Neomarkka Plc INTERIM REPORT 10.11.2008 at 6.45 PM 1(16)
INTERIM REPORT 1.1. - 30.9.2008
NEOMARKKA GREW IN RUSSIA
STRONG DECREASE OF METAL PRICES AND DELAYED INSTALLATIONS OF DOMESTIC
PRODUCTION LINES AFFECTED THE RESULT
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| KEY FIGURES | 7-9/ | 7-9/ | 1-9/ | 1-9/ |
| | 2008 | 2007 | 2008 | 2007 |
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| Turnover, EUR million, of which | 31.3 | 22.8 | 90.3 | 37.0 |
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| - Cable business turnover | 31.1 | 23.3 | 91.0 | 31.9 |
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| - Gains and losses from trade of | 0.2 | -0.6 | -0.7 | 5.1 |
| financial assets | | | | |
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| Operating profit, EUR million, of | -0.2 | -1.2 | 3.3 | 3.6 |
| which | | | | |
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| - Cable business | 0.1 | -0.5 | 5.1 | -0.5 |
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| - Trade of financial assets | -0.3 | -0.7 | -1.6 | 4.1 |
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| Profit for the financial year EUR | -0.8 | -1.1 | 0.4 | 1.8 |
| million | | | | |
--------------------------------------------------------------------------------
| Earnings per share EUR | -0.12 | -0.19 | 0.08 | 0.29 |
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Return on investment (ROI) during period under review was 3.5 % (3.7%). Equity
ratio is 48.7 % (50.3 %).
Neomarkka has executed the new strategy since June 2007. All financial figures
are not fully comparable to the corresponding period of the previous year,
because the business operations have changed substantially.
The acquired OAO Expocable´s financial figures have been taken into the account
in cable business segment reporting starting from 1 August 2008.
Reka Cables (Reka Cables Ltd and its subsidiaries) belong to the cable business
segment and has been part of Neomarkka Group since 1.6.2007. These financial
figures of Reka Cables are comparable:
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| REKA CABLES | 1-9/ | 1-9/ |
| | 2008 | 2007 |
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| Turnover, EUR million | 90.1 | 72.2 |
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| Operating profit, EUR million | 5.8 | 4.2 |
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MAJOR EVENTS DURING THE PERIOD UNDER REVIEW
Industrial private equity investments; Cables
The turnover and operating profit of Reka Cables increased also during the third
quarter. However, the growth was limited by the delayed and prolonged
installations of the Riihimäki medium- and high voltage factory machines. The
changes needed for the installation of the machines decreased the available
production capacity of medium- and high voltage products. Orders were postponed
and partly also cancelled. The delay has caused also turbulence in the
production process. Operating profit includes quality costs amounting to EUR 0.8
million.
The prices of the metals (copper and aluminium) have been very volatile. The
rapid price decrease of metals in September affected the stock valuation
diminishing the operating profit in September by EUR 1.0 million.
In August Neomarkka bought majority of the shares of Russian cable manufacturer.
OAO Expocable is producing special cables e.g. for the use of oil and gasworks.
The company is situated next to the power cable factory of Reka Cables. The
acquisition expanded the coverage of Neomarkka´s cable business in Russia and
enabled the development of the factory area in Podolsk. The total investment
decision of close to EUR 20 million was made to develop the cable production in
Russia. The amount includes machinery and equipment purchases, enlargement of
the production buildings, changes in the factory area and the acquisition of OAO
Expocable.
Russia´s share of the turnover during the period under review was EUR 11.4
million (EUR 2.2 million). Despite the strong growth the sales has suffered due
to the delays of Riihimäki production plant. The St. Petersburg market area has
been entered also by medium voltage products. On the other hand major projects
in Moscow area have been postponed due to the financial situation. Capacity
problems limit new order intake for the rest of the year regarding some
products.
The associated company Nestor Cables Ltd´s planned delivery capability of fibre
optic telecommunication cables was reached only at the end of the second
quarter. Also the installations of the machines needed for the copper cables
have been delayed and during the implementation there have been material losses.
The demand has been lower during the third quarter due to the fact that
customers have lowered their stock levels. The delay of installations is shown
in the financial result. The loss has been included in the Group result
according to share of ownership (30%).
Investments in securities
During the third quarter of the year, the gains and losses from the financial
assets were slightly positive. However, the gains and losses from the financial
assets during the period under review were negative and the segment made
operating losses.
Neomarkka has detached from the bonds issued by Nordea Bank Plc on 30 June 2008.
The costs incurred from the detach made earlier than what was agreed in the
agreements has been included to the financial figures.
The market risk of the investments in securities is very low because Neomarkka
does not have shares or share related derivatives in the investment portfolio.
The funds are mainly invested in temporal deposits.
Regarding ownership relating private equity, no changes were made during the
period.
NEOMARKKA SHARES; PRICES AND VOLUMES TRADED
Neomarkka Plc's B shares are listed on the NASDAQ OMX Helsinki. The closing
price at the end of the review period was EUR 9.00 (EUR 9.65) per share. On 31
December 2007 the price was EUR 9.79 per share. The share turnover in the review
period was 339,309 (2,263,490) shares. The lowest B share quotation was EUR 7.90
(EUR 7.78) and the highest quotation was EUR 10.50 (EUR 9.85).
FINANCIAL RESULT, BALANCE SHEET AND FINANCING
The interim report has been drawn up in accordance with the IAS 34 requirements
for interim reports. Same principles for drawing up consolidated financial
statements have been followed as in the financial statement 2007. The minority
interests have been taken into the consideration. The exchange rate differences
of the long term intra-group loans are handled in translation differences. The
interim report is unaudited.
FINANCIAL RESULT
The consolidated turnover totalled EUR 90.3 million in the review period,
consisting of the turnover of the cable business and the gains and losses from
the trade of financial assets. The turnover of the cable business totalled EUR
91.0 million (EUR 31.9 million). The gains and losses from the trade of
financial assets totalled EUR -0.7 million (EUR 5.1 million) in the review
period.
Operating profit for the review period was EUR 3.3 million (EUR 3.6 million), of
which the operating profit of the cable business was EUR 5.1 million (EUR -0.5
million). The operating loss of the trade of financial assets was EUR -1.6
million (operating profit EUR 4.1 million). The net result for the review period
was EUR 0.4 million (EUR 1.8 million). Earnings per share were EUR 0.08 (EUR
0.29).
BALANCE SHEET AND FINANCING
At the end of the review period the balance sheet totalled EUR 117.1 million
(EUR 120.2 million).
At the end of the review period, the equity per share was EUR 9.49 (10.04) and
the equity ratio was 48.7% (50.3%).
The growth of cable business requires financing of the working capital.
Therefore the check account limit of Reka Cables has been increased to EUR 6.0
million. Reka Cables has also the factoring credit limit of EUR 7.5 million.
The delays in the start-up process of the associated company Nestor Cables Ltd
are seen in the financing situation of the company. Check account limits are in
use and further financing possibilities are being surveyed to be able to have
more flexibility in the monthly variations. The business operations start-up is
financed with both own and external capital.
The liquidity situation of the Group is good.
INVESTMENTS
The investments made in the review period relate to the cable business,
totalling EUR 16.1 million of which the acquisition of the majority of the share
capital of OAO Expocable was EUR 7.3 million (EUR 37.0 million of which purchase
of Reka Cables was EUR 27.0 million). Long-term leases have been recognised as
fixed assets under IFRS.
Shareholders' meeting and governance
The Annual General Meeting (AGM) was held on 11 June 2008. The AGM resolved to
accept the Annual Report, the Financial Statement and the Consolidated Financial
Statements from fiscal period 2007 and accepted the proposal of the Board of
Directors to pay dividend of EUR 0.50 per share. From the financial year 2006 a
dividend of EUR 0.30 per share was paid.
The AGM discharged the Board of Directors and the Managing Director for fiscal
period 2007.
The AGM resolved to elect five members to the Board of Directors of Neomarkka
Plc and re-elected the following members: Jorma Wiitakorpi as chairman of the
Board, Matti Lainema as vice chairman and as members Ilpo Helander, Taisto Riski
and Pekka Soini.
The AGM authorized the Board of Directors to acquire the company´s own shares
and to decide on the issue of shares and special rights entitling to shares as
proposed.
As external auditor for the fiscal period 2008 the AGM elected Deloitte & Touche
Ltd, Authorized Public Accountants, having Hannu Mattila, APA, as main auditor.
Taisto Riski and Matti Laimema, members of the Board of Directors, are the
members of the Audit Committee.
The Managing Director of Neomarkka Plc is Markku E. Rentto.
PERSONNEL
The Group employed an average of 367 people (135). Group personnel numbered 540
on 30 September 2008, of which 537 were in the cable business.
GROUP STRUCTURE AND SHAREHOLDERS
Neomarkka Plc is the parent company in a Group that includes the fully owned
subsidiaries Novalis Plc and Alnus Ltd with their subsidiaries. The domicile of
the parent company is Hyvinkää.
At the end of the review period, Neomarkka Plc had 12,705 (13,132) shareholders.
The biggest shareholder Reka Ltd had a 50.76% (50.76%) interest at the end of
the review period, with 65.77% (65.77%) of all votes. Neomarkka Plc is thus part
of the Reka Group. Reka Ltd's domicile is Hyvinkää.
At the end of the review period, the aggregate ownership of the ten largest
shareholders was 60.05% (59.59%) of all shares and 72.18% (71.90%) of all votes.
MAJOR EVENTS AFTER THE REVIEW PERIOD
The installations and tests of machinery at the Riihimäki factory have been
continued. Major part of the installations have been finished but the last part
of the machinery of the production line and some machines enabling the widening
of the high voltage product sortiment will be installed during the last months
of the year. The delay of machinery installations in Riihimäki has affected to
the timetable of the extension and changes to Russian production plants
buildings and machinery. The extension project in Russia will proceed fully
after the extension in Riihimäki has been finished.
Reka Cables Ltd has started the co-operation negotiations on 11 November 2008
concerning factories in Hyvinkää and in Keuruu due to the seasonal fluctuations.
More detailed need for lay-offs and length of lay-offs will be specified during
the negotiations. Possible adjustments will start earliest on 3 December 2008.
The volatility of metal prices has continued. The situation in the financial
markets shows in economy and the demand of cables has decreased at least
instantaneously. The world metal reserves have grown and prices of both
aluminium and copper have further decreased. The need to downsize these reserves
has tightened the competition.
Reka Cables Ltd has paid back its loan to the Nordic Investment Bank. At the end
of September the loan in the balance sheet was EUR 1.3 million.
Regarding investments in securities, assets have been invested in short-term
investments.
ASSESSMENT OF UNCERTAINTY FACTORS AND BUSINESS RISKS
The main financial risks of Neomarkka are currency, interest rate, commodity,
liquidity, credit and investment market-risks. These financial risks and their
hedging measures are explained further in notes to the financial statement for
year 2007.
In accordance with the updated strategy in 2007, future risk factors are more
closely tied to trends in the business operations of a small number of portfolio
companies and to normal business risks. The previous strategy based Neomarkka's
risk on a widely distributed market risk.
The most significant risks at Reka Cables and OAO Expocable are the fluctuation
in raw material costs and more rapid changes in the volume of orders than in the
past. In order to be aware of the risks and prepare for them, Reka Cables Ltd
has carried out an extensive risk-charting process.
The company believes that the cable markets in Russia will grow and develop and
has invested heavily in exploiting the business opportunities there. These
investments include a risk that the growth in Russia will not take place
according to expectations.
Nestor Cables Ltd's business carries cable business risks and the risks involved
in starting up a new company.
Comments made in this report that do not refer to actual facts that have already
taken place are future estimates. Such estimates include expectations concerning
market trends, growth and profitability, and statements that include the terms
‘believe', ‘assume', ‘will be', or a similar expression. Since these estimates
are based on current plans and estimates, they involve risks and uncertainty
factors which may lead to results differing substantially from current
statements. Such factors include 1) operating conditions, e.g. continued success
in production and consequent efficiency benefits, availability and cost of
production inputs, demand for new products, changing circumstances in respect of
the acquisition of capital under acceptable conditions; 2) circumstances in the
sector such as the intensity of demand for products, the competition, current
and future market prices for the Group's products and related pricing pressures,
the financial situation of the Group's customers and competitors, competitors'
possible new competing products and 3) the general economic situation such as
economic growth in the Group's main geographical market areas or changes in
exchange rates and interest rates.
PROSPECTS FOR THE NEAR FUTURE
The volatility of metal prices has continued. The prices of metals have
decreased substantially since July 2008, 40% in copper and 30% in aluminium. The
prices of the metals at the end of the year are estimated to be roughly at the
level of today. The situation in the financial markets shows in economy and the
demand of cables has decreased at least instantaneously. At this moment it is
difficult to safely estimate the length and volume of the decrease of demand for
building related cables.
In the previous interim report it was stated that due to the production
facilities in Russia and the expansion of the Riihimäki production facilities
the turnover of industrial activities will exceed EUR 120 million and that there
will be increase in profitability.
The delay of machinery installations in Riihimäki will cause EUR 10 million loss
of turnover. Therefore the turnover is estimated to be somewhat less than EUR
120 million. The operative business profit before metal write offs is estimated
to remain at the level of year 2007. The adverse effects of only write offs of
metals have by now risen to EUR 2 million and the result is estimated to be
significantly below the result of the last year and the goal.
Majority of Neomarkka´s investments in securities are in capital secured short
term investments.
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| CONSOLIDATED INCOME STATEMENT (IFRS) | | | |
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| | 7-9/ | 7-9/ | 1-9/ | 1-9/ |
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| EUR 1,000 | 2008 | 2007 | 2008 | 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Industrial business | 31,043 | 23,347 | 90,980 | 31,890 |
| turnover | | | | |
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| Gains and losses from the | 237 | -557 | -703 | 5,077 |
| trade of financial assets | | | | |
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| Turnover | 31,280 | 22,790 | 90,277 | 36,967 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Change in inventories of | -1,700 | -563 | 4,245 | -1,417 |
| finished products and | | | | |
| production in progress | | | | |
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| Production for own use | 58 | 1 | 116 | 11 |
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| Materials and services | -21,750 | -17,517 | -69,845 | -23,231 |
--------------------------------------------------------------------------------
| Personnel expenses | -3,916 | -2,892 | -11,269 | -4,109 |
--------------------------------------------------------------------------------
| Depreciation and | -972 | -836 | -2,776 | -1,117 |
| impairment | | | | |
--------------------------------------------------------------------------------
| Other operating income | -3,171 | -2,218 | -7,402 | -3,529 |
| and expenses | | | | |
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| | -31,451 | -24,025 | -86,931 | -33,392 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating profit | -171 | -1,235 | 3,346 | 3,575 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income | 212 | 0 | 383 | 0 |
--------------------------------------------------------------------------------
| Financial expenses | -457 | -481 | -1,828 | -1,464 |
--------------------------------------------------------------------------------
| Share of the result of | -279 | 0 | -566 | 0 |
| associates | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit before taxes | -695 | -1,716 | 1,335 | 2,111 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Taxes | -105 | 597 | -908 | -343 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit for the period | -800 | -1,119 | 427 | 1,768 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Allocation of profit for | | | | |
| the period | | | | |
--------------------------------------------------------------------------------
| To equity holders of the | -710 | -1,119 | 511 | 1,768 |
| parent | | | | |
--------------------------------------------------------------------------------
| To minority interest | -90 | 0 | -84 | 0 |
--------------------------------------------------------------------------------
| | -800 | -1,119 | 427 | 1,768 |
--------------------------------------------------------------------------------
| Earnings per share | -0.12 | -0.19 | 0.08 | 0.29 |
| calculated on the profit | | | | |
| attributable to equity | | | | |
| holders of the parent | | | | |
| after and before | | | | |
| dilution, EUR | | | | |
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| Number of shares | 6,020,360 | 6,020,360 | 6,020,360 | 6,020,360 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CONSOLIDATED BALANCE SHEET (IFRS) | | |
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| EUR 1,000 | 30.9.2008 | 31.12.2007 |
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| A s s e t s | | |
--------------------------------------------------------------------------------
| NON-CURRENT ASSETS | | |
--------------------------------------------------------------------------------
| Goodwill | 4,669 | 4,527 |
--------------------------------------------------------------------------------
| Other intangible non-current assets | 7,278 | 3,479 |
--------------------------------------------------------------------------------
| Tangible non-current assets | 33,812 | 23,916 |
--------------------------------------------------------------------------------
| Holdings in associates | 486 | 1,004 |
--------------------------------------------------------------------------------
| Deferred tax assets | 597 | 204 |
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| TOTAL NON-CURRENT ASSETS | 46,842 | 33,130 |
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| CURRENT ASSETS | | |
--------------------------------------------------------------------------------
| Inventories | 23,309 | 16,815 |
--------------------------------------------------------------------------------
| Financial assets recognised at fair | 20,670 | 37,034 |
| value through profit and loss | | |
--------------------------------------------------------------------------------
| Available-for-sale financial assets | 4,001 | 4,001 |
--------------------------------------------------------------------------------
| Sales receivables and other receivables | 19,493 | 12,154 |
--------------------------------------------------------------------------------
| Cash in hand and at bank | 2,819 | 3,268 |
--------------------------------------------------------------------------------
| TOTAL CURRENT ASSETS | 70,292 | 73,271 |
--------------------------------------------------------------------------------
| T o t a l a s s e t s | 117,134 | 106,401 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| S h a r e h o l d e r s´e q u i t y a n | | |
| d l i a b i l i t i e s | | |
--------------------------------------------------------------------------------
| SHAREHOLDERS´ EQUITY | | |
--------------------------------------------------------------------------------
| Share capital | 24,082 | 24,082 |
--------------------------------------------------------------------------------
| Premium fund | 66 | 66 |
--------------------------------------------------------------------------------
| Reserve fund | 1,221 | 1,221 |
--------------------------------------------------------------------------------
| Translation differences | -133 | -145 |
--------------------------------------------------------------------------------
| Retained profit | 10,063 | 11,971 |
--------------------------------------------------------------------------------
| Other unrestricted equity | 21,327 | 21,327 |
--------------------------------------------------------------------------------
| Profit for the period | 511 | 1,153 |
--------------------------------------------------------------------------------
| Equity attributable to equity holders of | 57,137 | 59,675 |
| the parent | | |
--------------------------------------------------------------------------------
| Minority interest | -72 | 0 |
--------------------------------------------------------------------------------
| Total shareholders´ equity | 57,065 | 59,675 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| LONG-TERM LIABILITIES | | |
--------------------------------------------------------------------------------
| Deferred tax liabilities | 3,103 | 2,091 |
--------------------------------------------------------------------------------
| Provisions | 1,331 | 540 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 22,453 | 22,512 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| SHORT-TERM LIABILITIES | | |
--------------------------------------------------------------------------------
| Tax liabilities from the profit | 253 | 198 |
--------------------------------------------------------------------------------
| Short-term interest-bearing liabilities | 14,379 | 4,999 |
--------------------------------------------------------------------------------
| Accounts payable and other liabilities | 18,549 | 16,386 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES | 60,069 | 46,726 |
--------------------------------------------------------------------------------
| S h a r e h o l d e r s´e q u i t y a | 117,134 | 106,401 |
| n d l i a b i l i t i e s | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| BALANCING ACCOUNT OF SHAREHOLDERS´EQUITY (IFRS) |
--------------------------------------------------------------------------------
| EUR | Share | Pre | Rese | Trans- | Other | Retai | Total | Mino | Share- |
| 1,000 | capit | -mi | r-ve | lation | unres | -ned | | -rit | holder |
| | al | um | fund | differ | -tric | profi | | y | s´ |
| | | fun | | -ences | -ted | t | | inte | equity |
| | | d | | | equit | | | -res | total |
| | | | | | y | | | t | |
--------------------------------------------------------------------------------
| Share- | 24,08 | 66 | 1,22 | | 21,32 | 13,77 | 60,47 | | 60,473 |
| holder | 2 | | 1 | | 7 | 7 | 3 | | |
| s´ | | | | | | | | | |
| equity | | | | | | | | | |
| 31.12. | | | | | | | | | |
| 2006 | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | | | | | | | 0 | | 0 |
| s | | | | | | | | | |
--------------------------------------------------------------------------------
| Profit | | | | | | 1,768 | 1,768 | | 1,768 |
| for | | | | | | | | | |
| the | | | | | | | | | |
| finan- | | | | | | | | | |
| cial | | | | | | | | | |
| year | | | | | | | | | |
--------------------------------------------------------------------------------
| Total | | | | | | 1,768 | 1,768 | 0 | 1,768 |
| return | | | | | | | | | |
| s and | | | | | | | | | |
| costs | | | | | | | | | |
| during | | | | | | | | | |
| the | | | | | | | | | |
| period | | | | | | | | | |
--------------------------------------------------------------------------------
| Divi-d | | | | | | -1,80 | -1,80 | 0 | -1,806 |
| ends | | | | | | 6 | 6 | | |
| paid | | | | | | | | | |
--------------------------------------------------------------------------------
| Minori | | | | | | | 0 | 0 | 0 |
| ty | | | | | | | | | |
| intere | | | | | | | | | |
| st | | | | | | | | | |
--------------------------------------------------------------------------------
| Share- | 24,08 | 66 | 1,22 | 0 | 21,32 | 13,73 | 60,43 | 0 | 60,435 |
| holder | 2 | | 1 | | 7 | 9 | 5 | | |
| s´ | | | | | | | | | |
| equity | | | | | | | | | |
| 30.9. | | | | | | | | | |
| 2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| EUR | Share | Pre | Rese | Trans- | Other | Retai | Total | Mino | Share- |
| 1,000 | capit | -mi | r-ve | lation | unres | -ned | | -rit | holder |
| | al | um | fund | differ | -tric | profi | | y | s´ |
| | | fun | | -ences | -ted | t | | inte | equity |
| | | d | | | equit | | | -res | total |
| | | | | | y | | | t | |
--------------------------------------------------------------------------------
| Share- | 24,08 | 66 | 1,22 | -145 | 21,32 | 13,12 | 59,67 | | 59,675 |
| holder | 2 | | 1 | | 7 | 4 | 5 | | |
| s´ | | | | | | | | | |
| equity | | | | | | | | | |
| 31.12. | | | | | | | | | |
| 2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| Change | | | | 12 | | -51 | -39 | | -39 |
| s | | | | | | | | | |
--------------------------------------------------------------------------------
| Profit | | | | | | 511 | 511 | | 511 |
| for | | | | | | | | | |
| the | | | | | | | | | |
| finan- | | | | | | | | | |
| cial | | | | | | | | | |
| year | | | | | | | | | |
--------------------------------------------------------------------------------
| Total | | | | 12 | | 460 | 472 | | 472 |
| return | | | | | | | | | |
| s and | | | | | | | | | |
| costs | | | | | | | | | |
| during | | | | | | | | | |
| the | | | | | | | | | |
| period | | | | | | | | | |
--------------------------------------------------------------------------------
| Divi-d | | | | | | -3,01 | -3,01 | | -3,010 |
| ends | | | | | | 0 | 0 | | |
| paid | | | | | | | | | |
--------------------------------------------------------------------------------
| Minori | | | | | | | 0 | -72 | -72 |
| ty | | | | | | | | | |
| intere | | | | | | | | | |
| st | | | | | | | | | |
--------------------------------------------------------------------------------
| Share- | 24,08 | 66 | 1,22 | -133 | 21,32 | 10,57 | 57,13 | -72 | 57,065 |
| holder | 2 | | 1 | | 7 | 4 | 7 | | |
| s´ | | | | | | | | | |
| equity | | | | | | | | | |
| 30.9. | | | | | | | | | |
| 2008 | | | | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CONSOLIDATED CASH FLOW STATEMENT (IFRS) | 1.1.-30.9. | 1.1.-30.9. |
| EUR 1,000 | 2008 | 2007 |
--------------------------------------------------------------------------------
| OPERATING ACTIVITIES | | |
--------------------------------------------------------------------------------
| Payments received from operating activities | 116,751 | 181,208 |
--------------------------------------------------------------------------------
| Payments paid on operating activities | -102,514 | -122,989 |
--------------------------------------------------------------------------------
| Paid interests and other financial expenses | -1,295 | -2,016 |
--------------------------------------------------------------------------------
| Interests received and other financial | 226 | 265 |
| incomes | | |
--------------------------------------------------------------------------------
| Direct taxes paid | -1,502 | -1,135 |
--------------------------------------------------------------------------------
| Total operating activities | 11,669 | 55,333 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| INVESTING ACTIVITIES | | |
--------------------------------------------------------------------------------
| Acquisition of subsidiaries and new | -7,110 | -26,909 |
| business | | |
--------------------------------------------------------------------------------
| Investments in tangible assets | -7,362 | -5,931 |
--------------------------------------------------------------------------------
| Total investing activities | -14,472 | -32,840 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| FINANCING ACTIVITIES | | |
--------------------------------------------------------------------------------
| Increase in loans | 7,084 | 22,018 |
--------------------------------------------------------------------------------
| Decrease in loans | -1,307 | -43,000 |
--------------------------------------------------------------------------------
| Payments of financial leasing | -464 | -168 |
--------------------------------------------------------------------------------
| Dividends paid | -2,956 | -1,783 |
--------------------------------------------------------------------------------
| Total financing activities | 2,357 | -22,933 |
--------------------------------------------------------------------------------
| | | |
--------------------------------------------------------------------------------
| CASH FLOW FOR THE PERIOD | -449 | -440 |
--------------------------------------------------------------------------------
| Liquid funds at beginning of the period | 3,268 | 3,324 |
--------------------------------------------------------------------------------
| LiQUID FUNDS AT END OF PERIOD | 2,819 | 2,884 |
--------------------------------------------------------------------------------
NOTES TO THE ACCOUNTS
The interim report has been drawn up in accordance with the IAS 34 requirements
for interim reports. The interim report is unaudited.
PRINCIPLES FOR DRAWING UP THE INTERIM REPORTS
Neomarkka has applied the same principles for drawing up the interim reports as
in the financial statement 2007. The minority interests have been taken into the
consideration. The exchange rate differences of the long term intra-group loans
are handled in translation differences.
SEGMENT INFORMATION
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--------------------------------------------------------------------------------
| 30.9.2008 |
--------------------------------------------------------------------------------
| EUR 1,000 |
--------------------------------------------------------------------------------
| | Investment | Industrial | Others and | Total |
| | in | Investment; | elim. | |
| | securities | cables | | |
--------------------------------------------------------------------------------
| Industrial business | | 90,980 | | 90,980 |
| turnover | | | | |
--------------------------------------------------------------------------------
| Gains and losses from | -703 | | | -703 |
| the trade of financial | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
| Turnover | -703 | 90,980 | | 90,277 |
--------------------------------------------------------------------------------
| Segment operating | -1,642 | 5,113 | | 3,471 |
| profit | | | | |
--------------------------------------------------------------------------------
| Unallocated items | | | -125 | -125 |
--------------------------------------------------------------------------------
| Operating profit | | | | 3,346 |
--------------------------------------------------------------------------------
| Share of the result of | | -566 | | |
| associates | | | | -566 |
--------------------------------------------------------------------------------
| Unallocated items | | | | -2,353 |
--------------------------------------------------------------------------------
| Profit for the | | | | 427 |
| financial year | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Segment assets | 25,686 | 88,555 | 2,893 | 117,134 |
--------------------------------------------------------------------------------
| Unallocated assets | | | | 0 |
--------------------------------------------------------------------------------
| Total assets | 25,686 | 88,555 | 2,893 | 117,134 |
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| | | | | |
--------------------------------------------------------------------------------
| Segment liabilities | 569 | 22,019 | 649 | 23,237 |
--------------------------------------------------------------------------------
| Unallocated | | | 36,832 | 36,832 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Total liabilities | 569 | 22,019 | 37,481 | 60,069 |
--------------------------------------------------------------------------------
| | | | | |
--------------------------------------------------------------------------------
| Assets - Liabilities | 25,117 | 66,536 | -34,588 | 57,065 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Investments | 0 | 7,964 | 789 | 8,753 |
--------------------------------------------------------------------------------
| Depreciations | -16 | -2,760 | 0 | -2,776 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 30.9.2007 |
--------------------------------------------------------------------------------
| EUR 1,000 |
--------------------------------------------------------------------------------
| | Investment | Industrial | Others and | Total |
| | in | Investment; | elim. | |
| | securities | cables | | |
--------------------------------------------------------------------------------
| Industrial business | | 31,890 | | 31,890 |
| turnover | | | | |
--------------------------------------------------------------------------------
| Gains and losses from | 5,077 | | | 5,077 |
| the trade of financial | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
| Turnover | 5,077 | 31,890 | | 36,967 |
--------------------------------------------------------------------------------
| Segment operating | 4,123 | -548 | | 3,575 |
| profit | | | | |
--------------------------------------------------------------------------------
| Unallocated items | | | | 0 |
--------------------------------------------------------------------------------
| Operating profit | | | | 3,575 |
--------------------------------------------------------------------------------
| Share of the result of | | | | 0 |
| associates | | | | |
--------------------------------------------------------------------------------
| Unallocated items | | | | -1,807 |
--------------------------------------------------------------------------------
| Profit for the | | | | 1,768 |
| financial year | | | | |
--------------------------------------------------------------------------------
| | | | | |
--------------------------------------------------------------------------------
| Segment assets | 42,995 | 73,729 | | 116,724 |
--------------------------------------------------------------------------------
| Unallocated assets | | | 3,472 | 3,472 |
--------------------------------------------------------------------------------
| Total assets | 42,995 | 73,729 | | 120,196 |
--------------------------------------------------------------------------------
| | | | | |
--------------------------------------------------------------------------------
| Segment liabilities | 2,084 | 20,821 | | 22,905 |
--------------------------------------------------------------------------------
| Unallocated | | | 36,856 | 36,856 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Total liabilities | 2,084 | 20,821 | | 59,761 |
--------------------------------------------------------------------------------
| | | | | |
--------------------------------------------------------------------------------
| Assets - Liabilities | 40,911 | 52,908 | -33,384 | 60,435 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Investments | 0 | 5,493 | 4,444 | 9,937 |
--------------------------------------------------------------------------------
| Depreciations | -16 | -1,101 | 0 | -1,117 |
--------------------------------------------------------------------------------
TURNOVER AND PROFIT IF OAO EXPOCABLE HAD BEEN FROM THE BEGINNING OF THE YEAR
If OAO Expocable had been acquired at the beginning of the financial period and
thus the figures would have been taken into account the whole period 1 Jan -30
Sep 2008, the turnover in Neomarkka Group would have been EUR 92.7 million and
the profit for the period EUR 0.2 million.
--------------------------------------------------------------------------------
| changes in tangible NON-CURRENT assets | | |
--------------------------------------------------------------------------------
| EUR 1,000 | 1-9/2008 | 1-12/2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Book value at beginning of period | 23,916 | 51 |
--------------------------------------------------------------------------------
| Investment | 7,208 | 11,061 |
--------------------------------------------------------------------------------
| Increase through company acquisition | 4,942 | 17,114 |
--------------------------------------------------------------------------------
| Decrease | 0 | -2,489 |
--------------------------------------------------------------------------------
| Depreciations | -2,254 | -1,821 |
--------------------------------------------------------------------------------
| BOOK VALUE AT END OF PERIOD | 33,812 | 23,916 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CONTINGENT LIABILITIES | | |
--------------------------------------------------------------------------------
| EUR 1,000 | 30.9.2008 | 31.12.2007 |
--------------------------------------------------------------------------------
| Debts, on behalf of corporate mortgages | | |
| are given | | |
--------------------------------------------------------------------------------
| Loans from financial institutions | 6,432 | 7,891 |
--------------------------------------------------------------------------------
| Granted corporate mortgages | 15,000 | 15,000 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Debts, on behalf of securities or | | |
| guarantees are given | | |
--------------------------------------------------------------------------------
| Loans from financial institutions | 12,456 | 13,033 |
--------------------------------------------------------------------------------
| Book value of pledged securities | 26,987 | 26,987 |
--------------------------------------------------------------------------------
| Granted guarantees | 12,456 | 13,033 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| OTHER COLLATERALS | | |
--------------------------------------------------------------------------------
| Guarantees | 1,624 | 120 |
--------------------------------------------------------------------------------
Payment commitments:
Reka Cables Ltd has made a commitment to the raw material acquisitions of its
subsidiary ZAO Reka Cables.
The sales receivables concerned are security for the factoring credit. On 30
September 2008 the factoring credit in use was EUR 6.7 million and the sales
receivables as collateral for the credit were EUR 7.8 million.
Concerning the acquisition of Reka Cables the parties to the deal have agreed on
an adjustment to the purchase price on the basis of the trend in the average
operating margin of Reka Cables in 2007 and 2008. At the most, the price can be
raised or lowered by EUR 3.5 million.
INVESTMENT COMMITMENTS
Investment commitments on tangible current assets on 30 September 2008 totalled
EUR 1.3 million (30 September 2007 EUR 7.8 million). The investment commitments
are related to the cable business.
DERIVATIVE CONTRACTS
--------------------------------------------------------------------------------
| EUR 1,000 | 30.9.2008 | 31.12.2007 |
--------------------------------------------------------------------------------
| Nominal values | | |
--------------------------------------------------------------------------------
| Interest derivatives | | |
--------------------------------------------------------------------------------
| Interest rate ceiling derivatives | 9,800 | 9,800 |
--------------------------------------------------------------------------------
| Interest rate swaps | 15,667 | 0 |
--------------------------------------------------------------------------------
| Foreign exchange derivatives | | |
--------------------------------------------------------------------------------
| Currency forward agreements | 9,351 | 0 |
--------------------------------------------------------------------------------
| Commodity derivatives | | |
--------------------------------------------------------------------------------
| Price hedging for metals | 937 | 1,119 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Fair values | | |
--------------------------------------------------------------------------------
| Interest derivatives | | |
--------------------------------------------------------------------------------
| Interest rate ceiling derivatives | 50 | 27 |
--------------------------------------------------------------------------------
| Interest rate swaps | -201 | 0 |
--------------------------------------------------------------------------------
| Foreign exchange derivatives | | |
--------------------------------------------------------------------------------
| Currency forward agreements | 35 | 0 |
--------------------------------------------------------------------------------
| Commodity derivatives | | |
--------------------------------------------------------------------------------
| Price hedging for metals | -150 | -36 |
--------------------------------------------------------------------------------
The loans of the Group have been partly hedged with interest rate derivatives. A
interest rate ceiling of 4.5% has been acquired for the EUR 3 million loan for
three years and of 4.7% for the EUR 6.8 million loan for three years. The
original interest rate base for the hedged EUR 3 million loan is the 6-month
Euribor and that for the EUR 6.8 million loan the 12-month Euribor. In addition
there are interest rate protections by using 1 year interest rate swaps.
--------------------------------------------------------------------------------
| RELATED PARTY EVENTS (REKA GROUP) |
--------------------------------------------------------------------------------
| EUR 1,000 | 1-9/2008 | 1-9/2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Sales to Reka Group | 91 | 5 |
--------------------------------------------------------------------------------
| Dividends to Reka Group | -1,528 | -587 |
--------------------------------------------------------------------------------
| Acquisition of Reka Cables Ltd | 0 | -25,803 |
--------------------------------------------------------------------------------
| Other purchases from Reka Group | -796 | -3,721 |
--------------------------------------------------------------------------------
| Sales receivables and other receivables at end of | 348 | 0 |
| period | | |
--------------------------------------------------------------------------------
| Non-current debts (financial leases) at end of | -8,155 | -5,294 |
| period | | |
--------------------------------------------------------------------------------
| Other debts at end of period | -34 | -1 |
--------------------------------------------------------------------------------
| Guarantees given | 0 | 0 |
--------------------------------------------------------------------------------
| Guarantees received | 1,327 | 1,768 |
--------------------------------------------------------------------------------
Guarantees received include the quarantee given by Reka Ltd for a Reka Cables
Ltd´s loan from the Nordic Investment Bank. This loan has been paid back in
November 2008.
ACQUISITION OF OAO EXPOCABLE
In a share transaction completed on 4 August 2008 Neomarkka bought a majority of
the shares of OAO Expocable. The price is paid in cash in two parts. First part
(80%) was paid in September 2008. The rest of the price will be paid at the
beginning of year 2009. In addition to the price for the shares, the acquisition
price includes expert fees and taxes. The following assets and liabilities were
recognised on the acquisition under IFRS 3 in related to the acquired 81.27%
share of the share capital. The purchase price allocation and opening balance on
1 August 2008 are preliminary.
--------------------------------------------------------------------------------
| EUR 1,000 | Acquiree´s | Fair value | Fair value |
| | carrying amount | adjustments | |
| | before | | |
| | combination | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net assets acquired | | |
--------------------------------------------------------------------------------
| Intangible assets | 0 | 4,136 | 4,136 |
--------------------------------------------------------------------------------
| Tangible assets | 171 | 4,771 | 4,942 |
--------------------------------------------------------------------------------
| Inventories | 668 | 0 | 668 |
--------------------------------------------------------------------------------
| Current receivables | 238 | 0 | 238 |
--------------------------------------------------------------------------------
| Cash in hand and bank | 130 | 0 | 130 |
--------------------------------------------------------------------------------
| Short term liabilities | -862 | 0 | -862 |
--------------------------------------------------------------------------------
| Deferred tax liability | 0 | -2,138 | -2,138 |
--------------------------------------------------------------------------------
| Total | | | 7,113 |
--------------------------------------------------------------------------------
| goodwill arising on | | | 139 |
| acquisition | | | |
--------------------------------------------------------------------------------
| total consideration, | | | 7,252 |
| satisfied by cash | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash outflow arising | | | |
| on acquisition: | | | |
--------------------------------------------------------------------------------
| Cash consideration, expert fees and taxes | -7,252 |
--------------------------------------------------------------------------------
| Cash and cash equivalents acquired | 130 |
--------------------------------------------------------------------------------
| Net cash outflow arising | | | -7,122 |
| on acquisition: | | | |
--------------------------------------------------------------------------------
FINANCIAL ASSETS RECOGNISED AT FAIR VALUE THROUGH PROFIT AND LOSS
--------------------------------------------------------------------------------
| EUR 1,000 | Book value | Book value |
| | 30.9.2008 | 31.12.2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Hedge funds or securities based on | | |
| hedge funds | | |
--------------------------------------------------------------------------------
| Ind eQ Active 4024 bonds / Nordea | 0 | 5,254 |
--------------------------------------------------------------------------------
| Ind eQ Active 4025 bonds / Nordea | 0 | 15,756 |
--------------------------------------------------------------------------------
| Total | 0 | 21,010 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Money market funds and deposits | | |
--------------------------------------------------------------------------------
| Nordea Pro Euro Korko Kasvu | 1,818 | 4,143 |
--------------------------------------------------------------------------------
| Interest rate warrants | 0 | 1,853 |
--------------------------------------------------------------------------------
| Certificate of deposits | 18,852 | 10,076 |
--------------------------------------------------------------------------------
| Total | 20,670 | 16,073 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Derivatives | | |
--------------------------------------------------------------------------------
| Interest derivatives; interest rate | 50 | 27 |
| ceilings | | |
--------------------------------------------------------------------------------
| Interest derivatives; interest rate | -201 | 0 |
| swaps | | |
--------------------------------------------------------------------------------
| Total | -151 | 27 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total financial assets recognised at | 20,519 | 37,109 |
| fair value through profit and loss | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| AVAILABLE-FOR-SALE FINANCIAL ASSETS | Book value | Book value |
| EUR 1,000 | 30.9.2008 | 31.12.2007 |
--------------------------------------------------------------------------------
| Private Equity | | | |
--------------------------------------------------------------------------------
| Oulun Puhelin Holding Plc | | 3,081 | 3,081 |
--------------------------------------------------------------------------------
| Lännen Teletieto Ltd | | 920 | 920 |
--------------------------------------------------------------------------------
| Total available-for-sale financial | 4,001 | 4,001 |
| assets | | |
--------------------------------------------------------------------------------
CALCULATION OF KEY FIGURES
--------------------------------------------------------------------------------
| Return on | = | Profit before taxes + interest and other | x 100 |
| investment | | financial expenses / | |
--------------------------------------------------------------------------------
| (ROI) % | | [Balance sheet total - provisions and | |
| | | non-interest bearing liabilities] | |
| | | (average) | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity ratio, | = | Shareholders' equity + minority interest | x 100 |
| % | | minus deferred tax liabilities / | |
--------------------------------------------------------------------------------
| | | Balance sheet total - advances received | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per | = | Profit for the period belonging to parent company |
| share (EPS), | | owners / |
--------------------------------------------------------------------------------
| EUR | | Number of shares adjusted for share | |
| | | issues (average) | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Equity/share, | = | Shareholders´ equity - minority interest minus |
| EUR | | deferred tax liabilities / |
--------------------------------------------------------------------------------
| | | Number of shares adjusted for share | | |
| | | issues at the end of the financial | | |
| | | period | | |
--------------------------------------------------------------------------------
Helsinki 10.11.2008
Neomarkka Plc
Board of Directors
pp. Sari Tulander
CFO
FURTHER INFORMATION:
Markku E. Rentto, Managing Director, tel. +358 207 209 190
Sari Tulander, CFO, tel. +358 207 209 192
DISTRIBUTION
NASDAQ OMX Helsinki
Main media
www.neomarkka.fi
NEOMARKKA GREW IN RUSSIA STRONG DECREASE OF METAL PRICES AND DELAYED INSTALLATIONS OF DOMESTICPRODUCTION LINES AFFECTED THE RESULT
| Source: Neo Industrial Oyj
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