- The second quarter result improved considerably from the
corresponding period in the previous year.
- Net sales of the second quarter increased by 9 percent and were EUR
332.6 (304.2) million.
- The second quarter EBIT was EUR 17.6 (2.6) million and EBIT
excluding the effect of unrealized gas derivatives and non-recurring
items was EUR 24.6 (0.2) million.
- Earnings per share were EUR 0.24 (-0.02) for the second quarter and
EUR 0.51 (-0.42) for the first six months.
- January - June net sales were EUR 682.0 (577.1) million.
- January - June EBIT was EUR 38.9 (-16.4) million and EBIT excluding
the effect of unrealized gas derivatives and non-recurring items was
EUR 45.3 (-20.2) million.
- Yara International ASA acquired in May 30.05 percent of all shares
and votes in Kemira GrowHow Oyj from the Government of Finland. As a
result Yara launched 20 July a mandatory tender offer for the
remaining shares in Kemira GrowHow.
- Competition Commission approved in early July Kemira GrowHow's and
Terra Industries' joint venture in the United Kingdom.
Key figures Q2/2007 Q2/2006 Q1 - Q2/2007 Q1 - Q2/2006
Net sales, EUR million 332.6 304.2 682.0 577.1
EBIT, EUR million 17.6 2.6 38.9 -16.4
EBIT excluding unrealized
gas derivatives and
non-recurring items, EUR
million 24.6 0.2 45.3 -20.2
Result before taxes, EUR 35.5 -20.1
million 15.9 1.0
Net result attributable toequity holders of the
parent company, EUR million 13.1 -1.0 28.3 -23.3
Earnings per share, EUR 0.24 -0.02 0.51 -0.42
Equity ratio, % 38.7 34.0
Gearing, % 47.4 75.6
Kemira GrowHow Group in April - June
Kemira GrowHow's second quarter was clearly better than in the
previous year. Net sales increased by 9 percent and were EUR 332.6
(304.2) million.
Consolidated operating profit during the second quarter of 2007 was
EUR 17.6 (2.6) million. EBIT as a percentage of net sales improved
during the second quarter from approximately 1 percent in 2006 to 5.3
percent in 2007. EBIT as a percentage of net sales, the effect of
unrealized gas derivatives and non-recurring items excluded, was 7.4
(0.1) percent.
Net sales, EUR million Q1 Q2 Q3 Q4 Q1-Q4
2007 349.5 332.6
2006 272.9 304.2 306.6 282.5 1,166.2
EBIT, Q1 Q2 Q3 Q4 Q1-Q4
EUR million
2007 21.4 17.6
2006 -19.1 2.6 19.1 8.5 11.1
A table of net non-recurring items is presented in the interim
financial statements part of this interim report (page 29).
Kemira GrowHow's net financial expenses, excluding the share of the
results of joint ventures and associated companies, were EUR -2.8
(-2.8) million during the second quarter of 2007. Net losses on
foreign exchange were EUR -1.1 (0.0) million during the second
quarter. Kemira GrowHow's share of the results of joint ventures and
associated companies was EUR 1.1 (1.2) million.
Income taxes for the second quarter were EUR -2.5 (-1.7) million and
result attributable to equity holders of the parent company was EUR
13.1 (-1.0) million.
Earnings per share in April - June were EUR 0.24 (-0.02).
Kemira GrowHow Group in January - June
Kemira GrowHow's first six months was clearly better than in the
previous year. Net sales increased by 18 percent and were EUR 682.0
(577.1) million.
Consolidated operating result of the first six months of 2007 was EUR
38.9 (-16.4) million. EBIT as a percentage of net sales improved from
-2.8 percent in 2006 to 5.7 percent in 2007. EBIT as a percentage of
net sales, the effect of unrealized gas derivatives and non-recurring
items excluded, was 6.6 (-3.5) percent.
Kemira GrowHow's net financial expenses, excluding the share of the
results of joint ventures and associated companies, were EUR -5.6
(-5.0) million in January - June. Net losses on foreign exchange were
EUR -1.4 (-0.2) million. Kemira GrowHow's share of the results of
joint ventures and associated companies was EUR 2.3 (1.3) million.
Income taxes for the first six months were EUR -6.0 (-2.5) million.
Income tax expense for the interim period is calculated separately
for each country in which the Group operates and it is based on an
estimated average annual effective tax rate in each country. In
accordance with prudence principle, deferred tax assets have not been
recorded from the results of loss-making units.
The result attributable to equity holders of the parent company for
the January - June period was EUR 28.3 (-23.3) million and earnings
per share were EUR 0.51 (-0.42). Kemira GrowHow Oyj has not issued
options, warrants, convertible bonds or similar instruments which
would dilute the earnings per share.
The second quarter of the strategic business units
Crop Cultivation
Net sales of the Crop Cultivation business unit increased during the
second quarter by 9 percent compared with the corresponding period in
2006 and were EUR 261.8 (240.9) million.
The second quarter operating result was EUR 14.1 (-0.7) million. EBIT
excluding the effect of unrealized gas derivatives and non-recurring
items was EUR 21.7 (-4.5) million. The second quarter operating
result of 2007 was improved especially by less expensive natural gas
and higher sales prices of fertilizers. EBIT as percentage of net
sales, gas derivatives and non-recurring items excluded, increased
from approximately -2 percent in the second quarter of 2006 up to
more than 8 percent in 2007.
Net sales, EUR million Q1 Q2 Q3 Q4 Q1-Q4
2007 276.7 261.8
2006 208.9 240.9 238.7 206.7 895.3
EBIT, Q1 Q2 Q3 Q4 Q1-Q4
EUR million
2007 16.3 14.1
2006 -18.4 -0.7 13.3 5.4 -0.4
The fertilizer business in Europe is highly seasonal in nature.
Typically the sales and profitability of European fertilizer
producers are stronger during the first and the second quarters of
the year compared with the third and the fourth quarters of the year,
since spring is the main application season for fertilizers in
Europe. The year 2006 was, however, exceptional, because high natural
gas prices substantially weakened the first half-year results and
producers were not able to pass on the gas price increases fully to
fertilizer prices. As the gas markets normalized during the latter
half of 2006, it seems that the seasonality of the European
fertilizer business is returning to the typical pattern.
Sales volumes in thousands of metric tons
Q2/2007 Q2/2006 Q1 - Q2/2007 Q1 - Q2/2006 Q1-Q4/2006
1,023 1,013 2,148 1,894 3,814
The second quarter sales volumes were up by approximately one percent
compared with the corresponding period in the previous year. The
sales volumes increased compared with the previous year in Finland,
the British Isles and Eastern Europe. Also overseas export grew from
the corresponding period in the previous year. The sales volumes in
Continental Europe fell, however, from the previous year.
The second quarter sales prices of nitrogen fertilizers were
approximately 2 - 4 percent higher in Continental Europe and
approximately 5 percent lower in the UK than last year. Sales prices
of NPK fertilizers were approximately 2 - 6 percent higher than last
year in Continental Europe and in the UK they remained nearly at the
same level as in last year. The total effect of higher sales prices
on operating profit was, however, positive.
The price of natural gas was on average about 20 -25 percent less
expensive than in the corresponding period in the previous year. Less
expensive natural gas and higher sales prices contributed the most to
the operating profit improvement.
Industrial Solutions
The second quarter net sales of the Industrial Solutions business
unit grew by 10 percent in 2007 and were EUR 79.8 (72.2) million.
The second quarter operating profit was EUR 7.1 (6.4) million. EBIT
excluding the effect of unrealized gas derivatives and non-recurring
items was EUR 6.7 (6.4) million. EBIT as a percentage of net sales,
gas derivatives and non-recurring items excluded, fell from
approximately 9 percent in the second quarter of 2006 to 8.4 percent
in the second quarter of 2007.
Net sales, EUR million Q1 Q2 Q3 Q4 Q1-Q4
2007 80.9 79.8
2006 75.8 72.2 76.0 84.9 309.0
EBIT, Q1 Q2 Q3 Q4 Q1-Q4
EUR million
2007 7.2 7.1
2006 0.9 6.4 6.3 6.3 19.9
During the second quarter, feed phosphate volumes in Europe were
above the previous year's level and prices increased on average by 5
percent.
The major contributors to improvement of operating profit were higher
phosphoric acid and feed phosphates prices and sales volumes as well
as less expensive natural gas.
Kemira GrowHow sold in May its Danish hydrochloric acid, sulphuric
acid and canning businesses to Gropa A/S. Kemira GrowHow will,
however, continue to provide its nitric acid and ammonia based
products in Denmark. The sale had no material effect on Kemira
GrowHow's net sales or operating profit.
Kemira GrowHow and Thermphos Trading GmbH, a fully-owned subsidiary
of a Dutch company Thermphos International B.V., signed a contract in
June to set up a joint venture company, Crystalis Oy, to produce
purified phosphoric acid (PPA). The joint venture is located at
Kemira GrowHow's site in Siilinjärvi, Finland.
Crystalis Oy's production facility will be integrated into Kemira
GrowHow's Siilinjärvi operations and the new company will use
Thermphos' and Kemira GrowHow's proprietary production technology.
The basic raw material for PPA is the phosphoric acid produced at
Siilinjärvi by Kemira GrowHow. Crystalis' production process will be
closely integrated into existing operations at Siilinjärvi, resulting
in improvement of competitiveness of Kemira GrowHow's phosphoric acid
production at Siilinjärvi plant. Crystalis Oy has started planning
its production facilities in Siilinjärvi and will start operations in
the fourth quarter of 2008. The planned annual production of PPA is
30,000 tons (P2O5).
Kemira GrowHow, a Finnish energy company Fortum and a local energy
company Savon Voima Lämpö agreed in May that Fortum will provide
district heat in Siilinjärvi starting from the beginning of 2008.
Heat generated at Kemira GrowHow's Siilinjärvi plant by Fortum's
sulphur burning unit and Kemira GrowHow's sulphuric acid plant
processes will be utilized in district heating. The project will
utilize the investment to increase production of sulphuric acid and
energy at Kemira GrowHow's Siilinjärvi plant, which was decided last
autumn by Kemira GrowHow and Fortum.
The agreement, with a capacity of some 55 - 60 GWh for district
heating per year, is for 12 years and covers the needs of some 2,500
households. Heat is generated in sulphuric acid production and
sulphur burner in an environmentally friendly way. This project will
decrease the amount of oil used in the district heat production by
some 2,500 tons per year. Fortum and Savon Voima will make the
necessary investments in the autumn of 2007.
January - June of the strategic business units
Crop Cultivation
Net sales of the Crop Cultivation business unit increased during the
first six months by 20 percent compared with the corresponding period
in 2006 and were EUR 538.4 (449.8) million.
The operating result in January - June was EUR 30.3 (-19.0) million.
EBIT excluding the effect of unrealized gas derivatives and
non-recurring items was EUR 37.7 (-24.3) million. The operating
result of the first six months of 2007 was improved especially by
less expensive natural gas and thanks to that, higher utilization
rate of ammonia plants, as well as by higher fertilizer sales
volumes. EBIT as percentage of net sales, gas derivatives and
non-recurring items excluded, improved from -5.4 percent in the
previous year to 7.0 percent.
One of the three nitric acid factories of Kemira GrowHow's plant in
Tertre, Belgium, suffered a fire in early February. There were no
human injuries or environmental damages. The production shut-down in
the nitric acid plant was approximately 4 months. During the
production shut-down the fertilizer production at Tertre was reduced
by approximately 25 percent. The nitric acid plant is insured for
property damage and business interruptions. Impairment losses of
tangible assets, totalling to EUR 0.9 million, were recorded due to
the fire. EUR 0.7 million of the impairment losses were allocated to
Crop Cultivation business unit. In total EUR 3.5 million of insurance
compensations were recognized due the fire during the first six
months, and EUR 3.0 million of the compensations were allocated to
Crop Cultivation business unit.
The first half-year sales volumes were up by approximately 13 percent
compared with the corresponding period in the previous year. The
sales volumes increased in all the market areas, but especially in
the British Isles and Central Eastern Europe.
The sales prices of nitrogen fertilizers were in January - June
approximately 3 percent higher in Continental Europe and
approximately 8 percent lower in the UK than last year. Sales prices
of NPK fertilizers were approximately 3 percent higher in Continental
Europe and approximately 3 percent lower in the UK than last year.
The total effect of higher sales prices on operating profit was,
however, positive.
The price of natural gas was on average about 30 - 35 percent less
expensive than in the corresponding period in the previous year.
Thanks to less expensive natural gas and higher price of ammonia,
ammonia plants were, unlike last year, in full production through the
whole winter, and there were no additional costs due to shut-downs
and restarts of ammonia plants. There was also no need to purchase as
much ammonia as last year. Lower natural gas prices, stable operation
of the ammonia plants and lower ammonia purchases together with
higher sales volumes contributed the most to operating profit
improvement.
Industrial Solutions
Industrial Solutions business unit's net sales of the first six
months increased by 9 percent in 2007 and were EUR 160.7 (148.1)
million.
January - June operating profit was EUR 14.3 (7.3) million. EBIT
excluding the effect of unrealized gas derivatives and non-recurring
items was EUR 13.6 (7.4) million. EBIT as a percentage of net sales,
gas derivatives and non-recurring items excluded, increased from
approximately 5 percent in the first six months of 2006 to 8.5
percent in the corresponding period of 2007.
EUR 0.2 million of impairment losses due to the fire at Tertre plant
were allocated to Industrial Solutions business unit. Allocated
insurance compensations were EUR 0.5 million.
During January - June, feed phosphate volumes in Europe were above
the previous year's level and prices increased on average by 5
percent.
The major contributors to improvement of operating profit were higher
phosphoric acid and feed phosphates prices, less expensive natural
gas and higher utilization rate of ammonia plants.
Financing
At 30 June 2007, the Group's net interest-bearing liabilities
amounted to EUR 158.5 million, compared with EUR 224.0 million at 30
June 2006 and EUR 185.9 at 31 December 2006. The proportion which
fixed-interest loans represented within the total amount of the
Group's interest-bearing loans was about 35 percent at the end of the
review period. Pension loans are considered to be floating rate
loans. At the end of the review period 30 June 2007 liquid funds
amounted to EUR 40.4 million (EUR 43.7 million at 30 June 2006 and
EUR 20.0 million at 31 December 2006).
The Group's equity ratio was 38.7 percent at the end of the review
period 30 June 2007 (34.0 percent at 30 June 2006 and 37.2 percent at
31 December 2006). The gearing ratio was 47.4 percent (75.6 percent
at 30 June 2006 and 59.5 percent at 31 December 2006).
Kemira GrowHow's main liquidity reserve is a syndicated revolving
credit facility that is used for general corporate purposes. The EUR
150 million credit facility is in place until the year 2010. The
utilization of the revolving credit facility as of 30 June 2007 was
EUR 80 million. Kemira GrowHow also has a EUR 300 million domestic
commercial paper program, a long-term bilateral bank loan and pension
loans. Other funding sources are financial leasing arrangements and
credit facilities with local house banks.
Cash flow during January - June 2007 was clearly better than in the
previous year as cash flow from operations was EUR 53.4 (-43.3)
million and EUR 35.9 (-74.9) million after investing activities. The
main reason for the increase in cash flow compared with the previous
year was better operating result and a decrease in net working
capital.
Capital expenditure
Gross capital expenditure was EUR 19.8 (48.2) million during the
first six months of 2007. Carbon dioxide emission right allowances,
EUR 0.5 (9.4) million, are included in gross capital expenditure.
Emission rights have been recorded at fair value when received. There
were no major investments made during the first quarter of 2007.
Previous year's gross investments include the acquisition of 19
percent of Hankkija-Maatalous Oy shares.
Depreciation and amortization in January - June were EUR 22.7 (22.3)
million and impairment losses EUR 2.4 (0.1) million. Impairment
losses totalling to EUR 1.3 million, consisting of impairment of
goodwill and intangible assets allocated to ZAO Agroprochimija,
Russia, were recorded in the second quarter due to redirection of
business. Other impairment losses were recognized of property, plant
and equipment and they are mainly related to assets destroyed at the
fire at Tertre plant. Proceeds from sales of fixed assets were EUR
5.8 (12.8) million. Net gains from sales of assets were EUR 3.5 (6.6)
million.
Cash flow from investing activities in January - June was EUR -17.6
(-31.6) million.
In 2007, capital expenditure excluding possible acquisitions is
estimated to be approximately EUR 50 million, including maintenance
investments of approximately EUR 30 million. The most significant
capital expenditure in 2007 are investments in energy efficiency
improvement and scheduled maintenance of the ammonia plant at Tertre,
Belgium and investments in sulphur burning unit and automatization of
fertilizer plant at Siilinjärvi, Finland.
Personnel
As at 30 June 2007, Kemira GrowHow had 2,567 (2,659) employees. The
average number of personnel was 2,514 (2,652). The number of
personnel in Finland was 1,142 (1,149) at the end of June and 1,080
(1,101) on average.
Shares and share capital
At the end of the review period, 30 June 2007, the share capital of
Kemira GrowHow Oyj amounted to EUR 155,973,000 consisting of
57,208,857 shares (before the deduction of treasury shares). Each
share, with the exception of the treasury shares, entitles its holder
to one vote at the General Meetings of Shareholders of Kemira GrowHow
Oyj. The share has no nominal value.
The Board of Directors of Kemira GrowHow Oyj used the authorizations
issued by the Annual General Meeting of 2006 to dispose of the
Company's own shares. Based on the Board of Directors' decision,
Kemira GrowHow Oyj transferred on 15 March 2007 77,320 shares to
persons involved in the 2004 share-based incentive plan.
At 30 June 2007, Kemira GrowHow Oyj held 1,783,380 own shares,
representing in total 3.12 percent of the number of issued shares.
At the end of the review period, the quoted price of Kemira GrowHow
Oyj shares stood at EUR 11.91 The highest quoted price in January -
June 2007 was EUR 12.21 and the lowest was EUR 6.67. The volume
weighted average quoted price in January - June 2007 was EUR 9.76.
The share capital had a market value of EUR 660.1 million at the end
of June 2007. The volume of shares traded during the January - June
period was equivalent to 150 percent of the average number of shares
outstanding.
Equity attributable to equity holders of the parent company was EUR
5.97 (5.33) per share at 30 June 2007. The number of shares used in
calculating this key ratio has been reduced by the number of treasury
shares.
As of 30 June 2007, Kemira GrowHow's ownership structure was the
following:
International institutions and nominee registered shareholders
(* 74.2%
Finnish institutions 14.0%
Finnish households 8.7%
Kemira GrowHow Oyj 3.1%
(* Yara Nederland B.V. acquired 24 May 2007 30.05 percent of the
shares in Kemira GrowHow Oyj from the Government of Finland. Pursuant
to article 7(2)(b) of the EC Council Regulation EC 139/2004 an
acquirer is not allowed to exercise the voting rights attached to the
purchased securities during the proceedings of the European
Commission. In accordance with regulation, save with the prior
consent of the European Commission, Yara will not exercise the voting
rights related to the shares purchased in connection with the share
purchase until the European Commission has approved the share
purchase and the tender offer.
Yara Nederland B.V. announced on 30 July, that as a result of a share
transaction concluded on 24 May 2007 and acceptances to a mandatory
tender offer, the holdings of Yara Nederland B.V. have exceeded
five-tenths (5/10) of the voting rights and share capital in Kemira
GrowHow Oyj on 27July 2007. The acceptances to the tender offer
represent 22.88 percent of shares in Kemira GrowHow Oyj, i.e.
13.089.404 shares.
Skagen AS, Stavanger, Norway, reported to Kemira GrowHow Oyj on 26
July 2007 that it has for its part accepted the mandatory public
tender offer by Yara Nederland B.V. for all shares held in Kemira
GrowHow Oyj. With effect immediately funds managed by Skagen AS no
longer may exercise any voting rights in Kemira GrowHow Oyj. Based on
the information that Kemira GrowHow Oyj has, the funds managed by
Skagen AS had more then 5 percent of the shares in Kemira GrowHow Oyj
(the shares were nominee-registered).
The Board of Directors of Kemira GrowHow Oyj has no authorization to
issue convertible bonds or warrants or options. The Annual General
Meeting held on 3 April 2007 authorized the Board of Directors to
dispose of the Company's own shares through a share issue and to
issue new shares through a subscribed issue. These authorizations
have not been used.
Annual general meeting
The Annual General Meeting of Kemira GrowHow Oyj held at 3 April
2007, approved the financial statements and consolidated financial
statements for the financial year of 1 January - 31 December 2006 and
granted discharge from liability to the members of the Board of
Directors as well as the managing director and the deputy managing
director.
The Annual General Meeting decided to distribute as dividend for the
financial year of 2006 EUR 0.15 per share, as proposed by the Board
of Directors. No dividend was paid to treasury shares held by Kemira
GrowHow Oyj, so the paid dividend amounted to EUR 8.3 million. The
dividend record date was 10 April 2007 and the dividend was paid on
17 April 2007.
The Annual General Meeting re-elected Ossi Virolainen, Lauri Ratia,
Arto Honkaniemi, Satu Raiski, Helena Terho and Esa Tirkkonen as
members of the Board of Directors and Maija Torkko as a new member.
The Annual General Meeting re-elected Ossi Virolainen as the Chairman
and Lauri Ratia as the Vice Chairman of the Board of Directors.
KPMG Oy Ab was re-elected as auditor, with Petri Kettunen, APA, as
responsible auditor, and Pekka Pajamo, APA, as deputy auditor.
The Annual General Meeting decided to authorize the Board of
Directors to dispose of a maximum number of 1,860,700 Company's own
shares through a share issue. The authorization is effective until 31
May 2008.
The Annual General Meeting decided to authorize the Board of
Directors to issue a maximum of 6,000,000 new shares through one or
more subscribed issues. In accordance with the authorization, the
Board of Directors may deviate from the shareholders' pre-emptive
rights to subscribe for Company shares if there is a persuasive
economic reason for the company to do so. The authorization is
effective until 31 May 2008.
The Annual General Meeting decided to establish a Nomination
Committee to prepare proposals for the next Annual General Meeting on
the composition and remuneration for the Board of Directors.
Efficiency improvements
During 2007 Kemira GrowHow aims to carry out efficiency improvement
projects, which would improve result in total by more than EUR 10
million. These projects include projects to improve production
efficiency, cutting down fixed costs, savings in logistics and
development of business in Eastern Europe. The most significant
on-going project is the project to increase efficiency of the ammonia
plant in Tertre. The project is estimated to be finished in spring
2008.
Yara's tender offer of shares in Kemira GrowHow Oyj
Yara Nederland B.V., a fully-owned subsidiary of Yara International
ASA, acquired 24 May 2007 17,188,480 shares in Kemira GrowHow Oyj
from the Government of Finland. The purchase price paid for the
shares was EUR 12.12 per share. The acquired shares represent 30.05
percent of all shares and votes in Kemira GrowHow.
As a result of the acquisition of the shares, Yara's holding exceeded
three-tenths (3/10) of the votes in Kemira GrowHow and Yara was under
the obligation to launch a mandatory tender offer under the Chapter 6
Section 10 of the Finnish Securities Markets Act for the remaining
shares in Kemira GrowHow. The tender offer began on 20 July and
expires at 16.00 on 7 September 2007. Yara reserves the right to
extend or interrupt the tender offer period in accordance with the
terms and conditions of the tender offer.
The offered cash consideration in the tender offer is EUR 12.12 per
share. The offer values Kemira GrowHow at EUR 671.8 million on an
equity value basis. The cash consideration of EUR 12.12 per share
corresponds to a premium of 30.7 percent over the closing price of
EUR 9.27 per share on 23 May 2007, the last trading day prior to the
tender offer obligation, and a premium of 30.8 percent over the
volume-weighted average price during the previous 3 months preceding
the tender offer obligation, i.e. from 24 February to 23 May 2007.
The offer price also represents a premium of 17.1 percent over Kemira
GrowHow's all-time high traded share price prior to the tender offer,
EUR 10.35 per share. Additionally Yara will pay interest accruing at
an annual rate of 5.00 percent from date on which an account operator
or a custodian has received the acceptance of the tender offer by a
shareholder of Kemira GrowHow until and including the payment day of
the offer price pursuant to the tender offer to such shareholder.
The tender offer is conditional on the relevant regulatory approvals.
However, Yara and Kemira GrowHow do not anticipate any problems with
the regulatory process. Yara and Kemira GrowHow have entered into a
combination agreement, and in accordance with the agreement, Yara is
prepared to accommodate any concerns of the authorities to a large
extent to assure such approval. Until such conditions are met and the
deal is finalized, Kemira GrowHow continues its business operations
as usual and there are no effects on the personnel. The CEO and the
management team of Kemira GrowHow continue to run the business
according to its current strategy and report to the Board of
Directors as before.
Yara will fund the offer consideration from its existing cash
balances and credit lines. Accordingly, the tender offer is not
subject to any financing conditions.
The Board of Directors of Kemira GrowHow has assessed the tender
offer and, to support its evaluation, acquired a fairness opinion
from Lehman Brothers Europe Limited. Based on its assessment the
Board has concluded that the offer price is fair from a financial
point of view to Kemira GrowHow's shareholders. Therefore, the Board
unanimously recommends that the shareholders accept the tender offer
by Yara.
The joint venture in the UK with Terra Industries
In October 2006 Kemira GrowHow Oyj and Terra Industries Inc. entered
into a Memorandum of Understanding which set out their agreement to
create a joint venture to operate the fertilizer and associated
process chemicals businesses of both companies in the United Kingdom.
The Competition Commission (UK) approved the proposed joint venture
11 July 2007. The approval is conditional upon the divestment of
certain process chemicals businesses (which account for less than 3
per cent of the net sales of the joint venture) as well as upon
amendment of certain terms in the agreements for supply of carbon
dioxide at Ince plant.
The joint venture will be held 50/50 by Kemira GrowHow and Terra and
will own and operate the site of Kemira GrowHow UK Limited at Ince
and the sites of Terra Nitrogen (UK) Limited on Teesside and
Severnside. The annual net sales of the combined operations included
in the joint venture exceeded EUR 500 million in 2006.
Both companies produce ammonium nitrate, which is the main nitrogen
fertilizer consumed in the UK, and Kemira GrowHow produces also
compound fertilizers. The joint venture will therefore provide a
complete fertilizer offering for agricultural customers. Through the
joint venture, Kemira GrowHow and Terra expect to create significant
cost and operational synergies that would enhance their ability to
service and compete in increasingly challenging markets.
Other events during the review period
The Finnish Ministry of Trade and Industry made in June a decision
about the mining rights in Sokli and issued Kemira GrowHow a two year
time period to start the mining operations in the Sokli area. If the
period of two years is not long enough and Kemira GrowHow believes
that it is possible to develop the deposit and pursue the opening of
the mine, Kemira GrowHow may again apply for the mining rights.
The Sokli mine area is located in Eastern Lapland in Finland, where
it is possible to extract niobium and phosphorus.
Market overview
During the latter half of last year, fertilizer deliveries of
European fertilizer producers fell by up to 10 percent compared with
the previous season. This was due mainly to a shift of last autumn's
fertilizer purchases to this spring, although the total fertilizer
deliveries of European fertilizer producers in the 2006/07 season,
which ended in June, are estimated to have decreased compared with
the previous season. Globally fertilizer consumption is estimated to
have grown by nearly 5 percent during the 2006/07 season and it is
expected to further increase by 3 percent in the new 2007/08 season.
In a longer term, the average annual growth in global consumption is
expected to remain at about 2 - 3 percent. The decline in consumption
in the western part of the European Union is compensated for by
increasing consumption in the eastern part of the Union. Global
nitrogen fertilizer production capacity is estimated to increase at a
slower pace than was anticipated last year. European fertilizer
supply has decreased due to plant closures.
As a result of the reform of the common agricultural policy of the
European Union in 2003, farm subsidies were mostly decided to be
decoupled from production. The reform is estimated to cut down cereal
production and on the other hand to increase energy crop production,
but the full long-term impact of these reforms is still difficult to
assess. However, the expanding cultivation of energy crops is assumed
to increase fertilizer consumption. The European Commission
forecasts, that in a longer term, farm income in the whole EU will
grow at an average annual rate of over 2 percent.
The European Commission intends to suggest, that the 10 percent
mandatory set aside agricultural area would be abolished for the
2007/08 season. This would increase fertilizer consumption.
Global cereal stocks continue to be the main driver of the fertilizer
market. According to the FAO global cereal production in 2006 was
more than 2 percent lower than in 2005, but it is expected to
increase by over 5 percent this year thanks to the more favourable
crop outlook. In the European Union, cereal production dropped by
almost 5 percent in 2006 compared with 2005. This year cereal
production in the EU is estimated to increase regardless of the
unfavourable weather conditions.
The recovery of world meat production, the surge in bio-ethanol
production in the United States and the currently prevailing rather
favourable global economic conditions are expected to result in
continuous growth in global cereal demand. Cereal stocks are at a
historically record low level and they are estimated to have
decreased during the 2006/07 season further by more than 14 percent.
Because the demand for grain increases, the stocks are not, however,
expected to grow materially, despite of the good crop outlook
Global market prices of commodity fertilizers such as urea and
diammonium phosphate (DAP) have strengthened substantially during
this year, decreasing the pressure of fertilizer imports from outside
of Europe.
The prices of wheat and other cereals increased strongly during late
2006 and they have remained at a high level. High cereal prices
improve the farmers' financial situation. Historically, improving
cereal prices have increased fertilizer consumption.
The gas infrastructure in Northwest Europe has improved significantly
from last year. During the autumn and winter a number of new gas
pipelines connecting the United Kingdom to the Dutch gas network and
to a new gas field in the North Sea were completed. This has
increased the supply of natural gas, which has decreased gas prices
and price volatility. Combined with the activities of the European
Union to open up the European gas markets, this is expected to
improve effectiveness of the gas markets in the long run. After the
mild winter European gas stocks were larger than usually, and thanks
to that, the market prices in North-Western Europe during the spring
and early summer did not follow the firm increases in oil prices.
During the summer the gas markets in North-Western Europe have
tightened due to exceptional weather and pipeline damages.
The feed phosphate market in Europe has remained stable. The supply
and demand balance of phosphoric acid has lately tightened further.
The market prices are substantially influenced by the price of
phosphoric acid annually agreed by India. This price has been
announced to increase approximately 30 percent this year. Also the
price of DAP has risen strongly supporting the price of phosphoric
acid.
Current outlook
Fertilizer demand and prices are expected to remain at a good level
also during the latter half of 2007 and prices are expected to remain
high. The price of the most important raw material, natural gas, is
expected to rise from the second half of 2006. Also the prices of
potash and sulphur are rising. Thanks to strong demand during the
spring, the producers' fertilizer inventories have declined from the
year end strengthening the initial fertilizer prices of the new
season, which began in July. Also the high world market prices of DAP
and urea support fertilizer prices for the new season. The
profitability of the latter part of the year depends essentially on
the price level of fertilizers in relation to the natural gas prices
during the second half year. The most important external factors
affecting the development of fertilizer business are estimated to
continue to be positive.
The positive development of the Industrial Solutions business unit's
operations is expected to continue. The world US dollar-based market
price of phosphoric acid has increased by approximately 30 percent.
The price increases are expected to be partly, with a delay,
reflected also on the prices of feed phosphates, because Kemira
GrowHow's competitors are sourcing the phosphoric acid to be used as
raw material from the markets. Kemira GrowHow has own phosphoric acid
production thanks to own mine.
In addition to positive development of fertilizer business, also
Kemira GrowHow's own actions, efficiency improvements and utilization
of new business opportunities, create additional possibilities for
result improvement in both Crop Cultivation and Industrial Solutions
business units.
Kemira GrowHow's operating profit of the whole year 2007,
non-recurring items excluded, is estimated to improve clearly from
2006. Due to the seasonality of the fertilizer business in Europe,
the second half-year of European fertilizer producers is, however,
typically weaker than the first.
All forecasts and estimates mentioned in this report are based on
current judgments of the economic environment and the actual result
may be significantly different.
Material risks and uncertainties
Kemira GrowHow's business is cyclical in nature due to the general
economic conditions of the fertilizer business and the cyclical
nature of the end-user markets. In addition, seasonal weather
conditions can have a negative effect on Kemira GrowHow's operations
and result.
Adverse changes in the supply and prices of natural gas and other
essential raw materials can also negatively affect Kemira GrowHow's
result if the cost increases cannot be passed on to end product
prices. The fluctuation between natural gas and oil derivative prices
has an effect on the market value of the contracts for the Group's
natural gas purchases and they can lead to significant result
volatility as the contracts are mainly related to future years.
Imports from Russia and Eastern Europe could create an imbalance in
supply and demand in Western European fertilizer markets unless the
EU maintains adequate protective measures especially to compensate
for the price differences of natural gas. Urea or other nitrogen
products manufactured in the low-price natural gas area can replace
part of the nitrate fertilizers traditionally used in Europe. Global
market prices of commodity fertilizers have an effect on fertilizer
imports from outside of Europe.
The nature of Kemira GrowHow's businesses exposes Kemira GrowHow to
risks of environmental costs and liabilities arising from the
manufacture, use, storage, transport and sale of materials that may
be considered to be harmful to nature or health and safety when
released into the environment. Many of Kemira GrowHow's operations
require environmental and other regulatory permits that are subject
to modification, renewal or revocation by issuing authorities.
EUR 170 million of the committed credit facilities of Kemira GrowHow,
whether drawn or undrawn, include covenants or other terms and
conditions. These terms and conditions do not restrict the use of the
respective credit facilities, but they can affect financing of the
Group in the future or may require negotiations with the providers of
funds. These credit facilities also include a condition that allows
the lenders to cancel the facilities and declare outstanding loans
due and payable if there is a change of control in Kemira GrowHow
Oyj.
If the tender offer made by Yara for the shares in Kemira GrowHow is
not accepted, it can affect significantly Kemira GrowHow's share
price.
Kemira GrowHow's operational and strategic risks are described in the
Board of Directors' Review for 2006.
Kemira GrowHow Oyj
Board of Directors
Additional information:
Kemira GrowHow Oyj
Heikki Sirviö, CEO
tel. +358 10 215 2442
Kemira GrowHow Oyj
Kaj Friman, Deputy CEO, CFO
tel. +358 (0)50 62 626
Distribution:
Helsinki Stock Exchange
Media
KEMIRA GROWHOW GROUP
INTERIM FINANCIAL STATEMENTS 1 JANUARY - 30 JUNE 2007
These condensed interim financial statements are unaudited. As a
result of rounding differences, the figures presented in the tables
may not add up to the total.
Condensed income statement
EUR million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006
Net sales 332.6 304.2 682.0 577.1 1,166.2
Other operating income 6.8 9.3 13.1 15.6 29.6
Cost of sales -297.6 -301.0 -616.6 -587.3 -1,134.2
Fair value changes of
currency derivatives,
net 0.7 1.2 0.4 0.2 0.8
Net result of realized
commodity derivatives -2.2 0.2 -2.3 0.2 1.0
Fair value changes of
unrealized commodity
derivatives, net -9.7 0.1 -12.6 0.1 -7.9
Depreciation,
amortization and
impairment -13.0 -11.4 -25.1 -22.4 -44.4
Operating profit/loss 17.6 2.6 38.9 -16.4 11.1
Financial income and
expenses -2.8 -2.8 -5.6 -5.0 -11.0
Share of the net result
of associated companies
and
joint ventures 1.1 1.2 2.3 1.3 0.1
Net financial items -1.7 -1.6 -3.4 -3.7 -10.8
Result before income
taxes 15.9 1.0 35.5 -20.1 0.3
Income taxes -2.5 -1.7 -6.0 -2.5 -6.8
Net result 13.4 -0.7 29.5 -22.7 -6.5
Attributable to
minority interests 0.3 0.3 1.2 0.6 1.3
Attributable to equity
holders of the parent
company 13.1 -1.0 28.3 -23.3 -7.8
Total 13.4 -0.7 29.5 -22.7 -6.5
Earnings per share, EUR 0.24 -0.02 0.51 -0.42 -0.14
Operating profit/loss,
% of net sales 5.3 0.9 5.7 -2.8 1.0
Net result attributable
to equity holders of
the parent company, %
of net sales 3.9 -0.3 4.1 -4.0 -0.7
Condensed balance sheet
30 June 30 June 31 December
EUR million 2007 2006 2006
Assets
Non-current assets
Intangible assets and goodwill 13.1 25.2 14.9
Property, plant and equipment and
biological assets 301.2 310.2 306.6
Holdings in associated companies and
joint ventures 22.3 21.5 20.4
Available-for-sale shares 15.3 15.3 15.3
Other investments 4.5 2.6 4.5
Deferred tax assets 33.3 31.2 33.1
Defined benefit pension assets 19.1 19.6 19.1
Total non-current assets 408.8 425.5 414.0
Current assets
Inventories 178.1 184.3 211.5
Receivables
Interest-bearing receivables 2.7 5.4 3.2
Accounts receivable and other
interest-free receivables 237.9 218.1 195.6
Tax receivables 0.3 0.4 0.6
Total receivables 240.9 223.9 199.3
Securities 10.4 23.4 3.3
Cash and bank 30.0 20.2 16.7
Total current assets 459.4 451.8 430.8
Total assets 868.2 877.3 844.7
30 June 30 June 31 December
EUR million 2007 2006 2006
Equity and liabilities
Equity
Share capital 156.0 156.0 156.0
Share premium account 8.5 8.5 8.5
Other reserves 0.5 0.5 0.5
Other non-restricted equity 142.2 142.2 142.2
Paid-up unrestricted equity reserve 0.7 - -
Treasury shares -10.6 -11.0 -11.0
Fair value reserve - 0.0 -
Hedging reserve 2.0 1.5 1.5
Retained earnings and translation
difference 3.5 20.6 20.3
Net result for the period attributable to
equity holders of the parent company 28.3 -23.3 -7.8
Attributable to equity holders of the
parent company 331.1 294.9 310.1
Minority interest 3.1 1.5 2.2
Total equity 334.2 296.4 312.2
Non-current liabilities
Non-current interest-bearing liabilities 103.5 111.1 103.9
Non-current interest-free liabilities 0.0 1.1 0.3
Provisions for liabilities and charges 2.5 2.4 2.7
Deferred tax liabilities 16.3 16.6 15.9
Defined benefit pension and other
long-term employee benefit liabilities 96.0 95.0 96.3
Total non-current liabilities 218.3 226.1 219.2
Current liabilities
Current interest-bearing liabilities 95.4 156.6 102.0
Short-term provisions 6.0 8.4 5.4
Accounts payable and other current
interest-free liabilities 210.2 186.9 199.6
Income tax payables 4.1 2.9 6.3
Total current liabilities 315.7 354.8 313.3
Total liabilities 534.0 580.9 532.5
Total equity and liabilities 868.2 877.3 844.7
Statement of changes in equity
Paid-up
Share Other unrestr. Fair
EUR Share premium Other non-restricted equity Hedging value
million capital account reserves equity reserve reserve reserve
Equity at
1 January,
2006 156.0 8.5 0.5 154.4 - 0.1 -
Cash flow
hedges,
recognized
in equity - - - - - 1.6 -
Cash flow
hedges,
transfer
to income
statement - - - - - 0.3 -
Available-
for-sale
shares,
change
in fair
value - - - - - - 0.1
Other
changes - - 0.0 - - - -
Tax effect
of net
income
recognized
directly
in equity - - - - - -0.5 0.0
Net income
recognized
directly
in equity - - 0.0 - - 1.4 0.0
Recognized
income and
expense
for the
period - - 0.0 - - 1.4 0.0
Dividends
paid - - - -12.2 - - -
Equity at
30 June,
2006 156.0 8.5 0.5 142.2 - 1.5 0.0
Paid-up
Share Other unrestr. Fair
EUR Share premium Other non-restricted equity Hedging value
million capital account reserves equity reserve reserve reserve
Equity at
1 January,
2007 156.0 8.5 0.5 142.2 - 1.5 -
Cash flow
hedges,
recognized
in equity - - - - - 1.0 -
Cash flow
hedges,
transfer
to income
statement - - - - - -0.3 -
Other
changes - - 0.0 - - - -
Acqui-
sition /
dispo-sal
of trea-
sury
shares - - - - 0.7 - -
Tax effect
of net
income
recognized
directly
in equity - - - - - -0.2 -
Net in
come
recog-
nized
directly
in equity - - 0.0 - 0.7 0.5 -
Re-
cognized
income
and
expense
for the
period - - 0.0 - 0.7 0.5 -
Dividends
paid - - - - - - -
Equity at
30 June,
2007 156.0 8.5 0.5 142.2 0.7 2.0 -
Attributable
to equity
Cumulative holders of
Treasury Retained translation the parent Minority Total
EUR million shares earnings difference company interest equity
Equity at 1
January, 2006 -1.7 23.3 -0.2 340.9 1.0 341.9
Exchange rate
differences - - 0.3 0.3 0.0 0.3
Hedging of net
investment in
foreign entity - - 0.3 0.3 - 0.3
Cash flow hedges,
recognized in
equity - - - 1.6 - 1.6
Cash flow hedges,
transfer to income
statement - - - 0.3 - 0.3
Available-for-sale
shares, change in
fair value - - - 0.1 - 0.1
Share of changes
recognized
directly in
associates' and
joint ventures'
equity - 1.1 - 1.1 - 1.1
Other changes - 0.0 - 0.0 - 0.0
Acquisition of
treasury shares -9.4 - - -9.4 - -9.4
Tax effect of net
income recognized
directly in equity - - 0.1 -0.5 - -0.5
Net income
recognized
directly in equity -9.4 1.1 0.7 -6.1 0.0 -6.1
Share-based
incentive plan - 0.1 - 0.1 - 0.1
Share-based
incentive plan,
tax effect - 0.0 - 0.0 - 0.0
Net profit for the
period - -23.3 - -23.3 0.6 -22.7
Recognized income
and expense for
the period -9.4 -22.2 0.7 -29.4 0.6 -28.7
Dividends paid - -4.4 - -16.6 -0.1 -16.7
Equity at
30 June,
2006 -11.0 -3.2 0.5 294.9 1.5 296.4
Attributable
to equity
Cumulative holders of
Treasury Retained translation the parent Minority Total
EUR million shares earnings difference company interest equity
Equity at 1
January,
2007 -11.0 12.3 0.1 310.1 2.2 312.2
Exchange
rate
differences - - 0.1 0.1 0.1 0.2
Hedging of
net
investment
in foreign
entity - - 0.0 0.0 - 0.0
Cash flow
hedges,
recognized
in equity - - - 1.0 - 1.0
Cash flow
hedges,
transfer to
income
statement - - - -0.3 - -0.3
Changes in
minority
interest - 0.0 - 0.0 0.0 -
Share of
changes
recognized
directly in
associates'
and joint
ventures'
equity - -0.1 - -0.1 - -0.1
Other
changes - 0.0 - 0.0 - 0.0
Acquisition
/ disposal
of treasury
shares 0.5 -0.5 - 0.7 - 0.7
Tax effect
of net
income
recognized
directly in
equity - - 0.0 -0.2 - -0.2
Net income
recognized
directly in
equity 0.5 -0.6 0.1 1.3 0.1 1.4
Share-based
incentive
plan - -0.4 - -0.4 - -0.4
Share-based
incentive
plan, tax
effect - 0.1 - 0.1 - 0.1
Net profit
for the
period - 28.3 - 28.3 1.2 29.5
Recognized
income and
expense for
the period 0.5 27.5 0.1 29.3 1.4 30.7
Dividends
paid - -8.3 - -8.3 -0.4 -8.7
Equity at
30 June,
2007 -10.6 31.5 0.3 331.1 3.1 334.2
Cash flow statements
EUR million 1-6/2007 1-6/2006 1-12/2006
Cash flows from operating activities
Cash flows from operating activities
before
change in net working capital 42.2 -6.4 28.9
Change in net working capital 11.2 -36.9 -25.1
Net cash flow from operating activities 53.4 -43.3 3.7
Cash flows from investing activities
Acquisition of subsidiary shares -0.8 -0.8 -0.8
Acquisition of associated company and
joint venture shares -3.0 -3.3 -3.4
Other purchases of non-current assets -19.6 -40.2 -60.9
Proceeds from sale of non-current assets 5.8 12.8 25.2
Net cash used in investing activities -17.6 -31.6 -39.9
Cash flow before financing 35.9 -74.9 -36.1
Cash flows from financing activities
Changes in non-current liabilities
(increase + / decrease -) -1.5 -2.8 -37.5
Changes in non-current loan receivables
(increase - / decrease +) 0.0 0.1 -1.8
Short-term financing, net (increase + /
decrease -) -4.2 91.5 65.3
Dividends paid -8.7 -16.7 -16.7
Acquisition of own shares 0.0 -11.0 -11.0
Other financing 0.2 -2.4 0.4
Net cash used in financing activities -14.2 58.5 -1.3
Effect of exchange rate fluctuations -1.3 3.1 0.5
Net change in cash and cash equivalents 20.4 -13.3 -37.0
Cash and cash equivalents at the
beginning of the period 20.0 57.0 57.0
Cash and cash equivalents at the end of
the period 40.4 43.7 20.0
Net change in cash and cash equivalents 20.4 -13.3 -37.0
Key figures
30 June 30 June 31 December
2007 2006 2006
EBITDA, % of net sales (1 9.4 1.0 4.8
Operating profit/loss, % of net sales 5.7 -2.8 1.0
Net result for the period attributable to
equity holders of the parent company, %
of net sales 4.1 -4.0 -0.7
Gross capital expenditure, EUR million 19.8 48.2 68.3
Gross capital expenditure, % of net sales 2.9 8.4 5.9
Equity ratio, % 38.7 34.0 37.2
Gearing, % 47.4 75.6 59.5
Interest-bearing net liabilities, EUR
million 158.5 224.0 185.9
Invested capital, EUR million 533.1 564.1 518.1
Return on equity, % 9.1 -7.1 -2.0
Return on equity, %, annualized 18.3 -14.2 -2.0
Return on investment, % 8.1 -2.5 2.4
Return on investment, %, annualized 16.2 -5.1 2.4
Number of personnel during the period,
average 2,514 2,652 2,589
Number of personnel at the end of the
period 2,567 2,659 2,489
1) EBITDA = operating profit / loss + depreciation, amortization and
impairment
Per share data
30 June 31 December
30 June 2007 2006 2006
Number of shares at the end of the
period, treasury shares excluded
(1,000) 55,425 55,348 55,348
Weighted average number of shares,
treasury shares excluded (1,000) 55,394 55,693 55,519
Earnings/share (EPS), EUR (* 0.51 -0.42 -0.14
Equity attributable to equity
holders of the parent company
/share, EUR 5.97 5.33 5.60
Cash flow from operations/share, EUR 0.96 -0.78 0.07
P/E ratio, price per earnings per
share of the review period 23.32 -10.64 -48.14
Market capitalization, EUR million 660.1 246.3 375.8
Number of shares traded, % of
average number of shares 150 58 102
Number of shares traded, (1,000) 83,184 32,544 56,797
Closing price for the share, EUR 11.91 4.45 6.79
Highest quoted price, EUR 12.21 6.21 6.82
Lowest quoted price, EUR 6.67 4.11 4.11
Volume weighted average quoted
price, EUR 9.76 5.49 5.59
(* Kemira GrowHow Oyj has not issued options or warrants or similar
instruments which would dilute the earnings per share.
Definitions of key ratios
Financial ratios
Operating profit = Profit after depreciation, amortization and
impairment
EBITDA = operating profit / loss + depreciation, amortization and
impairment
Interest-bearing net liabilities = Interest-bearing liabilities -
cash and bank - current investments
Equity = Equity attributable to equity holders of the parent company
+ minority interest
Invested capital = Balance sheet total - interest-free liabilities
Equity ratio, % = Equity x 100 / (Balance sheet total - advance
payments received)
Gearing, % = Net liabilities x 100 / Equity
Return on investments, % (ROI) = (Profit before taxes + interest
expenses + other financial expenses) x 100 / (Balance sheet total -
interest-free liabilities) (average of 1 January and end of the
review period)
Return on equity, % (ROE) = (Profit before income taxes - income
taxes) x 100 /
Equity (average of 1 January and end of the review period)
Per share data
Earnings per share (EPS) = Net result attributable to equity holders
of the parent company for the review period / Adjusted average number
of shares during the review period
Cash flow from operations = Cash flow from operations, after change
in net working capital and before capital expenditure
Cash flow from operations per share = Cash flow from operations /
Adjusted average number of shares
Equity attributable to equity holders of the parent company per share
= Equity attributable to equity holders of the parent company at the
end of the review period / Adjusted number of shares at the end of
the review period
Price per earnings per share (P/E) = Share price at the end of the
review period / Earnings per share (EPS) for the review period
Share turnover = The proportion of number of shares traded during the
review period to weighted average number of shares
Market capitalization = Number of shares at the end of the review
period x share price at the end of review period
Number of shares at the end of review period = Number of issued
shares - treasury shares
CONDENSED NOTES TO THE INTERIM REPORT
Accounting policies
These condensed consolidated interim financial statements have been
prepared in accordance with International Financial Reporting
Standard IAS 34 Interim Financial Reporting as approved by the
European Union. They do not include all of the information required
for full annual financial statements.
The accounting principles applied in these condensed interim
consolidated financial statements are the same as those applied by
Kemira GrowHow in its consolidated financial statements as at and for
the year ended 31 December 2006, with the exception of the following
new or revised or amended standards and interpretations, which have
been applied from 1 January 2007:
- IFRS 7 Financial Instruments: Disclosures
- Amendment to IAS 1 Presentation of Financial Statements:
Capital Disclosures
- IFRIC 9 Reassessment of Embedded Derivatives
- IFRIC 10 Interim Financial Reporting and Impairment
- IFRIC 11 IFRS 2 Group and Treasury Share Transactions
The new and amended standards will mainly have an effect on the
disclosures of the consolidated financial statements. Other new or
amended standards or interpretations are not material for Kemira
GrowHow Group.
Kemira GrowHow will apply the following new or revised or amended
standards and interpretations from 1 January 2009:
- IFRS 8 Operating Segments
- IAS 23 Borrowing Costs
Kemira GrowHow estimates that applying IFRS 8 will not have any
material effect on the financial information of Kemira GrowHow.
Applying revised IAS Borrowing Costs will change Kemira GrowHow's
accounting principles from 1 January 2009. From that date on the
borrowing costs that are directly attributable to the acquisition,
construction or production of an asset will be capitalized to the
acquisition cost of the asset. The capitalization will apply mainly
to property, plant and equipment.
Contingent liabilities
EUR million 30 June 2007 30 June 2006 31 December 2006
Mortgages 27.0 24.4 27.0
Assets pledged
On behalf of own
commitments - 2.4 2.3
Guarantees
On behalf of others (* 0.3 30.7 29.5
Operating leasing
commitments
Maturity within one year 5.0 5.2 9.3
Maturity after one year 30.2 33.2 27.7
(* EUR 0.0 (30.0) million of this obligation is related to the
guarantees for which Kemira Oyj has issued a counter indemnity to
Kemira GrowHow Oyj.
The Finnish Supreme Administrative Court gave a decision in April
2004 on Kemira GrowHow's appeal concerning the waste management
permit for Kemira GrowHow's Siilinjärvi plant in Finland. Although
the Court's decision was negative, the opinion of the management is
that this will not have an impact on Kemira GrowHow's financial
position. A new environmental and water management permit was issued
in October 2006 to Siilinjärvi mine and plants. The enforcement of
the permit is pending due to appeal. Kemira GrowHow estimates that
the new environmental permit will not create any new material
obligations.
Derivative instruments
31
30 June 30 June December
2007 2006 2006
Nominal Fair Nominal Fair Nominal Fair
EUR million value value value value value value
Currency derivatives
Forward contracts 157.1 -0.6 116.9 1.9 181.9 -2.4
of which hedging net
investment in foreign
entity 1.3 -0.1 1.4 0.2 1.2 -0.1
Currency options
Bought 81.4 0.1 131.3 0.6 61.7 0.7
Sold 11.4 0.0 130.7 -0.5 61.7 -0.2
Interest rate derivatives
Interest rate swaps 70.0 2.1 70.0 1.7 70.0 1.7
Interest rate options
Bought 10.0 0.3 10.0 0.3 10.0 0.3
Sold 10.0 0.0 10.0 0.0 10.0 0.0
Commodity derivatives
Swaps 143.9 -20.6 47.0 0.0 136.2 -7.9
Options
Bought - - 1.7 0.0 - -
Sold - - 3.3 0.0 - -
Derivative instruments are used only for hedging purposes. Nominal
values of derivative instruments do not necessarily correspond with
the actual cash flows between the counterparties and do not therefore
give a fair view of the risk position of the Group. The fair values
are based on market valuation on the date of reporting.
Segment information
Kemira GrowHow's operations are organized under two strategic
business units: Crop Cultivation and Industrial Solutions. The
Industrial Solutions business unit has strong synergies with the Crop
Cultivation business unit in production and sourcing.
The Crop Cultivation strategic business unit produces and markets a
broad range of fertilizers and other related products and services
for agriculture, horticulture and home gardening in selected markets
in Northern, Western and Eastern Europe and overseas. Kemira GrowHow
has a significant market position in fertilizer business in Finland,
Denmark, the Baltic countries, the Benelux countries, France and the
United Kingdom.
The Industrial Solutions strategic business unit provides high
performance products and innovative solutions, such as feed
phosphates and feed acidifiers, a range of nitrogen-based chemicals
and phosphoric acid. The Industrial Solutions business unit focuses
on selected customer segments, that, in addition to the animal feed
industry, include the chemical, pharmaceutical, metal, electronics
and food industries. Industrial Solutions is one of the leading
global suppliers of inorganic feed phosphates having sales in more
than 80 countries. Kemira GrowHow's Process Chemicals business is one
of the two biggest suppliers in the Benelux countries, the United
Kingdom, Finland and Denmark.
Kemira GrowHow's primary segment is business segment. Kemira GrowHow
Group's business segments are Crop Cultivation and Industrial
Solutions strategic business units. Segment information is presented
in the tables below.
Net sales by segment
EUR million
Net sales 4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006
Crop Cultivation
External sales 261.6 240.7 537.0 449.4 894.3
Internal sales 0.2 0.2 1.5 0.4 0.9
Total 261.8 240.9 538.4 449.8 895.3
Industrial Solutions
External sales 71.0 63.5 145.1 127.7 271.9
Internal sales 8.8 8.7 15.6 20.3 37.1
Total 79.8 72.2 160.7 148.1 309.0
Internal eliminations -9.0 -8.9 -17.1 -20.7 -38.0
Kemira GrowHow total 332.6 304.2 682.0 577.1 1,166.2
Result by segment
EUR million 4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006
Operating profit/loss
Crop Cultivation 14.1 -0.7 30.3 -19.0 -0.4
Industrial Solutions 7.1 6.4 14.3 7.3 19.9
Segments total 21.2 5.7 44.7 -11.7 19.5
Corporate centre and
other -3.6 -3.1 -5.7 -4.7 -8.4
Operating profit/loss
total 17.6 2.6 38.9 -16.4 11.1
Share of joint
ventures' and
associates' result
Crop Cultivation 1.0 1.4 2.2 1.5 0.1
Industrial Solutions 0.2 -0.2 0.1 -0.2 0.0
Share of joint
ventures' and
associates' result
total 1.1 1.2 2.3 1.3 0.1
Total segment result
Crop Cultivation 15.1 0.7 32.5 -17.6 -0.3
Industrial Solutions 7.3 6.3 14.4 7.2 19.9
Segments total 22.3 7.0 46.9 -10.4 19.7
Corporate centre and
other -3.6 -3.1 -5.7 -4.7 -8.4
Total segment result 18.7 3.9 41.2 -15.1 11.3
Financial income and
expenses -2.8 -2.8 -5.6 -5.0 -11.0
Result before income
taxes 15.9 1.0 35.5 -20.1 0.3
Depreciation, amortization and impairment
EUR million
4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006
Crop Cultivation 9.4 8.6 17.9 16.8 33.4
Industrial Solutions 2.6 2.7 5.5 5.4 10.6
Segments total 12.1 11.3 23.4 22.2 44.0
Corporate centre and
other 0.9 0.1 1.7 0.2 0.4
Total depreciation,
amortization and
impairment 13.0 11.4 25.1 22.4 44.4
Assets
EUR million
30 June 30 June 31 December
2007 2006 2006
Crop Cultivation 566.9 588.0 575.9
Industrial Solutions 198.4 191.6 193.6
Corporate centre and
unallocated 35.9 24.8 25.1
Eliminations -9.8 -7.8 -6.7
Interest-bearing receivables 2.7 5.4 3.2
Tax receivables 0.3 0.4 0.6
Deferred tax assets 33.3 31.2 33.1
Cash and bank and current
investments 40.4 43.7 20.0
Total assets 868.2 877.3 844.7
Liabilities
EUR million
30 June 31 December
30 June 2007 2006 2006
Crop Cultivation 252.7 244.7 253.5
Industrial Solutions 64.7 51.6 55.6
Corporate centre and
unallocated 5.9 4.5 7.1
Eliminations -8.6 -7.2 -11.9
Interest-bearing liabilities 198.9 267.7 205.9
Tax liabilities 4.1 2.9 6.3
Deferred tax liabilities 16.3 16.6 15.9
Total liabilities 534.0 580.9 532.5
Gross capital expenditure
EUR million
1-6/2007 1-6/2006 1-12/2006
Crop Cultivation 12.6 39.1 53.2
Industrial Solutions 7.2 9.1 15.2
Corporate centre and unallocated - - -
Total 19.8 48.2 68.3
Quarterly development by strategic business unit
EUR million
4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
Net sales 2007 2007 2006 2006 2006 2006
Crop Cultivation
External sales 261.6 275.4 206.4 238.5 240.7 208.7
Internal sales 0.2 1.3 0.3 0.2 0.2 0.2
Total 261.8 276.7 206.7 238.7 240.9 208.9
Industrial Solutions
External sales 71.0 74.1 76.1 68.1 63.5 64.2
Internal sales 8.8 6.8 8.8 8.0 8.7 11.6
Total 79.8 80.9 84.9 76.0 72.2 75.8
Internal eliminations -9.0 -8.1 -9.1 -8.2 -8.9 -11.8
Kemira GrowHow total 332.6 349.5 282.5 306.6 304.2 272.9
4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
Operating profit/loss 2007 2007 2006 2006 2006 2006
Crop Cultivation 14.1 16.3 5.4 13.3 -0.7 -18.4
Industrial Solutions 7.1 7.2 6.3 6.3 6.4 0.9
Segments total 21.2 23.5 11.7 19.5 5.7 -17.4
Corporate centre and other -3.6 -2.1 -3.2 -0.5 -3.1 -1.7
Operating profit/loss total 17.6 21.4 8.5 19.1 2.6 -19.1
Non-recurring items
Non-recurring items include mainly capital gains and losses from sale
of assets, impairment losses, releases of provisions and
restructuring expenses.
Non-recurring items, net, EUR million 1 - 3 4 - 6 7 - 9 10 - 12 2007
Crop Cultivation 3.0 1.2 4.3
Industrial Solutions 0.6 1.2 1.8
Other - 0.2 0.2
Total 3.6 2.6 6.2
Non-recurring items, net, EUR million 1 - 3 4 - 6 7 - 9 10 - 12 2006
Crop Cultivation 1.4 3.7 6.0 1.2 12.4
Industrial Solutions -0.1 0.0 0.3 0.2 0.4
Other 0.0 -1.5 0.0 -1.7 -3.1
Total 1.3 2.3 6.3 -0.3 9.6
Property, plant and equipment
EUR million
Changes in property, plant and equipment 1-6/2007 1-6/2006 1-12/2006
Carrying amount at beginning of the
period 306.4 318.1 318.1
Additions 18.9 15.7 35.2
Disposals -1.7 -1.4 -6.9
Depreciations -21.1 -20.7 -41.0
Impairment losses and reversals of
impairment losses -1.1 -0.1 -0.2
Reclassification and other changes -0.1 0.0 -0.3
Exchange differences -0.3 -1.7 1.4
Carrying amount at end of the period 301.0 309.9 306.4
The amount of contractual commitments for the acquisition of
property, plant and equipment were EUR 17.7 million at the end of
June 2007.
Impairment losses of tangible assets are related mainly to property
which was damaged in the fire at Tertre plant.
Related party transactions
Kemira GrowHow Group's related parties include the parent company,
subsidiaries, associated companies and joint ventures. Related
parties also include the members of the Board of Directors and the
Group's Management Team, the CEO and his deputy and their family
members. Kemira GrowHow's Finnish pension foundations and funds are
legal units of their own and they manage part of the pension assets
of the Group's personnel in Finland.
Kemira GrowHow follows the same commercial terms in transactions with
associated companies, joint ventures and other related parties as
with third parties.
During the review period Kemira GrowHow's related party transactions
were mainly sales to associated companies and joint ventures. During
the review period there were no related party transactions whose
terms would differ from the terms in transactions with third parties.
Yara Nederland B.V., a fully-owned subsidiary of Yara International
ASA, has acquired 30.05 percent of shares and votes in Kemira GrowHow
Oyj from the Government of Finland. Based on its ownership in Kemira
GrowHow, Yara would be a related party to Kemira GrowHow. However,
pursuant to article 7(2)(b) of the EC Council Regulation EC 139/2004
an acquirer is not allowed to exercise the voting rights attached to
the purchased securities during the proceedings of the European
Commission. Because Yara will not use the voting rights related to
the shares purchased in connection with the share purchase until the
European Commission has approved the share purchase, Yara is not yet
considered a related party to Kemira GrowHow.
Based on the 2004 share-based incentive plan, Kemira GrowHow Oyj
transferred in March own shares to persons who are considered to be
related parties. The shares were transferred to the CEO (12,249
shares), the deputy CEO (9,187 shares) and other members of the
Management Board (in total 25,262 shares).
Transactions with associated companies and joint ventures
EUR million
1-6/2007 1-6/2006 1-12/2006
Sales to associated companies and joint
ventures 71.1 48.2 136.3
Purchases from associated companies and
joint ventures 5.0 5.6 9.3
Other expenses charged by associated
companies and joint ventures 2.9 2.3 4.0
Other income from associated companies
and joint ventures 0.1 0.1 0.1
Interest income from associated companies
and joint ventures 0.2 0.4 0.5
Interest expenses to associated companies
and joint ventures 0.0 0.0 0.0
Dividend income from associated companies
and joint ventures 0.1 0.1 0.3
Property, plant and equipment sold to
associated companies and joint ventures,
sales price 0.0 - 0.6
Associated company and joint venture balances
EUR million
1-6/2007 1-6/2006 1-12/2006
Receivables
Loan receivables 6.4 7.1 6.7
Accounts receivable 16.0 11.5 19.7
Other receivables 0.5 0.1 0.1
Liabilities
Long-term liabilities - - -
Accounts payable 0.3 1.4 1.2
Other current liabilities - 0.8 0.3
Interim Report 1 January - 30 June 2007
| Source: Kemira GrowHow Oyj
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