Raute Corporation - Financial statements January 1 - December 31, 2013

RAUTE CORPORATION FINANCIAL STATEMENTS RELEASE FEBRUARY 13, 2014 AT 9:00 A.M.


RAUTE CORPORATION - FINANCIAL STATEMENTS JANUARY 1 - DECEMBER 31, 2013

- The Group’s net sales amounted to EUR 83.3 million (MEUR 101.3), down 18% on the comparison period. The order intake was EUR 63 million (MEUR 116).
- Operating profit was EUR +1.8 million (MEUR +5.0). Result before taxes was EUR +1.6 million (MEUR +4.8).
- Undiluted earnings per share were EUR 0.30 (EUR +0.75) and diluted earnings per share were EUR 0.30 (EUR +0.74).
- Fourth-quarter net sales amounted to EUR 24.5 million and the operating result was EUR 1.5 million. Order intake was EUR 22 million and the order book stood at EUR 28 million (MEUR 50) at the end of the reporting period.
- Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.20 (EUR 0.50) per share be paid for the financial year 2013.
- Board of Directors will propose to the Annual General Meeting that EUR 0.30 per share (EUR 0.00) be distributed from the non-restricted equity reserve as repayment of equity.
- Raute’s net sales are expected to grow in 2014 and operating profit is anticipated to improve over the year 2013.
 

TAPANI KIISKI, PRESIDENT AND CEO: SPRINT TO THE FINISH LINE AND GROWTH EXPECTATIONS

The development that took place during the final quarter of 2013 was dual in nature. Measured in net sales and operating profit, the fourth quarter was the best quarter of 2013, a successful sprint to the finish line that we had been expecting based on the timing of our order book. The order intake returned almost to its normal level without any major individual orders, but the order book weakened somewhat regardless of this. Due to the order book situation and uncertainty related to the timing of new deliveries, we took the decision to carry out personnel adjustment measures at Nastola and Jyväskylä in order to prepare for the expected underloading in some of our operations early this year.

The low order intake level in project deliveries for 2013 was a disappointment to us, especially on the part of the first and third quarters. My expectations for positive development in the emerging markets in Russia and Asia still failed to materialize. No decisions were made concerning significant capacity-increasing investments at the planning and negotiation stage. The market situation experienced by the plywood and LVL mills and, above all, the financing-related problems of our customers prevented the implementation of projects. North America was the only major market area in which we achieved positive results. The capacity utilization rates of our customer industries remained high throughout the year, which was apparent in the growing demand for our technology services.

Net sales for the whole of 2013 decreased 18 percent from the previous year. The growth of 13 percent experienced by technology services was not sufficient to compensate for the decrease in net sales that accumulated from large project deliveries. Due to the decrease in net sales, we were unable to achieve the previous year’s level that we had estimated for our 2013 operating profit. This serves as a reminder to us that we need to further develop our ability to adapt faster to changes in the market situation.

We have high expectations for 2014. The uncertainty that we still face in market development seems to have become the new status quo, but, based on our current order book and ongoing negotiations, we estimate that there is potential for growth in project deliveries in Europe, Russia and Asia. We also believe that technology services will continue to grow strongly. My estimate is that a number of major projects that have long been under negotiation will start up during the first part of the year, and that they will contribute to bringing Raute back on track in financial performance. Furthermore, I am certain that some of our product development projects will reach a phase where they will begin to pay themselves back.

Raute’s competitiveness and market position are strong. The EUR 8.5 million in contracts signed over the past two months by Raute for developing the various mills of a European plywood manufacturer bears testimony to the company’s long-term cooperation with its customers. We have shifted the focal point of our development projects to improving the cost competitiveness of our products and our operations. The results of this development work will begin to materialize further during 2014. I believe that we will begin to receive orders from areas in which we were not even involved a few years ago. Simultaneously our profitability will improve. We are seeking a clear improvement on the previous year in both net sales and profitability.

I would like to send out a heartfelt thank you to Raute’s customers for their invaluable cooperation and trust, to our personnel for their outstanding work and flexibility in the face of ever-changing challenges, to our shareholders for their continued confidence in us, and to all our other partners for their role in furthering Raute’s development and success.
 

FOURTH QUARTER OF 2013

Order intake and order book

The order intake, EUR 22 million (MEUR 12), achieved a close-to-normal average level in the fourth quarter without any new major individual orders being placed. Technology services accounted for EUR 11 million (MEUR 8) of the order intake.

The order book weakened during the fourth quarter by EUR 3 million, amounting to EUR 28 million at the end of 2013 (MEUR 50).

Net sales

Fourth-quarter net sales amounted to EUR 24.5 million (MEUR 33.9). Technology services accounted for 35 percent of total net sales (28%). Net sales increased 57 percent from the third quarter in line with the order book’s timing.

Result and profitability

Operating profit in the fourth quarter was EUR 1.5 million positive (MEUR 3.1 positive) and accounted for 6 percent (9%) of net sales. The result was EUR 0.9 million positive (MEUR 2.0 positive), and earnings per share were EUR 0.23 (EUR +0.49). Profitability improved in comparison with the previous quarters, which resulted from increased net sales.

RAUTE CORPORATION - FINANCIAL STATEMENTS JANUARY 1- DECEMBER 31, 2013

BUSINESS ENVIRONMENT

Market situation in customer industries

Raute’s customers in the veneer, plywood and LVL (Laminated Veneer Lumber) industries are engaged in the manufacture of wood products used in investment commodities and are thus highly affected by fluctuations in construction, housing-related consumption, international trade, and transportation.

The uncertainty related to the global economy and financial markets continued in 2013. For Raute’s customer industries, the market situation continued to be uncertain in several market areas.

Demand for wood products technology and technology services

In 2013, no major capacity-increasing projects were initiated by Raute’s customers. Investments were focused on relatively small machine and equipment investments and modernizations. Several large projects encompassing single production lines and mill-scale deliveries that are in the planning and negotiation phase were pending and in the negotiation phase throughout the year but the requirements for making the investment decisions, i.e. trust in the permanence of demand and the availability of funding, did not yet materialize.

Demand for maintenance and spare parts services continued at a good level. This bears testimony to the fact that the utilization rates of Raute’s customers’ production facilities remained good.

ORDER INTAKE AND ORDER BOOK

Raute serves the wood products industry with a full-service concept based on service that encompasses the entire life cycle of the delivered equipment. Raute’s business consists of project deliveries and technology services. Project deliveries comprise complete production machinery for new mills, production lines and individual machines and equipment. Additionally, Raute’s full-service concept includes comprehensive technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations as well as consulting, training and reconditioned machinery.

The order intake for 2013 stood at EUR 63 million (MEUR 116). The order intake decreased by 45 percent on the previous year as a result of a lack of capacity-generating mill projects. The order intake grew or remained on a par with the previous year’s level in all market areas when comparing 2013 with the previous year minus any new capacity-generating orders. North America achieved the largest relative growth.

35 percent of the new orders came from Europe (31%), 25 percent from North America (6%), 23 percent from Russia (12%), 13 percent from South America (48%) and 4 percent from Asia-Pacific (3%). The strong fluctuations in the distribution of new orders between the various market areas are typical for project-focused business.

The order intake for project deliveries stood at EUR 29 million (MEUR 89) and decreased from the previous year by 68 percent. No new orders related to building new production capacity were received (MEUR 66). A significant proportion of new orders were focused on drying technology and the further processing of dry veneer.

The order intake for technology services stood at EUR 34 million (MEUR 27). The increase in order intake mainly resulted from modernization orders from Europe and North America. Spare parts and maintenance services remained at the previous year’s good level.

COMPETITIVE POSITION

Raute’s competitive position has remained strong. Raute’s solutions help customers in securing their delivery and service capabilities throughout the life cycle of the equipment or service offered by Raute. In such investments, the supplier’s overall expertise and extensive and diverse technology offering play a key role. The competitive edge provided by Raute is also a major draw when customers select their cooperation partners. Raute’s strong financial position and its long-term dedication to serving selected customer industries also enhance its credibility and improve its competitive position as a company that carries out long-term investment projects.

NET SALES

The Group’s net sales amounted to EUR 83.3 million (MEUR 101.3). Net sales declined by 18 percent on 2012. The decline resulted from the low order intake in project deliveries and from the scheduling of our order book.

Net sales were generated by project deliveries related to the wood products technology business and by technology services.

Net sales for project deliveries totaled EUR 51 million (MEUR 73), down 30 percent from the previous year. Net sales remained below those of the previous year in terms of project deliveries related to the construction of new plywood production capacity. Project deliveries accounted for 62 percent of total net sales (72%). The plywood industry’s share of the net sales for project deliveries was 77 percent (93%), while the LVL industry’s share was 23 percent (7%).

Altogether four major new capacity-generating projects were at the installation and commissioning phase during the year, and they have proceeded according to the timetable set by the customer. The LVL mill order received from China in 2010 was completed. The expansion of a South American plywood mill, initiated in 2011, and the rebuilding of a mill destroyed in a fire in early 2012 have reached the commissioning phase. LVL machines ordered in July 2012 were installed in Germany under Raute’s supervision.

Net sales for technology services totaled EUR 32 million (MEUR 28). Net sales grew 13 percent from the previous year and accounted for 38 percent (28%) of total net sales. The increase in net sales was predominantly the result of modernizations.

Europe’s share of total net sales in 2013 was 40 percent (22%), South America’s 22 percent (52%), Russia’s 19 percent (14%), North America’s 14 percent (8%), and Asia-Pacific’s 5 percent (4%).

RESULT AND PROFITABILITY

The Group’s operating profit for 2013 was EUR 1.8 million positive (MEUR 5.0 positive) and accounted for 2 percent of net sales (5%). The profitability of operations declined from the previous year due to a decrease in net sales.

The Group’s financial income and expenses totaled EUR -0.2 million (MEUR -0.3). The Group’s profit before tax was EUR 1.6 million positive (MEUR +4.8) and profit for the financial year was EUR 1.2 million positive (MEUR +3.0). Comprehensive income for the Group was EUR 1.2 million positive (MEUR +3.2).

Undiluted earnings per share were EUR 0.30 (EUR +0.75) and diluted earnings per share were EUR 0.30 (EUR +0.74). Return on investment was 7 percent (15%) and return on equity 5 percent (+13%).

CASH FLOW AND BALANCE SHEET

The Group’s financial position remained good throughout the year. At the end of the financial year, the Group’s cash and cash equivalents exceeded interest-bearing liabilities by EUR 6.7 million (MEUR 8.1). At the end of the financial year gearing was -28 percent (-34%) and equity ratio 57 percent (48%).

The Group’s cash and cash equivalents stood at EUR 12.7 million (MEUR 19.5) at the end of the financial year. The change in cash and cash equivalents during the financial year was EUR 6.8 million negative (MEUR 6.2 negative). Operating cash flow was EUR 3.7 million positive (MEUR 1.9 positive). Cash flow from investment activities totaled EUR 3.2 million negative (MEUR 2.9 negative). Cash flow from financing activities was EUR 7.4 million negative (MEUR 5.2 negative), including dividend payments of EUR 2.0 million (MEUR 1.2 million) and debt repayments of EUR 5.4 million.

The Group’s balance sheet total at the end of the year stood at EUR 48.8 million (MEUR 63.1). Fluctuations in balance sheet working capital items and the key figures based on them are due to differences in the timing of customer payments and the cost accumulation from project deliveries, which is typical of the project business.

Interest-bearing liabilities amounted to EUR 6.0 million (MEUR 11.5) at the end of the financial period, with current interest-bearing liabilities accounting for EUR 3.5 million (MEUR 5.6).

The Parent company Raute Corporation has a EUR 10 million commercial paper program, which allows the company to issue commercial papers maturing in less than one year.

The Parent company Raute Corporation is prepared for future working capital needs and has concluded long-term credit facility agreements with three Nordic banks totaling EUR 23.0 million. The main covenants for the credit facility are an equity ratio of >30% and gearing of <100%. Of the credit facility, EUR 16.9 million remained unused at the end of the financial period. 

LOANS TO RELATED PARTIES AND OTHER LIABILITIES

On December 31, 2013, the Parent company Raute Corporation had loan receivables from its subsidiaries Raute Service LLC in the amount of EUR 355 thousand, Raute (Shanghai) Machinery Co., Ltd in the amount of EUR 550 thousand and Raute Canada Ltd. in the amount of EUR 682 thousand. Other liabilities are presented in the figures section of this report.

EVENTS DURING THE REPORTING PERIOD

Raute Corporation published stock exchange releases on the following events in 2013:

September 4, 2013 Raute's profit outlook for the full year 2013 weakened
September 30, 2013 Raute strengthens its Group Executive Board
November 4, 2013 Raute to initiate co-determination negotiations
November 28, 2013 Co-determination negotiations concluded at Raute.

RESEARCH AND DEVELOPMENT COSTS AND CAPITAL EXPENDITURE

Raute’s goal is to be the leading technology supplier in its field, and to invest strongly in continuous research and development, particularly in plywood and LVL manufacturing technology and the supporting by-product handling, automation and instrumentation applications, especially machine vision.

In 2013, the Group’s research and development costs totaled EUR 2.5 million (MEUR 2.5) and 3.0 percent of net sales (2.5%). In 2013, Raute continued to invest strongly in expanding its newest technology offering to meet the needs of the plywood and LVL industries and the supporting automation and instrumentation applications, especially machine vision. Additionally, the development of products designed for the emerging markets was continued.

The Group’s investments during the financial year totaled EUR 3.2 million (MEUR 3.5). The majority of investments were related to productional investments at the mills in Nastola, Finland, and in China. Investments include EUR 0.6 million in capitalized development costs (MEUR 1.0).

DEVELOPMENT OF OPERATIONS

The development of production and delivery capabilities continued at the new plant in China where increasing the company’s own production capacity enables better control over the quality and delivery times of the components and equipment manufactured in China.

The service ability and profitability of technology services were developed at Raute’s Canadian unit through the implementation of new organizational and operating models.

PERSONNEL

The Group’s headcount at the end of 2013 was 534 (503). Finnish Group companies accounted for 73 percent (74%) of employees, Chinese companies for 14 percent (11%), North American companies for 10 percent (11%), and other sales and service companies for 3 percent (4%).

Converted to full-time employees (“effective headcount”), the average number of employees during the financial year was 515 (480). Salaries and remunerations paid by the Group totaled EUR 22.7 million (MEUR 23.7).

The Group continued to develop the competence of its personnel and increase their commitment to the company. 3 percent (2%) of the payroll was invested in personnel training. The “Great Place to Work” project was used to develop Raute as a work community and work environment. The objective of the “Särmä” (Edge) project, which spanned the entire year, is to get Raute’s entire personnel to commit even more strongly to Raute’s customer promise and the better quality of products, services and operations.

At the end of 2013, decisions based on the co-determination negotiations were made to adapt Raute’s operations to the lower order book level and the predicted low order intake in early 2014 as well as to the productional and financial situation resulting from these. The temporary lay-offs of personnel at the company’s Nastola and Jyväskylä units for a maximum of 90 days began in December. The number of lay-offs and their timing will be decided based on order book development and the work load.

REMUNERATION

The Group has remuneration systems in place that cover the entire personnel.

The Annual General Meeting held on March 31, 2010 resolved to issue a maximum of 240,000 stock options. In compliance with the authorization granted by the Annual General Meeting, the Board of Directors issued 13,700 stock options marked with the symbol 2010 A, 7,500 stock options marked 2010 B and 12,000 stock options marked 2010 C to the Group’s key employees during 2013. Of the stock options transferred earlier, 4,200 stock options marked with the symbol 2010 A, 2,500 stock options marked 2010 B and 5,000 stock options marked 2010 C were returned to the company during 2013. The Group’s key personnel held on December 31, 2013 a total of 80,000 stock options marked with the symbol 2010 A, 80,000 stock options marked 2010 B and 80,000 stock options marked 2010 C. The subscription period for stock options marked with the symbol 2010 A began on March 1, 2013. Stock options have not been exercised to subscribe for shares until December 31, 2013. The terms and conditions of the stock option scheme are available on the company’s website.

SOCIETY AND THE ENVIRONMENT

The environment is one of the values that guide Raute’s operations. Raute strives to systematically develop the environmental soundness of its products and services and to reduce the environmental impacts of its operations. The Group abides by the principles of good corporate citizenship, taking into consideration nature and its protection, and how society as a whole operates, while respecting local cultures.

Raute’s operations mainly affect the environment indirectly when the company’s technology is used in the production processes of the wood products industry. Raute’s technology enables the wood products industry to substantially reduce the environmental load caused by its operations through, for example, more efficient use of wood raw materials, additives and energy.

The Group’s own operations do not involve considerable environmental risks that might have a direct impact on the Group’s business operations or financial position. The Nastola main production units manage environmental matters in compliance with a certified environmental system. The operations and ethical principles of the partner and subcontractor network are also subjected to systematic inspection.

Raute aims to continuously reduce energy consumption, decrease the volume of waste, and develop the working environment.

SEASONAL FLUCTUATIONS IN BUSINESS

The Group’s net sales and working capital fluctuate every quarter due to different types of project deliveries and their schedules. Business operations do not involve regular seasonal changes.

RISKS AND RISK MANAGEMENT

The Group’s identified key risk areas relate to the nature of the business, the business environment, financing, and damage or loss. The fluctuation in demand resulting from economic cycles and delivery and technology risks have been identified as the Group’s most significant business risks. 

The uncertainty related to the development of the global economy and financial markets maintains short-term risks. The most significant risks for Raute are related to the development of net sales and profitability.

The Group has no ongoing legal proceedings or other disputes in progress that might materially affect the continuity of business operations, nor is the Board of Directors aware of any other legal risks related to the Group’s operations that might have such an effect.

Business risks

Impact of economic cycles on business operations

Raute’s business operations are characterized by the sensitivity of investment demand to fluctuations in the global economy and the financing markets, and the cyclical nature of project business. The impact of changes in demand on the Group’s result is reduced by increasing the share of technology services, increasing operations in market areas with a small current market share, creating products for completely new customer groups and developing the partner network.

Deliveries and technology

The bulk of Raute’s business operations consists of project deliveries, which expose the company to risks caused by customer-specific solutions related to each customer’s end product, production methods or raw materials. At the quotation and negotiation phase, the company has to take risks relating to the promised performance figures and make estimates of implementation costs.

Raute invests heavily in product development. The developmental phase for new technologies involves the risk that the project will not lead to a technologically or commercially acceptable solution. The functionality and capacity of new solutions produced as a result of development work cannot be fully verified until the solutions can be tested under production conditions in conjunction with the customer deliveries.

Contract, product liability, implementation, cost and capacity risks are managed using project management procedures that comply with the company’s ISO-certified quality system. Technology risks are reduced by the conditions of delivery contracts and by restricting the number of simultaneous first deliveries.

Emerging markets

Raute’s objective is to increase its local business in China and Russia, among others, where, besides opportunities, companies face risks typical for emerging markets. Information security risks are managed according to a defined information security policy.

Human resources

Competence retention and development and ensuring the sufficiency of human resources are particularly important in cyclical business. Continuity is ensured by monitoring the development of the age structure, implementing systematic human resources management and investing in well-being at work.

Financing risks

The most significant financing risks in the Group’s international business operations are default risks and currency risks related to counterparties. The Group is also exposed to liquidity, refinancing, interest rate and price risks.

The default risk relating to customers’ solvency is managed by covering the unpaid sum with bank guarantees, letters of credit or other securities. The Group’s liquid assets are mainly held in banks in the Nordic countries.

The Group’s main currency is the euro. The most significant currency risks result from the following currencies: Chinese yuan (CNY), Russian ruble (RUB), Canadian dollar (CAD) and US dollar (USD). The main hedging instruments used are foreign currency forward contracts. Currency clauses are included in quotations to hedge against currency risks during the quotation period. Depending on the case, currency risks related to preliminary sales contracts are hedged with currency option contracts.

The Group has made preparations for fluctuating working capital requirements and possible disturbances in the availability of money through long-term credit facility agreements with three Nordic banks. The interest rate risk related to the company’s variable interest rate loans is hedged with interest rate swaps. The Group’s interest risks are mainly related to the return on liquid assets.

Risks of damage or loss

Raute’s most significant single risks concerning material damage and business interruption loss are a fire or a serious machine or information system breakdown at the Nastola main unit, where the production, planning, financial, and ERP systems serving the Group’s key technologies are centrally located.

Other risks of damage or loss include occupational safety risks, which are managed by means of active risk-prevention measures, such as continuous personnel training and investigation of all near-miss situations. Occupational safety and ergonomics are under continuous development.

Raute’s production operations do not involve significant environmental risks. The main unit in Nastola has an ISO-certified environmental management program, whose principles are also adhered to in other units.

The Group hedges against risks of damage or loss by assessing its facilities and processes in terms of risk management and by maintaining emergency plans.

Global and local insurance programs are checked regularly as part of overall risk management. The objective is to use insurance policies to sufficiently hedge against all risks that are reasonable to handle through insurance due to economic or other reasons.

Organizing risk management

Raute’s risk management policy is approved by the Board of Directors. The Board is responsible for organizing internal control and risk management, and for monitoring their efficiency.

The Executive Board defines the Group’s general risk management principles and operating policies, and defines the boundaries of the organization’s powers. The President and CEO and the CFO regularly report significant risks to the Board.

The Group’s President and CEO controls the implementation of the risk management principles in the entire Group, while the Presidents of the Group companies are responsible for risk management in their respective companies. The members of the Group’s Executive Board are responsible for their own areas of responsibility across company boundaries.

Raute has no separate internal auditing organization. The Controller function oversees the annual internal control plan approved by the Board, develops internal control and risk management procedures together with the operative leadership, and monitors compliance with risk management principles, operational policies and powers.

GROUP STRUCTURE

No changes took place in the Group’s legal structure during 2013.

SHAREHOLDERS

The number of shareholders totaled 1,682 at the beginning of the year and 1,915 at the end of the year. Series K shares were held by 49 private individuals (49) at the end of the financial year. Nominee-registered shares accounted for 3.1 percent (3.3%) of shares. No flagging notifications were given to the company in 2013.

On December 31, 2013, the Board of Directors and the Group’s President and CEO held altogether 226,959 company shares, totaling 5.7 percent (5.7%) of the company shares and 11.2 percent (11.2%) of the votes. The figures include the holdings of their own, minor children and control entities.

AUDITORS

At Raute Corporation’s Annual General Meeting on April 8, 2013, the authorized public accounting company PricewaterhouseCoopers was chosen as auditor with Authorized Public Accountant Janne Rajalahti as the principal auditor.

CORPORATE GOVERNANCE

Raute Corporation complies with the Finnish Corporate Governance Code 2010 for listed companies issued by the Securities Market Association on June 15, 2010.

Raute deviates from the Code’s recommendation 22 on appointing members to the Appointments Committee in that one member to the Committee is elected from outside the Board of Directors, as per the company’s Administrative Instructions, from among the representatives of major shareholders who have significant voting rights. The Board views this exception as justified, taking into consideration the company’s ownership structure and the possibility to consider the expectations of major shareholders as early as in the preparation phase of selecting members of the Board of Directors. 

Raute deviates from recommendation 9 on the number, composition and competence of the directors in that the company does not have both genders represented on the Board. When seeking new members, the Appointments Committee was unable to find any available female candidates fulfilling the criteria set for the members of the Board of Directors.

An outline of Raute Corporation’s corporate governance principles and the company’s remuneration statement will be published together with the financial statements.

CORPORATE GOVERNANCE STATEMENT

Raute Corporation’s Board of Directors has handled Raute Corporation’s Corporate Governance Statement for 2013 according to chapter 7, section 7 of the Finnish Securities Markets Act and recommendation 54 of the Finnish Corporate Governance Code 2010 for listed companies issued by the Securities Market Association on June 15, 2010. The statement has been drawn up separately from the Report of the Board of Directors and will be published together with the financial statements.

BOARD OF DIRECTORS AND PRESIDENT AND CEO

The Annual General Meeting elects the Chairman and Vice-Chairman for the Board of Directors, and 3–5 Board members.

At Raute Corporation’s Annual General Meeting on April 8, 2013, Mr. Erkki Pehu-Lehtonen was elected Chairman of the Board, Mr. Mika Mustakallio Vice-Chairman and Mr. Joni Bask, Mr. Risto Hautamäki, Mr. Ilpo Helander and Mr. Pekka Suominen as Board members.

The Board of Directors appoints the President and CEO and confirms the terms of his or her employment, including fringe benefits.

Mr. Tapani Kiiski, Licentiate in Technology, continued as Raute Corporation’s President and CEO. He was appointed as Raute Corporation’s President and CEO on March 16, 2004. As agreed in the executive contract, the term of notice is six months, and the severance pay equals twelve months’ salary.

Raute Corporation’s Articles of Association do not grant any unusual authorizations to the Board of Directors, or to the President and CEO.

Any decisions on changes to the Articles of Association or an increase in share capital are made in compliance with the regulations of the effective Companies Act.

EXECUTIVE BOARD

Raute’s Board of Directors appointed two new members to its Executive Board as of October 1, 2013. Raute Group’s Executive Board and the members’ areas of responsibility:

- Tapani Kiiski, President and CEO, Chairman – Sales
- Arja Hakala, Group Vice President, Finance, CFO – Finance and administration 
- Marko Hjelt, Group Vice President, Human Resources – Human resources and competence development (as of October 1, 2013)
- Mika Hyysti, Group Vice President, Technology – Technology, products and R&D (October 1, 2013)
- Timo Kangas, Group Vice President, Customer Care – Customer relationships and marketing, market area EMEA
- Petri Lakka, Group Vice President, Technology Services – Technology services
- Petri Strengell, Group Vice President, Operations – Project deliveries and operations.

SHARES

The number of Raute Corporations shares at the end of 2013 totaled 4,004,758, of which 991,161 were series K shares (ordinary share, 20 votes/share) and 3,013,597 series A shares (1 vote/share). The shares have a nominal value of 2 euros. Series K and A shares confer equal rights to dividends and company assets.

Series K shares can be converted to series A shares under the terms set out in section 3 of the Articles of Association. If an ordinary share is transferred to a new owner who has not previously held series K shares, the new owner must notify the Board of Directors of this in writing and without delay. Other holders of series K shares have the right to redeem the share under the terms specified in Article 4 of the Articles of Association.

Raute Corporation’s series A shares are listed on NASDAQ OMX Helsinki Ltd. The trading code is RUTAV. During 2013, 513,699 shares were traded (302,096) worth altogether EUR 4.4 million (MEUR 2.4). The number of shares traded represents 17 percent (10%) of all listed series A shares. The average price of a series A share was EUR 8.49 (EUR 8.22). The highest closing price of the year was EUR 9.33 and the lowest EUR 6.88.

The company’s market capitalization at the end of 2013 totaled EUR 27.8 million (MEUR 36.0), with series K shares valued at the closing price of series A shares, EUR 6.95 (EUR 9.00), on December 31, 2013.

Raute Corporation has signed a market making agreement with Nordea Bank Finland Plc in compliance with the Liquidity Providing (LP) requirements issued by NASDAQ OMX Helsinki Ltd.

Other share-related information is presented in the figures section of this report.

RAUTE’S DIVIDEND POLICY

Raute exercises an active dividend policy. Its aim is to ensure competitive returns for its investors. Dividend payment takes into account future investment needs and the goal of maintaining a solid equity ratio. Due to the nature of the project business, the dividend is not directly tied to the annual result.

DIVIDENDS FOR THE 2012 FINANCIAL YEAR

The Annual General Meeting held on April 8, 2013 decided to pay a dividend of EUR 0.50 per share for the financial year 2012. The dividends amounted to a total of EUR 2.0 million, of which series A shares accounted for EUR 1,506,798.50 and series K shares for EUR 495,580.50. The dividend payment date was April 18, 2013.

AUTHORIZATION OF REPURCHASE AND DISPOSAL OF OWN SHARES

The Annual General Meeting held on April 8, 2013 authorized the company’s Board of Directors to decide on the repurchase of Raute Corporation series A shares with assets from the company’s non-restricted equity and to decide on a directed issue of a maximum of 400,000 shares. The Board of Directors did not exercise the authorization in 2013. The company did not possess company shares at the end of the financial period or hold them as security.

EVENTS AFTER THE FINANCIAL YEAR

Raute Corporation published stock exchange releases on the following events in 2014:

January 28, 2014 Appointments Committee's proposal for the composition of Raute Corporation's Board of Directors
February 12, 2014 The Board of Directors of Raute has decided to establish a long-term share based incentive program for the top management.

PUBLICATION OF THE FINANCIAL STATEMENTS AND ANNUAL REPORT 2013

Raute Corporation’s consolidated financial statements 2013 will be published on February 13, 2014. Raute Corporation’s Annual Report 2013 will be published during week 9.

ANNUAL GENERAL MEETING 2014

Raute Corporation’s Annual General Meeting will be held at Lahti’s Sibelius Hall on Monday March 31, 2014 at 6:00 p.m. A shareholder who wishes to include an issue in Raute Corporation’s Annual General Meeting’s agenda shall notify the company thereof in writing no later than February 21, 2014.

THE BOARD OF DIRECTORS’ PROPOSAL FOR PROFIT DISTRIBUTION, DIVIDEND EUR 0.20 PER SHARE

The Parent company’s distributable funds total EUR 13,804 thousand, of which the profit for the financial year January 1 – December 31, 2013 is EUR 1,312 thousand.

The Board of Directors will propose to Raute Corporation’s Annual General Meeting, to be held on March 31, 2014 that a dividend of EUR 0.20 per share be paid for series A shares and series K shares for the financial year 2013, and that the remainder of distributable funds be transferred to equity.

At the date of the proposal for profit distribution, there are a total of 4,004,758 shares entitled for the dividend, i.e. the total amount of dividends would be EUR 801 thousand. The dividend would be paid to a shareholder registered in the company’s shareholders’ register held by Euroclear Finland Ltd on the record date for dividend distribution, April 3, 2014. The payment date would be April 10, 2014.

No essential changes have taken place in the company’s financial position since the end of the financial year. The company has good liquidity, and in the Board of Director’s view, the proposed profit distribution does not pose a risk to solvency.

THE BOARD OF DIRECTORS’ PROPOSAL FOR DISTRIBUTION OF ASSETS FROM THE NON-RESTRICTED EQUITY RESERVE, EUR 0.30 PER SHARE

The Board of Directors will propose to Raute Corporation’s Annual General Meeting, to be held on March 31, 2014 that the Annual General Meeting would resolve to distribute EUR 0.30 per share from the non-restricted equity reserve as repayment of equity. The repayment of equity would be paid to a shareholder registered in the company’s shareholders’ register held by Euroclear Finland Ltd on the record date April 3, 2014. The payment date would be April 10, 2014.

OUTLOOK FOR 2014

Raute’s business operations are characterized by the sensitivity of investment commodity demand to cyclical fluctuations in the global economy and the financial markets.

The development of the global economy and financial markets is still facing major uncertainty and the market situation for Raute’s customer industries is expected to remain unpredictable.

However, improvement investments in the plywood industry to ensure quality and cost competitiveness and to maintain market shares are expected to be at a reasonable level in the near future, provided that the economic uncertainty does not spiral into a new crisis. Several large projects encompassing single production lines and mill-scale deliveries that are in the planning and negotiation phase are also pending.

Thanks to its strong financial and market position and the development measures carried out, Raute is well positioned to respond to demand once the markets recover.

In the prevailing global economic and financial market situation, Raute will have opportunities in 2014 to achieve growth in project deliveries especially in Europe, Russia and Asia. The strong growth in technology services is expected to continue. Based on the order book and ongoing negotiations, Raute’s net sales are expected to grow in 2014 and operating profit is anticipated to improve over the year 2013.
 

SUMMARY OF FINANCIAL STATEMENTS AND NOTES

The figures for the financial years 2012 and 2013 presented in the figures section of the financial statements bulletin have been audited. The presented interim financial report figures have not been audited.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information

Raute Group is a globally operating technology and service company. Raute's customers are companies operating in the wood products industry that manufacture veneer, plywood and LVL. Raute's technology offering covers machinery and equipment for the entire production process. Raute's full-service concept is based on product life-cycle management. In addition to a broad range of machines and equipment, our solutions cover technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations. Raute's head office is located in Nastola, Finland. Its other production plants are in the Vancouver area in Canada, in the Shanghai area in China, and in Kajaani, Finland. The company's sales network has a global reach.

Raute Group's Parent company, Raute Corporation, is a Finnish public limited liability company established in accordance with Finnish law (Business ID FI01490726). Its series A shares are quoted on NASDAQ OMX Helsinki Ltd, under Industrials. Raute Corporation is domiciled in Lahti. The address of its registered office is Rautetie 2, FI-15550 Nastola, and its postal address is P.O. Box 69, FI-15551 Nastola.

Raute Corporation's consolidated financial statements information is available online at www.raute.com or at the head office of the Parent company, Rautetie 2, FI-15550 Nastola, Finland.

Raute Corporation's Board of Directors has on February 13, 2014 reviewed the consolidated financial statements for January 1 - December 31, 2013, and approved it to be published in compliance with this release.

2. Accounting principles

Raute Corporation's financial statements bulletin January 1 – December 31, 2013 has been prepared in accordance with standard IAS 34 Interim Financial Reporting. The financial statements bulletin does not contain full notes and other information presented in the financial statements. Raute Corporation's financial statements with full notes will be published on February 13, 2014.

Raute Corporation's financial statements bulletin for January 1 - December 31, 2013 has been prepared in accordance with the International Financial Reporting Standards, IFRS, accepted for application in the EU. Preparations have complied with the IAS and IFRS standards, as well as SIC and IFRIC interpretations, effective on December 31, 2013. The notes to the financial statements bulletin also comply with Finnish accounting legislation.

The financial statements bulletin has been prepared according to the same accounting principles as those applied in the Annual financial statements for 2012, with the exception of standard IAS 19 Employee benefit. The amendment of the Employee benefit standard had an impact on the recognition, measurement and presentation of the post-employment benefits, and also to the notes to the financial statements. The figures of the comparison year 2012 have been adjusted according to the revised standard IAS 19 Employee benefits. The effect of the standard in the equity has been presented in the note number 14 to the financial statements bulletin.

All of the figures presented in the consolidated financial statements are in thousand euro, unless otherwise stated. Due to the rounding of the figures in the financial statements tables, the sums of figures may deviate from the sum total presented in the table. Figures in parentheses refer to the corresponding figures in the comparison period.  

The preparation of Interim financial report in conformity with IFRS standards requires management to make certain critical accounting estimates and to exercise its judgment in applying the Group's accounting policies. Because the forward-looking estimates and assumptions are based on management's best knowledge at the reporting date, they comprise risks and uncertainties. The actual results may differ from these estimates.

3. Segment information

Operational segment

Continuing operations of Raute Group belong to the wood products technology segment.

Due to Raute's business model, operational nature and administrative structure, the operational segment to be reported as wood products technology segment is comprised of the whole Group and the information on the segment is consistent with that of the Group. Segment reporting follows the principles of presentation of the consolidated financial statements.

4. Net sales

The main part of the net sales is comprised of project deliveries related to wood products technology and modernizations in technology services, which are treated as long-term projects. The rest of the net sales is comprised of technology services provided to the wood products industry such as spare parts and maintenance services as well as services provided to the development of customers' business.

Project deliveries and modernizations related to technology services include both product and service sales, making it impossible to give a reliable presentation of the breakdown of the Group's net sales into purely product and service sales.

Large delivery projects can temporarily increase the shares of various customers of the Group’s net sales to more than ten percent. At the end of the period, the Group had two customers (2), whose customized share of the Group's net sales temporarily exceeded ten percent. The total share of these customers was 28 percent.

11. Related party transactions

No loans are granted to the company's management. On December 31, 2013, the Parent Company Raute Corporation had loan receivables from the subsidiary Raute Service LLC EUR 355 thousand (EUR 355 thousand), from Raute (Shanghai) Machinery Co., Ltd EUR 550 thousand and from Raute Canada Ltd. EUR 682 thousand (EUR 391 thousand).

No pledges have been given or other commitments made on behalf of the company's management and shareholders.

13. Share-based payments

The fair value of the options granted according to the 2010 stock option plan is recognized as an expense in the income statement during the earning period of the options. An expense of EUR 199 thousand (EUR 177 thousand) was recognized for the options to the income statement during the period.

14. Effects of adopting the amended IAS 19 standard

The Group has applied IAS 19 standard amendment as of January 1, 2013. According to the revised standard net interest expense or income of the net defined benefit liability or receivable has been defined using the discount rate estimated in the beginning of the financial year. Expected return on plan assets has not been recognized.

15. Financial assets and liabilities that are measured at fair value

At the end of the reporting period December 31, 2013, the fair value of the financial assets categorized at fair value on hierarchy level 3 was EUR 500 thousand. The methods of fair value determination correspond the valuation principles presented in the Annual financial statements for 2012. There were no transfers between the hierarchy levels 1 and 2 during the reporting period.

17. The Board of Directors' proposal for dividend distribution and measures concerning the result of 2013

The Board of Directors will propose to Raute Corporation's Annual General Meeting 2014, to be held on March 31, 2014, that a dividend of EUR 0.20 per share be paid for the financial year 2013, and that the remainder of distributable funds be transferred to equity. At the date of the proposal for profit distribution, there are a total of 4,004,758 shares entitled for the dividend, i.e. the total amount of dividends would be EUR 801 thousand.

The Board of Directors will propose to the Annual General Meeting that the Annual General Meeting would resolve to distribute EUR 0.30 per share from the invested non-restricted equity reserve as repayment of equity.