Net sales increased in the Forest Industry and Infrastructure & Environment business groups and the operating profit increased in the Forest Industry business group. The operating profit of the Forest Industry Consulting business group does not include any major fees from mergers & acquisitions activities. In 2000 the most notable fees from mergers & acquisitions activities materialized especially during the second quarter and partly during the third quarter of the year.
A decision to close down the alcohol plant contracting business, which is a part of the Energy business group, has been made and hence a EUR 6 million expense burdens the result of the Energy business group.
The surplus refunded by the Swedish Staff Pension Society, SPP, which was confirmed during the year 2000 but not taken into account in the operating profit for last year, was booked during the period under review. The refund, totalling EUR 4.9 million, is included on the line "other" in the key figure specification by business group. A refund of EUR 1.3 million was included in the third quarter of the year 2000.
The Group's liquidity remained good during the period under review. At the end of September, cash in hand and at banks amounted to EUR 33.0 million, and interest-bearing debts to EUR 34.8 million; hence interest-bearing net debts amounted to EUR 1.8 million. The net debt/equity ratio (gearing) was 1.7 (5.2) per cent.
Business groups
Forest Industry
Net sales for the period under review were EUR 112.2 (109.1) million. Operating profit amounted to EUR 14.1 (8.5) million. Profitability was good. The order stock amounted to EUR 76.7 (71.8 at the end of 2000) million.
Forest Industry Consulting
Net sales for the period under review were EUR 35.0 (39.7) million. Operating profit was EUR 0.5 (4.6) million. The order stock amounted to EUR 20.4 (25.6) million.
The weakening economic growth has resulted in reduced demand for consulting services, affecting the business group's result. A programme to improve the business group's internal processes and efficiency was started at the beginning of the year 2001. No major consultancy fees from mergers & acquisitions activities were booked during the period under review.
Energy
Net sales for the period under review were EUR 95.1 (133.9) million. Operating profit was EUR -2.3 (5.7) million. The order stock amounted to EUR 93.4 (111.6) million.
The decrease in net sales was primarily due to the reduced volume of the turn-key projects business. A decision to discontinue the loss-making alcohol plant contracting business has been made. This business generated net sales of about EUR 31 million in the year 2000. The Group's aim is to improve its relative profitability and to raise its operating profit to more than eight per cent of net sales. Because of the nature of the contracting business its profitability is lower than that of consulting and engineering projects. To cover the expenses of discontinuing the alcohol plant contracting business, the business group has booked an expense of EUR 6 million.
Decisions on new energy investments have been postponed due to the weakening economic growth and the uncertainty of the energy market development. This has had an impact on the capacity utilization rate and operating profit of the business group. The business group's capacity has been adjusted to correspond to the demand.
Infrastructure & Environment
Net sales for the period under review were EUR 77.8 (73.8) million. Operating profit was EUR 4.5 (5.9) million. The profitability fell short of set targets. The order stock was EUR 96.6 (96.5) million.
The target set for the telecommunications business, which is part of the Infrastructure & Environment business group, is to double the sales volume to EUR 20 million in 2001. Investments in third-generation telecommunications networks in Europe have been postponed by 6 to 12 months. For this reason, the planned doubling of the sales volume will not be achieved in 2001. Because the volume growth target is primarily based on realignment and training of the Group's current project implementation resources, the failure to reach the planned growth target will not weaken the business group's result for 2001.
Group structure
Efforts to further develop the Group's structure and business operations have continued during the current year. Jaakko Pöyry AB, Sweden, which is a part of the Forest Industry business group, has acquired the remaining shareholding, 49 per cent, of Rigel Konsult i Gävle AB. In response to the globalisation of the forest products industry, the local office network of the Forest Industry business group will be expanded in North America and Western Europe. There are also plans to expand the operations of the Energy and the Infrastructure & Environment business groups.
Order stock
The Group's order stock is in general still healthy, totalling EUR 287.1 million at the end of September, compared with EUR 305.5 million at the end of the year 2000. The order stock for consulting and engineering work declined by EUR 12.8 million and the order stock for turn-key projects by EUR 5.6 million during the period under review.
Capital expenditure
The Group's capital expenditure for the period under review totalled EUR 5.4 (8.9) million. The capital expenditure consisted mostly of costs related to computer software, systems and hardware.
Share capital and shares
The total number of shares at the end of the year 2000 was 13 724 136. A total of 208 425 new shares were subscribed during the review period based on warrants pursuant to the bond loan with warrants of 1998. In addition, 300 new shares were subscribed in October 2001. Following these subscriptions, the number of shares totals 13 932 861.
The bond loan with warrants issued in 1998 to all Jaakko Pöyry Group employees carries subscription rights for a total of 1.3 million of the company's shares, with the subscription period beginning partly (390 000 shares) on April 1, 2000, partly (390 000 shares) on April 1, 2001, and partly on April 1, 2002 (520 000 shares). The subscription period ends for all warrants on April 30, 2005. A total of 262 575 shares have been subscribed based on the warrants.
The Annual General Meeting on March 8, 2001 authorised the Board of Directors to decide on an increase of share capital by a new issue and/or by taking a convertible loan and/or by issuing option rights, so that based on the new issue, the convertible bonds and option rights, the share capital can be increased by a maximum of EUR 1.0 million by issuing for subscription a maximum of 1.0 million new shares. The authorisation is in force until March 8, 2002.
The Annual General Meeting authorised the Board of Directors to acquire and convey the company's own shares to a maximum of 5.0 per
cent of the company's share capital. The Board of Directors decided on March 8, 2001 to exercise the authorisations. The authorisations are in force until March 8, 2002. During the period under review the company has required 24 900 own shares and after the period 61 600 own shares, totally 86 500 own shares. The average acquisition price per share was 15.80 EUR.
The company's shares are quoted on the Helsinki Exchanges. The average trading price during the period under review was EUR 19.12, with a high of EUR 21.00 and a low of EUR 15.50. A total of 1.6 million of the company's shares (equalling 11.3 per cent of the total number of shares) were traded, corresponding to a turnover of EUR 29.8 million.
The Annual General Meeting approved the Board of Directors' proposal that a dividend of EUR 0.60 be paid per share for the year 2000 (EUR 0.45 for the year 1999), totalling EUR 8.2 million. The dividends were paid on March 20, 2001.
Prospects
The global economic outlook has weakened considerably, especially during the autumn. The decline in economic activity affects the Jaakko Pöyry Group's operations especially in North America, where investment demand has declined most rapidly. North America will account for about 5 per cent of the Jaakko Pöyry Group's net sales in 2001. Investment decisions have also been postponed in emerging markets during 2001. This is due in particular to the more cautious approach in financial markets to funding of projects in these regions. In Europe, the Jaakko Pöyry Group's main market area, economic activity has remained reasonably healthy, with no major decline in investment demand.
The Forest Industry business group's earnings for the first three quarters of the year were good and the order stock remains healthy. The business group's earnings will improve clearly compared with last year. The earnings of the Forest Industry Consulting business group in the final months of the year will depend particularly strongly on investment banking commissions and their phasing. The completion of some investment banking assignments may be postponed until 2002. The Energy business group's earnings will fall clearly short of last year's because of the discontinuation of the alcohol plant contracting business and the postponement of some projects in emerging markets. The earnings of the Infrastructure & Environment business group will be slightly weaker than last year's due to somewhat reduced investment demand.
The Jaakko Pöyry Group's order stock is in general still healthy, providing a good basis for the rest of the year. The Group has also retained its strong market position. Taking into account the prospects for the business groups, the order stock and the earnings development in the first three quarters of the year, as described in the foregoing, the Jaakko Pöyry Group's profit after financial items
is estimated at EUR 26-30 million for the year 2001. Earnings per share are estimated at EUR 1.25-1.45.
Vantaa, November 1, 2001
JAAKKO PÖYRY GROUP OYJ
Board of Directors
JAAKKO PÖYRY GROUP OYJ
Erkki Pehu-Lehtonen
President and CEO
Teuvo Salminen
Executive Vice President
The full Interim Report including tables is available to download from the enclosed link.
