RAISIO GROUP INTERIM REPORT JAN 1 - JUNE
Raisio Group plc Stock Exchange Release
31 July 2003 at 11.00 Finnish time 1 (10)
RAISIO GROUP INTERIM REPORT JAN 1 JUNE 30, 2003
Turnover rose, financial performance still weak
- Raisio Group turnover for the second quarter rose by close on
10%, totalling EUR 224.8 million (EUR 205.5m for Q2 in 2002).
- Operating profit/loss for the second quarter was EUR 0.4
million (EUR 5.0m) before one-off cost items.
Key figures 1-6/2003 1-6/2002 2002
Turnover EURm 425.8 400.4 843.1
Operating profit/loss EURm 10.4 12.4 20.6
Profit/loss before income taxes EURm 15.4 9.3 9.3
Earnings per share EUR 0.09 0.03 0.03
Equity ratio % 31.8 39.6 34.4
Cash flow from operations EURm -2.1 6.5 45.4
CEO RABBE KLEMETS:
Raisio Group turnover continued to rise in the second quarter
thanks to growth at Raisio Chemicals, where the acquisition of
Latexia last August and the encouraging trend in Asian sales
boosted turnover. Raisio Nutrition had another difficult quarter,
with sales of margarines and grain starch in particular, proving
lower than expected. The diagnostics company Diffchamb acquired by
Raisio Life Sciences in April helped to increase the business
sector's turnover.
Group profitability remained poor in the second quarter, though
Raisio Chemicals profit excluding one-off rationalization costs
improved clearly from the first quarter. At Raisio Nutrition, the
Milling, Animal Feeds and Malt businesses all did satisfactorily.
The second half will be challenging for the Group as a whole, but
I believe we are on the right track. Rationalization and the
investments now made will start to yield results and turnover will
go on growing. Special attention will be paid to strengthen the
balance sheet and to improve the solvency.ö
GROUP RESULTS AND FINANCING
Raisio Group turnover for the second quarter totalled EUR 224.8
million (EUR 205.5m). The rise for the first half was 6.3%, to a
total of EUR 425.8 million (EUR 400.4m). Most of the growth
derives from the acquisition of Latexia. Turnover from outside
Finland accounted for 52.0% (52.0%), or EUR 221.5 million (EUR
210.0m).
The consolidated operating result for the second quarter was EUR
-3.7 million (EUR 5.0m), including EUR 3.3 in one-off costs. The
first-half figure was EUR 10.4 million (EUR 12.4m). The change in
accounting practices due to IAS-based evaluation of inventories
improved the operating profit for the comparison period by EUR 2.4
million. The first-half consolidated result before taxes was EUR
-15.4 million (EUR 9.3m).
Research and development expenditure for the Group in the second
quarter came to EUR 5.1 million (EUR 5.1m), putting the end-June
figure at EUR 10.9 million (EUR 9.6m).
Net financial expenses in the second quarter totalled EUR 2.5
million (EUR 0.3m), and for the first half EUR 5.0 million (EUR
3.2m). The higher volume of loans compared with 2002 increased
interest expenses. Last year, appreciable exchange rate gains were
entered during the second quarter.
Cash flow from Group business operations was EUR 13.5 million (EUR
4.8m) in the second quarter and EUR 2.1 million (EUR 6.5m) for
the first half. Cash flow after investments stood at EUR 15.3
million (EUR 4.8m) for the quarter and EUR -38.5 million (EUR
-7.4m) for the first half. Gross investments came to EUR 24.3
million (EUR 11.9m) for the quarter and EUR 32.9 million (EUR
17.9m) for the first half. The largest single investments related
to the acquisition of Diffchamb, construction of latex and
specialty chemical plants in China, and the rationalization of
margarine production.
Net interest-bearing liabilities at the end of June came to EUR
336.8 million (EUR 281.4m end 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 equity ratio
was 31.8% (34.4% end 2002) and the gearing ratio 144.3% (109.4%
end 2002). These key indicators for end June reflect the impact of
the Diffchamb acquisition.
BUSINESS SECTORS
Raisio Chemicals
Raisio Chemicals turnover rose 27.5% in the second quarter, to EUR
109.4 million (EUR 85.8m). The first-half figure was EUR 212.6
million (EUR 172.1m). The increase was attributable to the
acquisition of Latexia, growth in Asian sales, and higher
production of coated paper in Europe, which found reflection in
higher sales of latex binders. Starch sales declined because of
the slump in demand and closure of the sales company in Germany in
summer 2002.
Raisio Chemicals turnover by business area
Turnover, EURm 1-6/2003 1-6/2002 2002
Starch binders 42.9 60.4 106.6
Latex binders 100.4 42.0 127.7
Specialty chemicals 69.3 69.7 135.8
The second-quarter operating result was EUR 0.1 million (EUR
2.1m), including EUR 3.3 million in one-off costs of the
rationalization programme. The first-half result fell to EUR 3.3
million (EUR 5.9m). The change in accounting practices due to IAS-
based evaluation of inventories improved the operating profit for
the comparison period by EUR 0.6 million. The better performance
in the second quarter could be attributed to more stable prices
for petrochemical raw materials and higher selling prices for
latices.
The codetermination negotiations with personnel related to the
rationalization programme launched in April were brought to
conclusion in June. There will be a loss of 40 jobs among white-
collar employees in Finland, and other Raisio Chemicals units
worldwide will downsize by around 60 altogether. The
rationalization programme aims at annual savings of some EUR 15
million, expected to take full effect as of the beginning of 2004.
Further aims are to use capital more efficiently and to reduce
working capital by EUR 15 million. The programme has proceeded
according to plan.
As part of the programme, Raisio Chemicals sold its share in the
sales company in Chile to its long-term partner in June. The
transaction will have no major impact on financial performance.
The construction of latex and specialty chemicals plants in China
is progressing according to plan, as is construction of the Future
Printing Center in Raisio.
Raisio Nutrition
Raisio Nutrition second-quarter turnover was EUR 109.6 million
(EUR 115.5m), while the end-June figure was EUR 203.8 million (EUR
221.6m). Turnover was reduced mainly by divestments of businesses,
other restructuring and the more competitive situation on the
markets. For Margarine, low sales were also due to delivery
problems caused by the integration of production operations. Grain
starch sales suffered from the poor demand for starch at Raisio
Chemicals. On the other hand, the turnover of Animal Feeds
business continued to grow.
Raisio Nutrition turnover by business areas and businesses
(internal sales included)
Turnover, EURm 1-6/2003 1-6/2002 2002
Food 116.6 131.9 265.3
Margarine 66.2 79.4 160.6
Milling 37.4 37.0 77.1
Food Potato 11.7 14.5 25.0
Others 5.5 3.8 9.5
Animal Feeds 77.5 75.0 159.4
Malt 12.0 13.7 30.2
Grain Starch 7.3 10.5 20.6
The Raisio Nutrition second-quarter operating result deteriorated
to EUR 2.5 million (EUR 3.1m) and the first-half figure to EUR
-3.9 million (EUR 7.0m). The change in accounting practices due to
IAS-based evaluation of inventories improved the operating profit
for the comparison period by EUR 1.6 million. The sale of the ice-
cream business in January boosted profits by EUR 1.2 million. On
the other hand, profitability was hampered by labour unrest in the
first quarter of the year. Profitability declined in all
businesses except Milling. Margarine performance was hampered
primarily by the fact that production in Sweden continued longer
than planned and transferring production to units in Finland and
Poland generated additional costs. The transfer began at the end
of 2002 and was finally completed in June.
In April Raisio Nutrition took the decision to start margarine
production in Russia by the end of 2003. The roughly EUR 2 million
investment will greatly improve Raisios market competitiveness
and strengthen the standing of the Groups already familiar brands
among Russian consumers.
Also in April, Raisio Nutrition decided to increase the scale of
its food potato production in Vihanti. The EUR 3 million
investment aims to strengthen Raisios position on the expanding
potato products market.
Raisio Life Sciences
Raisio Life Sciences second-quarter turnover was EUR 8.3 million
(EUR 7.1m) and the first-half figure EUR 14.5 million (EUR 13.3m).
Raisio Life Sciences turnover by business area
Turnover, EURm 1-6/2003 1-6/2002 2002
Ingredients 12.2 13.3 30.3
Diagnostics 2.3 - -
The second-quarter operating result was EUR 1.7 million (EUR
0.0m), and the first-half figure EUR 3.2 million (EUR 0.1m). The
change in accounting practices due to IAS-based evaluation of
inventories improved the operating profit for the comparison
period by EUR 0.2 million. Financial performance continued to be
hampered by the major investments made in food diagnostics and in
expanding the ingredients business in Europe.
The Swedish international food diagnostics company Diffchamb AB
became a Raisio Group subsidiary at the beginning of April and was
consolidated into the Group accounts as of the same date. The
effect of the acquisition on Raisio Life Sciences second-quarter
result was negative.
Benecol products are currently sold in around 20 countries. Raisio
partners put Benecol yoghurt drinks on the Dutch market in May and
on the Swiss market in June. New products will be introduced in
several European countries during the autumn.
A recently published (Journal of Pediatrics) impartial research
showed that the Benecol active ingredient, stanol ester, also
reduces elevated cholesterol levels in children more effectively
than the other cholesterol-reducing ingredients on the market.
ADMINISTRATION AND PERSONNEL
The Raisio Group employed 2,752 (2,494) people altogether on June
30, 2003, a rise attributable mainly to acquisitions and expansion
in Asia. 43.4% (41.0%) worked outside Finland. At the end of June,
Raisio Chemicals employed 1,137 people, Raisio Nutrition 1,310 and
Raisio Life Sciences 193.
Olavi Kuusela was appointed Managing Director of Raisio Nutrition
and a member of the Group Executive Committee as of September 1,
2003. At the same time, the Groups Purchasing and Logistics Unit
was incorporated into Raisio Nutrition, its biggest customer.
Raisio Nutritions present Managing Director, Urpo Pirilä, will
continue in the post until August 31, 2003, when he will start
working in business development.
Merja Lumme has been appointed Executive Vice-President, Human
Resources and a member of the Group Executive Committee as of
September 1, 2003. The present head of human resources and legal
affairs, Mikko Korttila, will continue as Executive Vice
President, Legal Affairs and a member of the Group Executive
Committee.
SHARE INFORMATION
21,519,522 Raisio Group plc free shares were traded on Helsinki
Exchanges in January-June, to a total value of EUR 20.5 million
and at an average price of EUR 0.95. The final trading quotation
in June 2003 was EUR 0.95. The price of the free share fell 9.5%
during the first half.
123,016 restricted shares were traded on Helsinki Exchanges in the
first half, to a total value of EUR 151,009 and at an
average price of EUR 1.23. The final trading quotation in June
2003 was EUR 1.18. The restricted share price fell 10.6% during
the first half.
The company had altogether 48,260 registered shareholders on June
30, 2003. 6.9% of its shares were owned by foreigners.
The Board of Directors did not exercise the authorization to raise
share capital granted it by the shareholders meeting.
OUTLOOK
Turnover is expected to continue to rise in the second half,
thanks to organic growth and the completed acquisitions in Raisio
Chemicals and Raisio Life Sciences. The turnover of Raisio
Nutrition is likely to be lower than in 2002. Raisio Group
turnover for the entire year is estimated at around EUR 900
million.
Thanks to rationalization measures and pricing changes, the
financial result is expected to improve in the second half and
be clearly positive, though the operating environment is still
challenging. The Group will probably still show a full-year
before-tax loss. Measures to ensure more efficient use of
capital will continue and a better equity ratio is expected.
Raisio, July 31, 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, P.O.Box 101, FIN-21201 Raisio, Finland,
tel. +358 2 443 2111
Please find the interview of CEO Rabbe Klemets on the Groups
website, www.raisiogroup.com, 31 July 2003 about at noon.
The figures in this review have not been audited.
CONSOLIDATED INCOME STATEMENT
(EURm) 1-6/2003 1-6/2002 2002
Turnover 425.8 400.4 843.1
Income and expenses from
business operations -409.3 -365.2 -772.3
Depreciations and write-downs -26.8 -22.9 -50.1
Share of associated companies results 0.0 0.1 -0.1
Operating result -10.4 12.4 20.6
% of turnover -2.4% 3.1% 2.4%
Financial items -5.0 -3.2 -11.3
Result before extraordinary items
and taxes -15.4 9.3 9.3
% of turnover -3.6% 2.3% 1.1%
Extraordinary items 0.0 0.0 0.0
Result before taxes -15.4 9.3 9.3
% of turnover -3.6% 2.3% 1.1%
Income taxes 0.2 -4.3 -2.9
Minority interest -0.2 0.0 -0.9
Consolidated result for the period -15.4 5.0 5.4
% of turnover -3.6% 1.2% 0.6%
Taxes are calculated based on the appropriate tax on the result.
CONSOLIDATED BALANCE SHEET
(EURm) 30.6.2003 30.6.2002 31.12.2002
Non-current assets
Intangible assets 92.9 73.4 85.5
Tangible assets 281.3 250.7 289.7
Investments 13.2 13.1 12.9
Current assets
Inventories 140.5 135.6 153.6
Receivables 188.1 156.8 165.4
Securities under financial assets 9.2 15.5 30.0
Cash in hand and at banks 10.5 11.1 12.2
Assets 735.7 656.1 749.4
Share capital 27.8 27.8 27.8
Other shareholders equity 182.5 208.8 205.7
Minority interest 23.2 21.7 23.6
Non-current liabilities 293.2 135.3 121.2
Current liabilities 209.0 262.5 371.0
Liabilities 735.7 656.1 749.4
CONSOLIDATED SOURCE AND APPLICATION OF FUNDS
(EURm)
1-6/2003 1-6/2002 2002
Cash flow before change in
operating capital 16.0 31.9 69.9
Change in working capital -12.8 -12.9 -6.7
Financial items and taxes -5.2 -12.4 -17.9
Cash flow from business operations -2.1 6.5 45.4
Investments -38.9 -17.2 -69.2
Proceeds from sales of fixed assets 2.5 3.2 4.3
Cash flow from investments -36.4 -14.0 -64.9
Change in non-current loans 17.2 -15.0 -24.3
Change in current liabilities 2.5 7.9 46.9
Change in non-current loan receivables -0.2 0.0 0.2
Dividend paid -3.6 -2.8 -3.0
Cash flow from financial operations 16.0 -10.0 19.8
Unallocated items -0.1 3.0 0.9
Change in liquid funds -22.5 -14.4 1.2
Liquid funds at beginning of period 42.2 41.0 41.0
Liquid funds at end of period 19.7 26.6 42.2
FINANCIAL INDICATORS
30.6.2003 30.6.2002 31.12.2002
Return on equity, ROE, % -12.4 3.8 2.4
Return on investment, ROI, % -2.3 6.2 4.5
Net interest-bearing liabilities
at end of period, EURm 337 236 281
Gross investments, EURm 32.9 17.9 81.0
% of turnover 7.7 4.5 9.6
R & D expenditure, EURm 10.9 9.6 20.3
% of turnover 2.6 2.4 2.4
Personnel average 2,844 2,534 2,654
Equity ratio, % 31.8 39.6 34.4
Gearing, % 144.3 91.1 109.4
Earnings/share, EUR -0.09 0.03 0.03
Cash flow/share, EUR -0.01 0.04 0.27
Equity/share, EUR 1.27 1.43 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 123.3 164.8 138.8
Restricted shares 41.7 59.8 50.2
Total 165.0 224.6 189.0
CONTINGENT LIABILITIES
(EURm) 30.6.2003 30.6.2002 31.12.2002
Assets given as security
For the company
Mortgages on real estate 71.8 61.4 10.5
Corporate mortgages 53.6 48.8 22.8
Contingent off-balance-sheet liabilities
Leasing liabilities
Amounts outstanding on leasing contracts
Falling due during 2003 2.9 3.2 4.5
Falling due later 7.1 5.6 6.2
Contingent liabilities for the Group companies
Guarantees 1.0 6.0 67.5
Contingent liabilities for the Company 13.5 13.3 14.4
Contingent liabilities for associated companies
Guarantees 0.0 15.5 0.0
Contingent liabilities for others
Guarantees 0.3 1.1 0.2
Liabilities arising from derivative contracts
Raw material futures: market value -0.1 -0.2 -0.3
Raw material futures:
value of underlying instruments 6.9 6.7 11.6
Forward electricity contracts:
market value -0.2 0.0
Forward electricity contracts:
value of underlying instruments 2.6 0.5
Currency forward contracts:
market value 0.3 0.1 0.4
Currency forward contracts:
value of underlying instruments*) 60.5 9.1 26.7
Interest-rate swaps: market value -2.4 0.0 -1.5
Interest-rate swaps:
value of underlying instruments 80.0 20.0 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) 1-6/2003 1-6/2002 2002
Raisio Chemicals 212.6 172.1 370.1
Raisio Nutrition 203.8 221.6 456.9
Raisio Life Sciences 14.5 13.3 30.3
Others 1.2 1.3 1.6
Interdivisional -6.3 -7.8 -15.8
Turnover, total 425.8 400.4 843.1
CONSOLIDATED TURNOVER BY MARKET AREA
(EURm) % of % of % of
turn- turn- turn-
1-6/2003 over 1-6/2002 over 2002 over
Finland 204.2 48.0 187.1 46.7 401.4 47.6
Scandinavia 36.0 8.4 40.4 10.1 77.3 9.2
Europe (excl. Finland
and Scandinavia) 132.7 31.2 124.8 31.2 258.3 30.6
The Americas 23.0 5.4 26.5 6.6 52.6 6.2
Asia 29.0 6.8 20.5 5.1 52.0 6.2
Other 0.9 0.2 1.2 0.3 1.6 0.2
Total 425.8 100.0 400.4 100.0 843.1 100.0
CONSOLIDATED OPERATING RESULT BY BUSINESS SECTORS
(EURm) 1-6/2003 1-6/2002 2002
Raisio Chemicals -3.3 5.9 10.7
Raisio Nutrition -3.9 7.0 10.7
Raisio Life Sciences -3.2 -0.1 0.5
Others 0.0 -0.4 -1.3
Operating result, total -10.4 12.4 20.6
QUARTERLY PERFORMANCE
(EURm) 1-3/ 4-6/ 7-9/ 10-12/ 1-3/ 4-6/
2002 2002 2002 2002 2003 2003
Consolidated turnover
Raisio Chemicals 86.3 85.8 95.6 102.4 103.2 109.4
Raisio Nutrition 106.1 115.5 117.9 117.3 94.2 109.6
Raisio Life Sciences 6.2 7.1 7.6 9.3 6.3 8.3
Others 0.4 0.9 0.2 0.1 0.4 0.8
Interdivisional -4.1 -3.8 -4.0 -4.0 -3.0 -3.3
Turnover, total 194.9 205.5 217.5 225.2 201.0 224.8
Consolidated operating result
Raisio Chemicals 3.8 2.1 2.3 2.5 -3.2 -0.1
Raisio Nutrition 3.9 3.1 5.5 -1.8 -1.4 -2.5
Raisio Life Sciences -0.1 0.0 0.4 0.2 -1.6 -1.7
Others -0.2 -0.2 -0.5 -0.4 -0.5 0.5
Operating result, total 7.5 5.0 7.6 0.6 -6.7 -3.7
Financial items -2.9 -0.3 -4.0 -4.2 -2.5 -2.5
Result before extraordinary
items and taxes 4.6 4.7 3.6 -3.6 -9.2 -6.3
Extraordinary items 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
Income taxes -2.4 -1.9 -1.1 2.5 0.0 0.2
Minority interest 0.2 -0.2 -0.4 -0.5 -0.1 -0.2
Consolidated result for the period
2.3 2.6 2.1 -1.6 -9.3 -6.2
