Raute Corporation - Financial statements January 1 - December 31, 2015

RAUTE CORPORATION FINANCIAL STATEMENT RELEASE FEBRUARY 16, 2016 AT 9:00 A.M.

RAUTE CORPORATION – FINANCIAL STATEMENTS JANUARY 1 – DECEMBER 31, 2015

- The Group’s net sales amounted to EUR 127.3 million (MEUR 94.0), up 35% on the comparison period. Order intake, at EUR 145 million (MEUR 112), increased 30%. The order book at the end of the year, EUR 60 million (MEUR 44), stood at a good level.
- Operating profit, at EUR +8.1 million (MEUR +2.6), more than tripled from the previous year. Result before taxes was EUR +8.1 million (MEUR +2.8).
- Undiluted earnings per share were EUR 1.65 (EUR +0.59) and diluted earnings per share were EUR 1.64 (EUR +0.59).
- Fourth-quarter net sales amounted to EUR 39.5 million and the operating result was EUR 2.8 million. Order intake was low at EUR 16 million.
- The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.80 (dividend EUR 0.40 and repayment of equity EUR 0.20) per share be paid for the financial year 2015.
- Raute’s net sales and operating profit for 2016 are expected to remain at the same level as in 2015.

TAPANI KIISKI, PRESIDENT AND CEO: 2015 A RECORD YEAR

I am pleased with our performance in 2015. Order intake, net sales and operating profit were all at a record high. Our profitability shows a threefold improvement on the previous year, owing to the increased net sales but also to the development measures we implemented. The order intake is an indication of our customers’ confidence and of our good competitiveness, while the increased net sales prove that our delivery ability and the flexibility of our capacity are in order. And the improved result shows that “our engine keeps on running while there is fuel”! There is still room for improvement, but we are in a good position to move forward.

Economic development in our main markets did not make our job easier. Europe’s economy shows modest growth, but the large number of orders is largely the result of our customers making strategic acquisitions in 2015. In North America strong economic growth continued, but construction activity remained at a low level. Although major South American countries suffer from a poor economic situation, exchange rates and new, competitive productions plants help our customers succeed in the export markets. In Asia, the slowdown of China’s economic growth has caused more wide-spread uncertainty, and in Russia the weak economy and political uncertainty delay the implementation of investments. We have our long-term co-operation with our customers, aimed at promoting their success, and their solid business and confidence in the future to thank for our successes last year.

We are particularly happy with the record-high net sales in the last quarter of 2015. They are proof that our development projects in the last few years have been successful. Our operating profit was also at a good level, although it did not reach the record-high level of the last quarter of 2014. Our project portfolio’s structure and timing differed from the situation at the end of 2014. We decided to discontinue a new technology development project, aimed at expanding and increasing our business. This resulted in impairments of balance sheet items and thus in a weaker financial result. We arrived at this decision due to technical problems and changes in the market situation. In spite of the risks related to product development, we believe that R&D investments are necessary to support the company’s growth and future competitive position. As proof of this we have made a one-and-a-half times large investment in our future, measured as R&D expenditure, than in the previous year.

Despite the relatively low order intake at the end of the year, our order book remains at a good level. Our customers in many market areas are preparing investments of different sizes, including mill-scale investments. I am also confident that our input into emerging market products will generate growth in the current year. Demand for our technology services, in particular spare parts, remained good throughout last year, which is an indication of the good capacity utilization rates of our customers’ production plants. Based on this setup, I am confident that we will be able to maintain last year’s level in terms of both net sales and profit in 2016.

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 under the significantly heavier workload, 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 2015

Order intake and order book

Order intake at EUR 16 million (MEUR 23) remained low. Technology services accounted for EUR 10 million (MEUR 10) of the order intake.

Raute’s customers have several large-scale projects in the planning phase, none of which led to an actual investment decision during the fourth quarter. Several individual production line orders and modernization projects were also further postponed.
The order book weakened during the fourth quarter by EUR 23 million, but remained at a good level, EUR 60 million (MEUR 44), at the end of 2015.

Net sales

Fourth-quarter net sales amounted to a new record at EUR 39.5 million (MEUR 34.0). Net sales increased 26 percent from the third quarter in line with the order book’s timing. The proportion of technology services fell to 25 percent (28%) of net sales as a result of a strong increase in project deliveries.

Result and profitability

Operating profit in the fourth quarter was EUR 2.8 million positive (MEUR 3.6 positive) and accounted for 7 percent (11%) of net sales. The operating profit included a total of EUR 0.6 million in costs related to the development of new business for Raute. The operating profit was further weakened by a credit loss of EUR 0.5 million, which was related to an estimate of a single client’s solvency. The result was EUR 2.4 million positive (MEUR +3.2), and undiluted earnings per share were EUR 0.58 (EUR +0.80). Profitability improved in comparison with the previous quarters, which resulted from increased net sales.

RAUTE CORPORATION – FINANCIAL STATEMENTS JANUARY 1–DECEMBER 31, 2015

BUSINESS ENVIRONMENT

Market situation in customer industries

Raute’s customers in the plywood and LVL industries are engaged in the manufacturing of wood products used in investment commodities and thus highly affected by fluctuations in the fields of construction, housing-related consumption, international trade, and transportation.

The situation in the global economy and the financial markets during 2015 did not change considerably with respect to Raute or Raute’s customer base. Over the last few months of the year the uncertainty linked to global economic development increased, in particular due to weaker-than-usual economic reports from China and political unrest in a number of regions.

Europe’s economy has continued to strengthen slightly. Russia’s development has remained weak and according to market data, Russian plywood manufacturers have reduced their prices especially on the European markets to compensate for a weakening in domestic demand. China’s measures to strengthen its economy have not as yet materialized as increased investments among Raute’s customers. The domestic markets of major South American countries were weak. In part due to weaker currencies, Chilean and Brazilian plywood manufacturers have increased their exports to Europe and North America.

Construction activity has remained at a low level in all market areas, including North America, where the economy in general continues its positive growth. Due to the market situation described above, Raute’s customers’ order books have remained short, which has not made for an attractive environment for implementing investments.

Demand for wood products technology and technology services

Unusually, altogether three major mill-scale capacity-generating projects were begun in Europe in 2015.

In addition to the projects started up during the first half of the year 2015, several large projects are still in the planning and negotiation phase in various market areas 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. The market impact of the projects announced during the first half of the year may also defer the implementation of projects currently at the planning phase. The increased uncertainty in the economic and market situation following the summer also slowed down decision-making concerning some investment projects.

Even though the North American economy continued to experience strong growth compared to the rest of the world, the growth of the construction industry has been clearly slower. Among Raute’s customers, demand focused on smaller modernization projects and technology services, as well as on individual replacement and efficiency-improving investments.

The political uncertainty resulting from the crisis in Ukraine, the weak economic development resulting from low oil and raw material prices, the weakening of the ruble and the difficulty of securing financing due to the economic sanctions have caused investment decisions to be postponed in the Russian markets. However, many investments are still being prepared actively. The normalization of the market situation in Russia is not expected to happen anytime soon.

In South America, Raute’s customers continued to focus on ramping up the capacity of the large plywood mill investments they made a few years ago and finding markets for their new production capacity. No new major investment projects were started up. Replacement investments also remained at a low level.

The weakening of China’s economic development slowed down decision-making concerning a number of pending projects. This also impacted the rest of Asia and even the entire world.

Demand for maintenance and spare parts services remained at a good level through the year. This bears testimony to the fact that the utilization rates of Raute’s customers’ production facilities remained, for the most part, 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 encompass projects from individual machine or production line deliveries to deliveries of all the machines and equipment belonging to a mill’s production process. 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 amounted to EUR 145 million (MEUR 112) during 2015. Of the new orders, 67 percent came from Europe (63%), 15 percent from North America (10%),10 percent from Russia (15%), 5 percent from Asia-Pacific (5%) and 3 percent from South America (7%). 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 105 million (MEUR 73) and increased on the previous year by 44 percent. The new orders included altogether three major capacity-generating mill projects to Europe, which entered into force in the first and second quarters.

Order intake in technology services amounted to EUR 40 million (MEUR 39), 5 percent more than in 2014. The order intake in spare parts increased by 15 percent. In modernizations the order intake was down a quarter as modernization projects in Europe and North America were postponed.
 
At the end of 2015, the order book, EUR 60 million (MEUR 44), was at a good level.
 
COMPETITIVE POSITION

Raute’s competitive position has remained good. Raute’s solutions help customers in securing their delivery and service capabilities throughout the life cycle of the production process or its part. In such investments, the supplier’s overall expertise and extensive and vast and diverse technology offering play a key role. Raute competitive advantages are significant when customers select their cooperation partners. Raute’s strong financial position and 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 in 2015 amounted to EUR 127.3 million (MEUR 94.0). Net sales grew by 35 percent on 2014. The growth in net sales resulted from a higher initial order book than in the comparison year, a large volume of order intake and the timing of the 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 85 million (MEUR 58), up 48 percent from the previous year. Project deliveries accounted for 67 percent (62%) of total net sales. The plywood industry’s share of the net sales of project deliveries was 68 percent (75%), while the LVL industry’s share was 32 percent (25%).

Altogether six major 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 final approval of the order received in July 2012 for the delivery of LVL mill machinery to Germany has been further delayed due to changes made in the production process. The two major orders received from Poland in 2014 progressed to production use and ramping up of production. The three new major orders received in 2015 progressed as planned to the machine and equipment delivery phase and installation phase.

Net sales for technology services totaled EUR 42 million (MEUR 36). Net sales grew 16 percent from the previous year and accounted for 33 percent (38%) of total net sales. The growth took place mainly in modernizations and spare parts.
 
Of the total net sales in 2015, Europe accounted for 66 percent (52%), North America for 13 percent (14%), Russia for 9 percent (18%), South America for 7 percent (13%), and Asia-Pacific for 5 percent (3%).

RESULT AND PROFITABILITY

The Group’s operating profit for 2015 was EUR 8.1 million positive (MEUR 2.6 positive) and accounted for 6 percent of net sales (3%). The operating profit was burdened by impairments totaling EUR 1.2 million, which were caused by the decision to discontinue a R&D project aimed at generating new business for Raute due to technical problems and changes in the market situation. The impact of credit losses on the operating profit was EUR -0.6 million. The fourth quarter accounted for EUR 39.5 million of net sales and operating profit for EUR 2.8 million.

The operating profit showed a threefold increase on the previous year mainly as a result of an increase in net sales and the operational development measures implemented.

The Group’s financial income and expenses totaled EUR -0.0 million (MEUR +0.2). The Group’s profit before tax was EUR 8.1 million positive (MEUR +2.8) and profit for the financial year was EUR 6.7 million positive (MEUR +2.4). Comprehensive income for the Group was EUR 6.8 million positive (MEUR +2.6).

Undiluted earnings per share were EUR 1.65 (EUR 0.59) and diluted earnings per share were EUR 1.64 (EUR 0.59). Return on investment was 28.5 percent (10.9%) and return on equity 24.7 percent (+9.8%).

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 5.0 million (MEUR 1.7). At the end of the financial year gearing was -17 percent (-7%) and the equity ratio was 59 percent (56%).

The Group’s cash and cash equivalents amounted to EUR 6.5 million (MEUR 4.4) at the end of 2015. The change in cash and cash equivalents in the financial year was EUR 2.1 million positive (MEUR 8.1 negative). Operating cash flow was EUR 7.5 million positive (MEUR 1.9 negative). Cash flow from investment activities totaled EUR 2.3 million negative (MEUR 1.1 negative). Cash flow from financing activities was EUR 3.1 million negative (MEUR 5.2 negative). Cash flow from financing activities includes EUR 2.4 million (MEUR 2.0) in dividend payment and repayment of equity from the non-restricted equity reserve, EUR 1.2 million in debt repayments and payments totaling EUR 0.6 million (MEUR 0.0) for series A shares subscribed for using stock options.

The Group’s balance sheet total at the end of 2015 stood at EUR 61.8 million (MEUR 52.6). 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.

The interest-bearing liabilities EUR 1.5 million (MEUR 2.8) at the end of 2015 were current interest-bearing liabilities (MEUR 1.5).

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 20.0 million remained unused at the end of the financial year. 

LOANS TO RELATED PARTIES AND OTHER LIABILITIES

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 2015:

March 5, 2015 Raute received an order worth EUR 30 million to Finland
March 24, 2015 Decisions of Raute’s Annual General Meeting
March 25, 2015 Change in Raute’s Executive Board
March 25, 2015 Raute received a new order worth EUR 31 million to Estonia - Profit outlook improved
March 26, 2015 Raute Corporation applies for listing of its 2010 stock options
April 24, 2015 Raute received a new order worth EUR 13 million to Estonia
May 7, 2015 Share subscriptions with Raute Corporation’s stock options 2010
July 3, 2015 Share subscriptions with Raute Corporation’s stock options 2010
August 4, 2015 Share subscriptions with Raute Corporation’s stock options 2010
October 7, 2015 Share subscriptions with Raute Corporation’s stock options 2010
November 10, 2015 Share subscriptions with Raute Corporation’s stock options 2010
December 21, 2015 Antti Laulainen appointed member of Raute Group’s Executive Board
December 29, 2015 Share subscriptions with Raute Corporation’s stock options 2010.

RESEARCH AND DEVELOPMENT

Raute is a leading technology supplier for the plywood and LVL industries and focuses strongly on the development of increasingly efficient, productive and environmentally friendly manufacturing technology and supporting measurement and machine vision applications. Opportunities provided by digitalization are also an essential part of R&D activities.

In 2015, the Group’s research and development costs totaled EUR 3.1 million (MEUR 1.8) and 2.4 percent of net sales (1.9%).
In 2015, the extensive program aimed at developing automation, measurement systems and machine vision to produce new, more advanced applications for process optimization in the plywood and LVL industries was continued. The new green veneer composing concept, which improves customers’ veneer yield, was successfully tested in production. The Dragon product family, targeted at China’s emerging plywood manufacturing markets, was expanded with an eight-foot peeling line and a veneer dryer. The implementation of IoT-based remote services was continued and expanded together with customers.

At the end of 2015, Raute decided to discontinue a development project aimed at broadening and increasing its business due to technical problems and changes in the market situation. The project accounted for EUR 1.2 million of the impairments. Impairments relating to other ongoing development projects amounted to EUR 0.2 million.

Balance sheet risk associated with new technology and first deliveries declined to EUR 0.5 million (MEUR 2.8) in 2015.

INVESTMENTS

The Group’s investments in 2015 totaled EUR 2.5 million (MEUR 1.7). The investments essentially consisted of replacement investments related to fixed assets. The biggest single investment was the NC boring machine purchased for the Nastola production unit, the acquisition cost of which is partly scheduled for 2016. The Group’s investments include EUR 0.2 million in capitalized development costs (MEUR 0.3).

DEVELOPMENT OF OPERATIONS

In 2015, the strategic development projects focused on ensuring delivery capability and quality. New operating methods and tools have been used to simultaneously implement three major delivery projects.

PERSONNEL

The Group’s headcount at the end of 2015 was 646 (587). Finnish Group companies accounted for 68 percent (67%) of employees, Chinese companies for 16 percent (18%), North American companies for 12 percent (11%), and other sales and maintenance companies for 4 percent (4%).

Converted to full-time employees (“effective headcount”), the average number of employees during the financial year was 614 (530). Salaries and remunerations paid by the Group totaled EUR 28.1 million (MEUR 24.1).

The Group continued to develop the competence of its personnel and increase their commitment to the company. 2 percent (2%) of the payroll was invested in personnel training. In 2015 the focus in personnel development was, on the basis of competence surveys, on the removal of identified bottlenecks in competence and induction of new employees.

REMUNERATION

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

Stock option incentive plan 2010

The Annual General Meeting held on March 31, 2010 resolved to issue a maximum of 240,000 stock options. On December 31, 2015, the Group’s key employees held a total of 94,625 stock options granted under the incentive plan.

Share-based incentive plan 2014–2018

The Group has a valid long-term share-based incentive plan based on performance for the years 2014–2018. The plan includes three separate share plans commencing in 2014, 2015 and 2016. Each plan will span three years. Any share-based reward accrued through the incentive plan shall be paid as series A shares. The value of the reward is based on the development of share price. A total amount of the share-based reward, equaling EUR 377 thousand (EUR 49 thousand), has been recognized as expense for the incentive plan in 2015. No shares were issued under the plan in 2015.

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 plywood and LVL industry. Raute’s technology enables customers to substantially reduce the environmental load caused by their 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 fluctuations in demand resulting from economic cycles and delivery and technology risks have been identified as the Group’s most significant business risks.

Risks in the near term continue to be driven by the uncertainty relating to the global economic situation and the development of the financial markets, as well as by international political instability. The most significant risks for Raute in the near term are related to major mill-scale projects, which are in the implementation phase, in accordance with the schedule determined in contract terms, and the development of the order intake.

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. The balance sheet risk related to new technology and first deliveries amounted to EUR 0.5 million (MEUR 2.8) at the end of 2015.

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 for example in China and Russia, where, besides opportunities, companies face risks typical for emerging markets.

Information security
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 through payment terms and by covering the unpaid sum with bank guarantees, letters of credit or other suitable securities. The Group’s liquid assets are mainly held in banks in the Nordic countries. The credit losses recognized during the financial year amounted to EUR 0.6 million (MEUR 0.0), most of which related to a single client.

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.

Risks of damage or loss

Raute’s most significant single risks concerning material damage and business interruption loss are a fire, a serious machine breakdown and information system breakdown or malfunction 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 economical 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, 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

Raute Corporation’s wholly-owned Chinese subsidiary Raute (Shanghai) Trading Co., Ltd. has been discontinued. Operations in China have been consolidated in another of Raute’s wholly-owned subsidiaries Raute (Shanghai) Machinery Co., Ltd.

SHAREHOLDERS

The number of shareholders totaled 1,991 at the beginning of the year and 2,623 at the end of the financial year. Series K shares were held by 50 private individuals (50) at the end of the financial year. Nominee-registered shares accounted for 3.3 percent (3.1%) of shares. The company did not receive any flagging notifications in 2015.

On December 31, 2015, the Board of Directors and the Group’s President and CEO held altogether 228,479 company shares, totaling 5.6 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 March 24, 2015, the authorized public accounting company PricewaterhouseCoopers was chosen as auditor with Authorized Public Accountant Janne Rajalahti as the principal auditor.

CORPORATE GOVERNANCE

In 2015, Raute Corporation has complied with the Finnish Corporate Governance Code 2010 for listed companies issued by the Securities Market Association on June 15, 2010.

Raute Corporation’s Corporate Governance Statement and the company’s remuneration statement will be published at the same time with the financial statements.

CORPORATE GOVERNANCE STATEMENT

Raute Corporation’s Board of Directors has reviewed Raute Corporation’s Corporate Governance Statement for 2015 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.

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 March 24, 2015, Mr. Erkki Pehu-Lehtonen was elected Chairman of the Board, Mr. Mika Mustakallio Vice-Chairman and Mr. Joni Bask, Mr. Risto Hautamäki, Ms. Päivi Leiwo 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 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
- Mika Hyysti, Group Vice President, Technology – Technology, products and R&D
- Timo Kangas, Group Vice President, Customer Care and Technology Services – Customer relationships and marketing, market area EMEA, and as of April 1, 2015 technology services
- Petri Strengell, Group Vice President, Supply Chain – Sourcing and production
and until April 1, 2015 Petri Lakka, Group Vice President, Technology Services.

SHARES

During 2015, a total of 96,480 new series A shares (10.470 shares) were subscribed for under the 2010 series A, B and C stock option rights.

The number of Raute Corporations shares at the end of 2015 totaled 4,111,708 (4,015,228), of which 991,161 (991,161) were series K shares (ordinary share, 20 votes/share) and 3,120,547 (3,024,067) series A shares (1 vote/share). The shares have a nominal value of two 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. In this kind of situation other holders of series K shares have the right to redeem the series K share under the terms specified in Article 4 of the Articles of Association.

Raute Corporation’s series A shares are listed on Nasdaq Helsinki Ltd. The trading code is RUTAV. During 2015, 1,094,902 shares were traded (593,682) worth altogether EUR 13.1 million (MEUR 4.6). The number of shares traded represents 36 percent (20%) of all listed series A shares. The average price of a series A share was EUR 11.95 (EUR 7.69). The highest closing price of the year was EUR 14.25 and the lowest EUR 7.17.

The company’s market capitalization at the end of 2015 totaled EUR 58.1 million (MEUR 29.3), with series K shares valued at the closing price of series A shares, EUR 14.12 (EUR 7.30), on December 31, 2015.

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

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

RAUTE CORPORATION’S 2010A , 2010 B AND 2010 C STOCK OPTIONS

Raute Corporation’s 2010 stock options have been listed on Nasdaq Helsinki Ltd since April 27, 2015 under the trading codes RUTAVEW110, RUTAVEW210 and RUTAVEW310. The closing prices at the end of 2015 were EUR 8.00 for series A stock options, EUR 5.70 for series B stock options and EUR 6.45 for series C stock options.

In 2015, altogether 54,175 series A shares have been subscribed for with Raute’s series A 2010 stock options, 21,600 with series B stock options and 20,705 with series C stock options.

At the end of 2015, altogether 15,355 series A stock options, 58,400 series B stock options and 54,295 series C stock options had not been exercised. The subscription prices at the end of 2015 were EUR 5.44 for series A stock options, EUR 7.93 for series B stock options and EUR 6.80 for series C stock options. The subscription period ends for series A stock options on March 31, 2016, for series B stock options on March 31, 2017 and for series C stock options on March 31, 2018.

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.

DISTRIBUTION OF PROFIT FOR THE 2014 FINANCIAL YEAR

The Annual General Meeting held on March 24, 2015 decided to pay a dividend of EUR 0.40 per share for the financial year 2014. The dividends amounted to a total of EUR 1.6 million, of which series A shares accounted for EUR 1,209,626.80 and series K shares for EUR 396,464.40. The dividend payment date was April 2, 2015.

The Annual General Meeting on March 24, 2015 resolved, on the basis of the balance sheet adopted in respect of the financial year that ended on 31 December 2014, on the repayment of assets from the invested non-restricted equity reserve in the amount of EUR 0.20 per share, i.e. a total of EUR 803,045.60 and the remainder, EUR 4,536,581.73, to be retained in equity. The date of repayment of equity was April 2, 2015.

AUTHORIZATION OF REPURCHASE AND DISPOSAL OF OWN SHARES

The Annual General Meeting held on March 24, 2015 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 2015.

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 2016:
January 18, 2016   Advance information on Raute Group’s 2015 net sales and operating profit.

PUBLICATION OF THE FINANCIAL STATEMENTS AND ANNUAL REPORT 2015

Raute Corporation’s consolidated financial statements 2015 will be published on February 16, 2016. Raute Corporation’s Annual Report 2015 will be published during week 9.

ANNUAL GENERAL MEETING 2016

Raute Corporation’s Annual General Meeting will be held at Lahti’s Sibelius Hall on Thursday March 31, 2016 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 23, 2016.

BOARD OF DIRECTORS’ PROPOSAL CONCERNING PROFIT DISTRIBUTION, DIVIDEND EUR 0.80 PER SHARE

On December 31, 2015, the Parent Company’s distributable assets totaled EUR 18,482 thousand, of which EUR 7,725 thousand stand for the profit for the financial year 2015.

The Board of Directors will propose to Raute Corporation’s Annual General Meeting, to be held on March 31, 2016, that a dividend of EUR 0.80 per share be paid to holders of series A shares and series K shares for the financial year 2015, and that the remainder of distributable assets be transferred to equity.

On the date of the profit distribution proposal, the number of shares entitling to a dividend is 4,111,708 shares, which would amount to total dividends of EUR 3,289 thousand. Shareholders who are registered in the shareholders’ register maintained by Euroclear Finland Ltd on the record date for dividend distribution, April 4, 2016, are entitled to dividends. The dividend payment date would be April 12, 2016.

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 Directors’ view, the proposed dividend does not pose a risk to solvency.

OUTLOOK FOR 2016

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

The development of the global economy and financial markets is 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 2016. Several large projects encompassing single production lines and new mills’ entire production lines that are in the planning and negotiation phase are also pending. The demand for technology services is expected to continue strong.

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

Based on the existing order book and the prevalent market situation, Raute’s net sales and operating profit for 2016 are expected to remain at the same level as in 2015. New orders will likely focus on the second half of the year.

SUMMARY OF FINANCIAL STATEMENTS AND NOTES

The figures for the financial year 2015 and 2014 presented in the tables section of the financial statements bulletin have been audited. The presented interim financial report figures have not been audited.
 

  *Cash and cash equivalents comprise cash and bank receivables, which will be due within the following three months' period.

NOTES

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 Lahti (formerly Nastola municipality), 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 Helsinki Ltd, under Industrials. Raute Corporation is domiciled in Lahti (formerly Nastola municipality), Finland. 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 statement 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 16, 2016 reviewed the financial statements bulletin for January 1 - December 31, 2015, and approved it to be published in compliance with this release.

2. Accounting principles
Raute Corporation's financial statements bulletin for January 1 - December 31, 2015 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 16, 2016.

Raute Corporation's financial statements bulletin for January 1 - December 31, 2015 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, 2015. 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 statement for 2015, with the exception of certain new or revised standards, interpretations and amendments
to existing standards which the Group has applied as of January 1, 2016.

The impact of the new and revised standards has been presented in the Annual financial statements for 2015. The adoption of these standards has not had an essential impact on the financial statements bulletin.

All of the figures presented in the financial statements bulletin are in thousand euro, unless otherwise stated. Due to the rounding of the figures in the financial statement 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  financial statement bulletin 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 and modernizations in technology services, which are treated as long-term projects. The other 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 sales share of these customers was 35 percent.

13. Share-based payments
An expense of EUR 12 thousand (EUR 99 thousand) was recognized for the options to the income statement during the reporting period.

A total of 96 480 Raute's series A new shares have been subscribed for with Raute's stock options 2010 A, 2010 B and 2010 C during the reporting period. The new shares have been registered in the Trade Register on May 7, 2015, on July 3, 2015, on August 4, 2015, on October 7, 2015, on November 10, 2015 and on December 29, 2015. The company's share capital is EUR 8 223 416 and the number of company's shares 4 111 708 pieces. 

An expense of EUR 377 thousand was recognized for the share rewards to the income statement during the reporting period.

During the reporting period, no share rewards were delivered based on the long-term share-based incentive program 2014-2018 directed to the top management.

14. Dividend distribution and repayment of equity
Raute Corporation's Annual General Meeting held on March 24, 2015, decided, according to the Board of Directors' proposal, to distribute a dividend of EUR 0,40 per share to be paid for series A and K shares, a total of EUR 1 606 thousand. The dividend
payment date was April 2, 2015.

Raute Corporation's Annual General Meeting held on March 24, 2015, decided, according to the Board of Directors' proposal, to distribute a repayment of equity EUR 0,20 per share to be paid for series A and K shares, a total of EUR 803 thousand.
The payment date was April 2, 2015.

15. Financial assets and liabilities that are measured at fair value
At the end of the reporting period December 31, 2015,  the fair value of the financial assets categorized at fair value on hierarchy level 2 was EUR 48 thousand. The fair value of the financial assets categorized at fair value hierarchy level 3 was EUR 490 thousand. The methods of fair value determination have been presented in the Annual financial statement. 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 2015
The Board of Directors will propose to Raute Corporation’s Annual General Meeting 2016, to be held on March 31, 2016,
that  a dividend of EUR 0,80 per share be paid for the financial year 2015, and that the remainder of distributable funds be transferred to equity. At the date of the proposal for profit distribution, there is a total of 4,111,708 shares entitled for the
the dividend, i.e. the total amount of dividends would be EUR 3,289 thousand.
  
 

RAUTE CORPORATION
Board of Directors


PRESS CONFERENCE ON FEBRUARY 16, 2016 AT 2 P.M.:
A briefing will be organized for analysts, investors and the media on February 16, 2016 at 2 p.m. at Scandic Simonkenttä Hotel, Tapiola cabinet, Simonkatu 9, Helsinki. The financial statements will be presented by Mr. Tapani Kiiski, President and CEO, and Ms. Arja Hakala, CFO.

FINANCIAL RELEASES IN 2016:
Raute’s interim reports will be published as follows:
- January–March on Friday, April 29, 2016
- January–June on Wednesday, July 27, 2016
- January–September on Wednesday, October 26, 2016

Raute Corporation’s consolidated financial statements will be published on February 16, 2016. Raute Corporation’s Annual Report 2015 will be published during week 9.

Raute Corporation’s Annual General Meeting will be held in Lahti, at Sibelius Hall on Thursday, March 31, 2016 at 6:00 p.m.

FURTHER INFORMATION:
Mr. Tapani Kiiski, President and CEO, Raute Corporation, mobile phone +358 400 814 148
Ms. Arja Hakala, CFO, Raute Corporation, mobile phone +358 400 710 387

DISTRIBUTION:
Nasdaq OMX Helsinki Ltd, main media, www.raute.com

RAUTE IN BRIEF:
Raute is a technology and service company that operates worldwide. Raute’s customers are companies operating in the wood products industry that manufacture veneer, plywood and LVL (Laminated Veneer Lumber). The technology offering covers machinery and equipment for the customer’s entire production process. As a supplier of mill-scale projects, Raute is a global market leader both in the plywood and LVL industries. Additionally, Raute’s full-service concept includes technology services ranging from spare parts deliveries to regular maintenance and equipment modernizations. Raute’s head office is located in the Nastola area of Lahti, Finland. Its other production plants are in Kajaani, Finland, the Vancouver area of Canada and in the Shanghai area of China. Raute’s net sales in 2015 were EUR 127.3 million. The Group’s headcount at the end of 2015 was 646.

More information on the company can be found at www.raute.com.