgages 34.4 52.9 53.1
Contingent off-balance-sheet liabilities
Leasing liabilities
Amounts outstanding on leasing contracts
Falling due during 2004 1.5 2.1 4.7
Falling due later 4.5 8.6 4.9
Contingent liabilities for the
Group companies
Guarantees 1.0 1.0 1.0
Contingent liabilities for the Company 1.5 13.9 7.0
Contingent liabilities for others
Guarantees 32.5* 0.4 0.4
Other liabilities 0.0 0.0 5.0
Liabilities arising from
derivative contracts
Raw material futures: market value -0.1 -0.9 -0.5
Raw material futures:
value of underlying instruments 3.3 8.1 11.3
Forward electricity contracts:
market value 0.2 0.1 0.0
Forward electricity contracts:
value of underlying instruments 8.1 2.6 2.6
Currency forward contracts:
market value 0.0 -0.7 2.1
Currency forward contracts:
value of underlying instruments 33.0 56.6 53.0
Interest-rate swaps: market value 0.0 -2.0 -1.5
Interest-rate swaps:
value of underlying instruments 0.0 80.0 80.0
*Includes guarantees that have not been released yet given to
financiers on behalf of companies belonging to Raisio Chemicals. The
guarantees have valid counter-guarantees.
CONSOLIDATED TURNOVER BY BUSINESS AREA
(EURm) 1-9/2004 1-9/2003 2003
Raisio Nutrition 302.0 313.5 417.9
Raisio Life Sciences 37.1 23.0 34.0
Raisio Chemicals 183.7 318.0 422.3
Interdivisional -8.1 -10.1 -13.8
Turnover, total 514.8 644.4 860.5
CONSOLIDATED TURNOVER BY MARKET AREA
(EURm) % of % of % of
1-9/ turn- 1-9/ turn- turn-
2004 over 2003 over 2003 over
Finland 272.7 53.0 304.9 47.3 412.0 47.9
Scandinavia 28.4 5.5 52.2 8.1 66.5 7.7
Europe (excl. Finland
and Scandinavia) 167.6 32.6 210.0 32.6 278.2 32.3
The Americas 20.9 4.1 35.2 5.5 47.4 5.5
Asia 24.0 4.7 40.8 6.3 54.6 6.3
Other 1.1 0.2 1.5 0.2 1.9 0.2
Total 514.8 100.0 644.4 100.0 860.5 100.0
CONSOLIDATED OPERATING RESULT BY BUSINESS AREA
(EURm) 1-9/2004 1-9/2003 2003
Raisio Nutrition -17.6 -2.5 -11.7
Raisio Life Sciences -6.5 -5.2 -5.4
Raisio Chemicals 3.6 -0.3 1.9
Others 219.6 0.9 1.0
Operating result, total 199.1 -7.2 -14.3
QUARTERLY PERFORMANCE
(EURm) 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9
2003 2003 2003 2003 2004 2004 2004
Consolidated turnover
Raisio Nutrition 94.6 110.4 108.5 104.4 91.1 108.5 102.4
Raisio Life Sciences 6.3 8.3 8.5 11.0 11.8 13.7 11.7
Raisio Chemicals 103.2 109.4 105.4 104.3 106.5 77.1 0.0
Interdivisional -3.0 -3.3 -3.8 -3.6 -3.9 -3.1 -1.1
Turnover, total 201.0 224.8 218.7 216.1 205.6 196.2 113.0
Consolidated operating result
Raisio Nutrition -1.4 -2.4 1.3 -9.2 -1.5 -18.8 2.8
Raisio Life Sciences -1.6 -1.7 -2.0 -0.2 0.6 -7.8 0.7
Raisio Chemicals -3.2 -0.1 2.9 2.2 1.9 1.7 0.0
Others -0.6 0.5 1.0 0.1 -0.3 220.3 -0.4
Operating result, total-6.7 -3.7 3.2 -7.1 0.7 195.4 3.0
Financial items -2.5 -2.5 -4.2 -3.7 -3.0 -3.0 0.4
Result before extraordinary
items and taxes -9.2 -6.3 -1.0 -10.8 -2.3 192.4 3.4
Extraordinary items 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Result before taxes -9.2 -6.3 -1.0 -10.8 -2.3 192.4 3.4
Income taxes 0.0 0.2 -1.0 2.2 -2.0 -2.4 5.9
Minority interest -0.1 -0.2 -0.4 -0.2 0.0 -1.0 -0.3
Consolidated result for the period
-9.3 -6.2 -2.4 -8.8 -4.3 189.0 9.0
