Vacon Plc, Stock Exchange Release, 24 April 2008 at 9.00 am
Strong growth continues
January-March summary:
• Order intake totalled MEUR 78.2, growth of 39.4 % from the
corresponding period in the previous year (MEUR 56.1).
• Revenues totalled MEUR 65.9, growth of 26.0 % (MEUR 52.3).
• Operating profit was MEUR 7.6, increase of 20.6 % (MEUR
6.3).
• Cash flow from operations was MEUR 4.6 (MEUR 2.5).
• Earnings per share were EUR 0.34 (EUR 0.28), growth of 21.4
% from the previous year.
The AC drive market has continued to grow during the first months of
2008. Demand for speed control solutions for electric motors that
utilize energy efficiently and for applications for use in renewable
power generation is strong at the moment.
The value of the orders received by Vacon exceeded EUR 78 million,
and revenues were almost EUR 66 million. These figures are proof not
only of the growth of the market but also of Vacon's effective
product development and of the expansion of operations around the
world; they also show the effect of the purchase of the TB Wood's AC
drives business. Excluding the impact of the purchase of the TB
Wood's business, Vacon's order intake increased 24.4 %, revenues 15 %
and operating profit 23.8 % from the corresponding period in the
previous year.
Revenues rose on all continents. The relative increase in revenues
was highest in the Asia and Pacific region, but growth was also
strong in North and South America. Growth in revenues in the Europe,
Middle East and Africa region also clearly surpassed market growth.
The operating profit margin in the first quarter was 11.5 %, compared
to 12 % in the corresponding period of 2007. The operating profit
margin before amortization of intangible rights (EBITA margin) was 13
%, which is the same as one year earlier. Amortization of the
intangible rights generated by the acquisition of the AC drives
business of TB Wood's (EUR 0.4 million) reduced the operating profit
margin by 0.6 percentage points. The profitability of business
operations remained at the same level as in the first quarter of
2007.
Integrating the AC drives business of TB Wood's into Vacon Group has
progressed according to plan. It is estimated that the final
acquisition price will be USD 29.2 million. According to initial
calculations, the acquisition of TB Wood's generates goodwill of EUR
6.4 million, which is based on the anticipated opportunities for
expansion and synergy benefits. Initial calculations for the goodwill
and for allocating the acquisition price of the business acquired are
presented later in the tables to this report.
January - March result and equity structure
MEUR 1-3/ 1-3/ Change 1-12/
2008 2007 % 2007
Revenues 65.9 52.3 26.0 232.2
EBITDA 9.3 7.4 25.7 34.0
Depreciation -
tangibles -0.8 -0.7 14.3 -2.8
EBITA 8.5 6.8 26.5 31.2
Amortization -
intangibles -0.9 -0.5 80.0 -1.9
Operating
profit 7.6 6.3 20.6 29.2
Profit before
tax 7.3 6.2 17.7 28.8
Profit for
period 5.2 4.4 18.2 21.4
Orders received by the Group were 39.4 % higher than in the previous
year. Orders in North America and Asia and for renewable energy
production applications in Europe were the biggest factors in the
strong growth. The order book for the acquired business at the start
of the year together with the orders received during the first
quarter totalled EUR 8.4 million. Excluding the impact of the
purchase of the TB Wood's business, the volume of orders increased
24.4 %.
Revenues increased 26% from the corresponding period in the previous
year. Growth in revenues excluding the acquisition of the TB Wood's
business was 15 %.
The first quarter operating profit was 20.6 % higher than one year
before. The operating profit for comparable figures was EUR 7.8
million, growth from the previous year of 23.8 %. The EBITA margin
was 13 %, the same level as in the previous year. The operating
profit as a percentage of revenues declined from the previous year's
figure of 12 % to 11.5 %. Amortization of intangible rights generated
by the acquisition of the TB Wood's AC drive business (EUR 0.4)
reduced the operating profit margin by 0.6 percentage points. The
earnings per share rose to EUR 0.34, an increase from the previous
year of EUR 0.06.
The balance sheet total was EUR 135.9 (91.2) million. The balance
sheet total shows the impact of the acquired business. The equity
ratio was 42.9 %. The Group's cash flow from operations for the
January- March period was EUR 4.6 (2.5) million.
The Group's equity structure and liquidity remained strong.
Interest-bearing net debt at the end of the period totalled EUR 5.7
(-9.5) million, and gearing was 9.9 % (-20.1 %).
The Annual General Meeting was held in March, and the dividend paid
(EUR 0.75 per share) has been entered, based on the decision of the
AGM, as a dividend payment liability in the interim financial
statement for the first quarter. The dividend was paid on 7 April
2008 in accordance with the decision of the AGM.
The Group's order book stood at EUR 47.1 (33.5) million. The order
book increased from the beginning of the year by EUR 12.3 million.
Market position
Vacon Group revenues by market area were as follows
MEUR 1-3/ % 1-3/ % 1-12/ %
2008 2007 2007
Europe,
Middle East,
Africa 47.1 71.5 40.6 77.7 172.6 74.3
North and
South
America 13.0 19.7 8.1 15.5 42.1 18.1
Asia and
Pacific 5.8 8.8 3.5 6.8 17.5 7.6
Total 65.9 100.0 52.3 100.0 232.2 100.0
During the first quarter of 2008 Vacon strengthened its position in
all its main market areas. Based on market surveys, the company
estimates that it has about four per cent of the global market.
Vacon's revenues by region increased as follows: Europe, Middle East
and Africa in total 16 %, North and South America 60 %, and Asia and
Pacific 66 %.
Breakdown of Vacon Group revenues by distribution channel
MEUR 1-3/ % 1-3/ % 1-12/ %
2008 2007 2007
Direct
sales 29.0 44.0 22.6 43.2 99.0 42.6
Distribu-
tors 8.7 13.2 7.4 14.1 31.3 13.5
OEM 17.0 25.8 13.0 24.9 56.4 24.3
Brand
label 11.2 17.0 9.3 17.8 45.5 19.6
Total 65.9 100.0 52.3 100.0 232.2 100.0
Group revenues by distribution channel increased as follows: OEM 31
%, direct sales 28 %, distributors 18 % and brand label customers 20
%.
Vacon Group structure
On 1 January 2008 Vacon purchased the AC drives business of TB
Wood's, part of US-based Altra Holdings Inc. The transaction included
factories in the USA and Italy and sales companies in India and
Germany.
During the first quarter Vacon established a sales company in the
Czech Republic.
Following these additions Vacon's own sales network comprises 19
subsidiaries as well as branch offices in Brazil, the Arab Emirates
and Thailand.
Research and development
R%D expenditure during the first quarter totalled EUR 4.1 (3.2)
million, and EUR 0.3 (0.3) million of this was capitalized as
development costs. R&D costs accounted for 6.2 % (6.2 %) of Group
revenues.
Work on developing new products continues in accordance with the
company's plans.
Investments
Gross investments by the Group during the first three months,
excluding the purchase of the TB Wood's AC drives business, totalled
EUR 1.3 (1.5) million. Expenditure focused on increasing and
maintaining production capacity and on information systems.
Organization and personnel
The number of Vacon Group personnel has increased by 199 since the
start of the year of which the acquisition of the TB Wood's AC drive
business brought 149 new employees. At the end of March the Group
employed 1068 (720) people, of whom 591 (467) were in Finland and 477
(253) in other countries. The table below shows the average number of
Vacon personnel during the review period:
1-3/2008 1-3/2007 1-12/2007
Office personnel 628 481 512
Factory personnel 427 226 260
TOTAL 1 055 707 772
Shares and shareholders
Vacon had a market capitalization at the end of March of EUR 426.5
million. The closing share price on 31 March 2008 was EUR 28.00. The
lowest share price during the January-March period was EUR 20.02 and
the highest EUR 29.96. A total of 1,212,017 Vacon shares were traded
during the January-March period, in monetary terms EUR 31.8 million.
Vacon's main shareholders on 31 March 2008:
Number of shares Holding, %
Ahlström Capital Oy 2 297 996 15.0
Tapiola Mutual Pension
Insurance Company 584 500 3.8
Vaasa Engineering Oy 424 433 2.8
Koskinen Jari 358 590 2.3
Holma Mauri 347 171 2.3
Ehrnrooth Martti 330 000 2.2
Tapiola Group companies 325 300 2.1
Niemelä Harri 309 840 2.0
Karppinen Veijo 209 349 1.4
Mutual Insurance Company
Pension Fennia 170 000 1.1
Nominee registered and in
foreign ownership 4 945 256 32.3
Others 4 992 565 32.7
Total 15 295 000 100.0
Vacon Plc's own shares -62 812
Shares outstanding 15 232 188
On 31 March 2008 members of Vacon's Board of Directors, the President
and CEO, and the Deputy to the CEO held directly a total of 568,296
shares, or 3.7 % of Vacon's share stock.
Own shares
On 31 March 2008 Vacon Plc held a total of 62,812 of its own shares.
In accordance with the terms of the company's share bonus scheme, on
8 April 2008 the persons in the scheme were given a bonus of
altogether 19,500 shares. As of 9 April 2008 the company holds 43,312
of its own shares, which it acquired at an average price of EUR
12.46. This is 0.4 % of the share capital and voting rights, so it
has no significant impact on the distribution of ownership or voting
rights in the company.
Annual General Meeting of Shareholders
Vacon Plc's Annual General Meeting of Shareholders was held in Vaasa
on 26 March 2008.
The AGM approved the 2007 financial statements and discharged the
Board members and Managing Director from liability for the 2007
fiscal year.
The AGM adopted the Board's proposal of paying a dividend of EUR 0.75
per share, or EUR 11.4 million in total. The AGM decided on 31 March
2008 as the record date for the dividend payment and 7 April 2008 as
the payment date.
The AGM discharged the Board members and Managing Director from
liability for the 2007 fiscal year. The AGM confirmed that the number
of Board members is seven (7). Pekka Ahlqvist, Jari Eklund, Kalle
Heikkinen, Mauri Holma, Jan Inborr and Veijo Karppinen were
re-elected as Board members and Professor Riitta Viitala, D.Sc.
(Econ. & Bus. Adm.) was elected as a new member to the Board.
The AGM also decided that KPMG Oy Ab would continue as the company's
auditor.
The AGM adopted the Board's proposal to authorize the Board to decide
on purchasing the Company's own shares. The Board's proposal is
reported in the stock exchange release of 29 February 2008. All
decisions of the Annual General Meeting of Shareholders were made
unanimously.
Jan Inborr was re-elected Chairman and Veijo Karppinen was re-elected
Vice Chairman of the Board of Directors at the Board's organization
meeting. Jan Inborr was re-elected Chairman of the Board's
Remuneration and Nomination Committee and Pekka Ahlqvist and Veijo
Karppinen were re-elected members of the committee.
Dividend policy
The dividend policy of Vacon's Board of Directors is to propose for
approval by the Annual General Meeting of Shareholders a dividend in
line with the company's financial performance. The goal is to pay a
dividend of about
50 % of the profit for the period. The level of dividend takes into
account the financing required to expand operations.
Prospects for 2008
Developments in the AC drive market are expected to remain favourable
in 2008. The need to improve the energy consumption of electric
motors and the intensive investments in energy production based on
renewable energy sources are increasing the market for AC drives.
Based on market surveys Vacon estimates that the AC drive market is
growing at an annual rate of more than 8 %. North-American market
growth is forecast to be some what less than the average growth rate
and in Asia it is forecast to be over the average, with China and
India the engines of growth. Vacon's investments in the growing
markets in North America, Asia and Russia will reinforce Vacon's
global market position. The purchase of TB Wood's AC drives business
boosts Vacon's growth potential. Market surveys indicate that Vacon's
market share is rising in all major market areas.
Vacon considers that potential risks to its financial performance in
2008 are problems that material suppliers may have with capacity,
increasing problems with the availability of key components and
increases in their prices, and the weakening of the US dollar.
Revenues in 2008 are forecast to rise by more than 25 % (by more than
15 % on comparable figures) and profitability to weaken slightly from
2007 in consequence of integrating the TB Wood's AC drive business
during the year. This is not, however, expected to have any material
impact on Vacon Group's earnings per share in 2008. Earnings per
share are forecast to exceed EUR 1.50 in 2008.
Financial reports in 2008
Vacon will publish two more interim reports in 2008 as follows:
- January-June Thursday, 7 August 2008 at 9.00 am
- January-September Thursday, 23 October 2008 at 9.00 am
Vacon is holding a Capital Markets Day on 13 May 2008 in Vacon's
Vantaa office, Finland starting at 9.00 a.m..
Formal statement
This release contains certain forward-looking statements that reflect
the current views of the company's management. Due to the nature of
these statements, they contain risks and uncertainties and are
subject to changes in the general economic situation and in the
company's business sector.
Vacon in brief
Vacon was established in 1993 from a passion to develop and produce
AC drives globally. It is a matter of honour for Vacon to offer
customers efficient, reliable and easy to use means for improving
process control and saving energy and costs. Vacon's solutions
represent clean technology. They can be used to control the speed of
electric motors used by industry and municipal engineering, and in
power generation using renewable energy. Vacon provides AC drives in
the power range 0.25 kW - 5 MW. Revenues in 2007 totalled EUR 232.2
million.
Vaasa, 24 April 2008
VACON PLC
Board of Directors
For more information please contact:
Mr Vesa Laisi, President and CEO, phone: +358 (0)40 8371 510
Mr Mika Leppänen, CFO and Vice President, Finance & Control, phone:
+358 (0)40 8371 235
Conference for media and analysys
Vacon will hold a briefing for analysts and the media at 11.30 am on
24 April 2008 in the Vaakuna meeting room at the Sokos Hotel Vaakuna,
Kaivokatu 3, Helsinki.
Dial-in conference for investors and investment analysts
A dial-in conference in English for investors and investment analysts
will be held at 3.00 pm on 24 April 2008. President and CEO Vesa
Laisi and Mika Leppänen, CFO and Vice President, Finance and Control,
will participate in the conference. Lines can be booked ten minutes
before the conference by calling the service number +44 207 162 0025.
The conference ID code is "Vacon Oyj". To hear a recording of the
conference, available for three working days, call +44 207 031 4064,
ID code 782084.
Conference link:
http://wcc.webeventservices.com/view/wl/r.htm?e=103014&s=1&k=1160FA7DA444BC6482628EE794A1E4FC&cb=genesys
Distribution
Helsinki Exchanges
Financial Supervision Authority
Main media
Accounting principles
This interim report has been prepared in accordance with IFRS
(International Financial Reporting Standards) standard IAS 34 on
Interim Financial Reporting. The interim report does not contain all
the information required for annual financial statements.
Vacon has prepared this interim report applying the same accounting
principles as those decribed in detail in its 2007 consolidated
financial statements
The interim report is unaudited.
Consolidated income statement, IFRS, MEUR
1-3/ 1-3/ 1-12/
2008 2007 2007
Revenues 65.9 52.3 232.2
EBITDA 9.3 7.4 34.0
Depreciation -0.8 -0.7 -2.8
EBITA 8.5 6.8 31.2
Amortization -0.9 -0.5 -1.9
Operating profit 7.6 6.3 29.2
Financial income 0.6 0.1 0.6
Financial expenses -0.8 -0.2 -1.0
Profit before taxes 7.3 6.2 28.8
Income taxes -2.1 -1.8 -7.4
Profit for the period 5.2 4.4 21.4
Attributable to:
Equity holders of
the parent 5.1 4.3 20.9
Minority interest 0.1 0.1 0.5
Earnings per share, euro 0.34 0.28 1.37
Earnings per share
diluted, euro 0.34 0.28 1.37
Consolidated balance sheet , IFRS, MEUR
31.3.2008 31.3.2007 31.12.2007
ASSETS
Intangible assets 23.7 7.8 9.6
Tangible assets 16.4 13.4 14.7
Investments 2.0 1.6 1.9
Loans receivable and 0.4 0.8 0.4
other receivables
Deferred tax assets 2.0 1.3 1.5
Total non-current assets 44.5 24.8 28.2
Inventories 23.1 14.2 14.7
Trade and other receivables 52.5 40.6 45.8
Cash and cash equivalents 15.8 11.6 34.4
Total current assets 91.4 66.4 94.9
Total assets 135.9 91.2 123.2
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent company 56.1 46.5 62.9
Minority interest 1.0 0.8 1.1
Total equity 57.2 47.3 64.0
Deferred tax liabilities 3.1 1.3 1.6
Employee benefits 1.4 0.7 0.8
Interest-bearing liabilities 18.2 1.8 19.1
Total non-current liabilities 22.7 3.9 21.6
Trade and other payables 48.5 37.2 30.9
Income tax liabilities 3.0 1.9 1.6
Provisions 1.3 0.8 0.8
Interest-bearing liabilities 3.2 0.3 4.3
Total current liabilities 56.0 40.1 37.6
Total equity and liabilities 135.9 91.2 123.2
Q1/2007 Calculation of changes in shareholders' equity, IFRS, MEUR
Minor- Total
ity equity
Attributable to equity holders of the parent inter-
est
Share Share Own Transla- Revalu- Re- Total
capital Pre- shares tion ation earn-
mium differ- fund tained
reserve rence ings
Shareholders'
equity
31.12.2006 3.1 5.0 -1.2 -0.1 0.1 45.2 52.0 1.0 53.0
Cash flow
hedging:
Hedging
result 0.0 0.0 0.0
allocated to
equity
Transferred
as
adjustment to
sales income -0.1 -0.1 -0.1
Translation
difference 0.0 0.0 0.0
Other changes 0.1 0.1 0.0 0.1
Net income
recorded
directly in
equity 0.0 0.0 0.1 0.0 0.0
Profit for
period 4.3 4.3 0.1 4.3
Income and
expenses
recorded
during
period,
total 0.0 0.0 4.4 4.4 0.1 4.5
Dividend paid -9.9 -9.9 -0.3 -10.2
Shareholders'
equity
31.3.2007 3.1 5.0 -1.2 -0.1 0.0 39.7 46.5 0.8 47.3
Q1/2008 Calculation of changes in shareholders' equity, IFRS, MEUR
Minor- Total
Attributable to equity holders of the parent ity equity
inter-
est
Share Share Own Transla- Revalu- Re- Total
capital Pre- shares tion ation tained
mium diffe- fund earn-
rence ings
Shareholders'
equity
31.12.2007 3.0 5.0 -1.2 -0.5 0.0 56.5 62.9 1.0 64.0
Cash flow
hedging:
Hedging
result
allocated to
equity 0.0 0.0 0.0
Transferred
as
adjustment to
sales income 0.0 0.0 0.0
Translation
difference -0.6 -0.6 -0.6
Other changes 0.1 0.1 0.0 0.1
Net income
recorded
directly in
equity 0.0 0.0 0.0 -0.6 0.0 0.1 -0.5 0.0 -0.5
Profit for
period 5.1 5.1 0.1 5.2
Income and
expenses
recorded
during
period,
total 0.0 0.0 0.0 -0.6 0.0 5.2 4.7 0.1 4.8
Dividend paid -11.4 -11.4 -0.2 -11.6
Shareholders'
equity
31.3.2008 3.0 5.0 -1.2 -1.0 0.0 50.3 56.1 1.0 57.2
Consolidated cash flow statement, IFRS, MEUR
31.3.2008 31.3.2007 31.12.2007
Profit for the period 5.2 4.4 21.4
Depreciation 1.7 1.2 4.8
Financial income and expenses 0.3 0.1 0.5
Taxes 2.1 1.8 7.4
Other adjustments 0.3 0.0 0.1
Change in working capital -3.9 -3.4 -5.5
Cash flow from financial items
and tax -1.0 -1.5 -7.5
Cash flow from operating
activities 4.6 2.5 21.1
Investments in tangible and
intangible assets -21.2 -1.4 -8.6
Proceeds from disposal of
tangible and intangible assets 0.0 0.0 0.4
Loans granted 0.0 0.0 0.0
Other investments -0.1 -0.2 -0.6
Repayment of loan receivables 0.0 0.0 0.2
Proceeds from disposal of other
investments 0.0 0.0 0.0
Cash flow from investing
activities -21.3 -1.5 -8.6
Share issue 0.0 0.0 0.0
Proceeds from long-term
borrowings 0.0 0.0 21.9
Repayment of long-term loans -0.3 0.0 -0.2
Proceeds from short-term
borrowings 0.0 0.0 1.0
Repayment of short-term loans -1.0 -2.0 -2.2
Financial leasing payments 0.0 -0.2 -0.3
Dividends paid -0.2 -0.3 -10.2
Cash flow from financial activities -1.5 -2.4 10.0
Change in liquid funds -18.2 -1.4 22.5
Liquid funds at start of period 34.4 13.0 13.0
Translation differences for liquid
funds -0.5 0.0 -1.2
Liquid funds at end of period 15.8 11.6 34.4
Segment information
Reporting on Vacon Group's operations is firstly by business segment
and secondly by geographical segment.
Vacon has one business segment, AC drives. The figures for the
primary segment are identical with the figures for the whole Group.
Vacon's operations are organized in the following functions: Products
and Markets, Production, Research & Development, Finance and
Administration, Human Resources, IT and Process Development. To
ensure that the organisation is customer-oriented, operations are
controlled by customer segments that are called business areas. These
business areas are: Component Customers, Solutions Customers, OEM and
Brand Label Customers, and Service and After-Market Services.
The secondary, geographical segment is divided into three sales
areas: EMEA (Europe, Middle East and Africa), Americas (North and
South America) and APAC (Asia and Pacific).
Acquired business operations
On 1 January 2008 the Group acquired the AC drives business of TB
Wood's, part of US-based Altra Holdings Inc. According to initial
calculations, the acquisition of TB Wood's generates goodwill of EUR
6.4 million, which is based on the anticipated opportunities for
expansion and synergy benefits.
MEUR
Acquisition cost
Cash price 19.8
Direct costs relating to acquisition 1.3
Total acquisition cost 21.1
Fair value of net assets acquired 14.7
Goodwill 6.4
Allocation:
Europe, Middle East and Africa 2.6
North and South America 3.7
Asia and Pacific 0.1
Impact on cash flow was as follows:
Total acquisition cost 21.1
Loans raised -19.4
Cash funds received -0.7
Net payment for acquisition from cash
funds 0.9
Carrying Fair value Useful commercial life in
amount years
Identified intangible
assets
Customer relations 4.4 5
Technology developed 4.2 5
Tangible assets 1.8 2.2
Inventories 5.6 5.6
Receivables, total 2.9 2.8
Cash and bank balances 0.7 0.7
Assets, total 11.0 19.9
Non-current
liabilities 0.3 0.3
Current liabilities 3.5 3.5
Deferred tax
liabilities 1.5
Liabilities, total 3.8 5.2
Net assets 14.7
Acquisition cost 19.8
Direct costs relating
to
acquisition 1.3
Goodwill 6.4
Key indicators
31.3. 2008 31.3. 2007 31.12.2007
Equity per share, EUR 3.69 3.11 4.13
Equity ratio, % 42.9 52.3 52.9
Gross capital expenditure
(excl. purchase of TB
Woods), MEUR 1.3 1.5 9.1
Gross capital expenditure
as % of revenues 2.0 3.0 3.9
Interest-bearing net
liabilities, MEUR 5.7 -9.5 -11.0
Net gearing, % 9.9 -20.1 -17.1
Order book, MEUR 47.1 33.5 34.8
Adjusted average number
of shares during the
period 15 232 188 15 213 428 15 226 997
Number of shares at end
of period 15 232 188 15 213 428 15 232 188
Average number of
personnel 1 055 707 772
Commitments and contingencies, MEUR
31.3.2008 31.3.2007 31.12.2007
Commitments and contingencies 1.1 1.8 1.1
Financing commitments 0.9 1.3 1.0
Currency derivatives, MEUR
31.3.2008 31.3.2007 31.12.2007
Forward exchange contracts
Fair value 0.4 0.2 0.4
Nominal value 10.4 14.2 12.7
Calculation of financial ratios
Profit for the financial year attributable to equity
holders of the parent company
Earnings per ---------------------------------------------------
share =
Adjusted average number of shares
Equity attributable to the equity holders
of the parent company
Equity per share ----------------------------------------------------
=
Adjusted average number of shares at year end
Shareholders' equity (incl. minority interest) x 100
Equity ratio = ----------------------------------------------------
Balance sheet total - advances received
(Interest-bearing liabilities - cash, bank balances
and financial assets) x 100
Gearing = --------------------------------------------------
Shareholders' equity (incl. minority interest)
Vacon Plc Interim Report 1 January - 31 March 2008
| Source: Vacon.
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