LAROX CORPORATION STOCK EXCHANGE RELEASE ON 16 FEBRUARY 2007, FREE FOR PUBLICATION AT 8.30 a.m. LAROX CORPORATION FINANCIAL STATEMENTS 1 JANUARY 31 DECEMBER 2006 OVERVIEW Highlights of 2006: - New quantity of orders received increased by 13.6 % compared to previous year. New orders received during the fiscal year totalled EUR 138 million (EUR 121.5 million). The amount of new orders received during the fourth quarter of the year totalled EUR 43.5 million (EUR 39.4 million). - Group order backlog at the end of the year was 50.5 % higher than at the turn of the previous year, i.e. EUR 44.9 million (EUR 29.8 million). - Net sales was EUR 122.8 million (EUR 104.3 million), an increase of 17.7 %. - Operating profit improved by 33.9 %, i.e. EUR 8.9 million (EUR 6.7 million). - Result before taxes totalled EUR 7.0 million (EUR 5.8 million). - Net cash from operating activities totalled EUR 15.0 million (EUR 1.6 million). - Earnings per share totalled EUR 0.53 (EUR 0.49). - The Board of Directors proposes a dividend of EUR 0.30 (0.24) per share. Larox Corporation President, Mr Toivo Matti Karppanen We have reason to be extremely satisfied with 2006, as our position in the fragmented filter segment was strengthened. Net sales increased by nearly 18 % over the previous year to EUR 122.8 million, thus achieving the target for net sales that we set in 2004. Furthermore, this growth was entirely organic, as no acquisitions were made in 2006. Our sales have also increased profitably: Laroxs operating profit for the 2006 fiscal year increased by 33.9% to EUR 8.9 million. We entered 2006 with a healthy order backlog. Sales of products and services for the mining and metallurgy industry and the chemical process industry, as well as sales of aftermarket products and services, all exceeded their targets. The year progressed steadily, and we improved cumulatively our previous years performance in each quarter in terms of both sales and profitability. Our cash flow remained very strong throughout the entire year. Larox is a global player that has a strong presence in each of its target markets. Our focus on a narrow area of expertise combined with a broad product portfolio and excellent client relationships have created positive results. Laroxs brand, service and quality high-tech products are also strengths compared with our competitors. Based on our results this strategy has proven to be good, and our business activities will continue to guarantee services to customers throughout the entire lifespan of their Larox solutions. We entered 2007 with a bigger order backlog than ever before in Laroxs history. This provides an excellent basis for our future operations. We have good reason to believe that the healthy and profitable growth of our net sales will continue. BOARD REPORT BUSINESS OPERATIONS Demand for Laroxs products was positive in essential markets. Order accumulation developed well throughout the whole year and the order backlog at the end of the year was clearly bigger than in the previous year. Orders received in the Group grew by 13.6 % from the year of comparison and totalled EUR 138 million. Group order backlog grew by 50.5 % from the end of the year 2005 and was EUR 44.9 million at the end of 2006. The economic trend, which favoured industrial investments, had a positive effect on the Group result. Demand in the mining and metallurgical industry remained healthy and it was driven by high prices of metals resulting from growing consumption of metals mostly in China and other Asian countries. In chemical process industry demand is recovering in all market areas, especially in Europe. Approximately 95 % of Larox net sales were generated outside Finland. The geographical division of net sales was as follows: 1-12/2006 1-12/2005 1-12/2004 North, Central and South America 36.3 % 34.3 % 36.9 % Asia and Australasia 23.6 % 26.4 % 26.4 % Europe, CIS, Middle East, Africa 40.1 % 39.3 % 36.7 % GROUP STRUCTURE There were no changes in Group structure during the fiscal year. PROFITS AND PROFITABILITY The Larox Group result before taxes for the fiscal year totalled EUR 7.0 million (EUR 5.8 million), i.e. 5.7 % (5.6 %) of net sales. Operating profit totalled EUR 8.9 million (EUR 6.7 million). Net sales totalled EUR 122.8 million (EUR 104.3 million). Depreciation totalled EUR 3.4 million (EUR 3.9 million) and the share taken by net sales was 2.8 % (3.8 %). Result for the fiscal year totalled EUR 5.0 million (EUR 4.5 million). Order backlog at the end of the fiscal year totalled EUR 44.9 million (EUR 29.8 million). New orders received during the fiscal year totalled EUR 138 million (EUR 121.5 million). The return of shareholders equity was 19.4 % (19.7 %). Return on invested capital was 16.7 % (12.6 %). Earnings per share totalled EUR 0.53 (EUR 0.49). Operating profit includes EUR 0.9 million extraordinary costs, recorded in the last quarter, which were caused by the termination of the component manufacturing functions in the Netherlands product factory in Utrecht. In future Netherlands product factory will buy these components from sub-suppliers. This was informed in a stock exchange release on 6 November 2006. FINANCING The interest-bearing debts totalled EUR 29.0 million (EUR 40.0 million). Groups net financing costs totalled EUR 1.9 million (EUR 0.9 million) and the share taken by net sales was 1.5 % (0.8 %). Net financing costs include losses resulted from unrealized exchange rate revaluations. The equity ratio was 33.9 % (29.9 %) and the debt- equity ratio was 1.1 (1.6). INVESTMENTS Larox Group investments totalled EUR 2.3 million (EUR 1.8 million). The investments were mainly directed to development, IT applications and replacement investments. RESEARCH AND PRODUCT DEVELOPMENT Expenditure by the Larox Group on research, equipment and process development, automation products and test filtration in the fiscal year was 2006 2005 2004 EUR million 6.8 6.9 6.6 % of net 5,5 % 6,6 % 6,8 % sales At the beginning of the year Larox started a project in cooperation with Lappeenranta University of Technology and TEKES (Finnish Funding Agency for Technology and Innovation), aimed at improving the efficiency of test filtration by statistic methods. In the project a computer programme will be developed, which guides the test filtration engineer and makes an optimal test plan that gives a maximum amount of information using a minimum-size test sample. The project will be completed by the end of 2007 and applied in test filtration. The main focus in product development was related to launching new products and continuously improving the existing products. New product launches during the fiscal year were high volume Hoesch Fast Opening Filter Press and Pannevis Side Vacuum Belt Filter ranges. The first orders for new design belt filters were received during the fiscal year. Larox has been further investing in and working on with the redesign, standardization and modularization of the Hoesch Filter Press and the Pannevis Vacuum Belt Filter families. As a result and to meet tightening customer specifications as well as new requirements of European Atex-directives Larox will have a more cost efficient design and the filters will meet the latest industry standards. Larox now has Atex-proven solutions for customers who have solid /liquid separation applications with explosion proof atmospheres. As a result of product continuous improvement Larox has succeeded to improve with several customers their process results and the reliability of the Larox solution. PERSONNEL The average number of personnel employed by the Group in the review period was 450 (438). At the end of the year the number of personnel by area was as follows: Area 2006 2005 2004 Finland 210 215 212 Other European countries 139 147 151 North America 27 26 24 South and Central America 33 25 22 Asia and Australasia 17 17 13 Middle East and Africa 20 15 13 Personnel total 446 445 435 Employee benefits expenses are divided as follows: 1000 EUR 1.1.- 1.1.- 1.1.- 31.12.2006 31.12.2005 31.12.2004 Salaries and fees -23 219 -21 407 -20 575 Pension expenses, defined -2 228 -2 273 -2 102 contribution plans Pension expenses, defined -33 -4 258 benefit plans Share-based payments -57 -100 0 Other employee benefits -2 555 -2 584 -2 483 Employee benefits expenses, total -28 092 -26 369 -24 902 THE BOARD OF DIRECTORS AND AUDITORS In Larox Corporation annual general meeting of shareholders on 30 March 2006 Mr Timo Vartiainen, Mrs Katariina Aaltonen, Mr Teppo Taberman, Mr Thomas Franck and Mr Matti Ruotsala were re-elected to the Board. Mr Timo Vartiainen was elected Chairman of the Board and Mr Teppo Taberman was elected Vice Chairman in the organizational meeting of the Board of Directors held immediately after the annual general meeting of shareholders. The Annual General Meeting of shareholders elected the following main auditors: APA Kim Karhu and auditing society PricewaterhouseCoopers Oy with primary responsibility APA Kaija Leppinen. APA Henrik Sormunen and APA Jarmo Alén were elected deputy auditors. ADMINISTRATION In 2006 the main principles of corporate governance, recommended by the Helsinki Stock Exchange (OMX), the Central Chamber of Commerce and the Confederation of Finnish Industries (EK) were adopted in the Larox Corporation. The companys Board of Directors has confirmed the principles, and these can be found on the Larox Corporation website: www.larox.com. RISKS AND UNCERTAINTY FACTORS Investments in customers fields of business affect Laroxs business. The most remarkable risks that may affect the Group's business and financial result are caused by overall development of economic trends, which is reflected in the financial situation and demand in the customers fields of operation. The development of demand is followed based on general economic situation, e.g by utilizing test filtrations, order backlog and three (3) and six (6) months sales forecasts. There are a lot of competitors in the business. In addition to international companies a great number of smaller local companies compete with Larox. The Group's dependency of one single customer is limited but loosing more customers may have financial consequences. The Group has paid special attention to risks related to the increase of material and sub-contracting costs. The risks related to stability and availability of the Group personnel have been acknowledged and the Group has taken measures to keep the management and other personnel in the Group and to facilitate recruiting of new personnel. Different financial instruments are used to manage financial risks. The purpose is to protect the Group against changes that are unfavorable to the Groups financial situation. The objective of the Group is to minimize the impacts of fluctuations in financial markets on the Groups cash reserves, profits and shareholders equity. The main risks are currency risks and interest rate risks. The Group treasury function manages financial risks centrally according to the currency policy approved by the Board of Directors. Larox has insurance coverage on material damages and legal liability for damages. Insurance coverage on unexpected risks is however limited. ENVIRONMENTAL MATTERS Direct environmental influence of Laroxs business is minor. The Group takes care of the proper sorting and further handling of its wastes, including hazardous wastes. The portion of energy expenses was 1.9 % (1.5 %) of other operating expenses. AUTHORIZATION GIVEN TO THE BOARD OF DIRECTORS TO DECIDE ON THE INCREASE OF SHARE CAPITAL THROUGH A NEW SHARE ISSUE The Annual General Meeting of shareholders on 30 March 2006 authorized the Board of Directors to decide on the increase of share capital by a maximum of EUR 330 000 by offering a maximum of 550 000 new B-series shares to be subscribed but this authorization was not used during the review period. ISSUE OF EQUITY INSTRUMENTS, SUBSCRIPTION OF B-SERIES SHARES BASED ON THE MANAGEMENT INCENTIVE SYSTEM Based on Larox Corporation share issue to the top management in 2004, a total of 27 075 of the subscribed B-series shares, the restriction period of which ended on 1 December 2006, are released for trading together with other Larox Corporation B-series shares. In the share issue to the top management a total of 108 300 B- series shares were subscribed. The restriction periods of other shares subscribed in this share issue will end on 1 December 2007 regarding 37 095 shares and on 1 December 2008 regarding 43 430 shares. Larox Corporation published the terms of the share issue of 2004 to the top management in stock exchange releases of 16 February 2004 and 17 March 2004. SHARE AND SHAREHOLDERS The trading with Larox shares 1 January 31 December 2006 totalled 2 570 733, which is 27.4 % of the total number of shares. The value of the trading totalled EUR 19.9 million. The lowest price of the Larox share was EUR 6.10 and the highest EUR 9.35 per share. The closing trading price of the share was EUR 9.00 per share and the market value of the capital stock EUR 84.4 million. At the end of 2006 the number of shareholders was 743. EVENTS AFTER THE BALANCE SHEET DATE In Finland the engineering design cooperation with Etteplan Oyj was widened. As a part of the agreement, 10 employees transferred to Etteplan on 1 January 2007. Good development of order backlog has continued in January. FUTURE PROSPECTS The market situation is expected to continue favourable and the Group net sales and profitability are expected to improve from the previous year. The good order backlog at the turn of the year, EUR 44.9 million (EUR 29.8 million) and the already started procedures support this. The orders of approximately EUR 9 million, received at the beginning of 2007 (stock exchange release of 5 February 2007) are a proof of strong investment activity in filters. Positive demand of metals, which is expected to continue strong and the recovering demand in the chemical process industry influence specially investment decisions. DISTRIBUTION OF PROFITS Parent companys dividends available for the distribution totalled EUR 12.3 million, of which the profit for the fiscal year is EUR 5.2 million. The Board proposes to the annual general meeting of shareholders dividend to be distributed EUR 0.30 per share, i.e. a total of EUR 2.8 million. No essential changes have taken place in financial situation of the company after the balance sheet date. Proposed dividend to be distributed does not endanger the solvency of the company. All below figures in the financial statements have been adjusted and therefore the added sum of individual figures may differ from the presented added figure. KEY RATIOS OF LAROX GROUP EUR 1000 1- 1- 1- 12/2006 12/2005 12/2004 New orders 137 971 121 470 93 204 Group order backlog at end of 44 911 29 845 12 425 period Net sales 122 809 104 324 96 470 Operating profit 8 931 6 670 3 894 % of net sales 7,3 6,4 4,0 Net financing costs 1 887 879 2 069 % of net sales 1,5 0,8 2,1 Result before taxes 7 044 5 790 1 825 Result for the period 5 004 4 502 1 508 Investments 2 285 1 832 32 580 Shareholders' equity per share 2,84 2,68 2,25 at end of period, EUR Equity Ratio % 33,9 29,9 28,9 Return on equity, % 19,4 19,7 8,6 Return on investments, % 16,7 12,6 8,0 Liabilities and shareholders' 83 295 84 269 72 523 equity % of net sales 67,8 80,8 75,2 Contingent liabilities 26,8 26,7 30,0 Earnings per share, EUR 0,53 0,49 0,17 Dividend per share, EUR *)0.30 0,24 0,17 Trading price at end of period, 9,00 6,10 4,66 EUR Market capitalization at end of 84,4 56,6 43,2 period, EUR million **) Average number of personnel 450 438 436 Number of personnel at the end 446 445 435 ot period Net sales per person 273 238 221 *) Board of directors proposal to the annual general meeting of Larox Corporation shareholders. **) A-share data is based on the B shares last trading date of the financial year. KEY FIGURES BY QUARTERS 2006 2006 2006 2006 2005 EUR 1000 10-12 7-9 4-6 1-3 10-12 New orders 43 482 31 525 38 041 24 923 39 444 Group order backlog 44 911 41 780 37 706 29 526 29 845 Net sales 40 431 28 281 29 001 25 097 39 518 Operating profit 4 568 2 457 1 853 52 6 794 % of net sales 11,3 8,7 6,4 0,2 17,2 Net financing costs 218 259 724 686 338 % of net sales 0,5 0,9 2,5 2,7 0,9 Result before taxes 4 350 2 198 1 129 -634 6 455 Result for the 3 358 1 293 899 -546 4 846 quarter INCOME STATEMENTS, 10- 10- 1- 1- IFRS 12/2006 12/2005 12/2006 12/2005 EUR 1000 Sales 40 431 39 518 122 809 104 324 Other operating income 557 481 1 680 1 019 Change in inventories of finished goods and work in -811 -2 012 -1 287 -329 progress Materials and services -20 170 -15 530 -59 743 -46 157 Employee benefits -8 214 -7 824 -28 092 -26 369 expenses Depreciation, -777 -1 012 -3 412 -3 931 amortisation & impairment losses Other operating -6 447 -6 827 -23 023 -21 888 expenses OPERATING PROFIT 4 568 6 794 8 931 6 670 Financial income 138 448 890 897 Financial expenses -510 -867 -3 032 -1 987 Share of profit/loss 155 80 255 212 in associates PROFIT BEFORE TAX 4 350 6 455 7 044 5 791 Income tax expense -992 -1 609 -2 040 -1 288 PROFIT FOR THE PERIOD 3 358 4 846 5 004 4 503 EPS basic & diluted 0,36 0,52 0,53 0,49 (EUR) BALANCE SHEETS, IFRS EUR 1000 31.12.2006 31.12.2005 ASSETS Intangible assets 18 871 19 336 Goodwill 2 948 3 179 Property, plant and 9 566 10 622 equipment Investments in 1 153 1 006 associates Other long-term 208 273 investments Deferred tax asset 3 561 2 097 NON-CURRENT ASSETS 36 307 36 512 Inventories 19 842 15 964 Trade and other 25 194 30 056 receivables Cash and cash 1 952 1 737 equivalents CURRENT ASSETS 46 988 47 756 TOTAL ASSETS 83 295 84 269 EQUITY AND LIABILITIES Share capital 5 629 5 565 Share issue 0 64 Share premium account 5 777 5 777 Other reserves 61 124 Translation -69 -145 differences Retained earnings 15 271 13 516 SHAREHOLDERS' EQUITY 26 668 24 901 Deferred tax liability 2 511 1 333 Long-term liabilities, 19 405 24 829 interest-bearing Employee benefit 479 500 obligations Non-current provisions 1 341 1 254 NON-CURRENT 23 735 27 916 LIABILITIES Short-term 9 619 15 187 liabilities, interest- bearing Short-term 23 273 16 265 liabilities, non interest-bearing CURRENT LIABILITIES 32 892 31 452 TOTAL EQUITY AND 83 295 84 269 LIABILITIES CASH FLOW STATEMENTS, IFRS 1000 EUR 1- 1- 12/2006 12/2005 Net profit/loss 5 004 4 502 Adjustments to the net 7 132 6 476 profit/loss of the period Change in working capital 6 020 -5 624 Interest paid -1 814 -1 794 Interest income received 179 30 Other financing items -310 21 Income taxes paid -1 229 -2 020 Net cash from operating 14 981 1 592 activities Net cash used in investment -1 772 -1 805 activities Share issue 0 310 Increase in loans 5 896 12 647 Decrease in loans -16 494 -9 820 Repayment of finance lease -56 -634 liabilities Dividends paid -2 226 -1 576 Net cash used in financing -12 880 925 activities Change in cash and cash 329 712 equivalents Operating balance of cash and 1 737 962 cash equivalents Effect of the foreign exchange -114 62 rates Closing balance of cash and 1 952 1 737 cash equivalents CHANGE IN SHAREHOLDERS' EQUITY 1-12/2005 Share Fair Hed Other Trans 1000 EUR Share issue valu ging reser lat Retai diff ned capital prem res. res ves earn Total SHAREHOLDERS' EQUITY 5 564 5 532 0 0 134 -100 9 760 20 890 1 JANUARY Impact of implementation of new 175 175 standards*) ADJUSTED 5 564 5 532 0 0 134 -100 9 935 21 065 SHAREHOLDERS' EQUITY 1 JANUARY Cash flow hedging Increase in hedging reserve -15 -15 Gain of the fair value 138 138 revaluation Change in 11 -44 771 738 translation difference Recognised directly in retained -216 -216 earnings**) Other changes -145 -145 Profit for the 4 502 4 502 period Dividend -1 576 -1 576 distribution Rights issue 1 1 Unregistered share 64 245 308 capital Share-based payments 100 100 SHAREHOLDERS' EQUITY 5 629 5 777 138 -15 0 -145 13 516 24 901 31 DECEMBER 2005 *) Impact of IAS 32 and IAS 39 adoption. **) Adjustment to deferred taxes from previous periods. CHANGE IN SHAREHOLDERS' EQUITY 1-12/2006 Share Fair Hed Trans Retain ed EUR 1000 Share issue val ging lat ear capital prem res res diff nings Total SHAREHOLDERS' 5 629 5 777 138 -15 -145 13 516 24 902 EQUITY 1 JANUARY Cash flow hedging Increase in hedging reserve -30 -30 Gain of the fair value -33 -33 revaluation Other changes 75 -1 081 -1 006 Profit for the 5 004 5 004 period Dividend -2 226 -2 226 distribution Share-based payments 57 57 SHAREHOLDERS' 5 629 5 777 105 -44 -70 15 270 26 668 EQUITY 31 DECEMBER 2006 Larox has applied the same accounting principles in this Annual Report as in Annual Report 2005. Additionally the Group has applied the following standard changes and interpretations, effective on 1 January 2006, which may influence the accounting principles of the Groups financial statements. - IAS 19 (change), Employee Benefits - Amendment to IAS 39 Cash flow hedge accounting of forecast intra-group transactions - IAS 39 (change) Financial Instruments: recognition and measurement - IFRS 4 (change) Insurance Contracts - IFRIC 4, Determining whether an Arrangement Contains a Lease - IAS 21 The Effects of Changes in Foreign Exchange Rates Net Investment in a Foreign Operation The contents of changes in standards and interpretations were presented in more detail in 2005 Annual Report. The adaptation did not cause such changes in accounting principles which would have had an effect on the information presented in this release. The Larox Corporation annual report will be published in week 12/2007. The interim report for January - March 2007 will be published on 27 April 2007, and the interim report for JanuaryJune 2007 will be published on 10 August 2007 and the interim report for January September 2007 will be published on 26 October 2007. The Larox Corporation Annual General Meeting of shareholders will be held on 30 March 2007 at 11 a.m. at the Larox Corporation head office in Lappeenranta. Lappeenranta on 16 February 2007 LAROX CORPORATION BOARD OF DIRECTORS For further information, please contact Mr Toivo Matti Karppanen, President & CEO Phone +358 5 668 8210 E-mail topi.karppanen@larox.com www.larox.com DISTRIBUTION The Helsinki Stock Exchange, Central Media
LAROX CORPORATION FINANCIAL STATEMENTS 1 JANUARY 31 DECEMBER 2006
| Source: Larox Oyj