PÖYRY PLC Stock Exchange Notice February 2, 2007 at 8.30 a.m. PÖYRY PLCS NOTICE CONCERNING ANNUAL ACCOUNTS FOR 2006 Earnings per share for the financial year were EUR 0.58. The return on investment exceeded the strategic target, amounting to 31.1 per cent. The consolidated balance sheet structure is good; the net debt/equity ratio (gearing) was 37.6 per cent. The order stock increased to EUR 507.6 million at the end of the year. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.50 per share be paid. Consolidated earnings and balance sheet The world economy continued to develop favourably in 2006. Economic prospects for 2007 are also mostly favourable. The good economic development has boosted investment activity practically all over the world. As a result of improved demand, the Pöyry Groups strong market position and the streamlining of its operations, consolidated net sales increased to EUR 623.3 million and profit before taxes improved clearly during the year under review. Profit before taxes was EUR 50.2 (38.6 in the previous year) million. The net profit for the period was EUR 34.8 (26.3) million. Earnings per share improved by 28.9 per cent during the year to EUR 0.58 (0.45). The target for the Groups return on investment is 20 per cent; in 2006 the return on investment was 31.1 (25.8) per cent. The consolidated balance sheet structure is healthy. The equity ratio is 49.2 (49.8) per cent. The Groups liquidity is good. The net debt/equity ratio (gearing) was 37.6 (-36.1) per cent. The Groups order stock increased during the financial year. At the end of the year it amounted to EUR 507.6 (452.1) million. Prospects The Pöyry Group has a strong market position in all of its business areas. The order stock grew clearly during 2006 and the balance sheet position remained good. Consolidated net sales will grow during 2007. Consolidated profit before taxes are expected to improve in 2007. The Auditors Report is dated February 1, 2007. Dividend The Board of Directors of Pöyry Plc proposes to the Annual General Meeting on March 5, 2007 that a dividend of EUR 0.50 (0.325) per share be paid for the year 2006. The dividend will be payable on March 15, 2007. Annual General Meeting Pöyry Plcs Annual General Meeting will be held on March 5, 2007 at the Pöyry House, Vantaa, Finland. The invitation to the Annual General Meeting will be published in its entirety as a separate notice on February 2, 2007 at 9.00 a.m. Enclosures Board of Directors Report, January 1 December 31, 2006 Consolidated statement of income, balance sheet, statement of changes in financial position, changes in equity and liabilities Key figures PÖYRY PLC Erkki Pehu-Lehtonen Teuvo Salminen President and CEO Deputy to the President and CEO Additional information by: Erkki Pehu-Lehtonen, President and CEO, Pöyry Plc Tel. +358 10 33 22999, +358 400 468 084 Teuvo Salminen, Deputy to the President and CEO, Pöyry Plc Tel. +358 10 33 22872, +358 400 420 285 Satu Perälampi, Investor Relations Manager, Pöyry Plc Tel. +358 10 33 23002, +358 40 526 3388 www.poyry.com DISTRIBUTION: Helsinki Stock Exchange Major Media PÖYRY GROUP BOARD OF DIRECTORS REPORT, JANUARY 1 DECEMBER 31, 2006 Consolidated earnings and balance sheet The world economy continued to develop favourably in 2006. Economic prospects for 2007 are also mostly favourable. The good economic development has boosted investment activity practically all over the world. As a result of improved demand, the Pöyry Groups strong market position and the streamlining of its operations, consolidated net sales increased to EUR 623.3 million and profit before taxes improved clearly during the year under review. Profit before taxes was EUR 50.2 (38.6 in the previous year) million, which equals 8.1 per cent of net sales. The net profit for the period was EUR 34.8 (26.3) million. Earnings per share improved by 28.9 per cent during the year to EUR 0.58 (0.45). The Group aims for an improvement in earnings per share averaging 15 per cent a year. The target for the Groups return on investment is 20 per cent; in 2006 the return on investment was 31.1 (25.8) per cent. The consolidated balance sheet structure is healthy. The equity ratio is 49.2 (49.8) per cent. The Groups liquidity is good. At the end of the year, the Groups cash and cash equivalents amounted to EUR 74.9 (64.5) million. Interest-bearing debts totalled EUR 13.6 (10.7) million. The net debt/equity ratio (gearing) was 37.6 (-36.1) per cent. At the beginning of 2006, the Pöyry Group expected profit before taxes for the year under review to improve compared with 2005. In the interim report for the third quarter the earnings estimate was raised and earnings were forecast to improve clearly. The improvement in earnings was primarily due to better demand, successful integration and favourable earnings development of mergers and acquisitions implemented in 2005 and 2006, and improved internal efficiency, mostly in the use of Group resources and in project implementation. Key figures, 2006 2005 2004 EUR million Net sales 623.3 523.6 473.9 Profit before taxes 50.2 38.6 30.9 Profit for the year, of which 34.8 26.3 20.9 attributable to equity holders 33.6 25.9 19.7 of the parent company Earnings/share, EUR 0.58 0.45 0.36 Return on investment, % 31.1 25.8 21.4 Equity ratio 49.2 49.8 51.2 Cash and cash equivalents 74.9 64.5 62.2 Interest-bearing debts 13.6 10.7 12.2 Gearing, % -37.6 -36.1 -37.4 Common Pöyry brand adopted The extraordinary General Meeting on March 28, 2006 decided to change the companys business name to Pöyry Plc (Pöyry Oyj in Finnish). The change was entered into the Trade Register on April 3, 2006. During 2006, all Pöyry business groups and units adopted the common Pöyry brand. Following this change, all Group companies were given new names beginning with Pöyry and they now operate under the common brand in all markets. The objective of this change was to bring together the resources of the Groups extensive office network and to concentrate all communications clearly and efficiently under one brand. In addition to supporting the Groups growth targets, the new brand also supports the Global Network Company concept and increases the companys international recognition. Business groups The parent company of the Pöyry Group is Pöyry Plc. The parent company is responsible for developing the Groups strategy and for supervising its implementation, for financing, for exploiting synergistic benefits and for general co-ordination of the Groups operations. The parent company has charged service fees for general administration and parent company costs to the business groups. The relative share charged is derived from the business groups payroll costs. The Pöyry Groups business operations are conducted through three business groups: Energy, Forest Industry, and Infrastructure & Environment. The business groups are globally responsible for their operations. All three business groups offer a full range of consulting, investment planning and implementation, maintenance planning and operations improvement services to their clients, covering the entire lifecycle of their business. Energy The brisk activity in world energy markets continued during 2006. The higher price of crude oil and environmental considerations attracted growing attention to new sources of energy, so energy producers have started to contemplate alternative sources of energy. The internationalisation of the energy sector continued, as did the liberalisation of energy markets. As markets open up, competition will increase, which raises energy companies return-on-investment requirements. The restructuring of the energy sector continued and oil and gas companies expanded their power production. In Europe, the liberalisation of energy markets and the more diversified energy supply resulted in increased demand for energy-related management consulting services. The Energy business group continued to strengthen its global market position and local presence during the year. The Energy business groups net sales in 2006 were EUR 197.4 million. Operating profit improved clearly during 2006, amounting to EUR 14.6 million. The increase in operating profit was due to improved demand for services in all business areas. In addition, acquisitions contributed to the business groups operating profit and relative profitability. The business group continued to streamline its business area-based organisation, which resulted in improved capacity utilisation. The order stock remained good, amounting to EUR 204.9 (195.2) million at the end of the year. The most important new projects were the hydropower plant contract with Verbund Austrian Hydro Power in Austria (EUR 13 million); the power plant engineering contract with EGL Group in Italy (EUR 7.3 million); the hydropower plant contract with SouthEast Asia Energy Limited in Laos (EUR 8.9 million); the hydropower plant contract with Hochtief Glendoe Joint Venture in the United Kingdom (EUR 5 million); and the sea water cooling project for Qatar Petroleum in Qatar (EUR 17 million). Energy, EUR million 2006 2005 2004 Net sales 197,4 160,0 146,5 Operating profit 14,6 9,1 7,0 Operating profit, % 7,4 5,7 4,8 Order stock 204,9 195,2 171,8 Personnel at year-end 1692 1463 1485 Forest Industry The challenging business conditions in the pulp and paper industry continued during 2006, especially in Europe and North America. Efforts to improve the efficiency of operations continued and several paper machines, pulp production lines and even entire mills were shut down. Only a few new investments and major modernisation projects were launched during the year. In spite of improved demand and slightly higher prices, the industrys earnings were depressed by rising energy prices, higher raw material costs and non-recurring rationalisation expenses. The brisk investment activity in Asia and South America continued. In spite of the challenging market conditions, the Forest Industry business group managed to maintain its position in the market, while increasing its net sales and operating profit. Net sales for 2006 amounted to EUR 224.9 million and operating profit was EUR 22.9 million. Factors contributing to the favourable profit development included global networking of the companys resources, local presence in the most important emerging markets, effectively implemented projects and increased demand for management consulting services. Investments in the chemical industry, demand for local services also in other process industries, and new biofuel projects, especially in North America, contributed to the favourable development. The order stock grew to EUR 111.4 (97.3) million at the end of 2006. The biggest new assignments received included engineering and project services for Solvay S.A.s hydrogen peroxide plant in Belgium; engineering services for the expansion of Aracruz Celulose S/As pulp mill in Brazil and the engineering and project management services for Klabin S/As new board mill, also in Brazil (EUR 20 million); engineering and site services for Kemira Plcs new chemical plant in Uruguay; and engineering services for UPM Corporations new recovery line in Finland. Among new operations improvement and modernisation projects the most important were the transfer of Norske Skogindustrier ASs Union TMP plant in Norway and the rebuild of USG Corporations board machine in the United States. Forest Industry, EUR million 2006 2005 2004 Net sales 224.9 199.3 186.3 Operating profit 22.9 19.7 17.2 Operating profit, % 10.2 9.9 9.2 Order stock 111.4 97.3 82.5 Personnel at year-end 2418 2123 2077 Infrastructure & Environment Demand for infrastructure- and environment-related services strengthened during 2006. Maintaining a local presence became more important for project development in all market areas. Demand for consulting and engineering services in public-sector rail bound traffic projects continued to grow, especially in Asia and Latin America. Activities in the water and environment sector increased in Latin America, while remaining stable in other markets. The increased frequency of climatic disturbances added to the importance of flood control in many regions of the world. Demand for real estate services showed the strongest growth in Russia and the Baltic region. On the other hand, some projects were postponed because of overheated demand. The business groups market position continued to strengthen in local and international markets. As a result of increased demand for the business groups services and streamlining of its operations, net sales and operating profit increased during the year. Net sales for 2006 were EUR 201.8 million and operating profit EUR 13.0 million. Operating profit improved clearly, especially due to several new assignments in the rail bound traffic market in Latin America and the resultant good staff capacity utilisation. Strong growth for real estate services supported the earnings development. The order stock increased during the year to EUR 191.0 (159.5) million. The most important new projects were the light rail transport system project for Metro de Maracaibo C.A. in Venezuela (EUR 13.1 and EUR 8.0 million); construction supervision for the high-speed railway project of Zhengzhou-Xian Passenger Dedicated Line Company Ltd in China (EUR 2.6 million); and the continuation of implementation services to C.A. Metro de Valencia for line No. 1 of the light rail system of the city of Valencia, Venezuela (EUR 12.6 million). Infrastructure & Environment, 2006 2005 2004 EUR million Net sales 201.8 164.9 142.1 Operating profit 13.0 9.2 7.0 Operating profit, % 6.4 5.6 4.9 Order stock 191.0 159.5 118.8 Personnel at year-end 2207 1979 1715 Development of Group structure The Pöyry Groups clients are globalising and consolidating their operations. Through its comprehensive global network of offices the Group serves its clients as an adviser and project implementation specialist, globally and locally. The Pöyry Groups local network of offices offers clients a good alternative for outsourcing their internal engineering services. The Group is actively expanding its office network. The Group also intends to expand its technology and know-how base by acquiring technology leaders within its main business sectors. These companies expertise can also be efficiently marketed via the Groups global network of offices. To improve the Groups relative profitability, operations are being increasingly focused on consulting and engineering services. Turnkey project operations have been reduced and earnings targets for individual turnkey projects have also been raised. Turnkey projects are only undertaken by the Energy business group and the objective is to keep their volume below 30 per cent of the business groups net sales. This equals about 1015 per cent of the Groups consolidated net sales. Acquisitions Energy The Energy business group expanded its global presence in the oil and gas engineering and consulting sector by acquiring in May IGL Consultants Ltd, headquartered in Aberdeen, Scotland. The companys main operational bases are in Aberdeen (UK), Stavanger (Norway), Perth (Australia) and Kuala Lumpur (Malaysia), and at the time of the acquisition it had 117 employees. The company specialises in engineering, operations support and expert consulting services. It has a wide client base including international and national oil companies and independents. IGLs net sales for 2006 were EUR 15 million. IGL Consultants has been consolidated into the Pöyry Group as of May 2006. The business group expanded its management consulting business in October by acquiring Convergence Utility Consultants Ltd, headquartered in Switzerland. The merger represented an excellent strategic fit, strengthening Pöyrys position as the biggest consultant in the European energy market. Convergences main operational bases are in Dusseldorf, Milan, Paris, Warsaw and Zurich and it has 70 employees. Convergence is a business strategy and economics consulting firm serving utility companies, regulators and energy-sector institutions. Its service portfolio covers a broad spectrum relating to producers, network carriers, retailers and suppliers. The companys net sales for 2006 amounted to EUR 10 million. Convergence Utility Consultants has been consolidated into the Pöyry Group as of October 2006. The business group aims to expand its network of local offices in Europe and Asia. In addition, the business group intends to expand its technological expertise, especially in the areas of renewable energy, management consulting, oil and gas reserves, and environmental protection. Forest Industry Pöyry Civil Oy acquired, in February, 100 per cent of the shares of Salminen & Sorasalmi Oy of Espoo, Finland. The companys net sales are EUR 0.7 million. Salminen & Sorasalmi strengthens the structural engineering operations of Pöyry Civil Oy and broadens its business in Russia and the Baltic countries. Salminen & Sorasalmi was merged into Pöyry Civil Oy on September 30, 2006. In addition, Pöyry Civil Oy acquired in June the entire share capital of TH Consulting Oy, a structural design firm based in Espoo, Finland. The companys net sales are EUR 0.4 million. Pöyrys Forest Industry business group formed, in March, a joint venture with the Shandong Light Industry Design Institute to provide detail engineering services in China. The joint venture, named Pöyry Shandong Engineering Consulting Co. Ltd, is 70 per cent owned by Pöyry. The company is based in Jinan, Shandong Province in Eastern China, and has a staff of about 100. The joint venture is a major step in strengthening Pöyrys local engineering presence in China, building on the existing operations in Shanghai and Beijing. The business groups office network will be expanded in the next few years in line with market developments. The expansion is likely to take place primarily in emerging markets, where investment activity is expected to grow, and partly in Europe and North America, where local services are required for rebuilds and maintenance engineering. Infrastructure & Environment Pöyry Environment Oy in February acquired 100 per cent of the shares of Savon Tekmi Oy, based in Kuopio, Finland. Savon Tekmi Oy has net sales of EUR 0.9 million. The acquisition strengthens Pöyrys local operations in eastern Finland. Savon Tekmi Oy specialises in geotechnical, foundation and municipal engineering. It also has expertise in surveying and in planning, and in research related to contaminated soils. Savon Tekmi Oy was merged into Pöyry Environment Oy on September 30, 2006. The business group increased, in August, its ownership in Entec A.S., Estonia. Pöyry Environment Oys ownership increased from 42 per cent to 67 per cent of Entecs shares. The transaction strengthens Pöyrys position in the Estonian engineering services market. Entec A.S. specialises in consulting and engineering services in the fields of water supply, community planning, municipal engineering, waste management, environmental consulting and contaminated soils. The company has a leading position in its own business sector in Estonia. Entec has net sales of about EUR 1 million and a staff of 30. The business group aims to expand its network of local offices in Europe and Asia. Order stock The Groups order stock increased during the financial year. At the end of 2006, the order stock totalled EUR 507.6 million, compared with EUR 452.1 million at the end of 2005. The order stock of the consulting and engineering business increased by 72.7 million during the year. The share of consulting services and operation and maintenance services of the order stock has increased. Assignments in these areas are short- term and are partly booked under net sales without being recorded in the order stock. Pöyrys Forest Industry business group entered, in December 2006, into an agreement with Chamflora - Três Lagoas Agroflorestal Ltda regarding the implementation of a greenfield bleached kraft pulp mill in the state of Mato Grosso do Sul in Brazil. In the agreement Pöyry is designated as the supplier of overall project management as well as engineering, procurement, and construction management services for the pulp mill project. The final price is dependent on the scope of the services but is estimated to be no less than USD 50 million. A separate stock exchange notice will be released when the agreement has been signed and the project recorded in the order stock. Order stock, EUR million 2006 2005 2004 Consulting and engineering 500.8 428.1 359.3 EPC 6.8 24.0 13.9 Order stock, total 507.6 452.1 373.2 Human resources Personnel structure The total number of personnel in the Group increased during 2006. The Group had an average of 6038 employees during the year, which is 11.3 per cent more than in 2005. The number of personnel increased the most outside Western Europe. Mergers and acquisitions added 220 employees to the total. Of the total personnel, 5514 were employed in operative project work. Personnel, average 2006 2005 2004 Operative personnel 5514 4936 4778 Administrative personnel 524 487 441 Personnel, total 6038 5423 5219 Salaries and bonuses Salaries and bonuses in the Pöyry Group are determined on the basis of collective and individual agreements, the employees performance and the required qualification level. Supplementing the basic salary, the Group has implemented a bonus scheme which is primarily aimed at Group companies management. In addition, separately agreed bonus schemes were implemented in selected projects. In 2006, salaries paid totalled EUR 273.4 million, of which profit bonuses accounted for EUR 11.1 million. Salaries and bonuses, EUR 2006 2005 2004 million Salaries and remunerations 262.3 223.6 210.5 Profit bonuses 11.1 9.3 7.8 Salaries and bonuses, total 273.4 232.9 218.3 Human resources management The future path of human resources functions was determined on the basis of a Group-wide review completed during 2006. Based on this review, Pöyrys HR functions will be strengthened both globally and locally. In the autumn of 2006 the Group Vice President, Human Resources was employed and appointed member of the Group Executive Committee, with responsibility for finalising the HR development plan and putting it into practice. The executive committees of the business groups will also be complemented with human resources managers. Operating principles will be enhanced in 2007 by intensifying the co- operation within the Groups HR network and by developing joint operating models. The objective of these efforts is to create a professionally ever-more skilled, business-oriented and closely co- operating HR service organisation. Guidelines for competence development are defined as a part of the strategy process. This ensures that the Pöyry Groups competences will develop in accordance with is varying business needs. Research and development The Pöyry Groups research and development co-operation committee consists of representatives of the business groups, IT staff and the companys management. Its main objectives are to promote internal research and development, to assist in obtaining supplementary financing and engaging clients in development processes, and to keep the research and development focus on the Groups objectives. The Pöyry Group is engaged in hundreds of research and development projects each year, relying on the expertise, experience and innovativeness of its employees. Research and development efforts are conducted in partnership with clients and research institutions, often in an interdisciplinary manner, making use of the Groups technical and technological expertise to improve the competitiveness of the Group and its clients. The income and expenses attributable to research and development are mostly part of the Groups client work and cannot therefore be defined in exact monetary terms. The income and expenses have been taken into account in the statement of income for the financial year. Capital expenditure and depreciation The Groups capital expenditure totalled EUR 37.7 million, of which EUR 9.8 million mainly consisted of computer software, systems and hardware and EUR 27.9 was due to business acquisitions. Capital expenditure and 2006 2005 2004 depreciation, EUR million Capital expenditure, operative 9.8 8.0 7.3 Capital expenditure, shares 27.9 17.8 11.4 Capital expenditure, total 37.7 25.8 18.7 Depreciation 7.8 7.9 9.1 Financing The Groups liquidity remained good during the financial year. At the end of the year, the Groups cash and cash equivalents totalled EUR 74.9 (64.5) million. Interest-bearing debts amounted to EUR 13.6 (10.7) million. The net debt/equity ratio (gearing) was 37.6 (-36.1) per cent, which was clearly better than the target of keeping gearing below 30 per cent. Financing, EUR million 2006 2005 2004 Cash and cash equivalents 74.9 64.5 62.2 Interest-bearing debts 13.6 10.7 12.2 Unutilised credit facilities 25.3 31.1 30.7 Gearing, % -37.6 -36.1 -37.4 Cash flow before financing 26.4 18.6 20.0 Assessment of operational risks and uncertainties In the Pöyry Group risks are managed in accordance with the Groups risk management policy and instructions. The various risks related to the Groups business operations are being monitored in line with a risk classification of external and internal risks. Internal risks include strategic and operational risks, and financing risks. If realised, identified risks could have a material negative impact on Pöyrys business operations, earnings, financial position or reputation. All identified major risks have been quantified and qualified and measures defined for managing them. The effectiveness of risk management actions is being regularly audited in the Group. The most significant risks identified in the group-wide risk management process of 2006 are described in the following. External risks With the exception of the risk related to the general economic development, no major external risks were identified in the risk management process of 2006. Strategic risks Pöyrys most significant strategic risks are related to business development and to the adoption of the one-brand strategy. The most significant strategic risks related to business development consist of risks concerned with company acquisitions, and the establishment of operations in new markets. Risks related to acquisitions are managed by complying with Pöyrys acquisition policy, and the operating procedures and models prepared on the basis of it. To manage the risks related to establishment in new markets, a market- specific strategy has been prepared for new market areas. The Group adopted a one-brand strategy during the year. The risks related to the Groups reputation and international recognition arising from the one-brand strategy are addressed by introducing brand management procedures, which are currently under preparation, and by adhering to scrupulous business practices, as stipulated in the Groups operating guidelines. Operational risks Pöyrys most significant operational risks are related to its assignments and staff. Pöyrys assignments involve a risk that the service or work performed contains a professional error, oversight or some other undesirable effect, which causes a significant economic or other liability. The following procedures are designed to manage these risks: - adhering to quality systems, operating procedures and approval procedures - appointing a supervisory body for major projects - training project managers and staff for project management and project administration tasks - complying with instructions for the processing of proposals and contracts, especially with a view to limiting contractual liabilities. However, the instructions for limiting contractual liabilities cannot always be taken into account particularly in dealing with public-sector clients - maintaining a group-wide liability insurance programme to cover liability risks related to project work. Insurances do not, however, cover all liability risks Pöyrys business success depends on its professional staff. The business requires that key staff stays with the Group and that staff with new competences is recruited according to need. The Global Network Company concept also requires a uniform management culture and uniform business practices. To identify the various risks in these areas, an external consultant has conducted a review of human resources functions and related risks. The Group Vice President, Human Resources is responsible for the planning and implementation of group-wide human resources processes, and for the recruitment of new human resources staff. Financial risks Political-risk countries in some of the markets where Pöyry is doing business involve a risk of income and capital losses. These risks are alleviated as far as possible by employing front-loaded payment schedules, and by effective collection of outstanding receivables and repatriation of funds. Project-related currency and tax risks are managed with the aid of various operating procedures and regular compliance checks. Realisation of risks, court processes No such risks, court processes, other legal proceedings or actions by authorities were realised in the risk management process during 2006 which would have had a material significance for the Group. Share capital and shares The total number of shares at the end of 2005 was 14 545 036. The Annual General Meeting on March 7, 2006 decided to increase the number of shares in proportion to the ownership of the shareholders, without increasing the share capital ("share split"). The share split was realised so that all shares of the company with an accounting par value of EUR 1.00 were split so that each share entitled to four (4) new shares with an accounting par value of EUR 0.25 each. The share split was registered in the Trade Register on March 13, 2006. As a result, the total number of shares in the company quadrupled from 14 545 036 to 58 180 144 shares. The share capital remained unchanged at EUR 14 545 036. The new shares created through the share split were available for public trading on the Helsinki Stock Exchange as of March 14, 2006. The companys own shares The Annual General Meeting authorised the Board of Directors to acquire and convey the companys own shares to a maximum of 1 400 000 shares (no more than 5 600 000 new shares after the share split). The Board has not exercised the authorisations. The authorisations are in force until March 7, 2007. Shares can be acquired with funds distributable as profit. The shares will be acquired in order to strengthen the companys capital structure and also to be used as compensation in business acquisitions or in acquisition of assets related to the companys business. Authorisation to issue new shares The Annual General Meeting on March 7, 2006 authorised the Board of Directors to decide on an increase in the 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 the option rights the share capital can be increased by a maximum of EUR 2.8 million by issuing for subscription 2.8 million new shares (no more than 11.2 million after the share split). The authorisation is in force until March 7, 2007. Bond loan with warrants and stock options Pöyry Plc issued in 2004 stock options to the management of the Group as well as to a wholly-owned subsidiary of Pöyry Plc. According to the original terms, the stock options entitle to subscription of a maximum of 550 000 shares in Pöyry Plc, and each stock option entitles the holder to subscribe one share in the company. Because of the share split, the Annual General Meeting decided on March 7, 2006 to amend the terms and conditions of the stock options issued in 2004 accordingly. Each stock option will entitle the holder to subscribe four (4) shares in the company with an accounting par value of EUR 0.25 each, with the total subscription price remaining unchanged. The share subscription periods are the following: for 660 000 shares (after the share split) between March 1, 2007 and March 31, 2010, for 660 000 shares (after the share split) between March 1, 2008 and March 31, 2011, and for 880 000 shares (after the share split) between March 1, 2009 and March 31, 2012. All stock options have been issued and their receipt confirmed. Board of Directors proposal The Board of Directors of Pöyry Plc proposes to the Annual General Meeting on March 5, 2007 that a dividend of EUR 0.50 (0.325) per share be paid for the year 2006, totalling EUR 29.1 million. The proposed dividend corresponds to 86.2 (72.2) per cent of the earnings per share for the financial year. The dividend will be payable on March 15, 2007. Board of Directors and President Members of the Board of Directors of Pöyry Plc elected in the Annual General Meeting are Henrik Ehrnrooth (Chairman), Heikki Lehtonen (Vice Chairman), Pekka Ala-Pietilä, Matti Lehti, Harri Piehl, Karen de Segundo and Franz Steinegger. President and CEO of the company is Mr Erkki Pehu-Lehtonen, M.Sc. (Eng.) and Deputy to the President and CEO is Mr Teuvo Salminen, M.Sc. (Econ.). Auditors Auditors have been KPMG Oy Ab, Authorised Public Accountants, with Mr Sixten Nyman, Authorised Public Accountant, as responsible auditor. Prospects The world economy was in a good phase in 2006. Prospects for 2007 are also mostly favourable and the economic growth is expected to continue. The Pöyry Group has strengthened its market position in recent years. The Groups order stock increased by EUR 55.6 million during the financial year, amounting to EUR 507.6 million. The order stock is normal in terms of its price level and risk profile. The Groups balance sheet position and liquidity are also good. Energy The good performance of Southeast Asian, Latin American and European economies, combined with the expansion of the EU, creates favourable conditions for growth of demand for energy-related services. The EUs expanding energy legislation is boosting demand for industry-specific management consulting services in the energy sector. In addition, environmental legislation adds to the demand for services related to renewable energy and power plant modernisations. The high price of crude oil is not expected to decline significantly, which continues to foster new business opportunities in the oil and gas sectors. To secure the availability of energy, energy companies will continue to focus on diversifying the energy supply. The Energy business group has strengthened its market position and it has a good order stock. The business groups operating profit will improve in 2007. Forest Industry Demand for engineering services is not expected to change materially during 2007. Pulp mill investments continue in South America and Asia. Paper machine investments will be directed to the emerging markets of Asia and to economies in transition, such as Russia and eastern Europe. Some replacement investments are also being developed in industrialised countries. Demand for engineering and local services is boosted by new investments in biofuels and chemical industry. Rising production costs require further production efficiency and productivity improvements in mature markets. Industry restructurings will increase demand for consulting and investment banking services. The Forest Industry business groups operating profit will remain stable in 2007, barring a major change in the world pulp and paper industrys economic cycle. Infrastructure & Environment The Infrastructure & Environment business groups demand prospects for 2007 are stable. Western Europes steady economic growth is expected to continue. The business groups efforts to expand its operations will continue to be focused on eastern Europe and other emerging markets. International financing institutions will increase their funding to environmental projects, especially in Asia and Africa. The strengthening of the business groups position in Latin America creates new business opportunities in these markets. Responding to tougher price competition both locally and internationally, the business group is sharpening the focus of its product and service portfolio. The business groups order stock has grown and its market position is good. The Infrastructure & Environment business groups operating profit will improve in 2007. Group The Pöyry Group has a strong market position in all of its business areas. The order stock grew clearly during 2006 and the balance sheet position remained good. Consolidated net sales will grow during 2007. Consolidated profit before taxes are expected to improve in 2007. PÖYRY GROUP STATEMENT OF INCOME EUR million 2006 2005 NET SALES 623.3 523.6 Other operating income 0.3 0.8 Share of associated companies' results + 1.2 + 0.8 Materials and supplies - 24.0 - 19.1 External charges, subconsulting - 73.2 - 56.0 Personnel expenses - 327.7 - 283.2 Depreciation - 7.8 - 7.9 Other operating expenses - 142.2 - 121.8 OPERATING PROFIT 49.9 37.2 Proportion of net sales, % 8.0 7.1 Dividend income + 0.0 + 0.2 Interest income and other financial income + 2.3 + 2.0 Interest and other financial expenses - 1.2 - 0.6 Exchange rate differences - 0.8 + 0.3 Value decrease - 0.0 - 0.5 PROFIT BEFORE TAXES 50.2 38.6 Income taxes - 15.4 - 12.3 NET PROFIT FOR THE PERIOD 34.8 26.3 Attributable to: Equity holders of the parent company 33.6 25.9 Minority interest 1.2 0.4 Earnings/share for profit attributable to the equity holders of the parent company, EUR 0.58 0.45 Corrected with dilution effect 0.57 0.45 BALANCE SHEET EUR million 2006 2005 ASSETS NON-CURRENT ASSETS Goodwill 61.4 42.4 Intangible assets 7.9 8.5 Tangible assets 17.0 15.2 Shares in associated companies 5.0 4.3 Other shares 6.7 7.3 Loans receivable 0.6 1.1 Deferred tax receivables 5.8 6.5 Pension receivables 3.1 4.3 Other 9.0 9.4 Total 116.5 99.0 CURRENT ASSETS Work in progress 52.7 56.6 Accounts receivable 134.2 108.1 Loans receivable 0.6 0.4 Other receivables 21.9 21.2 Cash and cash equivalents 74.9 64.5 Total 284.3 250.8 TOTAL 400.8 349.8 EQUITY AND LIABILITIES EQUITY EQUITY ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE PARENT COMPANY Share capital 14.5 14.5 Share premium reserve 31.5 31.5 Legal reserve 19.1 18.6 Translation difference - 10.9 - 8.6 Retained earnings 102.6 88.1 Total 156.8 144.2 Minority interest 6.1 4.7 Total 162.9 148.9 LIABILITIES NON-CURRENT LIABILITIES Interest bearing non-current liabilities 4.2 6.8 Pension liabilities 6.9 6.8 Deferred tax liability 3.3 2.9 Other non-current liabilities 3.4 7.7 Total 17.8 24.2 CURRENT LIABILITIES Amortisations of interest bearing non-current liabilities 2.7 2.6 Interest bearing current liabilities 6.6 1.3 Provisions 3.7 3.4 Project advances 70.0 51.0 Accounts payable 25.1 18.8 Other current liabilities 112.0 99.6 Total 220.1 176.7 TOTAL 400.8 349.8 STATEMENT OF CHANGES IN FINANCIAL POSITION EUR million 2006 2005 FROM OPERATING ACTIVITIES Net profit for the period 34.8 26.3 Depreciation and value decrease + 7.8 + 8.4 Gain on sale of fixed assets - 0.1 - 0.1 Share of associated companies' results - 1.2 - 0.8 Financial items - 0.3 - 1.9 Income taxes + 15.4 + 12.3 Change in work in progress + 3.9 - 3.5 Change in accounts and other receivables - 25.5 - 4.2 Change in advances received + 18.9 - 3.3 Change in payables and other liabilities + 15.5 + 14.9 Received financial income + 1.9 + 1.8 Paid financial expenses - 0.4 - 0.8 Paid taxes - 13.1 - 11.3 Total from operating activities + 57.6 + 37.8 CAPITAL EXPENDITURE Investments in shares in subsidiaries - 22.4 - 10.4 Investments in other shares - 0.0 - 2.7 Investments in fixed assets - 9.8 - 8.0 Sales of other shares + 0.5 + 1.1 Sales of fixed assets + 0.5 + 0.8 Capital expenditure total, net - 31.2 - 19.2 Net cash before financing + 26.4 + 18.6 FINANCING Repayments of loans - 2.5 - 2.6 Change in current financing + 5.4 + 1.0 Change in non-current investments + 0.5 - 0.1 Dividends - 19.4 - 17.1 Share subscription + 0.0 + 2.5 Net cash from financing - 16.0 - 16.3 Change in liquid assets + 10.4 + 2.3 Liquid assets January 1 64.5 62.2 Liquid assets December 31 74.9 64.5 CHANGES IN EQUITY, EUR million 2006 2005 Share capital beginning of period 14.5 14.1 Shares subscribed with warrants 0.0 0.4 Share capital end of period 14.5 14.5 Share premium reserve beginning of period 31.5 28.4 Shares subscribed with warrants 0.0 2.1 Minority change 0.0 1.0 Share premium reserve end of period 31.5 31.5 Legal reserve beginning of period 18.6 18.2 Transfer, retained earnings 0.5 0.5 Legal reserve beginning of period 19.1 18.6 Translation differences beginning of - 8.6 - 10.6 period Change during the period - 2.3 2.1 Translation differences end of period - 10.9 - 8.6 Retained earnings beginning of period 88.1 76.5 Payment of dividend - 18.9 - 16.9 Minority change - 0.2 1.8 Transfer, retained earnings - 0.5 - 0.5 Other changes + 0.8 + 0.8 Translation differences included in the result - 0.2 + 0.5 Net profit for the period 33.6 25.9 Retained earnings end of period 102.6 88.1 Minority interest beginning of period 4.7 7.1 Change during the period + 0.2 - 2.8 Net profit for the period 1.2 0.4 Minority interest end of period 6.1 4.7 Total equity beginning of period 148.9 133.7 Payment of dividend - 18.9 - 16.9 Shares subscribed with warrants 0.0 2.5 Other changes 0.8 0.8 Translation differences - 2.3 2.1 Translation difference included in the result - 0.2 0.5 Net profit for the period 34.8 26.3 Total equity end of period 162.9 148.9 PROFITABILITY AND OTHER KEY FIGURES 2006 2005 Return on investment, % 31.1 25.8 Return on equity, % 22.3 18.6 Equity ratio, % 49.2 49.8 Equity/assets ratio, % 40.7 42.8 Net debt/equity ratio (gearing), % -37.6 -36.1 Net debt, EUR million -61.3 -53.8 Current ratio 1.3 1.4 Consulting and engineering, EUR million 500.8 428.1 EPC projects, EUR million 6.8 24.0 Order stock total, EUR million 507.6 452.1 Capital expenditure, operating, EUR million 9.8 8.0 Proportion of net sales, % 1.6 1.5 Capital expenditure in shares, EUR million 27.9 17.8 Proportion of net sales, % 4.5 3.4 Personnel in group companies on average 6038 5423 Personnel in associated companies on average 251 249 Personnel in group companies at year-end 6389 5608 Personnel in associated companies at year-end 236 248 KEY FIGURES FOR THE SHARES 2006 2005 Earnings/share, EUR 0.58 0.45 Shareholders' equity/share, EUR 2.70 2.48 Dividend, EUR million 29.1 1) 18.9 Dividend/share, EUR 0.50 1) 0.325 Dividend/earnings, % 86.2 72.2 Effective return on dividend, % 4.2 4.1 Price/earnings multiple 20.3 17.7 Issue-adjusted trading prices, EUR Average trading price 9.15 6.71 Highest trading price 12.61 8.50 Lowest trading price 7.65 5.55 Closing price at year-end 11.80 7.97 Total market value of shares, outstanding shares, EUR million 686.5 463.4 Trading volume of shares Shares, 1000 23 581 20 340 Proportion of total volume, % 40.5 35.4 Issue-adjusted number of outstanding shares, 1000 On average 58 180 57 468 At year-end 58 180 58 180 1) Board of Directors' proposal. CONTINGENT LIABILITIES, EUR million 2006 2005 For own debts 0.0 0.0 Other obligations Pledged assets 0.5 0.4 Other obligations 46.4 51.7 Total 46.9 52.1 For associated companies 0.0 0.0 For others Pledged assets 0.1 0.0 Rent and leasing obligations 107.0 108.7 BUSINESS SEGMENTS, EUR million 2006 2005 NET SALES Energy 197.4 160.0 Forest Industry 224.9 199.3 Infrastructure & Environment 201.8 164.9 Unallocated -0.8 -0.6 Total 623.3 523.6 OPERATING PROFIT AND NET PROFIT FOR THE PERIOD EUR million/proportion of net sales, % % % Energy 14.6 7.4 9.1 5.7 Forest Industry 22.9 10.2 19.7 9.9 Infrastructure & Environment 13.0 6.4 9.2 5.6 Unallocated -0.6 -0.8 OPERATING PROFIT TOTAL 49.9 8.0 37.2 7.1 Financial items 0.3 1.4 PROFIT BEFORE TAXES 50.2 38.6 Income taxes -15.4 -12.3 NET PROFIT FOR THE PERIOD 34.8 26.3 Attributable to: Equity holders of the parent company 33.6 25.9 Minority interest 1.2 0.4 ORDER STOCK Energy 204.9 195.2 Forest Industry 111.4 97.3 Infrastructure & Environment 191.0 159.5 Unallocated 0.3 0.1 Total 507.6 452.1 Consulting and engineering 500.8 428.1 EPC 6.8 24.0 Total 507.6 452.1 GEOGRAPHICAL SEGMENTS The Nordic countries 154.6 137.1 Europe 277.3 229.2 Asia 79.5 72.5 North America 26.6 18.1 South America 63.9 43.7 Other 21.4 23.0 Total 623.3 523.6 PERSONNEL Energy 1692 1463 Forest Industry 2418 2123 Infrastructure & Environment 2207 1979 Unallocated 72 43 Total December 31 6389 5608 BUSINESS SEGMENTS, EUR million 1-3/06 4-6/06 7-9/06 10-12/06 NET SALES Energy 42.8 45.6 49.1 59.9 Forest Industry 52.8 57.0 54.8 60.3 Infrastructure & Environment 48.3 50.7 48.7 54.1 Unallocated 0.1 0.6 0.4 -1.9 Total 144.0 153.9 153.0 172.4 OPERATING PROFIT AND NET PROFIT FOR THE PERIOD Energy 3.2 3.3 3.7 4.4 Forest Industry 4.4 4.6 6.4 7.5 Infrastructure & Environment 3.3 2.8 3.4 3.5 Unallocated -0.7 -0.4 -0.3 0.8 OPERATING PROFIT TOTAL 10.2 10.3 13.2 16.2 Financial items 0.3 0.1 0.0 -0.1 PROFIT BEFORE TAXES 10.5 10.4 13.2 16.1 Income taxes -3.5 -3.2 -4.2 -4.5 NET PROFIT FOR THE PERIOD 7.0 7.2 9.0 11.6 Attibutable to: Equity holders of the parent company 6.9 6.9 8.6 11.2 Minority interest 0.1 0.3 0.4 0.4 OPERATING PROFIT % Energy 7.5 7.2 7.5 7.3 Forest Industry 8.3 8.1 11.7 12.4 Infrastructure & Environment 6.8 5.5 7.0 6.5 OPERATING PROFIT TOTAL 7.1 6.7 8.6 9.4 ORDER STOCK Energy 220.0 237.1 222.6 204.9 Forest Industry 111.4 109.1 111.0 111.4 Infrastructure & Environment 187.6 185.3 183.7 191.0 Unallocated 0.1 0.0 0.0 0.3 Total 519.1 531.5 517.3 507.6 Consulting and engineering 496.9 514.0 502.1 500.8 EPC 22.2 17.5 15.2 6.8 Total 519.1 531.5 517.3 507.6 BUSINESS SEGMENTS, EUR million 1-3/05 4-6/05 7-9/05 10-12/05 NET SALES Energy 37.8 39.3 37.4 45.5 Forest Industry 50.0 51.5 47.4 50.4 Infrastructure & Environment 35.7 39.2 39.7 50.3 Unallocated -0.2 -0.1 0.6 -0.9 Total 123.3 129.9 125.1 145.3 OPERATING PROFIT AND NET PROFIT FOR THE PERIOD Energy 2.0 2.1 1.8 3.2 Forest Industry 4.1 4.7 5.9 5.0 Infrastructure & Environment 1.3 2.6 2.3 3.0 Unallocated -0.2 -0.5 -0.2 0.1 OPERATING PROFIT TOTAL 7.2 8.9 9.8 11.3 Financial items 0.3 0.1 0.6 0.4 PROFIT BEFORE TAXES 7.5 9.0 10.4 11.7 Income taxes -2.5 -2.8 -3.2 -3.8 NET PROFIT FOR THE PERIOD 5.0 6.2 7.2 7.9 Attibutable to: Equity holders of the parent company 4.7 6.1 7.4 7.7 Minority interest 0.3 0.1 -0.2 0.2 OPERATING PROFIT % Energy 5.3 5.3 4.8 7.0 Forest Industry 8.2 9.1 12.4 9.9 Infrastructure & Environment 3.6 6.6 5.8 6.0 OPERATING PROFIT TOTAL 5.8 6.9 7.8 7.8 ORDER STOCK Energy 167.1 203.4 197.6 195.2 Forest Industry 82.5 79.6 78.3 97.3 Infrastructure & Environment 127.0 121.1 144.2 159.5 Unallocated 0.3 0.2 0.2 0.1 Total 376.9 404.3 420.3 452.1 Consulting and engineering 366.7 367.4 388.1 428.1 EPC 10.2 36.9 32.2 24.0 Total 376.9 404.3 420.3 452.1