VAAHTO GROUP PLC OYJ STOCK EXCHANGE RELEASE 16.11.2007 at 9.00 a.m. VAAHTO GROUP'S PREVIEW OF RESULTS FOR FISCAL YEAR 1.9.2006-31.8.2007 Vaahto Group's turnover for the fiscal period was 88.2 MEUR (65.4 MEUR) and operating profit 5.8 MEUR (2.5 MEUR). Earnings per share were 1.27 euros. The Board of Directors will propose a dividend of 0.40 euros per share. Business developments Vaahto Group's turnover for the fiscal year ending in August 2007 was 88.2 million euros (65.4 million euros), with an operating profit of 5.8 million euros (2.5 million euros). The turnover increased by 34.8% from that of the previous fiscal period. Due to the increased turnover and succesful project deliveries, the profitability and result of the Group improved significantly. The order backlog decreased during the period under review and came to 42.9 million euros (49.7 million euros) at the end of the fiscal year. Pulp & Paper Machinery Despite the tough competition, the Pulp & Paper Machinery division achieved fair sales figures for the fiscal year. Significant orders included a glass nonwovens production line for Ahlstrom Tver in Russia and the modernization of a board machine for Corenso, a subsidiary of Stora Enso, in the US. Other notable orders included projects for Lee & Man (China), Kombassan (Turkey), Anhui Shanying (China), and Powerflute Savon Sellu (Finland). The division's order backlog emphasizes technologically advanced key components of paper and board machines, such as headboxes, formers, and shoe presses. Product development has enabled the division to produce new, competitive products, including short-circulation systems, size presses, and center reels. The division's roll sales and roll-servicing business have been moderate. The fiscal year saw product-development and production investments initiated for polyurethane and composite coatings. The expansion of the product range strengthens the competitiveness of the division's roll-servicing business and supports the full-system deliveries of the Pulp & Paper Machinery division. The fiscal year also saw Vaahto Group establish a subsidiary company in Shanghai to strengthen the division's operations in China. The purpose of the company is to aid the division with sales to the Chinese market, and to create and develop a subcontractor network that also serves projects outside China. The Pulp & Paper Machinery division's turnover for the period under review was 54.2 million euros (38.4 million euros), with an operating profit of 3.7 million euros (1.9 million euros). The turnover increased by 40.9% from that of the previous fiscal period. The fiscal year's most significant delivery projects included main equipment for Ninxia Meil's new board machine (China) and a rebuild of Iggesund Paperboard's board machine (Sweden). The international market and competitive situation of the division is challenging. The main demand peak seems to be evening out, and the order backlog decreased during the fiscal period. However, the division is processing a significant number of projects in the offer phase. Determined product development work has improved the Pulp & Paper Machinery division's strategic competitive position, and the division aims to further strengthen its position as one of the leading suppliers of technology and services in the demanding international paper and board machine market environments. Process Machinery The market situation during the fiscal period was excellent for the Process Machinery division. The division's turnover for the period under review was 34.1 million euros (27.0 million euros), with an operating profit of 2.0 million euros (0.6 million euros). Turnover increased by 26.2% from that of the previous fiscal period. The Process Machinery division's tank and pressure vessel manufacture is the responsibility of a separate Group company, Japrotek Oy Ab. The company's ability to deliver demanding tank and agitator assemblies has proven to be a major competitive advantage. During the fiscal period, Japrotek Oy Ab received several large orders, including for a storage tank and agitator delivery to Belgium, soaking reactors for agitators for Outotec in China, storage tanks for Yara in Norway, and process equipment for OMG Kokkola in Finland. In the 2004-2005 fiscal year, the division won a delivery contract for demanding pressure vessels for the nuclear power plant in Olkiluoto. Due to changes in the customer's schedule, the delivery is still unfinished, and equipment deliveries will be completed in the current fiscal period. The agitator business of the Process Machinery division in the German subsidiary Stelzer R”rtechnik International GmbH developed favorably during the fiscal period. The company's reorganization of operations has proven to be successful. In the improved market situation, the company's turnover and order backlog clearly increased from those of the previous fiscal period. Spiral heat exchanger business again was clearly behind the targets set for the period. After the close of the fiscal period, Vaahto Oy, a subsidiary of Vaahto Group, made an agreement to sell its spiral heat exchanger business to German company HES Heat Exchanger System GmbH. The sale includes the spiral heat exchanger production line and its machines and equipment, with related intangible rights. Under the agreement, Vaahto Oy is responsible for the manufacture and delivery of the existing order backlog. The production machines and equipment will be transferred to the buyer gradually in spring 2008. The annual turnover for the spiral heat exchanger business has fluctuated between two to four million euros. Results Vaahto Group's operating profit for the fiscal period was 5.8 million euros, as compared to 2.5 million euros in the previous fiscal year. The operating profit for the period was 6.6% (3.8%) of the Group's turnover. Profits before taxes totaled 5.2 million euros (1.5 million euros), and the return on investment was 25.8% (12.5%). Financing The Group's cash flow was -5.8 million euros (6.5 million euros). In the decrease of the Group's cash flow, one must consider the advance payments received in the previous fiscal period that were put toward large project deliveries completed only in the period that just ended. Advance payments received decreased during the period under review and came to 6.3 million euros (11.1 million euros) at the end of the fiscal year. In addition, the strong growth in turnover considerably increased the amount of committed working capital. The Group's net financial expenses came to 0.6 million euros (0.9 million euros), or 0.7% (1.4%) of turnover. Investment cash flow was less than in the previous year, at -1.1 million euros (-1.8 million euros). The increase in debt, including interest, was 3.1 million euros. Total assets and liabilities on the consolidated balance sheet stood at 52.2 million euros (42.9 million euros), and the parent company's balance sheet showed 11.1 million euros (11.3 million euros). The Group's equity ratio decreased and was 35.5% (39.1%). Investments The Group's investments in capital assets for the fiscal period totaled 1.5 million euros (1.9 million euros). The polyurethane and composite coating plant of AK-Tehdas Oy and the rebuilding of Vaahto Oy's production facility heating system were the most significant investments. Other investments consisted mainly of smaller machinery and equipment acquisitions and of investments in information systems. Research and development The Group's research and development activities continued to concentrate for the most part on improving the competitiveness of the Pulp & Paper Machinery division's paper and board machines, key components, and roll servicing. The scope of the Group's R&D activities remained the same as in the previous fiscal period. Information systems The Group's information systems and information management systems were developed further, in accordance with the centralized operations model, and specification of the new Group-wide enterprise resource planning system began. The system's implementation is scheduled for the 2007-2008 fiscal year. Personnel Group personnel averaged 414 (410) over the fiscal year and numbered 428 (404) at the end of the period. In the Group, salaries and fees for the fiscal period were 15.9 million euros, pension expenses 2.7 million euros and other employee benefits 1.7 million euros. Employee benefits expenses totaled 20.2 million euros. Risks and business uncertainties Demand for Vaahto Group products depends largely on economic cycles and developments in the world economy and the customer industries. Risk caused by fluctuations in demand is being compensated for through adjustment of the Group's sales operations in line with the economic cycles of various markets and customer industries. Large-scale projects involve the risk of the final result falling short of expectations, since the project's future costs and other risks that could affect the delivery cannot be assessed explicitly enough at the tender stage. Risks associated with large projects can be managed by applying various quality systems, profitability analyses, directives, and acceptance procedures. The Group's financial risk management objectives are to minimize harmful effects on the Group's result caused by fluctuations in financial markets and ensure that the Group can gain equity and liability financing on competitive terms. Business-related risks of material, consequential, and liability losses are covered by appropriate insurance policies. Environment There are no remarkable environmental influences related to the own production of the Group. The Group strives to minimize the environmental defects by taking care of the proper sorting and further handling of its wastes, including hazardous wastes as well as by decreasing the use of power, raw materials and hazardous substances. Shareholders' equity The Board of Directors has no authority to issue new shares, convertible bonds, or bonds with warrants, nor the authorization to obtain or surrender shares. Administration The Annual General Meeting of December 14, 2006, elected the following to the Board of Vaahto Group Plc Oyj: Seppo Jaatinen, chairman Mikko Vaahto, vice-chairman Martti Unkuri, member Antti Vaahto, member Antti Vaahto served as CEO throughout the fiscal period. The Group companies have been audited by certified public auditing firm Ernst & Young Oy, with Pauli Hirviniemi, CPA, as chief auditor. Forecast of developments The market situation for the Group's major products is quite challenging at the moment. In Europe, the forest industry is investing very carefully, and in North America the weak US dollar is making the position of European suppliers more difficult. In the largest growing market area, China, local suppliers are growing stronger and the competitive situation is tightening up. Vaahto Group's competitiveness has grown, thanks to determined product development, the expanded product range, and procedures aimed at rationalizing the business operations. However, the order backlog was lower near the start of the fiscal period than at the corresponding time in the previous period, which poses clear challenges for a continuing increase of turnover in the new fiscal period. However, with improved competitiveness and the progressive product range, it is believed that the Group will succeed in the tough international competition, and the prerequisites for profitable business will therefore exist for the 2007-2008 fiscal year. Proposal for distribution of profits Parent company funds available for distribution of profits total 4,880,594.79 euros, of which 786,435.40 euros represents profits for the fiscal period. The Board will propose to the Annual General Meeting that a dividend of 0.40 euros per share, for a total of 1,148,920.80 euros, be paid. The remaining operating profit is to be transferred to the earnings account. The Annual General Meeting The Annual General Meeting of Vaahto Group Plc Oyj will be held on December 14, 2007 at 1.00 p.m. in the Sibelius Hall, Lahti. Interim management statement Instead of the interim report for the first three months of the accounting period, Vaahto Group Plc Oyj will disclose the interim management statement on January 17, 2008. VAAHTO GROUP CONSOLIDATED FIGURES CONSOLIDATED 2006/07 % of 2005/06 % of INCOME 12 turn- 12 turn- STATEMENT,IFRS months over months over 1000 EUR NET TURNOVER 88 161 65 414 Change in finished goods and work in progress 696 -835 Production for own use 377 359 Other operating income 303 602 Material and services -50 629 -33 254 Employee benefits expenses -20 241 -18 641 Depreciations -1 840 -1 804 Other operating expenses -11 015 -9 381 OPERATING PROFIT 5 812 6,6 2 461 3,8 Financing income and expenses -611 -948 Share of results of affiliated companies 24 PROFIT BEFORE TAXES 5 226 5,9 1 513 2,3 Tax on income from operations -1 313 -451 PROFIT FOR THE 3 913 4,4 1 062 1,6 PERIOD Net profit attributable: To equity holders of the parent 3 639 920 To minority interest 274 143 Total 3 913 1 062 Earnings per share calculated on profit attributable to equity holders of the parent: EPS undiluted, euros/share 1,27 0,32 EPS diluted, euros/share 1,27 0,32 Average number of shares (1000 shares): undiluted 2 872 2 872 diluted 2 872 2 872 CONSOLIDATED 31.8.07 31.8.06 BALANCE SHEET,IFRS 1000 EUR ASSETS NON-CURRENT ASSETS: Intangible assets 621 599 Goodwill 1 702 1 702 Investment properties 308 Tangible assets 14 644 15 031 Shares in affiliated companies 24 Non-current trade and other receivables 13 3 Other long-term investments 44 46 Deferred tax asset 120 1 NON-CURRENT ASSETS 17 169 17 690 CURRENT ASSETS: Inventories 8 188 7 501 Trade receivables and other 25 276 11 695 receivables Tax receivable, income tax 23 16 Cash equivalents 960 3 600 Cash and bank 574 2 391 CURRENT ASSETS 35 021 25 202 TOTAL ASSETS 52 190 42 892 CONSOLIDATED 31.8.07 31.8.06 BALANCE SHEET, IFRS 1000 EUR EQUITY AND LIABILITIES SHAREHOLDERS' EQUITY: Share capital 2 872 2 872 Share premium account 6 6 Other reserves 2 128 2 118 Retained earnings 8 436 5 479 Equity attributable to equity holders of the parent 13 442 10 475 Minority share 1 393 1 215 SHAREHOLDERS' EQUITY 14 835 11 689 NON-CURRENT LIABILITIES: Deferred tax liability 928 803 Long-term liabilities, interest-bearing 4 923 4 313 Non-current provisions 684 250 NON-CURRENT LIABILITIES 6 536 5 367 CURRENT LIABILITIES: Short-term liabilities, interest-bearing 6 331 3 826 Trade payables and other liabilities 23 558 21 973 Tax liability, income tax 931 36 CURRENT LIABILITIES 30 819 25 836 TOTAL EQUITY AND LIABILITIES 52 190 42 892 KEY FIGURES, IFRS 2006/07 2005/06 Shareholders' equity per share, 4,68 3,65 euros Earnings per share, euros 1,27 0,32 Solidity, % 35,5 39,1 Gross investments, 1000 EUR 1 502 1 859 Total average number of personnel 414 410 Order backlog at the end of the fiscal period, 1000 EUR 42 894 49 723 The amount of contract revenue recognized as revenue has been deducted from the order backlog. OTHER LIABILITIES 31.8.07 31.8.06 1000 EUR Lease liabilities, excluded financial lease liabilities: Current lease liabilities 114 252 Lease liabilities maturing in 1-5 years 272 138 Total 386 389 Other liabilities: Granted guarantees 452 637 Derivative contracts: Currency forward agreements are as a rule used to hedge against exchange rate risks. The currency forward agreements have been used to protect receivables and future assets. Interest rate agreements are used to hedge against the changes of the interests. The derivative agreements of the group are booked according to IAS 39: Financial instruments. Derivative agreements are initially recognized at their purchase cost which is equivalent to the fair value and they are subsequently remeasured at fair value. Fair values Nominal Fair Fair Fair of derivative value value, value, value agreements pos. neg. total 31.8.2007 1000 EUR Currency forward agreements 1 271 -14 -14 Currency option agreements 6 401 62 -29 33 Interest rate swap agreements 5 323 12 -9 2 Fair values of currency forwards are determined by using the market prices for the equivalent agreements on the day of the closing of the accounts. Fair values state for the income or expenses the group would book if the derivative agreements were closed at the end of the fiscal period. CONSOLIDATED FLOW 2006/07 2005/06 OF FUNDS 12 12 STATEMENT, IFRS months months 1000 EUR Flow of funds from operations: Profit before taxes 5 226 1 513 Adjustments 2 697 2 731 Change in working capital -11 797 3 238 Financial income and expenses and taxes -1 918 -1 012 Flow of funds from operations -5 792 6 470 Flow of funds from investments: Investments in tangible and intangible assets 1 502 -1 859 Income from sales of tangible and intangible assets 405 54 Granted loans -11 0 Flow of funds from investments -1 108 -1 805 Flow of funds from financial items: Withdrawals of short-term loans 4 297 30 Payments of short-term loans -1 792 -1 365 Withdrawals of long-term loans 2 247 620 Payments of long-term loans -1 637 -2 350 Dividends -671 -418 Flow of funds from financial items 2 444 -3 483 Change of liquid funds -4 457 1 181 Lahti, November 16, 2007 VAAHTO GROUP PLC OYJ Antti Vaahto CEO Information: Antti Vaahto CEO, Vaahto Group Plc Oyj tel. +358 40 8232835
VAAHTO GROUP'S PREVIEW OF RESULTS FOR FISCAL YEAR 1.9.2006-31.8.2007
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