LÄNNEN TEHTAAT PLC Stock exchange release 15 February 2008 at 8.30 a.m.
FINANCIAL STATEMENTS BULLETIN 1 January - 31 December 2007
January-December:
- Consolidated profit for the financial year totalled EUR 13.4 million (2006:
EUR 13.1 million).
- Earnings per share amounted to EUR 2.13 (2.10).
- Net sales of the continuing operations totalled EUR 309.6 (244.5) million, up
27% on the previous year.
- Operating profit of the continuing operations excluding non-recurring items
came to EUR 3.5 (3.8) million; non-recurring items totalled EUR -0.3 (+1.5)
million.
- The Board will propose a dividend of EUR 0.85 (0.84) per share to the Annual
General Meeting.
Fourth quarter:
- Net sales of the continuing operations totalled EUR 96.5 (71.9) million, up
34% on the same quarter in 2006.
- Operating profit of the continuing operations excluding non-recurring items
came to EUR 3.3 (3.0) million; non-recurring items totalled EUR -0.2 (+1.4)
million.
The information in this report has not been audited.
Matti Karppinen, CEO:
“The past financial year was one of significant decisions at Lännen Tehtaat. The
company took systematic and major steps towards its vision of being one of
Finland's leading food companies, with operations in the northern Baltic region.
The first step was the decision to discontinue the animal feed business, which
was incompatible with our strategy. The sale of a majority of the shares was
agreed on with Hankkija-Maatalous in January. Another major step was the
acquisition of Maritim Food, a Norwegian fish-processing company, at the
beginning of the year.
In addition to completed sales and acquisitions, we also conducted a
considerable number of studies into other potential corporate acquisitions and
restructuring arrangements during 2007. Some of these explorations are not yet
completed, and others ended with the parties not being able to reach a mutually
satisfactory conclusion. During the year, the mergers and acquisitions market
was a seller's market, and accordingly prices were high. However, towards the
end of the year the market began to cool down, and the buyer's position will no
doubt be stronger now.
In connection with its stratey review, the Board of Directors of Lännen Tehtaat
outlined the Group's growth targets, aiming to double net sales over a period of
three years. The Board also confirmed the other long-term targets: an operating
profit of at least 5% of the net sales, a return on equity of at least 12%, and
an equity ratio of at least 40%.
Our best-performing businesses in 2007 were Frozen Foods and Grain Trading. In
Frozen Foods, the targeted improvement in financial performance was achieved as
a result of sales growth and measures to improve productivity and
cost-efficiency. In Grain Trading, Avena Nordic Grain managed to increase its
sales volume in difficult market conditions while maintaining a reasonably good
level of profitability.
Apetit Kala produced a profit in the final quarter, but the result for the year
as a whole was disappointing. The Maritim Food group performed as expected. In
the course of the year, Apetit Kala undertook measures to improve operating
efficiency and productivity, the most significant of these being the
centralization of all its production in Kuopio. These measures involved certain
non-recurring and overlapping costs. The benefits of the centralization are
expected to be felt from the beginning of 2008. The Vegetable Oils business
performed slightly less well than expected in the latter half of the year
because product prices were raised later than the rise in raw material prices.
Achieving our growth target will be the most important challenge facing the
Group in the near future, and will require both organic growth and corporate
acquisitions.”
KEY FIGURES ILLUSTRATING PERFORMANCE, EUR million
Oct-Dec Oct-Dec Jan-Dec Jan-Dec
2007 2006 2007 2006
All operations, total
Net sales 96.5 117.4 376.8 408.7
Operating profit 3.0 8.1 12.3 14.5
Profit before taxes 4.5 10.0 14.6 17.8
Profit for the period 4.0 7.3 13.4 13.1
Earnings per share, EUR 0.62 1.18 2.13 2.10
Continuing operations
Net sales 96.5 71.9 309.6 244.5
Operating profit without
non-recurring items 3.3 3.0 3.5 3.8
Operating profit 3.1 4.4 3.2 5.3
Profit before taxes 4.6 6.8 6.0 10.2
Profit for the period 4.1 4.9 5.6 7.5
Earnings per share, EUR 0.63 0.78 0.88 1.20
Discontinued business operations
Net sales 0.0 52.5 78.8 164.2
Operating profit -0.1 3.7 9.1 9.2
Profit for the period -0.1 2.4 7.8 5.6
Earning per share, EUR -0.01 0.40 1.25 0.90
NET SALES AND PROFIT
Fourth quarter (Oct-Dec):
The net sales of the continuing operations in October-December totalled EUR 96.5
(71.9) million, an increase of 34% on the same quarter in 2006. Growth occurred
in all business operations, although the majority of it was in Grain Trading and
Fish. Adding Maritim Food to the Group increased the net sales of the Fish
business by EUR 9.7 million compared to the same quarter a year earlier. The net
sales of the Vegetable Oils business also increased significantly, and the net
sales of the Frozen Foods business increased slightly.
The operating profit of the continuing operations in October-December excluding
non-recurring items was slightly better than a year earlier, at EUR 3.3 (3.0)
million. Non-recurring items totalled EUR -0.2 (+1.4) million. The comparable
year-on-year figures show improved fourth-quarter performance in Grain Trading,
Frozen Foods and Other Operations, while the performance of the Fish business
remained the same, and that of the Vegetable Oils business deteriorated.
The fourth-quarter pre-tax profit of the continuing business operations was EUR
4.6 (6.8) million, while profit for the quarter came to EUR 4.1 (4.9) million.
The taxes on the profit for the quarter amounted to EUR -0.5 (-1.9) million. The
profit includes the share in the profit of associated companies, EUR 2.2 (1.9)
million — EUR 1.4 (1.9) million from Sucros and EUR 0.9 (0.0) million from
Suomen Rehu.
Financial year (Jan-Dec):
Consolidated profit for the financial year totalled EUR 13.4 (13.1) million.
This includes non-recurring EUR 5.6 million profit from the sale of the majority
holding in Suomen Rehu. The profit for 2006 includes EUR +3.7 million in
non-recurring items. The earnings per share came to EUR 2.13 (2.10).
Continuing operations
The net sales of the continuing operations in the financial year came to EUR
309.6 (244.5) million, an increase of EUR 65.1 million or 27% on the previous
year. The growth occurred mainly in the Fish and Grain Trading businesses.
The operating profit of the continuing operations excluding non-recurrent items
was EUR 3.5 (3.8) million. Non-recurring items totalled EUR -0.3 (+1.5) million.
The performance of Frozen Foods, Grain Trading and Other Operations improved on
the previous year, while that of the Fish and Vegetable Oils businesses
declined.
Net financial expenses for the financial year were EUR -0.8 (+3.2) million. In
the previous year, this figure included approximately EUR 2.6 million profit
from the sale of shares unrelated to the Group's business.
The share in the profit of associated companies was EUR 3.5 (1.6) million: EUR
2.1 (1.8) million from Sucros, and EUR 1.4 million from the 49% holding in
Suomen Rehu following the sale of the majority holding in June. The share in the
profit of Sucros includes the non-recurrent transitional aid to full-time
refiners of EUR 0.7 million, paid on the basis of the sugar production reform of
2006.
The pre-tax profit of the continuing operations was EUR 6.0 (10.2) million. This
includes EUR -0.2 (+4.2) million in non-recurring items. The profit for the
financial year was EUR 5.6 (7.5) million. Taxes for the financial year came to
EUR -0.4 (-2.7) million.
Discontinued operations
The Group's discontinued operations comprise Suomen Rehu. The income statement
for the previous year has been divided into continuing and discontinued
operations, as if Suomen Rehu had been discontinued from the beginning of 2006.
The profit for the discontinued operations for 2007 includes the profit of
Suomen Rehu from January to the beginning of June plus the profit from the sale
of the majority holding in Suomen Rehu less the costs of the transaction. A
tax-free profit of EUR 4.1 million on the sale of the majority holding based on
a fixed share price was recognized in the second quarter. The final sales price
was determined on the basis of the balance of the majority holding at the time
of the transaction. The correction to the sale price for the majority holding,
EUR 1.5 million, was recognized in the third quarter.
The profit of the discontinued operations for the financial year was EUR 7.8
(5.6) million.
FINANCING AND CASH FLOW
The cash flow from operating activities in the financial year after interest and
taxes amounted to EUR 5.3 (-6.4) million. The impact of the change in working
capital was EUR -3.3 (-23.1) million. The cash flow from investing activities
came to EUR 22.5 (-2.7) million. The impact of the sale of the majority holding
in Suomen Rehu on the cash flow in investing activities was EUR 42.4 million.
The cash flow from loans was EUR -24.9 (10.1) million. EUR 5.3 (4.6) million was
paid out in dividends.
At the end of the financial year, the Group had EUR 33.6 (56.0) million in
interest-bearing liabilities and EUR 13.2 (7.5) million in liquid assets. Net
interest-bearing liabilities totalled EUR 20.4 (48.5) million. The consolidated
balance sheet stood at EUR 205.9 (237.5) million. Equity totalled EUR 128.0
(119.2) million at the end of the financial year, and the equity ratio was 62.1%
(50.3%). Commercial papers issued for the Group's short-term financing stood at
EUR 27.5 (38.0) million at the end of the financial year. Liquidity is secured
with committed credit facilities. No credit facilities were in use at the end of
the financial year.
INVESTMENT
Gross investment in non-current assets excluding corporate acquisitions came to
EUR 7.5 (7.6) million. Investment by Frozen Foods totalled EUR 1.6 (0.8)
million, by the Fish business EUR 4.1 (0.6) million, by Vegetable Oils EUR 0.4
(0.4) million and by Other Operations EUR 0.8 (0.2) million. Investment by the
Feeds business up to the date of sale of the majority holding was EUR 0.6 (5.7)
million.
Investment in shares during the financial year totalled EUR 11.6 (3.0) million
and concerned the acquisition of shares in the Norwegian fish-processing company
Maritim Food AS and in Sandanger AS.
PERSONNEL
The most important areas for personnel development are management, professional
competence and workplace interactive skills.
The average number of personnel in the continuing operations during the
financial year was 725 (662). The average number of personnel in Frozen Foods
was 266 (275), in the Fish business 381 (303), including 89 at Maritim Food
(from 1 March 2007), in Vegetable Oils 36 (36), in Grain Trading 29 (29) and in
Other Operations 11 (19). The personnel at Apetit Suomi Oy have been included
under Frozen Foods or Fish, depending on which section they work in. The
personnel listed under Other Operations in 2006 included those employed by
Harviala Ltd up to 28 February.
SEASONALITY OF OPERATIONS
In accordance with the IAS 2 standard, the historical cost of inventories
includes a systematically allocated portion of the fixed production overheads.
In production that focuses on seasonal crops, raw materials are processed into
finished products mainly during the final quarter, which means that the
inventory volumes and their balance-sheet values are at their highest at the end
of the year. Since the entry of the fixed production overheads included in the
historical cost as an expense item is deferred until the time of sale, most of
the Group's annual profit is accrued in the final quarter. The seasonal nature
of operations is most marked in Frozen Foods and in the associated company
Sucros, due to the link between production and the crop harvesting season.
Apetit Kala's sales peak at weekends and on seasonal holidays. A major
proportion of the entire year's profit in the Fish business depends on the
success of Christmas sales.
OVERVIEW OF EACH BUSINESS
Frozen Foods
Net sales in Frozen Foods totalled EUR 49.3 (50.2) million. The slight decline
in net sales was due to the transfer of both sugar beet contract growing and
sales of the related supplies to Sucros Ltd at the beginning of 2007. The net
sales associated with contract growing in the previous financial year totalled
EUR 2.9 million. Food sales increased by about 4%, including an increase of
about 1% in sales of retail frozen foods. Apetit's own brand once again
accounted for a higher proportion of sales than in the previous year. Sales of
Apetit's frozen potato products and frozen pizzas grew by more than 15%. Active
marketing campaigns and new product launches expanded the overall market as well
as Apetit Pakaste's share of that market. Sales in other retail product groups
remained at the previous year's level. Sales in the hotel, restaurant and
catering sector grew by more than 10% due to the improved competitiveness of
Finnish vegetables in relation to imports. Among the different sales channels,
the largest growth in relative terms was in exports. A good pea crop in Finland
enabled peas to be exported not only to Italy but to central Europe too, where
the crop was exceptionally poor due to unfavourable weather conditions. Exports
increased by almost 40% on the previous year.
The operating profit of Frozen Foods, excluding non-recurring items, was EUR 3.5
(2.2) million. The profit was adversely affected by a non-recurring EUR 0.2
million write-down on fixed assets removed from service. Non-recurring items in
the previous year totalled EUR -0.5 million. The improved profit was the result
of improved product sales and changes in the product range. Systematic
improvement of productivity and cost-efficiency also had a favourable impact on
the profit of Apetit Pakaste. In order to continue this improvement, Apetit
Pakaste decided to transfer production from its Turku plant to Säkylä, which
will require an investment of about EUR 4 million at Säkylä during 2008.
Excavation for the necessary construction work was begun in the autumn, and the
construction is scheduled for 2008, the plan being to move production from the
Turku plant to Säkylä by the end of the year. This centralization of production
is expected to improve the operating profit by about EUR 0.9 million as of 2009.
Investment in Frozen Foods totalled EUR 1.6 (0.8) million in 2007. The most
significant item was a renewal of the freezing technology, which will enhance
energy efficiency and improve production logistics and product quality. Further
packaging automation was also introduced.
Fish
The net sales of the Fish business totalled EUR 81.7 (58.9) million. The
increase in net sales due to the acquisition of Maritim Food and Sandanger,
merged into the Group at the beginning of March and the beginning of September,
respectively, was EUR 26.0 million. Apetit Kala's sales and market share
declined slightly on the previous year as a result of delivery problems in the
summer and the poor availability of fresh fish and of the raw material for
hot-smoked whitefish in the autumn. Apetit Kala introduced several new products
during the year, including sliced hot-smoked fillets, and shellfish products
from Maritim Food sold under the Apetit Maritim brand came onto the market in
Finland in the autumn. Also sold under the Apetit Maritim brand are the new
rainbow trout and shrimp gourmet salads launched towards the end of the year.
Net sales at Maritim Food increased slightly on the previous year, mostly due to
an increase in the sales of shellfish and processed fish products. Sales of
dressings were roughly the same as the previous year. Sales of fish products
declined, mainly because of a drop in raw material prices. Sales to Maritim
Food's principal customer grew well during the year.
The full-year operating profit for the Fish business excluding non-recurring
items was EUR -1.5 (1.1) million. Non-recurring items totalled EUR -0.3 (+0.4)
million and comprised the write-down on Apetit Kala's Kustavi facility. The
allocation of the acquisition cost of Maritim Food caused a negative impact of
just over EUR -0.5 million. The non-recurring impact of the allocation was EUR
-0.3 million, and the long-term effect adding to depreciation is approximately
EUR -0.2 million annually. The contribution of Maritim Food to the operating
profit of the Fish business for the full year was slightly positive as
estimated.
Apetit Kala's profitability in the early part of the year was adversely affected
by high raw material prices, equipment failures and breaks in the production
process. The transfer of production from Kustavi and Kerava to Kuopio also led
to additional and overlapping costs. In the second half of the year, limited
availability of the raw material for hot-smoked whitefish affected the delivery
reliability of consumer-packaged products.
The functions of the Kustavi production plant were moved to Kuopio during
April/May, and the production and packaging functions of the Kerava plant during
August/September. Following this, the company's entire production is now
concentrated at a single plant in Kuopio. The logistics centre remains in
Kerava. The cost savings from this centralization are expected to gain full
effect from the beginning of 2008.
Management positions at Apetit Kala were filled during the year through the
recruitment of a managing director and production and purchasing managers. The
aim was to bring more expertise to the development of the company's core
processes, production control, quality, productivity and purchasing. Delivery
reliability and productivity have improved as a result of efficiency measures in
production control introduced in August. In purchasing, the focus has been on
developing procurement channels, agreement procedures and the purchasing
process.
In retail concepts, procedures were standardized among the Kalatori service
counters with the introduction of new concept manuals, regular concept
assessments and a self-assessment model. At the end of the financial year, there
were 66 Kalatori service counters.
Investment in the Fish business during the financial year totalled EUR 4.1 (0.6)
million. Of this, EUR 2.9 million was allocated to the expansion of the premises
in Kuopio in accordance with the production centralization plan. Other
significant investments involved replacing smoking ovens and improving the
filleting process. Maritim Food investments came to EUR 0.2 million.
Vegetable Oils
The net sales of the Vegetable Oils business increased by 13% to EUR 46.0 (40.6)
million. The increase was due to a growth in volume, higher added value products
and higher sales prices.
Operating profit excluding non-recurring items was EUR 0.8 (2.9) million. The
non-recurring items, EUR +0.1 (+0.2) million, include the profit from the sale
of the storage silo property at Kirkniemi in Lohja. The decrease in operating
profit was due to a decrease in the refining margin. The sales prices of
vegetable oils and protein feed have been slower to rise than the prices of raw
materials, which decreased the refining margin particularly in the latter half
of the year.
Gross investment in the Vegetable Oils business totalled EUR 0.4 (0.4) million.
The most significant individual investment was the renewal of the company's
enterprise resource planning system.
Grain Trading
Growth in the Grain Trading business continued to be strong throughout the year.
Net sales for the year were up by 38% to EUR 132.8 (96.3) million, growing on
both the domestic and international market. The growth was attributable to a
volume increase of about 10% and the exceptionally high market prices for grain
and oilseeds.
The Lithuanian subsidiary UAB Avena Nordic Grain consolidated its position as a
grain trader in the region and contributed to the net sales growth in the Grain
Trading business. In Kazakhstan, the volume of Avena's grain trading for export
exceeded the level of recent years by a considerable margin.With the aim of
expanding its grain procurement in Finland, Avena Nordic Grain opened an office
in Salo in August, mainly to serve growers in southwest Finland.
The full-year operating profit of the Grain Trading business almost doubled,
rising to EUR 3.9 (2.0) million.
Other Operations
Other Operations comprise the service company Apetit Suomi Oy, Group
Administration and items not allocated under any of the business segments.
The cost effect of services produced by Apetit Suomi is an encumbrance on the
operating result in proportion to the use of services.
Net sales in Other Operations amounted to EUR 4.4 (0.0) million. This figure
consists of service sales by Apetit Suomi Oy; in 2006, these sales were included
under other Frozen Foods operating income.
The operating profit of Other Operations, excluding non-recurring items, came to
EUR -3.0 (-4.5) million. This includes Apetit Suomi Oy's positive contribution
of +0.5 (0.0) million. The non-recurring items concerning previous business
divestments or discontinued business operations and real estate deals totalled
EUR +0.1 (+1.5) million.
AUTHORIZATIONS GRANTED TO THE BOARD OF DIRECTORS
The shareholders' meeting of Lännen Tehtaat plc held on 29 March 2007 authorized
the Board of Directors to decide on a new issue of shares and on the transfer of
Lännen Tehtaat plc shares held by the company, in one or more lots as share
issues based on the subscription price. The maximum number of new shares that
can be issued is 631,757, and the maximum number of Lännen Tehtaat shares held
by the company that can be transferred is 65,000. The subscription price for
each new share must be at least its nominal value, EUR 2. The transfer price for
Lännen Tehtaat shares held by the company must be at least the current value of
the share at the time of transfer, determined by the price quoted in public
trading on the Helsinki stock exchange (OMX Nordic Exchange Helsinki Oy). This
authorization includes the right to deviate from the shareholders' pre-emptive
subscription right if the company has a pressing financial reason to do so; the
right to offer shares not only against money payment but also against capital
consideration in kind or under other specified terms or by exercising right of
set-off; and the right to decide on the subscription price of shares and other
conditions of and matters related to the share issue.
This authorization is valid until the next Annual General Meeting. The
authorization revoked the earlier authorization to issue shares, given on 29
March 2006, and the authorization to transfer the company's own shares, given on
the same date.
To date, the Board of Directors has not exercised the authorization to issue
shares.
SHARES AND TRADING
At the end of the financial year the total number of shares issued by the
company stood at 6,317,576, and the registered share capital totalled EUR
12,635,152. The number of Lännen Tehtaat plc shares held by the company was
65,000, representing 1.0% of the entire share capital, with a nominal value of
EUR 130,000. No changes occurred in the amount of share capital or in the number
of Lännen Tehtaat shares held by the company during the financial year or the
previous financial year.
The number of Lännen Tehtaat plc shares traded on the stock exchange during the
financial year was 923,450 (1,622,123), representing 14.6% (25.7%) of the total
number of shares. The highest price quoted was EUR 24.50 (24.70) and the lowest
EUR 15.65 (15.26). The share turnover was EUR 19.3 (32.8) million. The share
price quoted at year end was EUR 16.19 (24.30), and the combined market value of
all shares was EUR 102.3 (153.5) million.
FLAGGING ANNOUNCEMENTS
On 19 October 2007, Skagen Funds administered by the Norwegian company Skagen AS
announced under chapter 2, section 9 of the Securities Markets Act, that it had
purchased Lännen Tehtaat plc shares and that its holding on 18 October 2007
totalled 318,200 shares, which represents 5.04% of the total number of Lännen
Tehtaat plc shares and of the voting rights conferred by the shares.
MANAGEMENT
The Board of Directors appointed the Group's CFO Eero Kinnunen as Deputy CEO.
The appointment takes effect on 1 January 2008.
RISKS, UNCERTAINTIES AND RISK MANAGEMENT
To improve risk management within the Group, risk surveys and risk assessments
of all activities were carried out in each of the business segments during the
year. The results were used to document a comprehensive risk management system.
Under this system, all Group companies and business units will regularly assess
and report the risks involved in their operations and the adequacy of the
control and management methods. The purpose of these risk assessments, which
support strategy formulation and decision-making, is to ensure that sufficient
measures are taken to control risks.
The Board of Directors of Lännen Tehtaat plc has confirmed the Group's risk
management policy and risk management principles.
No significant individual risks have emerged in the Group's risk assessments
that would warrant special measures over and above those defined in the risk
management process and forming part of normal business operations.
The Group's most significant strategic risks concern corporate acquisitions and
their integration into the Group, and changes occurring in the Group's business
sectors and in its customer relationships.
The main operating risks concern raw material availability, the time lags
between purchasing and selling or use of raw materials, and fluctuations in raw
material prices. Managing price risks is especially important in the Group's
Grain Trading, Vegetable Oils and Fish businesses, in which raw materials
represent between 65% and 85% of net sales. The prices of grains, oilseeds and
the main fish raw materials are determined on the world market. In both the
Vegetable Oils and Grain Trading businesses, limits are defined for open price
risks.
The Group operates in international markets and is therefore exposed to currency
risks associated with changes in exchange rates. The most significant currency
risks concern the US dollar and the Norwegian krone.
In accordance with the Group's risk management policy, all major open currency
positions are hedged. Further details concerning the management of currency
risks are given in the notes to the financial statements.
Fire, serious process disruptions and disease epidemics can all lead to major
property damage, losses from breaks in production, and other indirect adverse
impacts on the company's operations. Group companies guard against these risks
by evaluating their own processes through self-monitoring and by taking
corrective action where necessary. Insurance policies are used to cover all
risks for which insurance can be justified on financial or other grounds.
The renewal of Lännen Tehtaat's enterprise resource planning system was begun in
autumn 2007. The aim is to replace all of the Group's separate operating and
financial control systems with a single system. The Frozen Foods and Fish
businesses and the Group's common functions will switch over to the new system
during 2008. Lännen Tehtaat is aware of the risks involved in transferring to
the new system, and these risks are being regularly monitored by steering and
working groups as the project progresses.
EVENTS SINCE THE END OF THE FINANCIAL YEAR
Apetit Kala's retail concept business, the Kalatori service counters, has been
run both by the company and as franchises. Apetit Kala has now decided to
discontinue the franchise model. The 11 Kalatori sales points which are now
franchises will be taken over by Apetit Kala during the spring.
In January, Sami Haapasalmi was appointed to head the Lännen Tehtaat Group's
domestic and international fish business. He is responsible for the
profitability of the Fish business segment and for expanding the business both
organically and through acquisition.
Continuation of beet sugar production in associated company
In September 2007, the agriculture ministers of the European Union member states
approved the new decisions on cutting sugar production. The key element of the
new arrangements is that the cut in production is intended to be achieved by
encouraging growers and the industry to give up production voluntarily.
Following the EU's decisions, the continuation of production at Sucros Ltd's
Säkylä sugar mill has hung in the balance. In December, the producer
organizations (the Central Union of Agricultural Producers and Forest Owners
(MTK) and the Central Union of Swedish-Speaking Agricultural Producers in
Finland (SLC)) and Sucros Ltd signed a seven-year sectoral agreement on the
terms and conditions for beet growing and sugar production. A sufficient number
of growers expressed the desire to continue growing sugar beet, and the
necessary number of contracts to secure production at the Säkylä sugar mill were
signed during January and February 2008.
On 8 February 2008, Sucros Ltd and its owners Danisco Sugar A/S and Lännen
Tehtaat plc took the decision to continue beet sugar production at the Säkylä
mill.
Lännen Tehtaat plc has a 20% holding in sugar producer Sucros Ltd. This holding
is valued at about EUR 19.2 million on the consolidated balance sheet. The new
sectoral agreement dispelled the uncertainty over future sugar production in
Finland. On this basis, Lännen Tehtaat will recognise more than EUR 3 million
related to the EU restructuring aid for the closure of the Salo sugar mill as
non-recurring income from the associated company Sucros Ltd in the first quarter
of 2008, which means that all the compensation will have been recognised in the
accounts.
Alteration to reporting practice
Lännen Tehtaat has decided to alter its reporting practice in respect of the way
in which it presents its share of the profit/loss of associated companies from
the start of 2008. In future, the share of the profit/loss of associated
companies related to food businesses will be included in the operating profit,
and the share of the profit/loss of associated companies not forming part of
Lännen's core businesses will be shown below the operating profit. The share of
the profit/loss of Sucros Ltd, Ateriamestarit Oy and Sandanger AS will be shown
above the operating profit. The share of the profit/loss from Sucros Ltd and
Ateriamestarit Oy will be reported under Other Operations, and the share from
Sandanger AS from 1 March to 31 August 2007 will be reported under the Fish
business.
The share of the profit/loss from Suomen Rehu will be shown below the operating
profit.
Strategy review
Following a review of strategy, the Lännen Tehtaat plc Board of Directors
confirmed the company's updated vision and mission statements and its corporate
values. Lännen Tehtaat plc's vision is to be one of Finland's leading food
companies, with operations in the northern Baltic region. The company's mission
is to produce added value for its shareholders on a long-term basis. This will
be achieved by means of profitable organic and external growth. The Group's
corporate values are a commitment to customer focus, corporate social
responsibility and renewal.
The Board of Directors also approved the Group's long-term financial targets.
The aim is to double net sales over a period of three years and to achieve an
operating profit equal to 5% of net sales, a return on equity of 12% and an
equity ratio in the longer term of at least 40%.
OUTLOOK FOR 2008
The full year's net sales for the continuing business operations are expected to
be up, and the operating profit excluding non-recurring items is expected to
improve on the previous year.
The net sales of the Frozen Foods business are expected to increase slightly on
2007. Sales of Apetit's own brands are expected to grow, while sales to the
hotel, restaurant and catering sector and to the food industry are likely to
remain steady and exports are expected to decline. Apetit Pakaste's financial
performance will be adversely affected by higher raw material and energy costs
and the non-recurring expenses from the transfer of production from Turku to
Säkylä and the introduction of the enterprise resource planning system. The
positive impact of production centralization will begin to show in 2009.
The net sales of the Fish business are expected to grow with the first full year
of the added net sales of Maritim Food and Sandanger. Apetit Kala net sales are
expected to increase through livelier demand and improved delivery performance,
and as existing Kalatori franchises are transferred to Apetit Kala. The
performance of the Fish business is expected to improve and to end up
significantly in profit as a result of process development and
productivity-improving measures. The operating profit will also improve with the
first full year of Maritim Food being part of the Group.
The net sales of the Vegetable Oils business are expected to increase from their
2007 level due to rising product prices. The refining margin is expected to grow
and the operating profit to improve on 2007.
The net sales of the Grain Trading business are expected to remain at the
previous year's level. The operating profit is expected to be good, though
slightly below the exceptionally good level seen in 2007.
The transition to IFRS reporting means that a considerable proportion of the
Group's profits are accrued late in the year.
PROPOSED DIVIDEND
The aim of the Board of Directors of Lännen Tehtaat plc is that the company's
shares provide shareholders with a good return on investment and retain their
value. It is the company's policy to distribute at least 40% of the profit for
the financial year in dividends to the equity attributable to the shareholders
of the parent company.
The Board of Directors proposes to the Annual General Meeting that the dividend
to be paid on the financial year 2007 be 40% of the profit for the financial
year. The Board's proposal for dividend is thus EUR 0.85 (0.84) per share.
The parent company's distributable funds totalled EUR 61,598,627.82 on 31
December 2007, of which EUR 26,783,845.36 is profit for the financial year. The
Board of Directors will propose to the Annual General Meeting that Lännen
Tehtaat plc pays a dividend of EUR 0.85 per share from the distributable funds,
or EUR 5,314,689.60 in total, and leaves the remaining EUR 56,283,938.22 in its
equity.
CONSOLIDATED INCOME STATEMENT
EUR million
10-12/ 10-12/ 1-12/ 1-12/
2007 2006 2007 2006
3 mths 3 mths 12 mths 12 mths
Continuing operations
Net sales 96.5 71.9 309.6 244.5
Other operating income 0.5 0.0 1.4 2.0
Operating expenses -92.2 -66.6 -302.3 -236.3
Depreciation -1.4 -0.9 -5.0 -4.7
Impairments -0.3 - -0.5 -0.2
Operating profit 3.1 4.4 3.2 5.3
Financial income and expenses -0.7 0.4 -0.8 3.2
Share of profit of associated
companies 2.2 1.9 3.5 1.6
Profit before taxes 4.6 6.8 6.0 10.2
Income taxes -0.5 -1.9 -0.4 -2.7
Profit for the period,
continuing operations 4.1 4.9 5.6 7.5
Discontinued operations
Profit/loss for the period,
discontinued operations -0.1 2.4 7.8 5.6
Profit for the period 4.0 7.3 13.4 13.1
Attributable to:
Equity holders of the parent 3.9 7.3 13.3 13.1
Minority interests 0.1 0.0 0.1 -
Earnings per share, calculated of
the profit attributable to the
shareholders of the parent company
Basic and diluted earnings per
share, EUR, total 0.62 1.18 2.13 2.10
Basic and diluted earnings per
share, EUR, continuing operations 0.63 0.78 0.88 1.20
Basic and diluted earnings per
share, EUR, discontinued operations -0.01 0.40 1.25 0.90
CONSOLIDATED BALANCE SHEET
EUR million
Dec 31, 2007 Dec 31, 2006
ASSETS
Non-current assets
Intangible assets 4.7 1.5
Goodwill 7.0 17.4
Tangible assets 43.5 67.4
Investment in associated companies 39.2 23.1
Available-for-sale investments 0.1 0.1
Receivables 4.6 5.8
Deferred tax assets 0.3 0.3
99.4 115.6
Current assets
Inventories 64.4 65.3
Receivables 28.6 48.7
Income tax receivable 0.4 0.3
Financial assets at fair value
through profit and loss 8.1 -
Cash and cash equivalents 5.1 7.5
106.6 121.9
Total assets 205.9 237.5
EQUITY AND LIABILITIES
Equity attributable to the equity
holders of the parent company 127.3 119.2
Minority interest 0.7 -
Total equity 128.0 119.2
Non-current liabilities
Deferred tax liabilities 4,8 7,0
Long term financial liabilities 5,3 7.0
Non current provisions 0.1 -
Non-current liabilities total 10.2 14.0
Current liabilities
Short-term financial liabilities 28,2 49,1
Income tax payable 0.7 1.0
Trade payables and other liabilities 38.7 54.2
Current liabilities total 67.6 104.3
Total liabilities 77.9 118.3
Total equity and liabilities 205.9 237.5
CONSOLIDATED CASH FLOW STATEMENT
EUR million
1-12/2007 1-12/2006
Net profit for the period 13.4 13.1
Adjusments, total -1,5 8.5
Change in working capital -3,3 -23.1
Interests paid from
operating activities -2.8 -1.9
Interests received from
operating activities 0.7 0.3
Taxes paid -1.2 -3.2
Net cash flow from operating activities 5,3 -6.4
Investments in tangible and intangible assets -7.6 -7.7
Proceeds from sales of tangible
and intangible assets 0.2 4.6
Acquisition of subsidiaries deducted by cash -9.9 -2.8
Proceeds from sales of subsidiaries 42,0 0.0
Acquisition of associated companies 0.0 -0.2
Proceeds from sales of associated companies 0.6 0.0
Purchases of other investments -35.1 -0.1
Proceeds from sales of other investments 27.0 3.4
Dividends received from investing activities 5.3 0.0
Net cash flow from investing activities 22.5 -2.7
Raising of long-term loans - 1.9
Raising of short-term loans - 19.1
Repayments of short-term loans -16.7 0.0
Repayments of long-term loans -8.1 -10.8
Payment of financial lease liabilities -0.1 -0.1
Dividends paid -5.3 -4.6
Cash flows from financing activities -30.2 5.5
Net change in cash and cash equivalents -2.4 -3.7
Cash and cash equivalents at the
beginning of the the period 7.5 11.2
Cash and cash equivalents at the
end of the period 5.1 7.5
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
EUR million
A = Share capital
B = Share premium account
C = Net unrealised gains
D = Other reserves
E = Own shares
F = Translation differences
G = Retained earnings
H = Attributable to equity holders of the parent company
I = Minority interest
J = Shareholders' equity total
A B C D E F G H I J
Shareholders'
equity at
Jan. 1, 2006 12.6 23.4 1.9 7.3 -0.8 -0.2 68.3 112.4 3.7 116.1
Available-for-sale
financial assets:
transferred to
income statement
on sale - - -2.1 - - - - -2.1 - -2.1
Cash flow hedges:
gains recorded
in equity - - 0.5 - - - - 0.5 - 0.5
Taxes related to
items entered into
equity and removed
from equity - - 0.2 - - - - 0.2 - 0.2
Other changes - - - - - - -0.3 -0.3 - -0.3
Business combination - - - - - - - - -3.7 -3.7
Profit for the period - - - - - - 13.1 13.1 - 13.1
Total recognised
income and
expenses 12.6 23.4 0.5 7.3 -0.8 -0.2 81.1 123.8 - 123.8
Dividend
distribution - - - - - - -4.6 -4.6 - -4.6
Shareholders'
equity at
Dec 31,2006 12.6 23.4 0.5 7.3 -0.8 -0.2 76.5 119.2 - 119.2
Shareholders'
equity at
Jan. 1, 2007 12.6 23.4 0.5 7.3 -0.8 -0.2 76.5 119.2 - 119.2
Cash flow hedges:
gains recorded
in equity - - -0.1 - - - - -0.1 - -0.1
Taxes related to
items entered into
equity and removed
from equity - - 0.0 - - - - 0,0 - 0,0
Increase/decrease
in subsidiary - - - - - 0.2 - 0.2 0.7 0.9
Translation
differences - - - 0.1 0.1 - 0.1
Other changes - - - -0.1 - - 0.0 -0.1 - -0.1
Profit for the
period - - - - - 13.3 13.3 0.1 13.4
Total recognised
income and
expenses 12.6 23.4 0.4 7.2 -0.8 0.1 89.8 132.6 0.7 133.4
Dividend
distribution - - - - - -5.3 -5.3 - -5.3
Shareholders'
equity at
Dec 31, 2007 12.6 23.4 0.4 7.2 -0.8 0.1 84.5 127.3 0.7 128.0
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The year-end report have been prepared in accordance with IAS 34, Interim
Financial Reporting, as adopted by the EU. The accounting policies adopted are
consistent with those of the Group's annual financial statements for the year
ended 31 December 2006.
Lännen Tehtaat has adopted the following new amendments and interpretations to
published standards as well as new standards from January 1, 2007:
- IFRS 7 Financial Instruments: Disclosures.
- IAS 1 (Amendment) Capital Disclosures.
- IFRIC 9 Reassessment of Embedded derivatives
- IFRIC 10 Interim Financial Reporting and Impairment.
The adopted standards and interpretations have not had any significant effects
on this year-end report.
SEGMENT INFORMATION
A Frozen Foods
B Fish
C Grain trading
D Vegetable Oil
E Other Operations
F Continuing operations total
G Discontinued operations
H Total
Business segments 1-12/2007
EUR million A B C D E F G H
Total external sales 49.3 81.7 132.8 46.0 4.4 314.2 78.8 393.0
Intra-group sales -0.1 -0.1 -1.2 0.0 -3.2 -4.6 -11.6 -16.2
Net sales 49.2 81.6 131.6 46.0 1.2 309.6 67.2 276.8
Operating profit/loss 3.3 -1.8 3.9 0.9 -3.0 3.2 9.1 12.3
Share of profit of
associated companies 0.0 0.1 - - 3.4 3.5 0.1 3.6
Gross investments in
non-current assets 1.6 4.1 - 0.4 0.8 6.9 0.6 7.5
Corporate acquisitions
and other share
purchases - 11.6 - - - 11.6 - 11.6
Depreciations 1.7 1.6 0.1 0.6 1.0 5.0 0.2 5.2
Impairments 0.2 0.3 - - - 0.5 - 0.5
Personnel 266 381 29 36 11 725 125 849
Business segments 1-12/2006
EUR million A B C D E F G H
Total external sales 50.2 58.9 96.3 40.6 0.0 246.0 173.5 419.5
Intra-group sales -0.1 0.0 -1.4 0.0 0.0 -1.5 -9.3 -10.8
Net sales 50.1 58.9 94.9 40.6 0.0 244.5 164.2 408.7
Operating profit/loss 1.7 1.6 2.0 3.0 -3.0 5.3 9.2 14.5
Share of profit/loss of
associated companies 0.0 0.0 - - 1.6 1.6 0.1 1.7
Gross investments in
non-current assets 0.8 0.6 0.0 0.4 0.1 1.9 5.7 7.6
Corporate acquisitions
and other share
purchases - 1.7 - 1.3 0.1 3.0 - 3.0
Depreciations 2.7 0.8 0.1 0.6 0.5 4.7 3.5 8.2
Impairments - 0.2 - - - 0.2 - 0.2
Personnel 275 303 29 36 19 662 319 981
GEOGRAPHICAL SEGMENTS
Net sales
EUR million
1-12/2007 1-12/2006
12 mths 12 mths
Finland 189.2 188.6
Scandinavia 45.8 22.4
Baltic states and Russia 10.0 2.3
Other countries 64.6 31.2
Continuing operations total 309.6 244.5
Discontinued operations 67.2 164.2
Total 376.8 408.7
DISCONTINUED OPERATIONS
The sale of the majority holding in Suomen Rehu Ltd was completed at the start
of June, when Suomen Rehu and its subsidiaries were transferred to
Hankkija-Maatalous Oy. Suomen Rehu Ltd is presented as discontinued operations
apart from continuing operations of Lännen Tehtaat till the point of sale. From
the beginning of June Lännen Tehtaat's 49% ownership in Suomen Rehu Ltd is
presented as an associated company.
Based on the change in Suomen Rehu Ltd's assets and liabilities share price
adjustment was determined during the third interim period and EUR +1.5 million
was recognised in the bookkeeping related to the sold 51% shareholding.
In connection with the sale of the majority shareholding an option scheme has
also been agreed under which Lännen Tehtaat will, if it wishes, have the right
to sell the remaining 49% of the shares in Suomen Rehu Ltd to
Hankkija-Maatalous. The latter, for its part, has a right to buy for the
remaining shares, which it will be able to put into effect at the earliest 15
months after the purchase of the majority holding.
In the case of option exercise, Lännen Tehtaat receives the same price per share
for the remaining 49% ownership as for the sold majority shareholding in Suomen
Rehu Ltd, including the share price adjustment. In addition, the sale price is
affected by the financial result of Suomen Rehu Ltd from the beginning of June
2007.
EUR million 1-5/2007 1-12/2006
5 mths 12 mths
Profits 85.2 176.7
Costs -76.5 -169.1
Profit before taxes 8.6 7.6
Income taxes -0.8 -2.0
Profit for the period 7.8 5.6
Profits 1-5/2007 include revenue from the sale of Suomen Rehu Ltd shares
totalling EUR 5.8 million and costs include sale related expenses totalling EUR
0.2 million.
EUR million 1-5/2007 1-12/2006
5 mths 12 mths
Cash flows from operating activities 7.6 5.4
Cash flows from investing activities -0.6 1.4
Cash flows from financing activities -6.9 -10.5
Total financing activities 0.1 -3.7
The change in the net working capital has a significant effect on the operating
cash flows.
KEY INDICATORS
Dec 31, 2007 Dec 31, 2006
Shareholders' equity per share, EUR 20.36 19.06
Equity ratio, % 62.1% 50.3%
Gearing, % 16.0% 40.7%
Gross investments in non-
current assets, EUR million,
continuing operations 6.9 1.9
Corporate acquisitions and other
share purchases, EUR million,
continuing operations 11.6 3.0
Average number of personnel,
continuing operations 725 662
Average number of shares, 1 000 pcs 6 253 6 253
The key figures in this interim financial report are calculated with same
accounting principles than presented in year 2006 annual financial statements.
CONTINGENT LIABILITIES
EUR million
Dec 31,2007 Dec 31, 2006
Mortgages given for debts:
Real estate mortgages 7.3 37.5
Corporate mortgages 1.3 51.4
Shares pledged - 3.6
Other quarantees 7.7 -
Non-cancellable other leases,
minimum lease payments:
Real estate leases 5.3 2.8
Other leases 0.8 0.9
Contingent liabilities on behalf of
the Group companies:
Guarantees 5.1 -
SUOMEN REHU - OPTION SCHEME
The calculatory unrecognised value for the result based component included in
the option scheme as of September 30, 2007 is approximately EUR 0.0.
DERIVATIVE INSTRUMENTS
Outstanding nominal values of
derivative instruments
Forward currency contracts 5.0 4.5
Commodity derivative instruments 2.6 4.6
Interest rate swaps 25.0 25.0
INVESTMENT COMMITMENTS
Lännen Tehtaat has investment commitments in frozen foods segment a total of EUR
4.2 million as of December 31, 2007.
TANGIBLE ASSETS
EUR million
1-12/2007 1-12/2006
12 mths 12 mths
Book value at the beginning of the period 67.4 72.2
Acquisitions 6.5 7.3
Acquisitions of operations 7.6 -
Disposals -0.2 -4.2
Disposals of operations -32.6 -0.4
Depreciations and impairments -5.1 -7.7
Other changes -0.1 0.2
Book value at the end of the period 43.5 67.4
TRANSACTIONS WITH ASSOCIATED COMPANIES AND JOINT VENTURES
EUR million
1-12/2007 1-12/2006
12 mths 12 mths
Sales to associated companies 14.3 1.1
Sales to joint ventures 8.1 7.7
Purchase from associated companies 12.0 19.3
Purchase from joint ventures 0.1 0.3
Long-term receivebles from associated companies 3.9 5.2
Trade receivables and other
receivables from associated companies 3.1 5.0
Trade receivables and other
receivables from joint ventures 0.8 0.6
Trade payables and other liabilities
to associated companies 0.0 3.7
The sale of goods and services to the associated companies and joint ventures
are based on valid price catalogues of the Group.
LÄNNEN TEHTAAT PLC
Board of Directors
Further information: CEO Matti Karppinen, tel. 010 402 4001
Copies to:
OMX Nordic Exchange Helsinki Oy
Principal media
www.lannen.fi
