HONKARAKENNE OYJ STOCK EXCHANGE RELEASE 9 AUGUST 2007 AT 9.00 AM INTERIM REPORT 1 JANUARY - 30 JUNE 2007 Honkarakenne's half-yearly net sales increased by EUR 11.5 million compared with the previous year and stood at EUR 47.2 million. Income before tax showed a profit of EUR 2.0 million, i.e. increased by EUR 5.0 million. The order book amounted to EUR 35.9 million (EUR 15 million) at the end of June, which means a 15 % increase over last year. The equity ratio stood at 40.0 %, and the investments in January-June amounted to EUR 1.4 million. Net sales In January - June of the current year the net sales of Honkarakenne Group amounted to EUR 47.2 million, compared with EUR 35.7 million in the same period last year. The operating profit stood at EUR 2.3 million (EUR 2.7 million loss in the previous year), which equals 5.0% of net sales (-7.6%). Income before taxes and extraordinary items showed a profit of EUR 2.0 million, whereas a year ago it showed a loss of EUR 3.0 million. Net sales for the review period (January-June) exceeded last year's figures by 32 per cent. The net sales in Finland grew by 23% and exports by 40%. The exports accounted for 59% of net sales, whereas a year ago the corresponding figure was 56%. With regards to the Central European countries, the exports to France increased significantly but exports to Germany decreased from last year. This change was affected by the increase in value added tax, which came into force at the turn of the year. With regards to the East European countries, exports to Russia developed very favorably, and the project delivery of 100 homes to Kazakhstan was completed in the spring. Measured in euros the exports to Japan decreased by 18%; but the net sales measured in Yen remained the same as last year. Result In addition to normal seasonal changes, the favorable profit development of the review period was affected by the increased net sales in Finland and main market areas, good utilization rates at the factories, improved raw material use, more efficient operations, and lower overhead expenses. The price of wood has increased very rapidly within last 12 months, but the effect of increased sales prices on the profit can be seen already in the second quarter. The timeshares included in inventories have been sold during the review period. The Lieksa factory's buildings, machines, equipment and land were sold to Anaika Wood Oy Ltd. The sales had no effects on the result. Market situation The advance sales of the second quarter of the financial period met the expectations. Honkarakenne Group's order book amounted to EUR 35.9 million (EUR 31.2 million) at the end of June. Nevertheless, the significant upward adjustment of prices, which was required in all main market areas due to increased raw material prices has affected the consumers' purchase behavior: decision-making has been more careful and purchase decisions have been postponed. Generally speaking, the market situation has remained excellent in all main market areas, except for Japan. The weakening of the Yen, combined with the sharp increase in the price of wood, has deteriorated Honkarakenne's competitiveness in Japanese exports during the last 12 months. Financing and investments The financial position of the company has remained stable. The equity ratio has improved and it stood at 40.0% (35.3%) and the interest-bearing net liabilities amounted to EUR 9.9 million (EUR 14.6 million). Liquid assets amounted to EUR 3.1 million (EUR 2.5 million). Gearing was at 52.7% (87.2%). Capital expenditure totaled EUR 1.4 million (EUR 0.8 million). Own shares Honkarakenne Oyj has repurchased 56.456 of its B shares during the period under review for an average price of EUR 5.63 per share. At the end of the review period the company held 85,000 of its B shares with a total nominal value of EUR 170,000.00 and a total purchase price of EUR 474,056.84. These shares represent 2.27% of the company's capital stock and 0.90% of the voting rights. The purchase cost has been deducted from shareholders' equity in the consolidated financial statements. The Board of Directors has been granted a share repurchase authorization, valid until 4 April 2008, to repurchase company shares for an amount equivalent to a maximum of 5% of the company's capital stock. The Board of Directors has also been granted authority, also valid until 4 April 2008, to dispose of 187,448 B shares. Future Outlook for the latter half of the year The excellent development both in net sales and profit in the first half will create great facilities to increase net sales and significantly improve the result of the whole year. The results of the strengthening program will begin to show in late autumn, which will also improve the company's profitability. The industry feels that the price of wood has reached its peak, and that the price level will normalize and there will be no significant pressure to increase prices anymore. The market situation is believed to remain stable and demand is expected to remain excellent in the company's main market areas. The customers' decision-making behavior is believed to normalize during the autumn, provided that the price level of the market stabilizes. Events after the review period There have been no significant events after the review period. HONKARAKENNE OYJ Board of Directors DISTRIBUTION Helsinki Stock Exchange Principal media Financial supervision Further information: President and CEO Esko Teerikorpi, tel. +358 20 575 7816, +358 40 580 6111, esko.teerikorpi@honka.com. This interim report was drafted based on the IAS 34 standard "Interim reports", according to the manner in which the standard has been approved in the EU. The information of the interim report have not been examined by the auditor. This and previous press releases can be found on the company's website at www.honka.com, Investors. The interim report for January-September 2007 will be published on 1 November 2007. -------------------------------------------------------------------------------- | CONSOLIDATED INCOME | | | | | | | STATEMENT | | | | | | -------------------------------------------------------------------------------- | (unaudited) | 2007 | 2006 | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | (MEUR) | 4-6 | 4-6 | 1-6 | 1-6 | 1-12 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net sales | 28.7 | 21.8 | 47.2 | 35.7 | 84.7 | -------------------------------------------------------------------------------- | Change in inventories | 1.1 | 1.7 | 3.1 | 2.5 | -1.6 | -------------------------------------------------------------------------------- | Production for own use | 0.5 | 0.1 | 0.5 | 0.1 | 0.2 | -------------------------------------------------------------------------------- | Other operating income | 0.6 | 0.4 | 0.9 | 0.9 | 2.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Materials and services | 19.5 | 14.7 | 31.8 | 23.9 | 51.3 | -------------------------------------------------------------------------------- | Staff costs | 4.8 | 4.5 | 9.0 | 8.4 | 16.6 | -------------------------------------------------------------------------------- | Depreciations | 0.9 | 1.2 | 1.9 | 2.2 | 4.0 | -------------------------------------------------------------------------------- | Other operating | 3.5 | 4.2 | 6.7 | 7.4 | 14.7 | | expenses | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Operating profit/loss | 2.2 | -0.5 | 2.3 | -2.7 | -1.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial income and | -0.1 | -0.2 | -0.3 | -0.3 | -0.5 | | expenses | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit/loss before | 2.1 | -0.7 | 2.0 | -3.0 | -1.8 | | taxes | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Taxes | -0.3 | 0.0 | -0.4 | 0.5 | 0.2 | -------------------------------------------------------------------------------- | Minority share | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Profit/loss for the | 1.7 | -0.7 | 1.5 | -2.5 | -1.6 | | period | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings/share (EPS), | | | | | | | eur | | | | | | -------------------------------------------------------------------------------- | Basic | 0.47 | -0.18 | 0.41 | -0.67 | -0.42 | -------------------------------------------------------------------------------- | Diluted | 0.47 | -0.18 | 0.41 | -0.67 | -0.42 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | CONSOLIDATED BALANCE SHEET | | | | -------------------------------------------------------------------------------- | (unaudited) | | | | -------------------------------------------------------------------------------- | (MEUR) | 30.6.2007 | 31.12.2006 | 30.6.2006 | -------------------------------------------------------------------------------- | Assets | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current assets | | | | -------------------------------------------------------------------------------- | - Intangible assets | 1.4 | 1.3 | 1.2 | -------------------------------------------------------------------------------- | - Tangible assets | 24.4 | 25.4 | 26.3 | -------------------------------------------------------------------------------- | - Loans and other receivables | 0.7 | 0.9 | 1.1 | -------------------------------------------------------------------------------- | - Deferred tax assets | 1.0 | 1.3 | 1.7 | -------------------------------------------------------------------------------- | - Investments | 0.8 | 0.7 | 0.9 | -------------------------------------------------------------------------------- | Total | 28.3 | 29.6 | 31.2 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current assets | | | | -------------------------------------------------------------------------------- | - Inventories | 18.7 | 15.7 | 17.4 | -------------------------------------------------------------------------------- | - receivables | 11.7 | 9.4 | 11.2 | -------------------------------------------------------------------------------- | - Cash and bank receivables | 3.1 | 4.1 | 2.5 | -------------------------------------------------------------------------------- | Total | 33.5 | 29.2 | 31.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets | 61.7 | 58.8 | 62.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' equity and | | | | | liabilities | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Capital stock | 7.5 | 7.5 | 7.5 | -------------------------------------------------------------------------------- | Other capital and reserves | 11.3 | 10.1 | 9.2 | -------------------------------------------------------------------------------- | Total | 18.8 | 17.6 | 16.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Minority share | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Long-term liabilities | | | | -------------------------------------------------------------------------------- | Loans | 11.3 | 11.9 | 13.4 | -------------------------------------------------------------------------------- | Deferred tax liabilities | 1.3 | 1.3 | 1.3 | -------------------------------------------------------------------------------- | Provisions | 0.4 | 0.2 | 0.2 | -------------------------------------------------------------------------------- | Other liabilities | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Total | 13.0 | 13.4 | 14.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Short-term liabilities | | | | -------------------------------------------------------------------------------- | Loans | 1.8 | 3.8 | 3.7 | -------------------------------------------------------------------------------- | Accounts payable and other | 28.2 | 23.9 | 26.9 | | liabilities | | | | -------------------------------------------------------------------------------- | Total | 30.0 | 27.7 | 30.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total shareholders' equity and | 61.7 | 58.8 | 62.3 | | liabilities | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY | | | -------------------------------------------------------------------------------- | (Unaudited) | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1000 EUR | | | | | | -------------------------------------------------------------------------------- | | Share | Premium | Reserve | Retained | Total | -------------------------------------------------------------------------------- | | capital | fund | fund | earnings | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1.1.2006 | 7.498 | 520 | 5.316 | 5.959 | 19.293 | -------------------------------------------------------------------------------- | Translation | | | | -124 | -124 | | difference | | | | | | -------------------------------------------------------------------------------- | Result of the | | | | -2.496 | -2.496 | | period | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 30.6.2006 | 7.498 | 520 | 5.316 | 3.339 | 16.673 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1.1.2007 | 7.498 | 520 | 5.316 | 4.308 | 17.642 | -------------------------------------------------------------------------------- | Translation | | | | -41 | -41 | | difference | | | | | | -------------------------------------------------------------------------------- | Repurchase of own shares | | | -321 | -321 | -------------------------------------------------------------------------------- | Result of the | | | | 1.547 | 1.547 | | period | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 30.6.2007 | 7.498 | 520 | 5.316 | 5.493 | 18.827 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | CONSOLIDATED CASH FLOW STATEMENT | | | | -------------------------------------------------------------------------------- | (Unaudited) | | | | -------------------------------------------------------------------------------- | (MEUR) | | | | -------------------------------------------------------------------------------- | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | | 1-6 | 1-6 | 1-12 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from operations | +2.6 | -1.5 | +4.7 | -------------------------------------------------------------------------------- | Cash flow from investments, net | -1.5 | +0.6 | -2.4 | -------------------------------------------------------------------------------- | Total cash flow from financing | -2.1 | +1.3 | -0.2 | -------------------------------------------------------------------------------- | Increase in credit capital | +0.0 | +2.0 | +3.2 | -------------------------------------------------------------------------------- | Decrease in credit capital | -1.7 | -0.9 | -3.6 | -------------------------------------------------------------------------------- | Dividends paid | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Other financial items | -0.4 | +0.2 | +0.2 | -------------------------------------------------------------------------------- | Change in liquid assets | -1.0 | +0.4 | +2.0 | -------------------------------------------------------------------------------- | Liquid assets at the beginning of | +4.1 | +2.1 | +2.1 | | period | | | | -------------------------------------------------------------------------------- | Liquid assets at the end of period | +3.1 | +2.5 | +4.1 | -------------------------------------------------------------------------------- Notes to the interim report Calculation methods The interim report has been drafted based on the IAS 34 Interim Reports standard. The information in the interim report has been drawn up based on those valid international financial reporting standards that have been approved in the European Union. The drafting principles are the same as in the financial report drawn up 31 December 2006. This interim report should be read together with the financial report of 2006. The new introduced standards and interpretations have not affected the information in this interim report. -------------------------------------------------------------------------------- | TANGIBLE ASSETS | | -------------------------------------------------------------------------------- | (MEUR) | | -------------------------------------------------------------------------------- | (Unaudited) | Tangible | -------------------------------------------------------------------------------- | | assets | -------------------------------------------------------------------------------- | Acquisition cost 1.1.2007 | 60.4 | -------------------------------------------------------------------------------- | Translation difference (+/-) | 0.0 | -------------------------------------------------------------------------------- | Increase | 0.9 | -------------------------------------------------------------------------------- | Decrease | -0.3 | -------------------------------------------------------------------------------- | Transfers between balance sheet items | 0.0 | -------------------------------------------------------------------------------- | Acquisition cost 30.6.2007 | 61.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Accumulated depreciation 1.1.2007 | -35.0 | -------------------------------------------------------------------------------- | Translation difference (+/-) | 0.0 | -------------------------------------------------------------------------------- | Disposals and reclassifications | 0.3 | -------------------------------------------------------------------------------- | Depreciation for the period | -1.8 | -------------------------------------------------------------------------------- | Accumulated depreciation 30.6.2007 | -36.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Book value 1.1.2007 | 25.4 | -------------------------------------------------------------------------------- | Book value 30.6.2007 | 24.4 | -------------------------------------------------------------------------------- Own shares Honkarakenne Oyj: acquired in the first half of the year 56,456 of its own B shares, whose purchase price amounted to EUR 0.3 million. Events in the circle of acquaintances The circle of acquaintances consists of subsidiaries, associated companies and the company's management. The management included in the circle of acquaintances comprises the Board of Directors, CEO, and the company's managing committee. Wages and bonuses paid to the company's management will be published in the annual financial report. -------------------------------------------------------------------------------- | CONTINGENT LIABILITIES | | | | -------------------------------------------------------------------------------- | (Unaudited) | | | | -------------------------------------------------------------------------------- | (MEUR) | | | | -------------------------------------------------------------------------------- | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | | 1-6 | 1-6 | 1-12 | -------------------------------------------------------------------------------- | For own loans | | | | -------------------------------------------------------------------------------- | - Mortgages | 19.2 | 20.9 | 20.0 | -------------------------------------------------------------------------------- | - Pledged shares | 0.18 | 0.18 | 0.18 | -------------------------------------------------------------------------------- | For others | | | | -------------------------------------------------------------------------------- | - Guarantees | 0.85 | 0.68 | 1.49 | -------------------------------------------------------------------------------- | Leasing liabilities | 0.51 | 0.50 | 0.30 | -------------------------------------------------------------------------------- | Rent liabilities | 0.40 | 0.48 | 0.42 | -------------------------------------------------------------------------------- | Other liabilities | 0.00 | 0.10 | 0.00 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Nominal values of forward | | | | -------------------------------------------------------------------------------- | exchange contracts | 1.8 | 0.0 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | KEY INDICATORS | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | | 1-6 | 1-6 | 1-12 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Earnings/share (EPS), eur | 0.41 | -0.67 | -0.42 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity/share, eur | 5.0 | 4.4 | 4.7 | -------------------------------------------------------------------------------- | Equity ratio, % | 40.0 | 35.3 | 37.7 | -------------------------------------------------------------------------------- | Net debt (MEUR) | 9.9 | 14.6 | 11.7 | -------------------------------------------------------------------------------- | Gearing, % | 52.7 | 87.2 | 65.7 | -------------------------------------------------------------------------------- | Gross investments (MEUR) | 1.4 | 0.8 | 2.6 | -------------------------------------------------------------------------------- | % of net sales | 3.0 | 2.2 | 3.1 | -------------------------------------------------------------------------------- | Average number of personnel | 425 | 421 | 428 | -------------------------------------------------------------------------------- | Order book (MEUR) | 35.9 | 31.2 | 32.6 | -------------------------------------------------------------------------------- Calculation of key indicators Earnings/share Profit before extraord. items - income taxes - minority interest Adjusted average number of shares Equity/share Shareholders' equity Number of shares outstanding at end of period Equity ratio, % Shareholders' equity + minority interest x 100 Balance sheet total - advances received Net debt Interest-bearing debt-cash and cash equivalents Gearing, % Interest-bearing net debt x 100 Shareholders' equity + minority interest