RAISIO GROUP INTERIM REPORT JAN. 1 - SEP
Raisio Group plc Stock Exchange Release
3 November 2003 at 11.00 Finnish time
RAISIO GROUP INTERIM REPORT JAN. 1 - SEPT. 30, 2003
RAISIO GROUP OPERATING RESULT BACK IN THE BLACK
- Raisio Group turnover for the third quarter was EUR 218.7
million, on the level of the comparison period (EUR 217.5m for Q3 in
2002).
- The operating result was EUR 3.2 million (EUR 7.6m) for the
third quarter.
- Cash flow from operations came to EUR 37.6 million (EUR 23.0m)
for the third quarter.
Key figures 1-9/2003 1-9/2002 2002
Turnover EURm 644.4 617.9 843.1
Operating result EURm -7.2 20.0* 20.6
Result before taxes EURm -16.4 12.9* 9.3
Earnings per share EUR -0.11 0.04 0.03
Equity ratio % 32.7 34.6 34.4
Cash flow from operations 35.5 29.6 45.4
EURm
* includes EUR 3.0 million in IAS-based change in valuation of
inventories
CEO Rabbe Klemets:
"Raisio Groups rising turnover levelled off in the third quarter.
While Raisio Chemicals sales volume increased still further, Raisio
Nutritions sales continued to decrease. Raisio Life Sciences new
food-ingredient customers have entered the market at a slower pace
than had been anticipated.
The most encouraging development in the third quarter was in working
capital and cash flow. Our long-term efforts to release capital bore
fruit and we were able to release more than EUR 20 million from
working capital during the quarter. In the third quarter, business
operations generated a positive cash flow of some EUR 38 million.
Following three very challenging quarters, the Groups operating
result was back in the black in the third quarter of 2003. Compared
with the second quarter, the peak improvement was shown by Raisio
Nutrition businesses and Raisio Chemicals latex and starch
businesses. We will strive hard to ensure that the positive
development continues in the final quarter of the year."
GROUP RESULTS AND FINANCING
The Raisio Groups third-quarter turnover was EUR 218.7 million (EUR
217.5m). Raisio Chemicals turnover continued to grow but that of
Raisio Nutrition fell distinctly on 2002. Raisio Life Sciences
turnover was boosted by food diagnostics. For January-September,
Group turnover came to EUR 644.4 million (EUR 617.9 m), of which 53%
was from outside Finland (52%). This corresponds to EUR 339.5
million (EUR 323.0 m). Calculated with fixed exchange rates,
turnover would have been EUR 665.1 million or some 8% up on the
corresponding period in 2002.
The consolidated operating result was EUR 3.2 million for the third
quarter (EUR 7.6 m), including one-off costs of EUR 1.8 million.
Raisio Chemicals improved its result on the comparison period, but
the poor performance of Raisio Nutrition and Raisio Life Sciences
held back the Group figures. The January-September period showed an
operating result of EUR -7.2 million (EUR 20.0m), including EUR 5.2
million in one-off costs. The change in accounting practices due to
IAS-based evaluation of inventories improved the operating result
for January-September 2002 by EUR 3.0 million. The consolidated
result before taxes for January-September was EUR -16.4 million (EUR
12.9m).
Research and development costs in the third quarter were EUR 4.4
million (EUR 4.4m) and in January-September EUR 15.3 million (EUR
14.0m).
Net financial expenses for the third quarter were EUR 4.2 million
(EUR 4.0m). In January-September the net financial expenses were EUR
9.2 million (EUR 7.2m). The average volume of loans was higher than
in January-September 2002, which raised interest rate expenses. In
addition, exchange rate gains were less than in the comparison
period.
Cash flow from operations improved significantly and was EUR 37.6
million in the third quarter (EUR 23.0m) and EUR 35.5 million (EUR
29.6m) in January-September. After investment costs, cash flow was
EUR 28.3 million (EUR 18.9m) in the third quarter and in January-
September EUR -10.2 million (EUR -26.4m). Group gross investment
amounted to EUR 14.7 million in the third quarter (EUR 46.3m) and
EUR 47.6 million (EUR 64.2m) in January-September. The largest
single investments involved the construction of paper chemicals
plants in China and the acquisition of the Diffchamb company.
Consolidated net interest-bearing liabilities were EUR 305.8 million
at the end of the review period (EUR 281.4m at the end of 2002). The
accounting practice of the syndicated loan facility has been amended
at the beginning of the year to present a clearer picture of its
terms. The loan has now been entered under non-current liabilities.
The covenant for the loan is an equity ratio of at least 30%.
Capital was released, thanks to success in the projects to reduce
working capital, which stood at EUR 176.8 million (EUR 200.7m on
September 30, 2002). The equity ratio improved during the third
quarter and reached 32.7% (31.8% on June 30, 2003). The gearing
ratio was 132.5% (144.3% on June 30, 2003).
Preparations for adopting IFRS/IAS accounting standards have
proceeded according to plan. IFRS/IAS-based accounting will be
adopted in 2005.
BUSINESS SECTORS
RAISIO CHEMICALS
Raisio Chemicals turnover rose 10.3% in the third quarter, to EUR
105.4 million (EUR 95.6m). The January-September figure was EUR
318.0 million (EUR 267.7m). The increase was attributable to the
acquisition of Latexia in August 2002 and higher production volume
of coated paper in Western Europe. Starch sales declined, mainly
because of the closure of the sales company in Germany in summer
2002. While sales of specialty chemicals declined in the Nordic
countries, they continued to improve in Asia.
Raisio Chemicals turnover by business area
Turnover, EURm 1-9/2003 1-9/2002 2002
Latex binders 156.0 80.7 127.7
Specialty chemicals 95.1 103.5 135.8
Starch binders 66.9 83.5 106.6
Raisio Chemicals third-quarter operating result was EUR 2.9 million
(EUR 2.3m), including EUR 1.8 million in one-off costs incurred from
the rationalization programme launched in spring. The programme aims
at EUR 15 million annual cost savings. Measures taken did not yet
have any substantial impact on the third-quarter result. Margins for
latex binders were improved somewhat by the favourable trend in raw
material prices.
The operating result for January-September was EUR -0.3 million (EUR
8.2m), including EUR 5.2 million in one-off costs. The change in
accounting practices due to IAS-based evaluation of inventories
improved the operating result for January-September 2002 by EUR 1.5
million.
Deliveries of rosin sizes will start at the year end from newly
completed specialty chemicals plant in China. A new 100,000 tonne
latex plant will come on-stream in China and the Future Printing
Center in Raisio at the end of the year.
RAISIO NUTRITION
Raisio Nutritions third-quarter turnover was EUR 108.5 million (EUR
118.2m), while the January-September figure was EUR 313.5 million
(EUR 341.0m). Turnover was reduced mainly by restructuring and
difficulties with margarine sales, especially in Sweden. Sales of
frozen potato products were also poor.
Raisio Nutritions turnover by business areas and businesses
(including internal sales)
Turnover, EURm 1-9/2003 1-9/2002 2002
Food 173.6 197.7 266.9*
Margarine 97.7 118.5 160.6
Milling 56.0 56.1 77.1
Food Potato 16.4 19.8 25.0
Others 10.1 7.6 11.1*
Animal Feeds 121.2 119.4 159.4
Malt 21.8 22.2 30.2
Grain Starch 11.7 15.9 20.6
* Comparative figures have been adjusted to conform to current
organization.
Raisio Nutritions third-quarter operating result was EUR 1.3
million (EUR 5.5m). Result weakened especially in the Margarine and
Grain Starch businesses on the comparison period. However, their
profitability improved on previous quarter. The low oil-plant
pressing margin cut at the result in the Oil Milling business and,
consequently, in the Animal Feeds business area. The positive trend
in Milling continued, however.
The operating result for January-September was EUR -2.5 million (EUR
12.6 m). The change in accounting practices due to IAS-based
evaluation of inventories improved the operating result for January-
September 2002 by EUR 1.2 million.
In April, Raisio Nutrition acquired dairy facilities in Istra, near
Moscow, for margarine production. Modernization and expansion work
on the property is completed and the plant should come on-stream at
the end of the year.
To boost operating efficiency and profitability, Raisio Nutrition
modified its operational structure. Additionally, the unit in charge
of purchasing and logistics was transferred to Raisio Nutrition. In
October, the company initiated codetermination talks with the
intention of streamlining operations and refocusing resources to
better meet customer needs. At the same time, the company will adapt
to current demand and strengthen its competitiveness. Raisio
Nutrition will also assess the status of its Grain Starch business,
which has shown a steady loss for some time and, if needed,
discontinue it. If a decision to discontinue is made, it is
estimated that the number of personnel will be reduced by about 110.
RAISIO LIFE SCIENCES
Raisio Life Sciences third-quarter turnover was EUR 8.5 million
(EUR 7.6m) and the January-September figure EUR 23.0 million (EUR
20.9m). Its partners in food ingredients did not introduce any new
products in the third quarter. With the exception of the UK,
turnover in diagnostics has developed as expected.
Raisio Life Sciences turnover by business area
Turnover, EURm 1-9/2003 1-9/2002 2002
Ingredients 18.4 20.9 30.3
Diagnostics 4.6 - -
Raisio Life Sciences third-quarter operating result was EUR -2.0
million (EUR 0.4m). The substantial input to improve business
operations in Central and Southern Europe weakened profitability in
the Ingredients business. This input has resulted in new products
which already have official approval and will become available at
the end of the year and in early 2004.
The process of taking over the food diagnostics company Diffchamb,
acquired in April, continued. The acquisition had a negative effect
on Raisio Life Sciences third-quarter result.
Raisio Life Sciences January-September operating result was EUR
-5.2 million (EUR 0.3 m). The change in accounting practices due to
IAS-based evaluation of inventories improved the operating result
for January-September 2002 by EUR 0.3 million.
ADMINISTRATION AND PERSONNEL
The Raisio Group employed 2,719 (2,789 on September 30, 2002) people
altogether on September 30, 2003. The reduction was attributable
mainly to the rationalization of margarine production and to
efficiency programs. On the other hand, a number of new personnel
joined the Group with the acquisition of Diffchamb. 43% (45%) of the
personnel worked outside Finland. At the end of September, Raisio
Chemicals employed 1,148 people, Raisio Nutrition 1,304 and Raisio
Life Sciences 193.
As of September 1, 2003, the Raisio Group Executive Committee
consists of Rabbe Klemets (Chief Executive Officer), Jari
Lehmusvaara (Raisio Chemicals), Olavi Kuusela (Raisio Nutrition),
Jukka Lavi (Raisio Life Sciences), Antti Salminen (Chief Financial
Officer), Merja Lumme (Human Resources), Mikko Korttila (Legal
Affairs), and Taru Narvanmaa (Communications and Investor
Relations).
Mr Urpo Pirilä resigned from the Raisio Group and from his duties as
deputy member of the Board of Directors in September.
SHARE INFORMATION
Twenty-eight million Raisio Group plc free shares were traded on
Helsinki Exchanges in January-September, to a total value of EUR
27.3 million and at an average price of EUR 0.97. The last quotation
on September 30, 2003, was EUR 1.05. The price of the free share was
on a par with the price at the end of 2002.
405,470 restricted shares were traded on Helsinki Exchanges in
January-September, to a total value of EUR 474,116 and at an average
price of EUR 1.17. The last quotation on September 30, 2003, was EUR
1.10. The restricted share price fell 17% from the beginning of the
year.
The company had altogether 47,742 registered shareholders on
September 30, 2003. 6.7% of its shares were owned by foreigners.
On October 1, 2003, Raisio Group was accepted into the Kempen/SNS
Smaller Europe SRI index. A total of 69 European companies from 12
countries that meet high ethical, social and environmental criteria
have been selected for this sustainable development index.
OUTLOOK
Because turnover growth levelled out in the third quarter, the full-
year turnover will be lower than earlier anticipated. The turnover
of Raisio Chemicals will be higher than in 2002 but the market is
likely to remain tense in Raisio Nutritions main sectors.
Consequently, consolidated 2003 turnover is not expected to improve
substantially on 2002.
Rationalization measures will have an effect on Raisio Chemicals
cost efficiency in the final quarter. Raisio Life Sciences input in
the markets in Central and Southern Europe and the rationalization
project of Raisio Nutrition launched in October will not bring any
results before next year. Current rationalization measures in the
Group are expected to generate EUR 3-4 million in one-off costs in
the final quarter.
The Group is estimated to show an underlying before-tax result for
the final quarter that is better than a year before. However, the
before-tax result for the full year is still expected to be in the
red.
Measures to reduce working capital have been successful and action
to release capital will continue. This will support Raisio Groups
solvency.
Raisio, November 3, 2003
Raisio Group plc
Board of Directors
Additional information:
Taru Narvanmaa, EVP, Communications and Investor Relations,
tel. +358 50 590 9398
Antti Salminen, CFO, tel. +358 40 535 1216
Raisio Group plc, P.O.Box 101, FIN-21201 Raisio, Finland
tel. +358 2 443 2111, www.raisiogroup.com
The figures in this review have not been audited.
CONSOLIDATED INCOME STATEMENT
(EURm) 1-9/2003 1-9/2002 2002
Turnover 644.4 617.9 843.1
Income and expenses from
business operations -611.5 -560.9 -772.3
Depreciation of goodwill -3.8 -2.9 -4.1
Other depreciation and write-downs -36.2 -34.0 -45.9
Share of associated companies results -0.1 -0.1 -0.1
Operating result -7.2 20.0 20.6
% of turnover -1.1% 3.2% 2.4%
Financial income 3.5 4.4 5.1
Financial expenses -12.7 -11.5 -16.4
Result before extraordinary items
and taxes -16.4 12.9 9.3
% of turnover -2.5% 2.1% 1.1%
Extraordinary items 0.0 0.0 0.0
Result before taxes -16.4 12.9 9.3
% of turnover -2.5% 2.1% 1.1%
Income taxes -0.7 -5.4 -2.9
Minority interest -0.7 -0.4 -0.9
Consolidated result for the period -17.8 7.1 5.4
% of turnover -2.8% 1.1% 0.6%
Taxes are calculated based on the appropriate tax on the result.
CONSOLIDATED BALANCE SHEET
(EURm) 30.9.2003 30.9.2002 31.12.2002
Non-current assets
Intangible assets 24.7 28.4 28.2
Goodwill 66.7 57.6 57.3
Tangible assets 284.9 288.5 289.7
Investments 13.0 12.9 12.9
Current assets
Inventories 118.2 144.6 153.6
Deferred tax assets 14.5 17.2 11.9
Accounts receivable 118.3 124.2 114.7
Other receivables 40.5 37.8 38.9
Securities under financial assets 17.7 23.0 30.0
Cash in hand and at banks 9.5 23.9 12.2
Assets 708.1 758.0 749.4
Share capital 27.8 27.8 27.8
Other shareholders equity 179.3 210.4 205.7
Minority interest 23.6 23.3 23.6
Deferred tax liability 20.5 25.7 20.7
Non-current liabilities 252.7 120.4 100.5
Accounts payable 59.7 68.1 81.8
Other current liabilities 144.4 282.4 289.2
Liabilities 708.1 758.0 749.4
CONSOLIDATED SOURCE AND APPLICATION OF FUNDS
(EURm)
1-9/2003 1-9/2002 2002
Cash flow before change in
working capital 32.4 53.0 69.9
Change in working capital 14.3 -10.9 -6.7
Financial items and taxes -11.2 -12.6 -17.9
Cash flow from operations 35.5 29.6 45.4
Investments -48.4 -59.9 -69.2
Proceeds from sales of fixed assets 2.7 3.9 4.3
Cash flow from investments -45.7 -56.0 -64.9
Change in non-current loans -4.0 -7.2 -24.3
Change in current liabilities 1.5 41.5 46.9
Change in non-current loan receivables 0.0 0.0 0.2
Dividend paid -3.6 -3.0 -3.0
Cash flow from financial operations -6.0 31.3 19.8
Unallocated items 1.2 1.1 0.9
Change in liquid funds -15.0 5.9 1.2
Liquid funds at beginning of period 42.2 41.0 41.0
Liquid funds at end of period 27.2 46.9 42.2
FINANCIAL INDICATORS
30.9.2003 30.9.2002 31.12.2002
Return on equity, ROE, % -9.4 3.8 2.4
Return on investment, ROI, % -0.8 5.6 4.5
Interest-bearing liabilities
at end of period, EURm 333.1 347.0 333.6
Gross investments, EURm 47.6 64.2 81.0
% of turnover 7.4 10.4 9.6
R & D expenditure, EURm 15.3 14.0 20.3
% of turnover 2.4 2.3 2.4
Personnel average 2,834 2,602 2,654
Equity ratio, % 32.7 34.6 34.4
Gearing, % 132.5 110.5 109.4
Earnings/share, EUR -0.11 0.04 0.03
Cash flow from operations/share, EUR 0.22 0.18 0.27
Equity/share, EUR 1.25 1.44 1.41
Average number of shares during
the period, in 1000s
Free shares 129,767 129,760 129,761
Restricted shares 35,382 35,389 35,388
Total 165,149 165,149 165,149
Market capitalization of shares at end
of period, EURm
Free shares 136.3 144.0 138.8
Restricted shares 38.9 49.6 50.2
Total 175.2 193.6 189.0
CONTINGENT LIABILITIES
(EURm) 30.9.2003 30.9.2002 31.12.2002
Assets given as security
For the company
Mortgages on real estate 72.7 61.3 10.5
Securities pledged 4.3 0.0 0.0
Corporate mortgages 52.9 47.9 22.8
Contingent off-balance-sheet liabilities
Leasing liabilities
Amounts outstanding on leasing contracts
Falling due during 2003 2.1 2.6 4.5
Falling due later 8.6 6.1 6.2
Contingent liabilities for the Group companies
Guarantees 1.0 6.0 67.5
Contingent liabilities for the Company 13.9 13.9 14.4
Contingent liabilities for associated companies
Guarantees 0.0 0.0 0.0
Contingent liabilities for others
Guarantees 0.4 1.1 0.2
Liabilities arising from derivative contracts
Raw material futures: market value -0.9 -3.4 -0.3
Raw material futures:
value of underlying instruments 8.1 5.6 11.6
Forward electricity contracts:
market value 0.1 0.0
Forward electricity contracts:
value of underlying instruments 2.6 0.5
Currency forward contracts:
market value -0.7 0.0 0.4
Currency forward contracts:
value of underlying instruments*) 56.6 29.7 26.7
Interest-rate swaps: market value -2.0 -0.6 -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) 1-9/2003 1-9/2002 2002
Raisio Chemicals 318.0 267.7 370.1
Raisio Nutrition 313.5 341.0 458.5
Raisio Life Sciences 23.0 20.9 30.3
Interdivisional -10.1 -11.8 -15.8
Turnover, total 644.4 617.9 843.1
CONSOLIDATED TURNOVER BY MARKET AREA
(EURm) % of % of % of
turn- turn- turn-
1-9/2003 over 1-9/2002 over 2002 over
Finland 304.9 47.3 296.5 48.0 401.4 47.6
Scandinavia 52.2 8.1 57.8 9.4 77.3 9.2
Europe (excl. Finland
and Scandinavia) 210.0 32.6 186.6 30.2 258.3 30.6
The Americas 35.2 5.5 39.6 6.4 52.6 6.2
Asia 40.8 6.3 36.0 5.8 52.0 6.2
Other 1.5 0.2 1.4 0.2 1.6 0.2
Total 644.4 100.0 617.9 100.0 843.1 100.0
CONSOLIDATED OPERATING RESULT BY BUSINESS SECTORS*)
(EURm) 1-9/2003 1-9/2002 2002
Raisio Chemicals -0.3 8.2 10.7
Raisio Nutrition -2.5 12.6 11.0
Raisio Life Sciences -5.2 0.3 0.5
Others 0.9 -1.0 -1.6
Operating result, total -7.2 20.0 20.6
QUARTERLY PERFORMANCE*)
(EURm) 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/ 7-9/
2002 2002 2002 2002 2003 2003 2003
Consolidated turnover
Raisio Chemicals 86.3 85.8 95.6 102.4 103.2 109.4 105.4
Raisio Nutrition 106.5 116.4 118.2 117.5 94.6 110.4 108.5
Raisio Life Sciences 6.2 7.1 7.6 9.3 6.3 8.3 8.5
Interdivisional -4.1 -3.8 -4.0 -4.0 -3.0 -3.3 -3.8
Turnover, total 194.9 205.5 217.5 225.2 201.0 224.8 218.7
Consolidated operating result
Raisio Chemicals 3.8 2.1 2.3 2.5 -3.2 -0.1 2.9
Raisio Nutrition 4.0 3.1 5.5 -1.6 -1.4 -2.4 1.3
Raisio Life Sciences -0.1 0.0 0.4 0.2 -1.6 -1.7 -2.0
Others -0.2 -0.3 -0.5 -0.6 -0.6 0.5 1.0
Operating result, total7.5 5.0 7.6 0.6 -6.7 -3.7 3.2
Financial items -2.9 -0.3 -4.0 -4.2 -2.5 -2.5 -4.2
Result before extraordinary
items and taxes 4.6 4.7 3.6 -3.6 -9.2 -6.3 -1.0
Extraordinary items 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Result before taxes 4.6 4.7 3.6 -3.6 -9.2 -6.3 -1.0
Income taxes -2.4 -1.9 -1.1 2.5 0.0 0.2 -1.0
Minority interest 0.2 -0.2 -0.4 -0.5 -0.1 -0.2 -0.4
Consolidated result for the period
2.3 2.6 2.1 -1.6 -9.3 -6.2 -2.4
*) Comparative figures have been adjusted to conform to current
organization.
