RAISIO GROUP INTERIM REPORT 1 JANUARY-31
Raisio Group plc Stock Exchange Release
4 May 2004 at 11.00 Finnish time
RAISIO GROUP INTERIM REPORT 1 JANUARY31 MARCH 2004
Raisio Groups Financial Performance Improved
- Raisio Groups turnover for the first quarter was up by 2.3 per
cent and totalled EUR 205.6 million (EUR 201.0 million in the
first quarter of 2003).
- Operating result moved into the black, showing a profit of EUR
0.7 million (EUR -6.7 million).
- Cash flow from business operations improved significantly
compared to the first quarter of 2003.
- The divestment of Raisio Chemicals is progressing as planned.
- The Groups operative result before taxes for the whole year is
expected to show a profit.
Key Figures
Q1/2004 Q1/2003 2003
Turnover, EUR million 205.6 201.0 860.5
Operating result, EUR million 0.7 -6.7 -14.3
Result before taxes, EUR million -2.3 -9.2 -27.2
Earnings per share, EUR -0.03 -0.06 -0.16
Equity ratio, % 31.3 33.7 32.2
Cash flow from business operations,
EUR million 2.3 -15.6 77.0
CEO Rabbe Klemets:
All business sectors showed positive development in the first
quarter. The demand for paper chemicals was slightly higher than a
year earlier, but the improvement in Raisio Chemicals
profitability could primarily be attributed to the results of the
rationalisation programmes carried out last year. The streamlining
of Raisio Nutritions business activities in spring 2003 and the
continuing difficulties with margarine sales in Sweden taxed the
sectors turnover. Nevertheless, comparable operating result
improved. The input Raisio Life Sciences made last year in the
European ingredients markets began to pay off through new
customers and new product applications in the last quarter of
2003. The sector was able to almost double its turnover and make
an operating profit.
However, what characterised the first quarter most distinctly was
the strategy reassessment process, which resulted in the decision
to focus the Groups resources on developing the Nutrition and
Life Sciences businesses. Therefore, we decided to find a new
industrial owner for Raisio Chemicals. Among several potential
buyers, Ciba Specialty Chemicals was considered the best
alternative from both the financial and the industrial
perspective. The enterprise value of EUR 475 million will settle
Raisios debts and will allow it to focus more sharply on its key
competence area, well-being.ö
RESULTS AND FINANCING
Raisio Group recorded a turnover of EUR 205.6 million
(EUR 201.0 million) in the first quarter. Raisio Life Sciences and Raisio
Chemicals were able to increase their turnover, while Raisio
Nutritions turnover decreased slightly.
Using the Q1/2003 exchange rates, turnover was up by 1.8 per cent
to EUR 209.3 million. Exchange rate fluctuations did not have a
significant impact on the results.
Turnover from outside Finland represented 50.7% (53.0%) of the
total, or EUR 104.1 million (EUR 106.5 million).
Operating result for the first quarter was EUR 0.7 million
(EUR -6.7 million). The result before taxes was EUR -2.3 million
(EUR -9.2 million).
Research and development costs amounted to EUR 5.4 million
(EUR 5.8 million).
Net financial expenses in the January to March period totalled EUR
3.0 million (EUR 2.5 million). Exchange rate losses in the amount
of EUR 0.1 million were recorded for the period, compared with
gains of EUR 0.5 million a year earlier.
Taxes are calculated based on the appropriate tax on the result.
The result for the financial period was EUR -4.3 million (EUR -9.3
million). The parent companys tax surplus amounts to EUR 8.4
million.
Cash flow from business operations totalled EUR 2.3 million
(EUR -15.6 million) in the first quarter. The Groups gross investments
totalled EUR 12.5 million (EUR 8.6 million). The largest single
investments involved the construction of paper chemical plants in
China. Raisio Nutritions investments involved launching a
margarine factory in Russia and constructing a new production line
for the potato processing plant in Vihanti, Finland.
The Groups net interest-bearing liabilities were EUR 287.9
million (EUR 277.8 million on 31 December 2003) at the end of the
period. Equity ratio was 31.3% (32.2% on 31 December 2003) and
gearing was 135.6% (127.9% on 31 December 2003). Working capital
rose slightly from EUR 110.4 million at the year-end to EUR 113.4
million, but was still clearly lower than in the first quarter of
2003 (EUR 179.2 million).
BUSINESS SECTORS
Raisio Chemicals
The turnover for Raisio Chemicals was up by 3.3% to EUR 106.5
million (EUR 103.2 million). A challenging market situation
persisted, although there were signs of recovery in the demand for
latex binders in Europe. Customer deliveries from the latex and
specialty chemicals plants in China started.
Raisio Chemicals Turnover by Business Area, EUR million
Q1/2004 Q1/2003 2003
Latices 55.9 47.4 207.7
Specialty chemicals 28.1 33.4 125.0
Starches 22.5 22.4 89.6
Total 106.5 103.2 422.3
The results of the rationalisation and efficiency-boosting
measures initiated last year reflected on the profitability of
Raisio Chemicals: operating result rose to EUR 1.9 million (EUR -
3.2 million). The latex and starch binder business areas performed
well. Meanwhile, the profitability of the specialty chemicals
business was on a par with the previous year.
Future Printing Center, an associated company of Raisio Chemicals,
launched activities in Raisio at the beginning of 2004.
Raisio Nutrition
Raisio Nutrition posted a turnover of EUR 91.1 million (EUR 94.6
million). The ice cream and almond paste businesses sold in the
spring of 2003 as well as the discontinuation of industrial
margarine production in Sweden taxed the turnover of the food
business area. Margarine sales volumes continued to fall in
Sweden. Turnover generated by the feeds and malt business areas
remained on the Q1/2003 level.
Raisio Nutrition Turnover by Business Area and Business, EUR
million
Q1/2004 Q1/2003 2003
Food 53.0 57.0 232.2
Margarine 29.1 31.9 130.8
Milling 18.0 19.2 75.3
Food Potato 4.9 4.8 21.2
Others 3.9 3.2 14.4
Internal sales in Food -2.8 -2.0 -9.5
Animal Feeds 36.4 36.1 163.8
Malt 3.0 2.8 26.4
Grain Starch 3.9 3.5 15.0
Internal sales -5.3 -4.7 -19.5
Total 91.1 94.6 417.9
Raisio Nutrition was able to boost its operative results.
Disclosed operating result was on a par with Q1/2003 at EUR -1.5
million (EUR -1.4 million). The Q1/2003 result includes a sales
profit of EUR 1.2 million from the divestment of the ice cream
business. The rationalisation programme launched in 2003 had, so
far, only a partial impact on the result.
Favourable development in the margarine business in Finland and in
Poland helped improve the operating result, as did the better
performance of the milling business. Result for the animal feeds
business was hampered by low pressing margins from the oil milling
business.
Losses suffered in the Swedish margarine market also strained the
sectors financial performance. The strategic and operative
reassessment of the Swedish operations is under way. In March,
Raisios last remaining margarine production stage in Sweden was
wound up, and the property maintenance services were outsourced.
Sales of Raisios own margarine brands to the Swedish retail trade
are now handled through Cerealia Foods sales network. Further
additional decisions will be made by autumn. The Swedish
operations carry goodwill of EUR 21.5 million which may include a
need for a significant write-down.
Raisio Nutritions margarine production plant in Istra, near
Moscow, came online in January. Besides Poland, Russia represents
one of the key future growth areas for Raisio Nutrition. The Istra
plant and the Russian sales organisation employ approximately 100
people in total.
Raisio Nutrition and Lännen Tehtaat plan to join sales forces in
the catering sector and provide these services through a 50/50
owned sales company, Ateriamestarit Oy. The application is still
being processed by the Finnish Competition Authority.
The Finnish Food and Drink Industries Federation awarded Raisio
Nutrition the Finnish Food Product of the Yearö award in 2004 in
the retail trade grain product series for its multigrain cereal
and bran mixture with linseed (Sydänystävä Pellavainen Monivilja).
The Beneviva Omega3 light margarine also made it to the finals.
Thanks to the Camelina oil used in its production, this margarine
contains a significant amount of fatty acids that are essential
for humans. The success of these products is an indication of
Raisio Nutritions expertise in the grain and vegetable oil
segments.
Raisio Life Sciences
The turnover for Raisio Life Sciences grew by 88.7% and amounted
to EUR 11.8 million (EUR 6.3 million). In addition to the in April
2003 acquired food diagnostics company Diffchamb, good development
in the ingredient business helped fuel the growth of turnover. The
determined inputs made in the European ingredients market last
year are beginning to bear fruit.
One particularly successful product application is the yoghurt
drink sold in small bottles. This product is currently sold in
nine European countries. Furthermore, the first quarter saw the
launch of milk containing the Benecol ingredient in Spain, a
Benecol light spread in Greece and a Benecol yoghurt drink in
Finland.
Raisio Life Sciences Turnover by Business Area, EUR million
Q1/2004 Q1/2003 2003
Ingredients 9.8 6.3 27.0
Diagnostics 2.0 - 7.0
Total 11.8 6.3 34.0
Operating result rose to EUR 0.6 million (EUR -1.6 million) thanks
to increased sales volumes and a tight cost-cutting regime
implemented in both business areas.
PERSONNEL AND ADMINISTRATION
Raisio Group employed 2,718 personnel on 31 March 2004 (2,735 on
31 December 2003), 47% of whom worked outside Finland (45% on 31
December 2003). The number of personnel increased as a result of
the launch of Raisio Chemicals new production plants in China,
and the launch of Raisio Nutritions margarine production in
Russia. Meanwhile, the rationalisation programmes and the
discontinuation of margarine production in Sweden reduced the
number of personnel.
At the end of March, Raisio Chemicals employed 1,149 people,
Raisio Nutrition 1,329 and Raisio Life Sciences 187.
Mr Vesa Lammela, Chairman of the Supervisory Board, resigned from
his position after the Annual General Meeting held on 26 March
2004. Mr Ola Rosendahl, Vice Chairman, assumed his position for
the time being.
DECISIONS MADE AT THE ANNUAL GENERAL MEETING
Raisio Group plcs Annual General Meeting held on 26 March 2004
approved the financial statements for 2003 and discharged those
accountable from liability, and decided that a dividend of EUR
0.01 per share shall be paid. The dividend was paid on 7 April
2004.
The Board of Directors was authorised, for one year from the
Annual General Meeting, to make a decision to increase the share
capital. The maximum number of new shares to be subscribed under
the authorisation is 20,000,000; however, the maximum number of
restricted shares to be subscribed shall be 5,000,000. So far, the
Board has not used its authorisation.
A decision was also made to reduce the number of Supervisory Board
members to 25, effective as of the beginning of 2005. The
following members due to resign were re-elected to the Supervisory
Board from 2005 to 2007: Juhani Enkovaara, Erkki S. Koskinen, Hans
Langh, Johan Laurén, Asko Leinonen and Yrjö Ojaniemi.
Johan Kronberg and Mika Kaarisalo, authorised public accountants,
were elected regular auditors for the financial year 2005. The
accounting firm of PricewaterhouseCoopers Oy and Kalle Laaksonen,
authorised public accountant, were elected deputy auditors.
SHARES AND SHAREHOLDERS
The trading volume of Raisio Group plcs free shares grew
significantly in the first quarter. The number of free shares
traded on the Helsinki Exchanges between January and March
totalled 46.6 million (11.6 million in Q1/2003). The value of
share trading was EUR 65.9 million and the average share price was
EUR 1.42. The closing price on 31 March 2004 was EUR 1.54. The
price of the Series V share rose by 22% from the beginning of the
year.
A total of 456,621 restricted shares were traded in the January to
March period (63,886). The value of share trading was EUR 683,524
and the average share price was EUR 1.50. The closing price on 31
March 2004 was EUR 1.52. The price of the Series K share rose by
23% from the beginning of the year.
On 31 March 2004, Raisio Group had 45,996 registered shareholders.
Of all shares, 7.7% was in foreign holding (5.8% on 31 December
2003) with the corresponding value for free shares being 9.7%
(7.4% on 31 December 2003).
The subscription period for the 1998-2003 option programme ended
on 30 January 2004. No shares were subscribed under this
programme.
ADOPTION OF THE IFRS ACCOUNTING STANDARDS
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 published in the spring of 2005.
THE DIVESTMENT OF RAISIO CHEMICALS
In March 2004, Raisio Group and the Swiss Ciba Specialty Chemicals
signed an agreement regarding the sale of Raisio Chemicals.
The enterprise value of the sale is EUR 475 million. The sale
price consists of a cash payment and the transfer of debts. The
sale price will generate approximately EUR 200 million in pre-tax
sales profit. The sale of Raisio Chemicals will raise Raisio
Groups equity ratio to approximately 80%, assuming all interest-
bearing debt would be repaid. Finalising the deal requires the
approval of the competition and merger control authorities. All
the necessary filing has been made. The final closing date depends
on the length of the regulatory review, but it is currently
expected to take place in the second or the third quarter of 2004
STRATEGY PROCESS
The new Group strategy will be built on special expertise in well-
being, which is at the heart of Raisios activities in the food
and the functional food ingredients, animal feeds and food
diagnostics.
One of the cornerstones of the strategy, which is currently being
prepared, is to accelerate organic growth. Measures taken to
pursue organic growth include stronger focus on research and
development, which will allow Raisio to renew the product
portfolio. By expediting research and development, Raisio can
expand the range of plant-based products and launch new, tasty and
healthy foods and animal feeds, as well as functional food
ingredients. For the fast growing food diagnostics markets rapid
testing methods will be developed.
To support its objective to bolster R&D activities, Raisio has
decided to set up research centres in order to promote food and
food diagnostics development. Raisios new strategic nutrition
research unit will be located at the Viikki campus in Helsinki.
Strong focus will be placed on product development and quality
assurance in the production locations. A food diagnostics
research centre will start its operations in Turku Sciences Park
in May.
Russia and Poland provide interesting growth potential, and
networking with other players in the field is already under way in
the Baltic Sea region. Ingredient and diagnostic businesses are
expected to drive Raisios global expansion and rapid growth.
The strategy will be published during the summer.
OUTLOOK
The implemented rationalisation and efficiency-boosting measures
will help trim costs, thereby allowing both Raisio Chemicals and
Raisio Nutrition to improve their financial performance despite
the challenging business environment. Raisio Life Sciences is
expected to sustain good growth and improve its profitability also
in the following quarters. Raisio Groups operative result before
taxes for the whole year is expected to show a profit.
The divestment of Raisio Chemicals should be finalised in the
second or third quarter. The sale price of EUR 475 million will
make Raisio a debt-free company. The sales profit will increase
the operating profit by some EUR 200 million and profit after
taxes by some EUR 140 million.
Raisio, 4 May 2004
Raisio Group plc
Board of Directors
Further information:
Taru Narvanmaa, Executive Vice President, Communications and
Investor Relations, tel. +358 50 590 9398
Antti Salminen, Chief Financial Officer, tel. +358 40 535 1216
Raisio Group plc, P.O.Box 101, FI-21201 Raisio, Finland
tel. +358 2 443 2111, www.raisiogroup.com
Press- and analyst meetings will be held on 4 May 2004 at 11.30 in
Raisio and 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) 1-3/2004 1-3/2003 2003
Turnover 205.6 201.0 860.5
Income and expenses from
business operations -192.2 -194.5 -814.5
Depreciation of goodwill -1.3 -1.2 -5.1
Other depreciation and write-downs -11.1 -11.9 -54.8
Share of associated companies
results -0.2 -0.1 -0.3
Operating result 0.7 -6.7 -14.3
% of turnover 0.3 -3.3 -1.7
Financial income 0.8 1.6 4.1
Financial expenses -3.8 -4.1 -17.0
Result before extraordinary items
and taxes -2.3 -9.2 -27.2
% of turnover -1.1 -4.6 -3.2
Extraordinary items 0.0 0.0 0.0
Result before taxes -2.3 -9.2 -27.2
% of turnover -1.1 -4.6 -3.2
Income taxes -2.0 0.0 1.4
Minority interest 0.0 -0.1 -0.9
Consolidated result for the period -4.3 -9.3 -26.7
% of turnover -2.1 -4.6 -3.1
CONSOLIDATED BALANCE SHEET
(EURm) 31.3.2004 31.3.2003 31.12.2003
Non-current assets
Intangible assets 23.6 26.9 23.4
Goodwill 63.9* 56.4 65.3
Tangible assets 280.0 282.3 277.2
Investments 12.5 13.3 12.6
Current assets
Inventories 119.2 142.0 117.7
Deferred tax assets 20.5 12.7 20.3
Accounts receivable 89.7 118.0 86.8
Other receivables 39.6 42.5 37.1
Securities under financial assets 11.6 13.0 14.1
Cash in hand and at banks 18.5 9.8 20.5
Assets 679.1 716.9 675.0
Share capital 27.8 27.8 27.8
Other shareholders equity 161.8 190.4 166.2
Minority interest 22.8 23.3 23.2
Deferred tax liability 22.0 20.5 22.0
Non-current liabilities 237.7** 247.8 235.0
Accounts payable 67.6 60.4 75.2
Other current liabilities 139,5 146.7 125.5
Liabilities 679.1 716.9 675.0
*Raisio Chemicals EUR 21.8 million, Raisio Nutrition EUR 25,2
million, Raisio Life Sciences EUR 16,8 million.
**A total of USD 154 million had been withdrawn under the Groups
syndicated loan facility by 31 March 2004. The total credit limit
is USD 190 million, and the key covenant is an equity ratio of at
least 30%.
CONSOLIDATED SOURCE AND APPLICATION OF FUNDS
(EURm)
1-3/2004 1-3/2003 31.12.2003
Cash flow before change in
working capital 13.6 6.4 44.4
Change in working capital -5.9 -18.3 50.7
Financial items and taxes -5.3 -3.7 -18.2
Cash flow from business operations 2.3 -15.6 77.0
Investments -12.2 -9.5 -65.8
Proceeds from sales of fixed assets 0.5 1.9 3.6
Cash flow from investments -11.6 -7.6 -62.2
Change in non-current loans 1.0 -0.7 -18.1
Change in current liabilities 3.4 4.3 -1.0
Change in loan receivables -0.1 0.0 0.1
Dividend paid -0.2 0.0 -3.5
Cash flow from financial operations 4.2 3.7 -22.6
Unallocated items 0.6 0.2 0.3
Change in liquid funds -4.6 -19.4 -7.5
Liquid funds at beginning of period 34.6 42.2 42.2
Liquid funds at end of period 30.1 22.8 34.6
FINANCIAL INDICATORS
31.3.2004 31.3.2003 31.12.2003
Return on equity, ROE, % -8.0 -14.7 -10.9
Return on investment, ROI, % 1.1 -3.5 -1.8
Interest-bearing liabilities
at end of period, EURm 318.0 334,8 312.5
Gross investments, EURm 12.5 8.6 63.7
% of turnover 6.1 4.3 7.4
R & D expenditure, EURm 5.4 5.8 21.1
% of turnover 2.6 2.9 2.5
Personnel average 2,719 2,747 2,822
Equity ratio, % 31.3 33.7 32.2
Gearing, % 135.6 125.3 127.9
Earnings/share, EUR -0.03 -0.06 -0.16
Cash flow from operations/share, EUR 0.01 -0.09 0.47
Equity/share, EUR 1.15 1.32 1.17
Average number of shares during
the period, in 1000s
Free shares 130,097 129,765 129,768
Restricted shares 35,052 35,384 35,381
Total 165,149 165,149 165,149
Market capitalization of shares at
end of period, EURm
Free shares 201.0 111.6 160.9
Restricted shares 52.6 42.5 44.6
Total 253.6 154.1 205.5
CONTINGENT LIABILITIES
(EURm) 31.3.2004 31.3.2003 31.12.2003
Assets given as security
For the company
Mortgages on real estate 72.6 61.4 72.4
Securities pledged 4.1 0.0 4.0
Corporate mortgages 46.9 49.0 53.1
Contingent off-balance-sheet
liabilities
Leasing liabilities
Amounts outstanding on leasing contracts
Falling due during 2004 4.1 3.4 4.7
Falling due later 7.9 6.7 4.9
Contingent liabilities for the
Group companies
Guarantees 1.0 6.0 1.0
Contingent liabilities for the Company 4.8 13.3 7.0
Contingent liabilities for
associated companies
Guarantees 0.0 15.5 0.0
Contingent liabilities for others
Guarantees 1.1 1.1 0.4
Other liabilities 5.0 0.0 5.0
Liabilities arising from
derivative contracts
Raw material futures: market value -1.0 -0.3 -0.5
Raw material futures:
value of underlying instruments 14.0 13.0 11.3
Forward electricity contracts:
market value 0.2 0.0
Forward electricity contracts:
value of underlying instruments 4.1 2.6
Currency forward contracts:
market value 1.5 -0.1 2.1
Currency forward contracts:
value of underlying instruments*) 61.9 18.6 53.0
Interest-rate swaps: market value -1.7 0.2 -1.5
Interest-rate swaps:
value of underlying instruments 80.0 60.0 80.0
*) Some equity hedging of foreign subsidiaries was adopted during
the review period, resulting in an appreciable increase in the
total value of underlying instrument for currency forward
contracts.
CONSOLIDATED TURNOVER BY BUSINESS SECTORS
(EURm) 1-3/2004 1-3/2003 2003
Raisio Chemicals 106.5 103.2 422.3
Raisio Nutrition 91.1 94.6 417.9
Raisio Life Sciences 11.8 6.3 34.0
Interdivisional -3.9 -3.0 -13.8
Turnover, total 205.6 201.0 860.5
CONSOLIDATED TURNOVER BY MARKET AREA
(EURm) % of % of % of
1-3/ turn- 1-3/ turn- turn-
2004 over 2003 over 2003 over
Finland 101.4 49.3 94.5 47.0 412.0 47.9
Scandinavia 11.4 5.5 18.7 9.3 66.5 7.7
Europe (excl. Finland
and Scandinavia) 68.9 33.5 62.5 31.1 278.2 32.3
The Americas 11.2 5.5 11.1 5.5 47.4 5.5
Asia 12.1 5.9 14.1 7.0 54.6 6.3
Other 0.6 0.3 0.1 0.1 1.9 0.2
Total 205.6 100.0 201.0 100.0 860.5 100.0
CONSOLIDATED OPERATING RESULT BY BUSINESS SECTORS
(EURm) 1-3/2004 1-3/2003 2003
Raisio Chemicals 1,9 -3.2 1.9
Raisio Nutrition -1,5 -1.4 -11.7
Raisio Life Sciences 0,6 -1.6 -5.4
Others -0,3 -0,6 1.0
Operating result, total 0,7 -6.7 -14.3
QUARTERLY PERFORMANCE*)
(EURm) 1-3/ 4-6/ 7-9/ 10-12/ 1-3/
2003 2003 2003 2003 2004
Consolidated turnover
Raisio Chemicals 103.2 109.4 105.4 104.3 106.5
Raisio Nutrition 94.6 110.4 108.5 104.4 91,1
Raisio Life Sciences 6.3 8.3 8.5 11.0 11.8
Interdivisional -3.0 -3.3 -3.8 -3.6 -3.9
Turnover, total 201.0 224.8 218.7 216.1 205.6
Consolidated operating result
Raisio Chemicals -3.2 -0.1 2.9 2.2 1.9
Raisio Nutrition -1.4 -2.4 1.3 -9.2 -1.5
Raisio Life Sciences -1.6 -1.7 -2.0 -0.2 0.6
Others -0.6 0.5 1.0 0.1 -0.3
Operating result, total -6.7 -3.7 3.2 -7.1 0.7
Financial items -2.5 -2.5 -4.2 -3.7 -3.0
Result before extraordinary
items and taxes -9.2 -6.3 -1.0 -10.8 -2.3
Extraordinary items 0.0 0.0 0.0 0.0 0.0
Result before taxes -9.2 -6.3 -1.0 -10.8 -2.3
Income taxes 0.0 0.2 -1.0 2.2 -2.0
Minority interest -0.1 -0.2 -0.4 -0.2 0.0
Consolidated result for the period
-9.3 -6.2 -2.4 -8.8 -4.3
