MARIMEKKO CORPORATION'S INTERIM REPORT, 1 JANUARY - 30 SEPTEMBER 2007, NET SALES RISE BY 6%, EARNINGS ARE AT THE SAME LEVEL AS THE YEAR BEFORE In the January-September period of 2007, Marimekko Group's net sales rose by 6% to EUR 54.6 million (EUR 51.3 million). Exports and income from international operations grew by 19%. Operating profit amounted to EUR 7.1 million (EUR 7.1 million). Net profit for the period was EUR 5.2 million (EUR 5.2 million). Earnings per share were EUR 0.65 (EUR 0.65). The company's forecast for the remainder of 2007 remains unchanged. The Group's full-year net sales growth for 2007 is forecast to stay at the same level as in 2006. Profitability is estimated to remain good although slightly weaker than in the previous year. NET SALES July-September In the July-September period of 2007, the Group's net sales grew by 12.8% to EUR 20,699 thousand (EUR 18,357 thousand). Net sales in Finland increased by 10.9% to EUR 14,876 thousand (EUR 13,416 thousand). Exports and income from international operations grew by 17.8% and totalled EUR 5,823 thousand (EUR 4,941 thousand). January-September In the January-September period of 2007, the Group's net sales grew by 6.5% to EUR 54,608 thousand (EUR 51,282 thousand). Net sales in Finland increased by 2.3% to EUR 39,319 thousand (EUR 38,453 thousand). Exports and income from international operations grew by 19.2% to EUR 15,289 thousand (EUR 12,829 thousand). Exports and income from international operations accounted for 28.0% (25.0%) of the Group's net sales. The breakdown of the Group's net sales by product line was as follows: clothing 41.9%, interior decoration 42.5%, and bags 15.6%. Net sales by market area were the following: Finland 72.0%, the other Nordic countries 11.7%, the rest of Europe 6.8%, North America 5.2%, and other countries (Japan as well as other regions outside Europe and North America) 4.3%. During the January-September period of 2007, sales in Marimekko's own retail shops in Finland rose by 0.1% (2.3%). Sales to retailers in Finland increased by 5.7% (-2.6%). The growth was primarily due to significant promotional purchases by retailers. MARKET SITUATION Strong growth in the world economy has continued throughout the year. The briskest growth has been seen in Asia. Growth in Europe has also picked up noticeably. In the United States, growth expectations have weakened due to economic instability. Total production in Finland has grown faster than anticipated as a result of higher exports and private consumption (ETLA, The Research Institute of the Finnish Economy, forecast 2007/2). In the January-August period of 2007, retail sales in Finland grew by 7.8% over the corresponding period of the previous year (Statistics Finland, Wholesale and retail trade 2007, August). Retail sales of clothing increased by 2.5% (Textile and Fashion Industries TMA). Sales of womenswear rose by 3.6% and menswear by 2.6%. Sales of childrenswear fell by 1.6%. Sales of bags rose by 7.7%. In the January-July period of 2007, exports of textile products (SITC 65) increased by 8% and imports by 5%. Exports of clothing (SITC 84) rose by 10% and imports by 4% (National Board of Customs, monthly review, August 2007). REVIEWS BY BUSINESS UNIT Clothing In the January-September period of 2007, net sales of clothing fell by 0.5% to EUR 22,900 thousand (EUR 23,024 thousand). The fall was due to slower sales in Finland. In exports, sales growth was extremely good in all markets except the market area referred to as “other countries”, which saw a fall in sales. The most notable sales growth was seen in the United States and the market area referred to as “the rest of Europe”. Exports and income from international operations accounted for 24.2% of net sales of clothing. Interior decoration Net sales of interior decoration products rose by 13.9% to EUR 23,194 thousand (EUR 20,356 thousand). Growth accelerated in almost all markets. The market areas referred to as “other Nordic countries” and “the rest of Europe” enjoyed the strongest growth in sales. Net sales declined in the market area referred to as “other countries”. Exports and income from international operations accounted for 30.7% of net sales of interior decoration products. Bags Net sales of bags increased by 7.7% to EUR 8,514 thousand (EUR 7,902 thousand). Net sales in Finland grew slightly. Exports picked up significantly in all markets. Exports and income from international operations accounted for 30.9% of net sales of bags. Business gifts and contract sales Business gift and contract sales declined by 5.9%. Exports and international operations In the January-September period of 2007, the Group's exports and income from international operations grew by 19.2% to EUR 15,289 thousand (EUR 12,829 thousand). Strong growth continued in all export markets except the market area referred to as “other countries”, in which sales declined. The major export countries were Sweden, the United States, Japan, Denmark, Norway, Germany and Great Britain. In the market area referred to as "other Nordic countries", the growth rate remained high. Net sales rose by 20.0% to EUR 6,423 thousand (EUR 5,353 thousand). Sales increased significantly in all product lines. In the market area referred to as "the rest of Europe", sales growth was notable in all product lines. Net sales rose by 33.2% to EUR 3,708 thousand (EUR 2,783 thousand). Positive growth continued in Germany. The fastest relative growth in sales was seen in Great Britain and Italy. A retailer-established Marimekko concept store was opened in Graz, Austria at the end of June 2007. In North America, growth remained strong. There was a significant increase in sales in all product lines. Net sales rose by 31.5% to EUR 2,817 thousand (EUR 2,143 thousand). The new Marimekko concept stores opened in the 2006 financial period played a major role in the growth of sales. There were a total of four retailer-established Marimekko concept stores in the United States at the end of the period under review. The newest one was opened in May 2007 in Silver Spring in metropolitan Washington DC. In the market area referred to as "other countries", development was clearly slower than in the comparison period. Net sales fell by 8.2% to EUR 2,341 thousand (EUR 2,550 thousand). The termination of licensing operations in Japan at the end of 2006 reduced sales of interior decoration products and was partly responsible for the overall decline in sales. The difference compared with the corresponding period of the previous year was also partly due to the opening of Japanese concept stores, which then boosted sales significantly. Two new Marimekko concept stores were opened in Japan in the period under review: one in Yokohama in March and the other in Nagoya in September. At the end of September, there were a total of nine Marimekko concept stores in Japan. Licensing Royalty earnings from sales of licensed products were down slightly. In Finland, royalty earnings remained at the same level as in the corresponding period of the previous year. Royalty earnings in the United States contracted noticeably while extremely strong growth was seen in the Netherlands. The termination of licensing operations in Japan at the end of 2006 resulted in a significant decline in earnings from licensed products. Production The production volume of the Herttoniemi textile printing factory increased by 13% on the comparison period. Production volumes at the factories in Kitee and Sulkava remained at the same level as in the corresponding period of the previous year. Demand for some product groups exceeded expectations and increased the need for production capacity faster than anticipated; for this reason, delivery times had to be extended. EARNINGS July-September In the July-September period of 2007, the Group's operating profit rose by 13.5% to EUR 3,965 thousand (EUR 3,492 thousand). The improvement was due to a rise in sales in Finland. Earnings per share were EUR 0.36 (EUR 0.32). January-September In the January-September period of 2007, the Group's operating profit rose by 0.2% to EUR 7,105 thousand (EUR 7,088 thousand). Operating profit as a percentage of the Group's net sales amounted to 13.0% (13.8%). The Group's marketing expenses totalled EUR 2,945 thousand (EUR 2,892 thousand), or 5.4% (5.6%) of net sales. The Group's depreciation amounted to EUR 982 thousand (EUR 846 thousand), or 1.8% (1.6%) of net sales. Net financial expenses totalled EUR 38 thousand (EUR 54 thousand), or 0.1% (0.1%) of net sales. The Group's profit before taxes grew by 0.5% to EUR 7,067 thousand (EUR 7,034 thousand). Net profit for the period rose by 0.4% to EUR 5,231 thousand (EUR 5,211 thousand), or 9.6% (10.2%) of net sales. Earnings per share were EUR 0.65 (EUR 0.65). Earnings for the period under review were boosted by increased wholesale sales in Finland in the third quarter. This growth was mainly due to large promotional purchases by retailers. INVESTMENTS The Group's gross investments amounted to EUR 1,164 thousand (EUR 1,794 thousand), representing 2.1% (3.5%) of net sales. The major investments focused on production equipment renewal at the Herttoniemi textile printing factory and the construction of new premises for Marimekko´s Joensuu shop. EQUITY RATIO AND FINANCING The equity ratio was 68.1% at the end of the period (66.4% on 30 September 2006, 70.5% on 31 December 2006). The ratio of interest-bearing liabilities minus financial assets to shareholders' equity (gearing) was 5.8%, while it was 3.1% at the same time in the previous year (-11.7% on 31 December 2006). At the end of the period, the Group's interest-bearing liabilities amounted to EUR 4,711 thousand (EUR 4,976 thousand). The Group's financing from operations was EUR 6,213 thousand (EUR 6,057 thousand) and its financial assets amounted to EUR 3,160 thousand (EUR 4,221 thousand). SHARES AND SHARE PRICE TREND At the end of the review period, the company's fully paid-up share capital, as recorded in the Trade Register, amounted to EUR 8,040,000 and the number of shares totalled 8,040,000. The accounting countervalue of a share is one (1) euro. According to the book-entry register, the company had 5,277 registered shareholders at the end of the period. 18.3% of the shares were registered in a nominee's name and 2.9% were in foreign ownership. The number of shares owned either directly or indirectly by members of the Board of Directors and the president of the company was 1,610,200, representing 20.0% of the total votes conferred by the company's shares. At the end of the review period, the Board of Directors had no valid authorisations to carry out a share issue or issue of convertible bonds or bonds with warrants, or to acquire or dispose of the company's shares. During the January-September period of 2007, a total of 1,950,758 Marimekko shares were traded, representing 24.3% of the outstanding shares. The total value of share turnover was EUR 29,739,349. In the review period, the lowest price of the Marimekko share was EUR 13.10, the highest was EUR 17.00 and the average price was EUR 15.24. At the end of the review period, the share price was EUR 14.05. On 30 September 2007, the company's market capitalisation was EUR 113,042,400 (EUR 104,118,000 on 30 September 2006, EUR 117,786,000 on 31 December 2006). FLAGGING NOTIFICATIONS Morgan Stanley & Co International plc's share of Marimekko Corporation's share capital and voting rights rose to 5.08%, or 408,689 shares, as a result of a transaction made on 12 April 2007; and then fell to 4.77%, or 383,689 shares, as a result of a transaction made on 20 April 2007. Grantham, Mayo, Van Otterloo & Co. LLC's share of Marimekko Corporation's share capital and voting rights fell to 4.75%, or 382,200 shares, as a result of a transaction made on 27 June 2007. Largest shareholders according to the book-entry register on 30 September 2007 Percentage of holding and votes 1. Workidea Oy 20.00 2. Varma Mutual Employment Pension Insurance Company 4.10 3. ODIN Forvaltning AS 2.84 4. Säästöpankki Kotimaa 2.09 5. Evli Nordic Dividend 1.51 6. Nordea Nordic Small Cap Fund 1.33 7. Evli Select 1.18 8. Nordea Life Assurance Finland Ltd 1.14 9. Neste Oil Eläkesäätiö 1.12 10. Nordea Stable Return Fund 1.04 11. Nordea Pro Finland Fund 0.86 12. Ilmarinen Mutual Pension Insurance Company 0.70 13. Moisio Martti 0.67 14. Foundation for Economic Education 0.62 15. Miettinen Kari 0.60 Total 39.80 Nominee-registered 18.31 Others 41.89 100.00 PERSONNEL During the period under review, the number of Group personnel averaged 402 (392). At the end of period, the Group employed 406 (392) people, of whom 16 (14) worked abroad. Kirsi Räikkönen was appointed the Group's marketing and development director as of 16 April 2007, when she also became a member of the management group. RISK MANAGEMENT AND MAJOR RISKS The major risks to Marimekko's business operations have been detailed in the company's 2006 Annual Report. No change in these risks occurred during the period under review. ANNUAL GENERAL MEETING Marimekko Corporation's Annual General Meeting, held on 12 April 2007, adopted the company's accounts for 2006 and approved the Board of Directors' proposal for payment of a dividend for 2006 of EUR 0.65 per share, totalling EUR 5,226,000.00. The record date was 17 April 2007 and the dividend payout date 24 April 2007. The Annual General Meeting resolved that the Board of Directors shall consist of three members. Mr Matti Kavetvuo, M.Sc. (Eng.), B.Sc. (Econ.), and Mrs Kirsti Paakkanen, President, were re-elected and Mrs Tarja Pääkkönen, Ph.D. (Eng., Business Strategies), was elected as a new member of the Board of Directors until the end of the next Annual General Meeting. At its organisation meeting held after the Annual General Meeting, the Board of Directors elected Matti Kavetvuo as Chairman of the Board. The Annual General Meeting also decided that Nexia Tilintarkastus Oy, Authorised Public Accountants, will continue as regular auditor, with Mr Seppo Tervo, Authorised Public Accountant, as chief auditor, and Mr Matti Hartikainen, Authorised Public Accountant, as deputy auditor of the company. OUTLOOK FOR THE REMAINDER OF 2007 Strong growth in the world economy is forecast to continue throughout the year. The fastest growth is expected in Asia. Economic growth outlook in the euro area has remained favourable. In the United States, total production growth is expected to slow down slightly. In Finland, consumption demand is expected to remain strong and total output is estimated to increase by 4.4% in 2007 (ETLA, The Research Institute of the Finnish Economy, forecast 2007/2). Based on the business climate outlook and the company's order book for the fourth quarter, growth in Marimekko Group's net sales in 2007 is estimated to remain at the same level as in 2006. Profitability is estimated to remain good although slightly weaker than in the previous year. Helsinki, 31 October 2007 MARIMEKKO CORPORATION Board of Directors For additional information, please contact: Thomas Ekström, CFO, tel. +358 9 758 7261 Marja Korkeela, Group Communications, tel. +358 9 758 7238 MARIMEKKO CORPORATION Group Communications Marja Korkeela Tel. +358 9 758 7238 Fax +358 9 759 1676 E-mail: marja.korkeela@marimekko.fi APPENDICES TO THE INTERIM REPORT Consolidated income statement Consolidated balance sheet Consolidated cash flow statement Consolidated statement of changes in shareholders' equity Key indicators Consolidated net sales by market area and product line Segment information Quarterly trend in net sales and earnings The information presented in this interim report has not been audited. Marimekko's stock exchange releases are available on the company's website at www.marimekko.com under Investors/Stock Exchange Releases. DISTRIBUTION: OMX Nordic Exchange Helsinki Principal media Marimekko's website www.marimekko.com --------------- APPENDICES This interim report has been prepared in accordance with IAS 34: Interim Financial Reporting. The same accounting policy has been applied as in the 2006 financial statements. In addition, the following new or amended standards and interpretations have been adopted as from 1 January 2007: IFRS 7 Financial Instruments: Disclosures. The Group estimates that the adoption of this standard primarily affects the scope of the notes to the annual financial statements. IAS 1 (amended) Presentation of Financial Statements: Capital Disclosures. The amendment does not affect this interim report. IFRIC 9 Reassessment of Embedded Derivatives. The application of the interpretation does not affect this interim report. IFRIC 10 Interim Financial Reporting and Impairment. The application of the interpretation does not affect this interim report. CONSOLIDATED INCOME STATEMENT (EUR 1,000) 7-9/ 7-9/ 1-9/ 1-9/ 1-12/ 2007 2006 2007 2006 2006 NET SALES 20,699 18,357 54,608 51,282 71,424 Other operating income 21 10 56 44 60 Increase or decrease in inventories of completed and unfinished products 204 -227 1,128 87 -33 Raw materials and consumables 8,625 6,826 22,670 20,209 27,868 Employee benefit expenses 3,745 3,596 11,985 11,215 15,407 Depreciation and impairment 327 297 982 846 1,158 Other operating expenses 4,262 3,929 13,050 12,055 16,154 OPERATING PROFIT 3,965 3,492 7,105 7,088 10,864 Financial income 34 34 116 88 124 Financial expenses -68 -48 -154 -142 -192 -34 -14 -38 -54 -68 PROFIT BEFORE TAXES 3,931 3,478 7,067 7,034 10,796 Income taxes 1,019 898 1,836 1,823 2,806 NET PROFIT FOR THE PERIOD 2,912 2,580 5,231 5,211 7,990 Distribution To equity holders of the parent company 2,912 2,580 5,231 5,211 7,990 Earnings per share calculated on the profit attributable to equity holders of the parent company, EUR 0.36 0.32 0.65 0.65 1.00 CONSOLIDATED BALANCE SHEET (EUR 1,000) 30.9.2007 30.9.2006 31.12.2006 ASSETS NON-CURRENT ASSETS Tangible assets 10,242 9,569 9,992 Intangible assets 279 421 348 Available-for-sale investments 20 20 20 10,541 10,010 10,360 CURRENT ASSETS Inventories 17,785 15,604 16,304 Trade and other receivables 7,758 6,443 5,717 Tax receivables 325 88 - Cash and cash equivalents 3,160 4,221 5,789 29,028 26,356 27,810 ASSETS, TOTAL 39,569 36,366 38,170 SHAREHOLDERS' EQUITY AND LIABILITIES EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY Share capital 8,040 8,040 8,040 Retained earnings 18,869 16,087 18,861 Shareholders' equity, total 26,909 24,127 26,901 NON-CURRENT LIABILITIES Deferred tax liabilities 644 544 614 Interest-bearing liabilities 370 1,371 841 1,014 1,915 1,455 CURRENT LIABILITIES Trade and other payables 7,305 6,719 7,803 Tax liabilities - - 210 Interest-bearing liabilities 4,341 3,605 1,801 11,646 10,324 9,814 Liabilities, total 12,660 12,239 11,269 SHAREHOLDERS' EQUITY AND LIABILITIES, TOTAL 39,569 36,366 38,170 The Group has no liabilities resulting from derivative contracts, and there are no outstanding guarantees or any other contingent liabilities which have been granted on behalf of the management of the company or its shareholders. CONSOLIDATED CASH FLOW STATEMENT (EUR 1,000) 1-9/2007 1-9/2006 1-12/2006 CASH FLOW FROM OPERATING ACTIVITIES Net profit for the period 5,231 5,211 7,990 Adjustments Depreciation and impairment 982 846 1,158 Financial income and expenses -38 -54 -68 Taxes 1,836 1,823 2,806 Cash flow before change in working capital 8,087 7,934 12,022 Change in working capital -4,098 -3,168 -2,069 Cash flow from operating activities before financial items and taxes 3,989 4,766 9,953 Paid interest and payments on other financial expenses -141 -125 -194 Interest received 141 105 101 Taxes paid -2,309 -2,259 -2,958 CASH FLOW FROM OPERATING ACTIVITIES 1,679 2,487 6,902 CASH FLOW FROM INVESTING ACTIVITIES Investments in tangible and intangible assets -1,164 -1,794 -2,301 CASH FLOW FROM INVESTING ACTIVITIES -1,164 -1,794 -2,301 CASH FLOW FROM FINANCING ACTIVITIES Short-term loans drawn 4,000 3,000 3,000 Short-term loans repaid -1,400 -1,250 -3,100 Long-term loans repaid -471 -471 -946 Finance leasing debts paid -60 -41 -55 Dividends paid -5,226 -5,226 -5,226 CASH FLOW FROM FINANCING ACTIVITIES -3,157 -3,988 -6,327 Change in cash and cash equivalents -2,642 -3,294 -1,726 Cash and cash equivalents at the beginning of the period 5,789 7,515 7,515 Cash and cash equivalents at the end of the period 3,147 4,221 5,789 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Equity attributable to equity holders of the parent company (EUR 1,000) Transla- Share- tion Fair value holders' Share differ- and other Retained equity, capital ences reserves earnings total Adjusted share- holders' equity 1 Jan. 2006 8,040 16,097 24,137 Net profit for the period 5,211 Dividends paid -5,226 Shareholders' equity 30 Sept. 2006 8,040 5 16,082 24,127 Equity attributable to equity holders of the parent company (EUR 1,000) Transla- Share- tion Fair value holders' Share differ- and other Retained equity, capital ences reserves earnings total Adjusted share- holders' equity 1 Jan. 2007 8,040 18,861 26,901 Net profit for the period 5,231 Dividends paid -5,226 Shareholders' equity 30 Sept. 2007 8,040 3 18,869 26,909 KEY INDICATORS 1-9/ 1-9/ Change, % 1-12/ 2007 2006 2006 Earnings per share, EUR 0.65 0.65 0.0 1.00 Equity per share, EUR 3.35 3.00 11.7 3.35 Share of exports and international operations, % of net sales 28.0 25.0 24.6 Return on equity (ROE), % 25.9 28.8 31.3 Return on investment (ROI), % 31.5 33.5 38.2 Equity ratio, % 68.1 66.4 70.5 Gross investments, EUR 1,000 1,164 1,793 -35.1 2,455 Gross investments, % of net sales 2.1 3.5 3.4 Contingent liabilities, EUR 1,000 13,957 15,097 -7.6 14,513 Average personnel 402 392 2.6 393 Personnel at the end of the period 406 392 3.6 396 Number of shares at the end of the period (1,000) 8,040 8,040 8,040 Number of shares outstanding average (1,000) 8,040 8,040 8,040 NET SALES BY MARKET AREA AND PRODUCT LINE BY MARKET AREA, JULY-SEPTEMBER (EUR 1,000) 7-9/2007 7-9/2006 Change, % Finland 14,876 13,416 10.9 Other Nordic countries 2,558 2,025 26.3 Rest of Europe 1,284 1,065 20.6 North America 1,104 856 29.0 Other countries 877 995 -11.9 TOTAL 20,699 18,357 12.8 BY PRODUCT LINE, JULY-SEPTEMBER (EUR 1,000) 7-9/2007 7-9/2006 Change, % Clothing 7,797 7,745 0.7 Interior decoration 9,367 7,232 29.5 Bags 3,534 3,380 4.6 TOTAL 20,699 18,357 12.8 BY MARKET AREA, JANUARY-SEPTEMBER (EUR 1,000) 1-9/2007 1-9/2006 Change, % 1-12/2006 Finland 39,319 38,453 2.3 53,826 Other Nordic countries 6,423 5,353 20.0 7,373 Rest of Europe 3,708 2,783 33.2 3,655 North America 2,817 2,143 31.5 3,410 Other countries 2,341 2,550 -8.2 3,160 TOTAL 54,608 51,282 6.5 71,424 BY PRODUCT LINE, JANUARY-SEPTEMBER (EUR 1,000) 1-9/2007 1-9/2006 Change, % 1-12/2006 Clothing 22,900 23,024 -0.5 30,309 Interior decoration 23,194 20,356 13.9 30,716 Bags 8,514 7,902 7.7 10,399 TOTAL 54,608 51,282 6.5 71,424 SEGMENT INFORMATION (EUR 1,000) 1-9/2007 1-9/2006 1-12/2006 Net sales Finland 39,319 38,453 53,826 Other countries 15,289 12,829 17,598 Total 54,608 51,282 71,424 Assets Finland 37,709 34,558 36,662 Other countries 1,860 1,808 2,228 Eliminations -1,804 -1,610 -720 Total 39,569 36,366 38,170 Investments Finland 1,102 1,723 2,365 Other countries 62 70 90 Total 1,164 1,793 2,455 QUARTERLY TREND IN NET SALES AND EARNINGS (EUR 1,000) III/2007 II/2007 I/2007 IV/2006 Net sales 20,699 16,997 16,912 20,142 Operating profit 3,965 1,643 1,497 3,776 Earnings per share, EUR 0.36 0.15 0.14 0.35 (EUR 1,000) III/2006 II/2006 I/2006 Net sales 18,357 16,751 16,174 Operating profit 3,492 2,144 1,452 Earnings per share, EUR 0.32 0.20 0.13