PONSSE OYJ STOCK EXCHANGE RELEASE 13 FEBRUARY 2007, 8:30 a.m. PONSSE'S FINANCIAL STATEMENTS FOR 2006 JANUARY - DECEMBER 2006 - Consolidated turnover: EUR 238.6 million (2005, EUR 226.1 million) - Operating profit: EUR 29.6 million (2005, EUR 29.1 million) - Operating profit accounted for 12.4% of turnover (2005, 12.8%) - Earnings per share: EUR 0.75 (EUR 0.70) - Board of Directors' proposal for the distribution of dividend: EUR 0.40 per share (2005, EUR 0.40, split adjusted) OCTOBER - DECEMBER 2006 - Consolidated turnover: EUR 82.7 million (Q4/2005, EUR 67.8 million) - Operating profit: EUR 10.2 million (Q4/2005, EUR 9.6 million) Arto Tiitinen, President and CEO, states the following: - During the year, Ponsse's business operations developed. Development occurred despite the fact that the worldwide market did not grow. We succeeded in increasing our market share both domestically and globally. Our order books began to rise in the last quarter, increasing by 22 per cent on the previous year. - Market development was modest, but we maintained good profitability. - During the course of the year, we continued the investment programme of our industrial operations and enhanced our response ability by setting up six strategic sales areas. We decided to focus on developing forest energy and small wood harvesting technology, and invited Hannu Airavaara to lead the operation. - During the year, our ability to respond to market challenges and needs strengthened considerably. TURNOVER Ponsses turnover for the accounting period amounted to EUR 238.6 million (EUR 226.1 million). The turnover was distributed in the business areas as follows: Nordic countries 52.2 per cent (53.6 per cent), the rest of Europe 36.2 per cent (31.4 per cent), North and South America 10.8 per cent (14.7 per cent), and other countries 0.8 per cent (0.3 per cent). PROFIT PERFORMANCE Ponsse recorded an operating profit of EUR 29.6 million (EUR 29.1 million) for the period, accounting for 12.4 per cent of turnover (12.8 per cent). Return on capital employed (ROCE) stood at 35.5 per cent (40.5 per cent). Staff costs for the period totalled EUR 37.6 million (EUR 34.3 million), and other operating expenses were EUR 24.5 million (EUR 21.4 million). Net financial expenses were EUR -1.5 million (EUR -1.2 million). Income and expenses resulting from currency risk hedging were included in the financial items. Profit for the accounting period totalled EUR 21.0 million (EUR 19.6 million). Earnings per share were EUR 0.75 (EUR 0.70). BALANCE SHEET AND FINANCIAL POSITION At the end of the accounting period, the consolidated balance sheet total amounted to EUR 125.0 million (EUR 108.3 million). The amount of current assets was EUR 58.6 million (EUR 45.2 million). Interest-bearing liabilities totalled EUR 30.9 million (EUR 24.4 million), of which current creditors amounted to EUR 8.5 million (EUR 5.4 million) and non-current creditors EUR 22.4 million (EUR 19.0 million). Net liabilities were EUR 21.9 million (EUR 11.7 million). Equity ratio stood at 49.1 per cent (47.6 per cent). Trade receivables totalled EUR 20.7 million (EUR 14.8 million). Cash in hand and at banks came to EUR 8.6 million (EUR 12.3 million). The reported cash flow from business operations totalled EUR 6.8 million (EUR 18.4 million), while that from investing activities was EUR -5.2 million (EUR - 11.1 million). ORDER INTAKE AND ORDER BOOKS The order intake for the period totalled EUR 242.9 million (EUR 236.9 million), while period-end order books were valued at EUR 59.2 million (EUR 54.9 million). The order intake for the last quarter totalled EUR 90.9 million (Q4/2005, EUR 74.6 million). The order books included dealers minimum purchase commitments, based on previous practice. DEALER CHANNELS In October, Ponsse unveiled a new, worldwide sales and maintenance service network. Comprising six strategic areas, the organisation's tasks include reacting quickly to changes in markets and customer needs, development of the distribution network and the creation of the prerequisites for increasing sales. Each area is responsible for customer and organisation training in co- operation with the Ponsse Academy. In November, the company signed a distributor agreement with Babcock Africa (PTY) Ltd. The agreement deals with the retail and support of Ponsse's forest machinery, harvester heads and information systems in the Republic of South Africa. CAPITAL EXPENDITURE AND R&D Capital expenditure totalled EUR 5.3 million (EUR 11.2 million). R&D expenses totalled EUR 4.0 million (EUR 3.7 million). The amount of activated R&D expenses during the period was EUR 808 thousand (EUR 461 thousand). PERSONNEL The Group had an average staff of 795 (729) during the period and employed 795 people at the period-end (770). SHARE PERFORMANCE The trading volume of Ponsse Oyj shares for 1 January - 31 December 2006 totalled 3,576,975, accounting for 12.8 per cent of the total number of shares. Share turnover came to EUR 44.7 million, with the periods lowest and highest share price amounting to EUR 10.89 and EUR 15.00, respectively. At the end of the period, the share closed at EUR 13.00 and the market capitalisation totalled EUR 364.0 million. SHAREHOLDERS At year-end 2006, Ponsse Oyj had 4,305 shareholders (3,535 on 31 December 2005). The number of shareholders was increased by 21.8 per cent during the year. 1,012,074 shares were nominee-registered (3.6 per cent of the total), and 27,608 shares (0.10 per cent of the total) were under foreign ownership. During the accounting period, there were no disclosures pursuant to Chapter 2, Section 9 of the Securities Market Act concerning the portion of any person's holdings reaching or exceeding or falling below the limit prescribed by law. GOVERNANCE The company adheres to the insider regulations approved by the OMX Nordic Exchange Board of Directors and the guidelines on listed companies' governance and control systems (Corporate Governance). The governance principles are available from Ponsses web site, in the Investors section. RISK MANAGEMENT The Group's risk management policy seeks to maintain and further develop a practical and comprehensive system for the management and reporting of risks. This entails systematic risk assessment for each function and unit, integrating risk management into the business processes, constant quality development and disseminating information on best practices. Internal supervision constitutes an essential part of risk management. The Board of Directors is responsible for the organisation of operations and their adequacy, whilst the President and CEO are responsible for the implementation of supervision in practice. Methods of internal supervision include internal guidelines, reporting and various technical systems related to activities. An internal auditor is responsible for the company's internal supervision in practice, and he reports to the Board of Directors. BUSINESS UNCERTAINTIES General economic fluctuations affect Ponsse's product demand and its economic position. The effect is balanced by the fact that the company's business operations are spread out in several geographical areas. With regard to Ponsse's operations, risks dealing with raw materials and the subcontractor & supplier network are fundamental. In 2005, in order to control risks, the company started a supplier network development program implemented by a full-time project manager. One part of the program is to place strategically important suppliers in the immediate vicinity of Ponsse's Vieremä factory. Component-related risks are also controlled by manufacturing a large number of key components in Ponsse Group's own production facilities. Raw material and component suppliers' possible delivery problems may increase the prices of raw materials used in Ponsse products and lengthen their delivery times. Ponsse has strengthened the control of these risks by adjusting the conditions of its supplier agreements and by extending their periods of validity. Ponsse Group's financing risk management controls liquidity, interest and currency risks and secures credit capital's conditional financing availability by competitive conditions. FUTURE PROSPECTS According to the company's estimate, wood and paper demand will develop favourably. Approximately 50 million cubic metres of trees was toppled in the European storms in January, which has already had an effect on the order flow of new and used machinery. World economy prospects are favourable. It is estimated that demand for environmentally friendly cut-to-length machinery will continue to grow globally. Also maintenance service operations are estimated to grow along with machine base growth. Investments and successful new customer acquisitions implemented by the technology company Epec Oy will enable the company's profitable growth. In the autumn 2006, the company introduced a new harvester and a forwarder, which belong to the heavy duty category of the product line. The machines have been very well received in the market. Their serial production will start in spring 2007. The new products expand the product range and improve competitiveness. The near future prospects of the company are supported by order books, which are valued higher than in 2005. This was achieved despite the fact that production capacity grew during the year. During the accounting period, the company implemented productional development measures, and measures targeting the distribution network and the organisation. The measures are believed to strengthen business operations during the present accounting period. The company believes that its business operations' profitable growth will continue in the near future. ANNUAL GENERAL MEETING The Annual General Meeting will be held at the company's registered office at Ponssentie 22, 74200 Vieremä, on 12 April 2007, commencing at 10:00 a.m. BOARD OF DIRECTORS PROPOSAL FOR THE DISPOSAL OF PROFIT Ponsse Oyjs Board of Directors will recommend to the Annual General Meeting on 12 April 2007 that a dividend of EUR 0.40 per share be paid for 2006. PONSSE GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT (EUR 1,000) IFRS IFRS IFRS IFRS 10-12/06 10-12/05 1-12/06 1-12/05 TURNOVER 82,671 67,824 238,642 226,095 Increase (+)/decrease (-) in stocks of finished goods and work in progress -4,360 -4,408 5,774 730 Other operating income 1,029 309 2,132 1,326 Raw materials and services -50,051 -36,260 -150,621 -139,304 Expenditure on employment related benefits -10,329 -9,736 -37,612 -34,317 Depreciation -1,043 -1,474 -4,256 -4,041 Other operating expenses -7,679 -6,704 -24,469 -21,437 OPERATING PROFIT 10,239 9,552 29,590 29,051 Share of the results of associated companies 170 144 441 285 Financial income and expenses -258 -674 -1,525 -1,225 PROFIT BEFORE TAXES 10,149 9,023 28,505 28,111 Income tax -1,771 -3,090 -7,463 -8,480 Minority interest 0 164 0 0 PROFIT FOR THE PERIOD 8,378 6,096 21,042 19,629 In the financial statements for 2005, Ponsse Group changed the accounting policy concerning the purchase of used machines in connection with the sale of new machines. In accordance with the general IFRS principles (Chapter 35), the value adjustment made at the time of purchase of used machinery has been interpreted as actually being a discount on the sales price of new machinery and, therefore, the change in value has been accounted for as an adjustment item in the consolidated turnover. Until the end of Q3/2005, this type of change in value was presented under the item 'Materials and services'. Comparison data for 2005 has been adjusted accordingly. Actual changes in the value of used machinery that has been made after the time of sale will be handled as a write-down of inventory value in the same manner as previously. CONSOLIDATED BALANCE SHEET (EUR 1,000) IFRS IFRS ASSETS 31.12.06 31.12.05 NON-CURRENT ASSETS Intangible assets 3,605 2,652 Goodwill 3,791 3,773 Property, plant and equipment 24,308 24,270 Financial assets 39 35 Holdings in associated companies 1,328 1,013 Non-current receivables 165 103 Deferred tax assets 972 537 TOTAL NON-CURRENT ASSETS 34,206 32,383 CURRENT ASSETS Stocks 58,615 45,161 Trade receivables 20,715 14,782 Income tax receivable 349 0 Other current receivables 2,568 3,594 Liquid assets 8,564 12,341 TOTAL CURRENT ASSETS 90,811 75,879 TOTAL ASSETS 125,017 108,262 CAPITAL AND RESERVES, AND LIABILITIES SHAREHOLDERS EQUITY Share capital 7,000 7,000 Other reserves 20 19 Translation differences -750 -442 Retained earnings 54,888 44,811 CAPITAL AND RESERVES OWNED BY PARENT COMPANY SHAREHOLDERS 61,157 51,389 Minority interest 0 0 TOTAL CAPITAL AND RESERVES 61,157 51,389 NON-CURRENT LIABILITIES Interest-bearing liabilities 22,408 18,953 Deferred tax liabilities 869 1,142 Other non-current liabilities 74 359 TOTAL NON-CURRENT LIABILITIES 23,351 20,453 CURRENT LIABILITIES Interest-bearing liabilities 8,487 5,444 Provisions 3,517 6,324 Tax liabilities for the period 230 1,216 Trade creditors and other current liabilities 28,275 23,436 TOTAL CURRENT LIABILITIES 40,509 36,420 TOTAL CAPITAL AND RESERVES, AND LIABILITIES 125,017 108,262 CONSOLIDATED CASH FLOW STATEMENT (EUR 1,000) IFRS IFRS 1-12/'06 1-12/'05 BUSINESS OPERATIONS: Profit for the period 21,042 19,629 Adjustments: Financial income and expenses 1,525 1,225 Share of the result of associated companies -441 -285 Depreciation 4,256 4,041 Income tax 7,866 8,458 Other adjustments -424 278 Cash flow before change in working capital 33,824 33,346 Change in working capital: Change in current non-interest-bearing receivables -4,551 1,501 Change in stocks -13,454 -9,052 Change in current non-interest-bearing creditors 4,542 1,279 Change in provisions for liabilities and charges -2,807 2,171 Interest received 269 277 Interest paid -1,273 -932 Other financial items -527 -656 Income taxes paid -9,201 -9,517 NET CASH FLOW FROM BUSINESS OPERATIONS (A) 6,822 18,417 INVESTMENTS Investment in tangible and intangible assets -5,318 -11,209 Investment in other assets -2 -11 Dividends received 126 101 CASH OUTFLOW FROM INVESTING ACTIVITIES (B) -5,194 -11,119 FINANCING Withdrawal/Repayment of current loans 2,729 -2,677 Change in current interest-bearing liabilities -356 0 Withdrawal/Repayment of non-current loans 3,170 -4,961 Payment of finance lease liabilities 313 -231 Change in non-current receivables -61 4 Paid dividends -11,200 -2,800 NET CASH OUTFLOW FROM FINANCING (C) -5,405 -10,665 Change in liquid assets (A+B+C) -3,777 -3,367 Liquid assets 1 Jan. 12,339 15,706 Liquid assets 31 Dec. 8,562 12,339 RECONCILIATION OF CAPITAL AND RESERVES (EUR 1,000) A = Share Capital B = Share premium and other reserves C = Translation differences D = Retained earnings E = Minority interest F = Total capital and reserves CAPITAL AND RESERVES OWNED BY PARENT COMPANY SHAREHOLDERS A B C D E F CAPITAL AND RESERVES 1 JAN 2005 7,000 20 -838 28,425 419 35,025 Translation differences 0 0 396 -443 0 -47 NET INCOME RECOGNISED DIRECTLY IN CAPITAL AND RESERVES 0 0 396 -443 0 -47 Net profit for the period 0 0 0 19,629 -419 19,210 TOTAL RECOGNISED INCOME AND EXPENSES 0 0 396 19,186 -419 19,163 Dividend distribution 0 0 0 -2,800 0 -2,800 CAPITAL AND RESERVES 31 DEC 2005 7,000 20 -442 44,811 0 51,389 CAPITAL AND RESERVES 1 JAN 2006 7,000 20 -442 44,811 0 51,389 Translation differences 0 0 -308 234 0 -74 NET INCOME RECOGNISED DIRECTLY IN CAPITAL AND RESERVES 0 0 -308 234 0 -74 Net profit for the period 0 0 0 21,042 0 21,042 TOTAL RECOGNISED INCOME AND EXPENSES 0 0 -308 21,276 0 20,968 Dividend distribution 0 0 0 -11,200 0 -11,200 CAPITAL AND RESERVES 31 DEC 2006 7,000 20 -750 54,887 0 61,157 SEGMENT INFORMATION (EUR 1,000) GEOGRAPHIC SEGMENTS 1-12/'06 1-12/'05 TURNOVER Nordic countries 156,180 154,017 Rest of Europe 87,503 71,758 North and South America 25,562 33,775 Elimination -33,294 -34,697 Unallocated 2,691 1,242 TOTAL 238,642 226,095 OPERATING PROFIT Nordic countries 14,406 18,825 Rest of Europe 13,822 10,761 North and South America 902 2,027 Unallocated 460 -2,562 TOTAL 29,590 29,051 PLEDGES GIVEN, CONTINGENT AND OTHER LIABILITIES (EUR 1,000) 31.12.06 31.12.05 1. FOR OWN DEBT Debts for which mortgages have been pledged as collateral Loans from financial institutions 0 0 Mortgages given on land and buildings 0 101 Chattel mortgages given 0 336 MORTGAGES GIVEN AS PLEDGES, TOTAL 0 437 2. LEASING COMMITMENTS (EUR 1,000) 2,442 1,996 3. CONTINGENT LIABILITIES ON BEHALF OF GROUP COMPANIES (EUR 1,000) Guarantees given on behalf of Group companies 797 884 4. LIABILITIES BASED ON DERIVATIVE CONTRACTS (EUR 1,000) 4.1 Nominal values Interest rate derivatives Interest rate swap agreements 4,500 0 Currency derivatives Forward contracts 21,189 14,690 4.2 Market values Interest rate derivatives Interest rate swap agreements 15 0 Currency derivatives Forward contracts 219 -70 5. OTHER CONTINGENT LIABILITIES (EUR 1,000) Guarantees given on others behalf 1,648 1,289 Repurchase commitments 2,164 7,163 Other liabilities 0 0 Total 3,812 8,452 KEY FIGURES AND RATIOS 31.12.06 31.12.05 R&D expenditure, MEUR 4.0 3.7 Capital expenditure, MEUR 5.3 11.2 % of turnover 2.2 5.0 Average number of staff 795 729 Order books, MEUR 59.2 54.9 Equity ratio, % 49.1 47.6 Earnings per share, EUR 0.75 0.70 Equity per share, EUR 2.18 1.84 The per share indicators have taken into account the split (1:2) of the number of shares listed in the Trade Register on 28 March 2006. Income taxes based on profit for the period are included in the Profit and Loss Account and earnings per share. ORDER INTAKE, MEUR 1-12/'06 1-12/'05 Ponsse Group 242.9 236.9 Ponsse Group has applied International Financial Reporting Standards (IFRS) to its financial reporting as of 1 January 2005. The first IFRS-compliant annual financial statement was drawn up for the accounting period 2005. Prior to the adoption of IFRS, Ponsse Oyj's consolidated financial statements were prepared according to Finnish Accounting Standards (FAS). The comparison figures are Ponsses figures presented in the adjusted financial statements for the corresponding period in 2005. The preparation of the financial statement has adhered to standards valid at the end of the period under review. The above figures have not been audited. The above figures have been rounded and may therefore differ from those given in the official financial statements. Vieremä, 13 February 2007 Arto Tiitinen President and CEO FOR FURTHER INFORMATION, PLEASE CONTACT: Arto Tiitinen, President and CEO, tel. +358 (0)20 768 4621 or +358 (0)400 566 875 Mikko Paananen, CFO, tel. +358 (0)20 768 8648 or +358 (0)400 817 036 DISTRIBUTION Helsinki Stock Exchange Principal media www.ponsse.com