Ruukki Group Plc, Financial Statements Review, 26 February 2009 at 10:00 a.m.
RUUKKI GROUP PLC'S FINANCIAL STATEMENTS REVIEW FOR 1 JANUARY - 31 DECEMBER 2008
This Financial Statements Review is prepared in accordance with the IAS 34
standard. The presented information is unaudited. In the text below the
corresponding comparable figures from financial year 2007 are presented in
brackets, unless otherwise explicitly stated. When comparing financial
performance in 2008 versus that in 2007, it shall be taken into account that
Group strategy and structure have significantly changed during 2008.
HIGHLIGHTS 2008
- Revenue 1-12/2008 EUR 247.4 (1-12/2007: 213.9) million
- EBITDA 1-12/2008 EUR 17.6 (24.7) million
- EPS 2008, undiluted, EUR -0.11 (0.06)
- Strong net cash position
- Expansion into Minerals business in Q4/2008
- Positive EBITDA despite very challenging market conditions
- Net loss due to impairment losses of EUR 41.0 (1.0) million and
costs associated with Russian projects of EUR 7.8 (3.5) million
- Cancellation of Kostroma project in Q1/2008 and subsequent discontinuation
of pulp mill and sawmill projects in Russia decided in Q1/2009
- EUR 0.04 per share capital redemption proposed to the AGM, no dividend
GUIDANCE 2009
- EBITDA guidance 1-12/2009: consolidated Group EUR 10.0 million, Wood
Processing EUR 5.0 million, Minerals EUR 10.0 million
- Emphasis on positive cash flow
KEY DEVELOPMENTS DURING OR AFTER FINANCIAL YEAR 2008
- In Q4/2008 the Group entered into minerals business via acquisition of Turkish
mining operations and German and Maltese ferrochrome businesses thereby
enlarging the Group into a new industry and into new geographical areas
- All the preparations on Kostroma forest industry project were cancelled during
Q1/2008, in Q3/2008 significant cost savings were introduced relating to the
Russian pulp mill and sawmill projects, and subsequently all Russian projects
have been discontinued in Q1/2009
- The Group sold its Care Services business and certain metal industry assets,
as well as partially disposed of its Furniture Business
- Group's net cash position on 31 December 2008 was EUR 213.1 (317.9) million
- Ruukki Group Plc acquired altogether 29,000,000 own shares from the market,
corresponding to almost 10 % of all shares, and cancelled these treasury shares
in February 2009, after which Company's registered number of shares has been
261,034,022 shares
- The Group recognised in its 2008 income statement EUR 41.0 (1.0) million net
impairment losses on goodwill, intangible assets and tangible assets
- The Board of Directors proposes to the Annual General Meeting to be convened
later that a capital redemption of EUR 0.04 per share would be distributed out
of the paid-up unrestricted equity reserve i.e. in total EUR 10,441,360.88, and
no dividend is proposed
Revenue
--------------------------------------------------------------------------------
| Revenue, EUR million | Group Total | Wood Processing | Minerals |
--------------------------------------------------------------------------------
| Actual 2008 | 247.4 | 222.6 | 12.3 |
--------------------------------------------------------------------------------
| Guidance 2008 * | 245.0 | 220.0 | 15.0 |
--------------------------------------------------------------------------------
* as announced on 10 December 2008
Ruukki Group's consolidated revenue from continuing operations during 1-12/2008
totalled EUR 158.7 (128.4) million. Revenue growth was approximately 24 %.
Comparable revenue for the year 2008 was approximately 15 % lower year-on-year.
The business segments accounted for consolidated January-December revenue as
follows, presented as percentage share of total revenue from continuing
operations: Sawmill 61 % (46 %), House Building 32 % (49 %) and Minerals 8 % (0
%). Discontinued operations accounted for 36 % (40 %) of the total Group
revenue. Approximately 53 % (43 %) of total revenue was for exports.
Profitability
--------------------------------------------------------------------------------
| EBITDA, EUR million | Group Total | Wood Processing | Minerals |
--------------------------------------------------------------------------------
| Actual 2008 | 17.6 | 15.8 | 1.9 |
--------------------------------------------------------------------------------
| Guidance 2008 * | 20.0 | 13.0 | 5.0 |
--------------------------------------------------------------------------------
* as announced on 10 December 2008
The earnings before interest, taxes, depreciation and amortisation (EBITDA) from
continuing operations for the financial year 2008 were EUR 2.3 (17.3) million,
or 1.5 % (13.5 %) of revenue. The comparable EBITDA was about EUR -7.7 (16.3)
million when taking into account the effect of corporate restructurings.
The earnings before interest and taxes (EBIT) from continuing operations for the
financial year 2008 were EUR -46.7 (12.7) million, or -29,4 % (9.9 %) of
revenue. The comparable EBIT was about EUR -37.5 (12.9) million when taking into
account the effect of corporate restructurings and impairment losses.
During January - December 2008 altogether EUR 41.0 (1.0) million of impairment
losses were recognised, of which EUR 27.7 million was booked into third quarter,
EUR 11.4 million during fourth quarter and the remaining during the previous
quarters.
The Sawmill Business segment generated negative operating profit in the second,
third and fourth quarters due to slow-down in demand and decline of sales
prices. The House Building segment had strong performance even though delivery
volumes are on downward trend because of the general market conditions. The
fourth quarter has typically been and was also for 2008 the strongest quarter
with strong profit margin for the House Building segment. The Furniture Business
was consolidated into the Group up until 30 December 2008, and during 2008 it
contributed a positive EBITDA of EUR 2.1 (6.2) million.
During 2008 altogether EUR 7.8 (3.5) million expenses were recognised related to
Russian investment projects and their preparation. The impairment losses on
these projects totalled EUR 17.8 million in 2008 (2007: no impairment).
Minerals business was consolidated from the beginning or November 2008, and it
generated an EBITDA of EUR 1.9 million for 11-12/2008.
Financial position
Group's net cash position at the year-end 2008 stood at EUR 213.1 million (cash,
interest-bearing receivables and interest-bearing liabilities, net). At the end
of 2007 the corresponding net cash position was EUR 317.9 million (including
money market funds). In the 31 Dec 2008 net cash position there are about EUR
16.0 million of cash and interest-bearing receivables of Elektrowerk Weisweiler
GmbH, which is consolidated into the Group but in which Ruukki Group's ownership
stake is zero. The net cash position described above included interest-bearing
debt on 31 December 2008 as follows: short-term interest-bearing debt totalling
EUR 13.1 (16.0) million and long-term interest-bearing debt totalling EUR 23.1
(24.0) million.
Changes in the consolidated Group balance sheet at the end of 2008 compared to
end of 2007 relate to major extent to corporate restructuring. Acquisition of
Junnikkala sawmill in January increased Group's assets and liabilities, but the
disposal of Care Services business and especially partial disposal of Furniture
Business downsized Group balance sheet and diminished interest-bearing debt as
well. For the Minerals Business acquisition, EUR 80.0 million cash consideration
was paid in October, and about EUR 5.4 million of transaction costs were
accrued. The Minerals Business, as consolidated into the Group, had about EUR
6.6 million of cash reserves and EUR 15.7 million of interest-bearing
receivables on its 31 December 2008 balance sheet.
Mainly due to the Minerals Business acquisition Group's goodwill increased to
EUR 87.2 million on 31 December 2008 from previous year-end's EUR 34.9 million.
GROUP KEY FIGURES, CONTINUING OPERATIONS, EUR MILLION
--------------------------------------------------------------------------------
| | 2008 | 2007 |
--------------------------------------------------------------------------------
| CONTINUING OPERATIONS, EUR million | 12 months / | 12 months / 31 |
| | 31 Dec 2008 | Dec 2007 |
--------------------------------------------------------------------------------
| Revenue | 158.7 | 128.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EBITDA | 2.3 | 17.3 |
--------------------------------------------------------------------------------
| % of revenue | 1.5 % | 13.5 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EBIT | -46.7 | 12.7 |
--------------------------------------------------------------------------------
| % of revenue | -29.4 % | 9.9 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings before taxes | -41.5 | 18.0 |
--------------------------------------------------------------------------------
| % of revenue | -26.2 % | 14.0 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit for the period | -41.4 | 12.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Return on equity, % | -10.8 % | 5.3 % |
--------------------------------------------------------------------------------
| Return on capital employed, % | -8.1 % | 7.0 % |
--------------------------------------------------------------------------------
| Equity ratio, % | 64.8 % | 85.1 % |
--------------------------------------------------------------------------------
| Earnings per share, undiluted (EUR) | -0.14 | 0.05 |
--------------------------------------------------------------------------------
| Earnings per share, diluted (EUR) | -0.14 | 0.05 |
--------------------------------------------------------------------------------
| Equity per share, EUR | 1.20 | 1.41 |
--------------------------------------------------------------------------------
| Average number of shares, undiluted (1,000) | 290 034 | 217 889 |
--------------------------------------------------------------------------------
| Average number of shares, diluted (1,000) | 305 176 | 221 432 |
--------------------------------------------------------------------------------
| Number of shares outstanding, end of period | 290 034 | 290 034 |
| (1,000) | | |
--------------------------------------------------------------------------------
All the figures in the table above representing continuing operations, so all
the effects of the discontinued operations are excluded.
FINANCIAL PERFORMANCE, FOURTH QUARTER RESULTS
During the fourth quarter, the following financial performance was realised for
the consolidated Group and for the two major business areas (excluding e.g.
Russian projects and the headquarter's impact) from continuing operations:
--------------------------------------------------------------------------------
| Q4/2008 continuing | Revenue | EBITDA | EBIT |
| operations | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Wood Processing | 36.2 | 2.8 | -7.8 |
--------------------------------------------------------------------------------
| Minerals | 12.3 | 1.9 | -1.0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Group total | 48.5 | 1.2 | -19.8 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Q4/2007 continuing | Revenue | EBITDA | EBIT |
| operations | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Wood Processing | 32.6 | 7.3 | 6.2 |
--------------------------------------------------------------------------------
| Minerals | - | - | - |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Group total | 36.1 | 4.0 | 2.4 |
--------------------------------------------------------------------------------
GROUP STRATEGY
Ruukki Group's Board of Directors redefined the Group strategy during the second
quarter of 2008 to diversify into Minerals.
After the resolution at the end of October by the Extraordinary General Meeting,
and the related chrome ore and ferrochrome business acquisition, the Group now
has two main business areas: Wood Processing business and Minerals business.
The Wood Processing businesses are primarily located in the Northern part of
Finland, and the Group will focus on consolidating our position in this market.
The Group is actively looking into acquisition opportunities in the Minerals
sector with an initial focus on chrome mining and production.
In all of its operations cash flow generation is emphasized.
The Group has conservative approach to managing Group's debt/equity ratio.
GUIDANCE 2009
The Board of Directors of Ruukki Group Plc has decided to emphasise during 2009
cash flow generation in all of its operations. The Group is looking for
expansion opportunities and potential acquisition targets within the current
main business areas. The decision criteria for all investments will be the
expected pay-back profile and cash generation ability.
Due to very uncertain circumstances prevailing in global financial and products
markets, no revenue guidance will be given for 2009. For profitability, the
following EBITDA guidance is given based on cautious assumptions in the light of
the current market situation:
--------------------------------------------------------------------------------
| EBITDA, EUR | Group Total | Wood Processing | Minerals |
| million | | | |
--------------------------------------------------------------------------------
| Guidance 2009 | 10.0 | 5.0 | 10.0 |
--------------------------------------------------------------------------------
| Actual 2008 | 17.6 | 15.8 | 1.9 |
--------------------------------------------------------------------------------
The guidance presented above is based on the subsidiaries' 2009 budgets, on
order book at the end of 2008 and on current market situation.
CHAIRMAN AND CEO ALWYN SMIT:
- ”The global economic downturn has clearly and significantly affected the
business environment everywhere, and it has also touched Ruukki Group's Wood
Processing and Minerals businesses. However, due to specialised nature and
flexible operational model of our businesses, we have been able to survive the
turmoil relatively well, as compared to some of our major competitors.”
- ”Ruukki Group has strong net cash position, which enables us to utilise
business opportunities and pursue add-on acquisitions in the business areas we
are already in.”
- ”Although the outlook for future is challenging, we are convinced that we will
continue to generate positive operative cash flow.”
PRESS AND ANALYSTS BRIEFING
Ruukki Group Plc holds a conference call on 27 February 2009 at 4:00 p.m.
Finnish time in English. Chairman and CEO Alwyn Smit will present the financial
statements review. To attend the call, please register via email to
marjo.lonka@ruukkigroup.fi. Further instructions to participate in the
conference call will be given after registration.
For any further information, please contact:
Alwyn Smit
Chairman of the Board and CEO
Ruukki Group Plc
Telephone +358 50 442 1663 / +41 7960 19094
www.ruukkigroup.fi
Ruukki Group Plc's shares are listed on Nasdaq OMX Helsinki in which the shares
of the Company are traded in the mid cap segment, in the industrials sector
This Financial Statements Review is based on translation into English of a
document written in Finnish. In case there would be any potential discrepancies,
inconsistencies or inaccuracies, the Finnish version of the Financial Statements
Review shall prevail.
RUUKKI GROUP PLC: FINANCIAL STATEMENTS REVIEW, 1 JANUARY - 31 DECEMBER 2008
The key events from 1 January to 30 September have been detailed in the interim
reports published by the company during 2008, and hence the Company refers in
that respect to the information published earlier. Consequently, mainly events
that took place during or after the fourth quarter of 2008 will be described
below.
ACQUISITIONS, DIVESTMENTS AND MAJOR OTHER RESTRUCTURINGS CARRIED OUT DURING AND
AFTER THE FINANCIAL YEAR 2008
In addition to the number of changes that took place during 2008 in the
Company's major owners, which was also reflected in the Company's Board of
Directors, Ruukki Group's legal and operational structure and strategy were
reformed and revised during financial year 2008. The major steps of corporate
restructurings are chronologically described below:
Acquisition of Junnikkala sawmill (Q1/2008)
Greenfield forest industry investment project in Kostroma, Russia (cancelled in
Q1/2008)
Divestment of Metal Industry assets (Q1/2008 and Q3/2008)
Divestment of Care Services business segment (Q3/2008)
Acquisition of minerals businesses from Kermas Limited (Q4/2008)
At the end of Q2/2008 the Board of Directors redefined Group strategy so that
the business was to be diversified from wood processing business only to also
minerals business, in the first phase more specifically into ferrochrome
business. In early June 2008 Ruukki Group Plc and Kermas Limited, a major
shareholder in Ruukki Group, entered into a preliminary agreement on the
acquisition of Kermas Limited's chrome ore businesses in Turkey and ferrochrome
businesses in Malta and Germany. Based on due diligence surveys conducted during
the summer and autumn, as well as on a fairness opinion given by HSBC Bank Plc,
the extraordinary general meeting of Ruukki Group Plc decided on 28 October 2008
to acquire the businesses. The closing of the transaction took place at the end
of October. This transaction diversified Ruukki Group's businesses
geographically quite substantially, and represents a move into a new industry.
Partial divestment of Furniture Business segment (Q4/2008)
Ruukki Group's Furniture Business segment went through a number of operational
restructuring measures, including also co-determination negotiations, in 2008
targeted to enhance operative efficiency and to ensure cost competitiveness.
Ruukki Group Plc's Board of Directors decided in Q4/2008 to start processes
directed to selling partially or fully its shares in Incap Furniture Oy, the
furniture business subsidiary of Ruukki Group. Based on this, at the end of 2008
Ruukki Group partially disposed of the shares in Incap Furniture Oy lowering the
effective ownership stake of the Group to 48.3 %. Therefore, the Furniture
Business is included in the discontinued operations at the end of 2008, and not
anymore reported as a separate business segment.
Decision to discontinue all preparations on Russian pulp mill project (Q1/2009)
Based on changed situation on global financial markets, recent developments in
pulp and paper markets, and taking also into account Russia-specific factors,
the Board of Directors of Ruukki Group Plc decided to discontinue Russian pulp
mill and sawmill projects.
KEY EVENTS DURING THE FOURTH QUARTER OF 2008 (1 OCT - 31 DEC 2008)
Decisions by Extraordinary General Meeting on 7 October 2008
Ruukki Group Plc's Extraordinary General Meeting was held in Espoo on Tuesday 7
October 2008. The number of Board members was decided to be six. Esa Hukkanen,
Markku Kankaala, Jelena Manojlovic and Alwyn Smit were re-elected to the Board.
Thomas Hoyer and Terence McConnachie were elected as new Board members. The
Extraordinary General Meeting resolved the compensation of the Board of
Directors as follows: Chairman of the Board EUR 7,500 per month, and EUR 5,000
per month for each member.
Decisions by Extraordinary General Meeting on 28 October 2008
Ruukki Group Plc's Extraordinary General Meeting was held in Espoo on Tuesday 28
October 2008. The Extraordinary General Meeting decided, according to the
proposal of the Board, on execution of acquisition related to chrome and
ferrochrome operations so that Ruukki Group Plc shall purchase about 99.999 %
and its subsidiary Rekylator Oy about 0.001 % of the shares of a Maltese Company
called RCS Limited from a company called Kermas Limited and Ruukki Group Plc
shall purchase approximately 98.75 % of the shares of a Turkish company called
Türk Maadin Sirketi A.S. from Kermas Limited. Ruukki Group Plc paid as a
purchase consideration EUR 80 million in cash at the closing in October 2008,
and will pay as potential additional earn-out purchase consideration altogether
50 % of the combined net profit of RCS and TMS during a five year period
covering financial years 2009 - 2013. In any case the maximum total earn-out
consideration is capped at EUR 150 million. In addition, the transaction
includes among other things a long-term ferrochrome toll manufacturing agreement
between RCS Limited and German Elektrowerk Weisweiler GmbH, a put option for two
years related to the shares of Turkish Türk Maadin Sirketi A.S. and a call
option related to the shares of Elektrowerk Weisweiler GmbH exercisable after
five years.
The Extraordinary General Meeting decided, according to the proposal of the
Board, on issuing a maximum total of 73,170,731 option rights to Kermas Limited
related to additional earn-out purchase consideration of the aforementioned
acquisition. The option rights will be issued without consideration and they
will entitle the recipients to subscribe for a maximum total of 73,170,731
shares in Ruukki Group Plc. The share subscription price per share is EUR 2.30
(dividend adjustment). The subscription period for the shares occurs annually
within 30 business days after the approval of the additional earn-out purchase
consideration and matures on December 31, 2014.
The Extraordinary General Meeting decided to authorise the Board of Directors to
decide on the acquiring of own shares and transferring of acquired own shares
for a maximum amount of 19,000,000 shares. These authorisations are valid for
two years.
The Extraordinary General Meeting decided, according to the proposal of the
Board, and in deviation from the shareholders´ pre-emptive right of
subscription, on giving in total maximum 2,900,000 option rights to the
company's CEO Alwyn Smit. The option rights would entitle the owner to subscribe
in total maximum 2,900,000 new shares or shares that are in the possession of
the company. The subscription price of the option rights is EUR 2.30 per share
(dividend adjustment). The share subscription period for 1,450,000 stock options
commences on October 1, 2009 and for 1,450,000 stock options on October 1, 2010.
The subscription period matures on December 31, 2015.
Expansion into the Minerals business
Ruukki Group Plc's Board finalised, based on resolution by the Extraordinary
General Meeting on 28 October, the acquisition of chrome ore and ferrochrome
businesses, and hence paid EUR 80 million in cash to Kermas Limited as purchase
consideration at the end of October. The businesses acquired form a segment to
be reported separately, and it has had effect from November 2008 on the
consolidated Group revenue, results, financial position and cash flows. This
transaction has significantly diversified Group's industrial and geographical
position.
Expansion of the Pallet Business
Oplax Oy, a subsidiary belonging to Ruukki Group's Sawmill Business segment, on
7 November 2008 acquired the entire share capital of PSL Räinä Oy, which
operates in wooden loading pallets business and is located in Rovaniemi,
Northern Finland. Revenue of PSL Räinä Oy reached approximately EUR 2.0 million
in 2007 and there were 9 employees.
Measures taken in the Furniture Business operations and related to ownership
structure
Ruukki Group's Furniture Business segment (Incap Furniture) started at the end
of September co-determination negotiations related to all of its employees due
to financial and production-related reasons. The co-determination negotiations
related to all the Incap Furniture's employees and operations ended in November.
There are ongoing restructuring investigations at Incap Furniture Oy, the
outcome of which can affect the future operating model of that business.
In November 2008, Ruukki Group Plc's Board classified Furniture Business as a
non-core asset, and hence decided to start processes in order to partially or
fully dispose of the shares Ruukki Group owns in Incap Furniture Oy. On 30
December 2008 Ruukki Group Plc sold shares in Incap Furniture Oy so that its
ownership stake declined from about 72 % to about 48 %. Therefore, at the end of
2008 furniture business was not consolidated as a subsidiary, since
post-transaction Ruukki Group does not have controlling stake in the business.
Share buy-backs
Ruukki Group Plc's Board of Directors decided, based on authorisation given by
the Annual General Meeting in March 2008, to buy back via a trading plan its own
shares. The share buy-back was implemented in November when altogether
10,000,000 shares were acquired with an average purchase price of share of about
EUR 1.19.
Ruukki Group Plc's Board of Directors decided, based on authorisation given by
the Extraordinary General Meeting in October 2008, to buy back via a trading
plan its own shares. The share buy-back was started in December 2008 and the
maximum amount of 19,000,000 shares was reached at the end of January 2009. The
average purchase price of these shares was about EUR 1.12 per share.
KEY EVENTS AFTER THE FOURTH QUARTER (ON OR AFTER 1 JANUARY 2009)
Change in the Board of Director's Audit Committee
Ruukki Group Plc's Board of Directors decided that starting from 21 January 2009
the Audit Committee consists of three members. Thomas Hoyer and Markku Kankaala
have been appointed as new committee members, and Jelena Manojlovic continues in
her position in the audit committee. Thomas Hoyer was later elected as the
committee's chairman.
Cancellation of own shares
Ruukki Group Plc's Board of Directors decided to cancel 29,000,000 treasury
shares held by the company. The cancellation did not affect company's share
capital. After the cancellation company does not hold any own shares. The
registered number of shares has been 261,034,022 after the cancellation, which
became valid after it was registered at the Trade Register on 17 February 2009.
Decisions by Extraordinary General Meeting on 24 February 2009
The Extraordinary General Meeting decided, in accordance with the proposal by
the Board of Directors, to authorise the Board of Directors to decide on share
issue and on the issuing of stock options and other special rights that entitle
to shares. By virtue of the authorisation shares could be emitted in one or more
tranches in total a maximum of 100,000,000 new shares or shares owned by the
Company. This equates approximately 38.3 per cent of the Company's current
registered shares. The authorisation replaces all previous authorisations and is
valid for two years.
The Extraordinary General Meeting decided to authorise the Board of Directors to
decide on the acquiring of own shares for a maximum amount of 26,000,000 shares
with the funds from the Company's unrestricted shareholders' equity. The
authorisation covers acquisition of shares in public trade in NASDAQ OMX
Helsinki Oy and also outside of the public trade. This authorisation is valid
for one year.
DEVELOPMENT BY BUSINESS SEGMENT
WOOD PROCESSING BUSINESS
SAWMILL BUSINESS
The Sawmill Business segment specialises in the efficient processing of softwood
logs from Northern Finland into various sawn timber products sold for both
domestic and export markets. The construction industry forms the business area's
main customer segment in both Finland and elsewhere, because the Group's
products are very well suited to house building thanks to their strength
properties.
Revenue and profitability of the Sawmill Business segment were the following:
--------------------------------------------------------------------------------
| EUR million | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Revenue | 96.3 | 59.4 | 23.1 | 14.4 |
--------------------------------------------------------------------------------
| EBITDA | 4.2 | 10.2 | -0.2 | 1.5 |
--------------------------------------------------------------------------------
| EBITDA-% | 4.3 % | 17.1 % | -0.7 % | 10.2 % |
--------------------------------------------------------------------------------
| EBIT | -23.7 | 6.4 | -10.7 | 0.4 |
--------------------------------------------------------------------------------
| EBIT-% | -24.7 % | 10.8 % | -46.2 % | 3.0 % |
--------------------------------------------------------------------------------
Quarterly and annual revenue for the Sawmill Business segment as from 1 Jan
2007:
--------------------------------------------------------------------------------
| EUR million | 10-12/08 | 7-9/08 | 4-6/08 | 1-3/08 | 1-12/08 |
| | (3 mths) | (3 mths) | (3 mths) | (3 mths) | (12 mths) |
--------------------------------------------------------------------------------
| Revenue | 23.1 | 22.9 | 28.1 | 22.2 | 96.3 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR million | 10-12/07 | 7-9/07 | 4-6/07 | 1-3/07 | 1-12/07 |
| | (3 mths) | (3 mths) | (3 mths) | (3 mths) | (12 mths) |
--------------------------------------------------------------------------------
| Revenue | 14.4 | 15.8 | 16.6 | 12.6 | 59.4 |
--------------------------------------------------------------------------------
From March 2007 Oplax Oy, which produces wooden pallets, and from February 2008
Junnikkala subgroup have been consolidated into Sawmill Business segment's
figures.
Quarterly and annual EBIT for the Sawmill Business segment as from 1 Jan 2007:
--------------------------------------------------------------------------------
| EUR million | 10-12/08 | 7-9/08 | 4-6/08 | 1-3/08 | 1-12/08 |
| | (3 mths) | (3 mths) | (3 mths) | (3 mths) | (12 mths) |
--------------------------------------------------------------------------------
| EBIT excluding | -2.2 | -0.6 | -0.7 | 0.1 | -3.3 |
| one-off items | | | | | |
--------------------------------------------------------------------------------
| EBIT, one-off | -8.5 | -11.9 | 0.0 | 0.0 | -20.4 |
| items * | | | | | |
--------------------------------------------------------------------------------
| Total EBIT | -10.7 | -12.5 | -0.7 | 0.1 | -23.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR million | 10-12/07 | 7-9/07 | 4-6/07 | 1-3/07 | 1-12/07 |
| | (3 mths) | (3 mths) | (3 mths) | (3 mths) | (12 mths) |
--------------------------------------------------------------------------------
| EBIT excluding | 0.4 | 1.8 | 2.4 | 1.4 | 6.0 |
| one-off items | | | | | |
--------------------------------------------------------------------------------
| EBIT, one-off | 0.0 | 0.0 | 0.0 | 0.4 | 0.4 |
| items * | | | | | |
--------------------------------------------------------------------------------
| Total EBIT | 0.4 | 1.8 | 2.4 | 1.8 | 6.4 |
--------------------------------------------------------------------------------
* Following has been included in the one-off items: in Q4/2008 EUR 8.5 million
impairment of tangible and intangible assets, in Q3/2008 EUR 11.9 million
impairment of goodwill and tangible assets, and in Q1/2007 the realised
insurance compensation of EUR 0.4 million
During the preparation of financial statements, the Group has booked the raw
material inventories of sawmills to net realisable value, which had total effect
of EUR -0.5 million.
The volume in cubic meters of sawn timber production:
--------------------------------------------------------------------------------
| | 10-12/2008 | 10-12/2007 | 1-12/2008 | 1-12/2007 |
--------------------------------------------------------------------------------
| 1 000 m3 | 89 | 50 | 312 | 180 |
--------------------------------------------------------------------------------
In the Sawmill Business segment sawn timber demand, as well as market prices,
have continued on declining trend. Moreover, better price competiveness of
Swedish competitors has further deteriorated the situation. Hence, during
financial year 2008, including also the fourth quarter, the business segment has
been making operative losses. However, to balance the effect, the scale-down and
closures announced by major competitors and declining log prices have started to
ease the situation somewhat from the profitability perspective. Based on
information published by Finnish Forest Research Institute (METLA) in the middle
of February, in January 2009 the pine and spruce log prices are on average about
20 % lower than a year before. Pulp mills capacity decreases has also
contributed to the fact that for both log procurement and for chip sales, the
recent times have been challenging as to the availability and price of raw
material, as well as end-products and side-products.
During the latter half of 2008 Group's Junnikkala sawmill unit carried out a
major investment program at its Kalajoki and Oulainen mills costing altogether
EUR 9.5 million and aiming at enhancing efficiency and increasing annual
capacity from about 140,000 m3 to about 260,000 m3. The new investments have
been operational from November 2008, and are currently ramped up in phases.
Group's Sawmill Business segment has slightly cut down its capacity utilisation
towards the end of 2008, but has not yet made any major scale-down decisions.
Sawmill Business segment has encountered major currency related losses in
Q4/2008 and Q1/2009 related to rapid and large changes in EUR/JPY exchange rate,
which has been hedged using forward agreements. The realised foreign exchange
losses for financial year 2008 were altogether EUR 2.7 million and the
unrealised losses of the open forward positions on 31 December 2008 totalled EUR
2.5 million, which has been recognised in Group income statement as finance
costs. All the positions have been closed after the year end and additional
losses to be booked into Q1/2009 income statement will be about EUR 1.0 million.
The profitability of Pallet Business has remained good and growth in revenue has
met expectations. In November the Pallet Business was strengthened by the
acquisition of PSL Räinä Oy, which also somewhat diversifies the customer risks.
In the income statement of the segment EUR 11.8 million impairment losses on
goodwill, EUR 1.2 on intangible assets and EUR 7.4 million on machinery and
equipment were recognised in 2008. Impairments have been recognised due to
external and internal indications and based on future cash flow forecasts under
the current market situation.
At the end of December 2008 the Sawmill Business segment employed a total of 202
employees (31 Dec 2007: 112).
HOUSE BUILDING
The House Building segment specialises in the design, manufacture and assembly
of ready-to-move-in detached wooden houses in the whole Finland. The business
area's main customers are Finnish families and private persons.
The House Building business area has delivered wooden ready-to-move-in houses to
customers as follows:
--------------------------------------------------------------------------------
| 10-12/2008 | 10-12/2007 | 1-12/2008 | 1-12/2007 |
--------------------------------------------------------------------------------
| 118 | 146 | 342 | 473 |
--------------------------------------------------------------------------------
Revenue and profitability of the House Building segment were the following:
--------------------------------------------------------------------------------
| EUR million | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Revenue | 50.4 | 62.4 | 13.7 | 19.9 |
--------------------------------------------------------------------------------
| EBITDA | 10.4 | 13.6 | 3.1 | 4.9 |
--------------------------------------------------------------------------------
| EBITDA-% | 20.6 % | 21.8 % | 22.5 % | 24.5 % |
--------------------------------------------------------------------------------
| EBIT | 10.1 | 13.3 | 3.0 | 4.8 |
--------------------------------------------------------------------------------
| EBIT-% | 20.0 % | 21.4 % | 21.8 % | 23.9 % |
--------------------------------------------------------------------------------
The revenue from ready-to-move-in houses delivered by the business area is
recognised upon delivery to the customer, for which reason sites in progress
have no effect on the Group's revenue or profit. However, the Group entered in
Q2/2008 into an agreement to deliver 31 cottages, whose delivery time is in
Q1/2009, and for this specific project the revenue has been recognised by
applying the percentage of completion method.
The volume of delivered houses in 2008 was close to thirty per cent lower than
the corresponding volume during the previous year. According to the data
published by Statistics Finland the amount of private sector residential
construction was about 16 % lower in November 2008 compared to volumes year
before, but the number of building permits for the private house construction
was down 26 % year-on-year. Moreover, the general deterioration of economic
situation and prevailing uncertainty have affected the sales, the level of which
has been weak and led to decline in order book.
There were totally 99 employees employed by the segment at the end of December
2008 (31 Dec 2007: 118).
INVESTMENT PROJECTS
Despite the decision to cut down fixed expenses of the segment in the third
quarter 2008, the forest industry projects being pursued in Russia have been in
active investigation and preparation phase up until early 2009. However, in
February 2009, the Board of Directors of Ruukki Group Plc decided to discontinue
all preparations related to the planned pulp mill and saw mill projects due to
global pulp market demand-supply characteristics and due to situation in the
international financial markets and in Russia in general, which will lead to
one-off restructuring expenses in Q1/2009.
The technical design work on the Russian sawmill project was finalised by the
end of September, and the sawmill machinery and equipment are temporarily
stored. Ruukki Group Plc's Board has evaluated the fair value of these assets
already paid for being less than their book value. Therefore, especially in
third and fourth quarters major write-downs have been recognised. For the full
year 2008 total impairment, on both pulp and sawmill projects, of EUR 17.8
million were booked based on the resolutions of the Board of Directors of Ruukki
Group Plc. Therefore at the end of the financial year 2008 the sawmill machinery
and equipment have a net balance sheet value of EUR 7.4 million.
Quarterly and annual EBIT for the Investment Projects segment as from 1 Jan
2007:
--------------------------------------------------------------------------------
| EUR million | 10-12/08 | 7-9/08 | 4-6/08 | 1-3/08 | 1-12/08 |
| | (3 mths) | (3 mths) | (3 mths) | (3 mths) | (12 mths) |
--------------------------------------------------------------------------------
| EBIT excluding | -1.1 | -1.2 | -3.0 | -1.8 | -7.1 |
| one-off items | | | | | |
--------------------------------------------------------------------------------
| EBIT, one-off | -8.2 | -7.8 | -1.8 | -0.7 | -18.5 |
| items * | | | | | |
--------------------------------------------------------------------------------
| Total EBIT | -9.3 | -9.0 | -4.8 | -2.5 | -25.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR million | 10-12/07 | 7-9/07 | 4-6/07 | 1-3/07 | 1-12/07 |
| | (3 mths) | (3 mths) | (3 mths) | (3 mths) | (12 mths) |
--------------------------------------------------------------------------------
| EBIT excluding | -0.8 | -0.3 | -1.5 | -0.9 | -3.5 |
| one-off items | | | | | |
--------------------------------------------------------------------------------
| EBIT, one-off | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| items * | | | | | |
--------------------------------------------------------------------------------
| Total EBIT | -0.8 | -0.3 | -1.5 | -0.9 | -3.5 |
--------------------------------------------------------------------------------
* the one-off items above consist of EUR 2.5 million impairment during
Q1-Q2/2008 on previously capitalised expenses due to the decision to cancel the
implementation of Kostroma investment projects and EUR 7.8 million during
Q3/2008, of which EUR 1.0 million related to assets located in Kostroma region,
and EUR 8.2 million during Q4/2008. The Group's subsidiary has a further EUR 3.6
million off-balance sheet liability related to the installation works once the
sawmill will be erected.
At the end of the year, the number of employees dedicated to the Russian
investment projects totalled 8.
MINERALS BUSINESS
After the acquisition of RCS Limited in Malta and Türk Maadin Sirketi A.S. in
Turkey was closed at the end of October 2008, Ruukki Group has been
concentrating on post-acquisition integration procedures. Based on IFRS SIC-12
interpretation, also the German ferrochrome producer Elektrowerk Weisweiler has
been consolidated into the Group even though the current ownership stake of
Ruukki Group is zero.
The Minerals segment's performance for the two months period that it was
consolidated into the Group was the following:
--------------------------------------------------------------------------------
| EUR million | 11-12/2008 |
--------------------------------------------------------------------------------
| Revenue | 12.3 |
--------------------------------------------------------------------------------
| EBITDA | 1.9 |
--------------------------------------------------------------------------------
| EBITDA-% | 15.3 % |
--------------------------------------------------------------------------------
| EBIT | -1.0 |
--------------------------------------------------------------------------------
| EBIT-% | -8.1 % |
--------------------------------------------------------------------------------
The main assets and their fair value adjustments not recognised in local GAAP
accounting, but capitalised on Group IFRS balance sheet (EUR million)
--------------------------------------------------------------------------------
| Asset | Balance sheet | Depreciation period (years) |
| | value 31 Dec 2008 | |
--------------------------------------------------------------------------------
| Goodwill | 61.1 | Not amortised but tested for impairment |
--------------------------------------------------------------------------------
| Customers | 64.4 | 5 |
--------------------------------------------------------------------------------
| Technology | 5.4 | 5 |
--------------------------------------------------------------------------------
| Ore Reserves | 10.2 | 8 |
--------------------------------------------------------------------------------
| Buildings | 3.2 | 10 |
--------------------------------------------------------------------------------
| Machinery | 1.9 | 5 |
--------------------------------------------------------------------------------
| Inventories | 3.3 | 0.4 |
--------------------------------------------------------------------------------
Since the ferrochrome pricing on the global markets are based on USD, and since
the Group's Minerals Business subsidiaries partially operate outside the Euro
area, foreign exchange movements and conversions affect the EUR-denominated
profitability.
The Turkish mining operations have been run at full capacity, which has lead to
chrome ore inventories being somewhat increased. There is an active
investigation ongoing in Turkey on investment programs designated to utilise the
chrome ore reserves in cost-effective way.
Due to the lowered global demand from stainless steel producers for ferrochrome,
the German ferrochrome smelter has not been in use from the beginning of
December 2008. It is estimated that the production will be restarted in March
2009, as the level of end-product inventories has been steadily going down. The
decrease in ferrochrome production will contribute positively to operative cash
flow in Q1/2009, since capital tied earlier in inventories will be freed.
The number of employees totalled 404 on 31 December 2008 in the Maltese, Turkish
and German entities.
OTHER OPERATIONS
Associated companies were consolidated in the Group financial statements by
applying the equity method. The income from associates for 1-12/2008 has been
positive for a net amount of about EUR 0.6 million, but EUR 0.4 million
impairment on the shares of associates has been recognised.
The Group's parent company generated most of the expenses, also including
non-cash option expenses, presented in the Other Operations category.
Majority of the revenue not recognised in separately reported segments relates
to the Metal Industry subgroup previously owned by the Group.
During the latter half of 2008, Group merged a number of its minor or
non-operative subsidiaries into their parent or sister companies in order to
somewhat streamline the Group's legal structure.
GROUP PERSONNEL
At the end of the financial year Ruukki Group's number of employees was 721
(958), and accordingly for the parent company 8 (7). The average headcount was
913 (866) during the financial year. Group's personnel expenses for 2008 were
EUR 37,358,377.38 (32,037,200.86). There were altogether EUR 878,213.96
(576,147.77) expenses recognised in the profit and loss account based on option
and other share-based payments as depicted by IFRS 2 standard.
The Group has several different business areas. The number of personnel,
geographical location and tasks vary significantly between the business
segments. The number of personnel by segment was the following at the end of the
year:
--------------------------------------------------------------------------------
| | 31 Dec 2008 | 31 Dec 2007 |
--------------------------------------------------------------------------------
| Continuing Operations | | |
--------------------------------------------------------------------------------
| Sawmill Business | 202 | 112 |
--------------------------------------------------------------------------------
| House Building | 99 | 118 |
--------------------------------------------------------------------------------
| Minerals | 404 | - |
--------------------------------------------------------------------------------
| Russian Investment | 8 | 10 |
| Projects | | |
--------------------------------------------------------------------------------
| Group Management | 8 | 7 |
--------------------------------------------------------------------------------
| Discontinued Operations | | |
--------------------------------------------------------------------------------
| Furniture | - | 331 |
--------------------------------------------------------------------------------
| Care Services | - | 344 |
--------------------------------------------------------------------------------
| Metal Industry | - | 36 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total personnel | 721 | 958 |
--------------------------------------------------------------------------------
Of the employees, on 31 December 2008 altogether 408 worked abroad (56.6 %), and
313 (43.4 %) in Finnish entities. At the end of previous year, about 99.5 % of
the employee worked in Finland for the Finnish group companies.
FUTURE OUTLOOK FOR GROUP'S MAIN BUSINESS AREAS
Sawmill Business
Due to slowdown in global demand for construction and building materials,
including sawn timber, Ruukki Group expects the short-term outlook for sales
volumes and average prices, both in domestic and export markets, to remain weak
in the first half of 2009. If the downward trend in corporate confidence levels
off and if the general business cycle shows sign of turning up, then in late
2009 there is possibility for recovery.
It is foreseen that the short-term capacity utilisation rates of Ruukki Group's
sawmills will most probably be geared slightly downwards, but no major closures
are expected to take place, since the competitors' significant output cuts
create room for Ruukki Group's flexible and smaller scale operations.
Since log purchase prices have a major effect to the working capital needs, and
also to sawmills' profitability, the downward trend in Finnish pine and spruce
log purchase prices will have a positive contribution to profitability. On the
other hand there remain risks that the pulp mill closures create imbalances into
raw material supply chain or affect the chip sales from sawmills.
There also might be significant differences to the success of the various
sawmills both in respect to geographical areas where the sawmills operate and to
product mix, which might have to be adjusted to enhance productivity.
For 2009 no major capital investments are budgeted, but Ruukki Group remains
active in trying to find out ways of utilising synergy between the sawmills, for
example in procurement and sales, and on the other hand evaluates opportunities
for consolidation in the business area.
In the pallet business the short-term outlook remains stable, with sound profit
margins and cash flows, but there might be negative implications if the
customers of the business area will suffer from a deepening recession.
House Building business
The downward trend in the Finnish detached family house market is expected to
continue in the short future, which will have negative impact on new sales of
Ruukki Group's housing business as well. Furthermore, since over the past years
the capacity in the Finnish ready-to-move-in market has increased, by new
entrants coming into the market segment, it is foreseen that competition
intensifies, which might affect both pricing and profitability as well as
potentially lead to decrease in relative market share. In general it is expected
that for the foreseeable future Ruukki Group's housing business faces weak and
challenging business environment and that level of new sales will not recover
before 2010.
Even though ready-to-move-in houses are expected to gain market share from other
house packages, the deep short-term decline in market demand will affect and
decrease the future delivery volumes of Ruukki Group's House Building business
segment, at least in 2009. It is expected that the relative profitability would
be slightly lower than previously due to increase of fixed costs' share of total
costs and due to decrease in economies of scale in synergy and other benefits.
Due to the flexible operational model, the House Building business segment can
cope with lower volumes and maintain reasonable margins and generate positive
cash flows, but the level of absolute profits is certainly going to be lower in
2009 than it was in 2008. For 2009 the Group does not see geographical expansion
out of Finland having any effect on revenue or results.
Minerals business
Based on statistics by World Steel Association, over the past months global
steel production has decreased in all steel grades. Since Ruukki Group's
Minerals business produces and sells ferrochrome, which is used in stainless
steel production, this major dip in global demand has affected and will affect
adversely the demand and price outlook for the rest of 2009.
Ruukki Group's Minerals business is focused on special grades, especially
ultra-low carbon and low carbon ferrochrome, the short-term outlook is expected
to be better in both demand as well as average sales price development than for
certain larger bulk producers in lower quality market segment.
It is expected that certain input costs, including freight costs for chrome ore
transportation and certain raw material, will decrease in 2009 compared to the
levels in 2008, and hence the relative profitability is expected to remain
fairly good, even though the absolute sales volumes would dip. For exchange
rates, which affect both competitiveness and profitability and conversion of
foreign subsidiaries' financial figures, the current level of exchange rates has
been used as the basis for 2009 forecast.
For 2009 the Group will start an investment project in its Turkish mining
operations. For the 2009 that would only entail capital expenditure, but
starting from 2010 that can significantly increase the cost competitiveness of
the mining operations, if the investment project is carried out and finalised by
year-end 2009.
RISKS AND UNCERTAINTIES, CHANGES DURING AND AFTER THE FOURTH QUARTER OF 2008
By the acquisition of the chrome ore and ferrochrome business at the end of
October, the Group on the one hand diversified its industry risks, and hence is
less vulnerable to wood processing industry, but on the other hand the Group
exposed itself to the sector's commodity price risks. Moreover, the change in
the Group's business and legal structures has increased the absolute and
relative importance of foreign exchange rate risks, both directly and
indirectly. Since Ruukki Group did not previously have operations in the chrome
business, Ruukki Group is dependant on the competence of the key employees in
the acquired businesses. In general the economic downturn facilitates finding
competent personnel, but there might still be bottlenecks in both
geographically, since many Group's operations are in remote locations, and by
needed specialist resources having knowledge of Group's business units'
operations.
Since an increasing number of companies in Finland and abroad are now facing
liquidity problems, or have even forced to declare bankruptcies, credit risk has
increased quite remarkably, and can have effect on 2009 payment terms, required
collateral or credit insurances, and on the amount of credit losses realised.
Based on studies and surveys done, the Group has no knowledge of any
environmental risks or changes in environmental requirements that relate to its
businesses in excess of that what is already recognised as liability in Group
balance sheet. However, the Group might face some additional environmental
liabilities, or there might be changes in regulations, which can lead to
additional costs or investment needs.
There is now an unprecedented uncertainty in the global economy, applicable to
most of the businesses, as to the impact and tenure of the recession and
instability that was started during 2008 and in which the financial sector was
one major trigger. Even though Ruukki Group currently has strong net cash
position, in case the availability or terms of external financing remain
inadequate for longer than expected that can have major adverse effect on
implementation of the Group's strategy, on its future growth or on
implementation of mergers or acquisitions. Moreover, it could limit the
opportunities for the Group to pursue capital expenditure projects within the
current businesses.
The 2009 EBITDA guidance confirmed by the Board is based on assumptions on 2009
average price development, exchange rate development, production and sales
volumes, and projections on needed investments and financing. If there will be
deviations between the forecasted and realised values of the forecast
parameters, then the Group EBITDA might not be in line with the guidance.
In the Sawmill Business, major short-term risks and uncertainties relate to
customer demand and development of market prices. If the capacity utilisation
has to be cut even further that can have adverse effect on profitability since
losing benefits from economies of scale typically increase average production
costs per unit. If the Finnish and Swedish pulp industry closes more of its
capacity, it could affect both the availability of logs and also the revenue
from chip sales. On the other hand, in case the so-called bio energy, related to
utilisation of sawmills' side products like chips in energy generation, would
become more lucrative, that could alleviate the situation and even create a new
source of revenue for the sawmills. The market prices of emission rights can
also have some, even though not major, effect on the Group's Sawmill segment
profitability. If there are any public sector changes to taxes, laws, required
safety measures or any other similar issue, that can increase costs of the
sawmills. Since Ruukki Group's sawmills have also be selling sawn timber
products to the Finnish furniture manufactures, including Incap Furniture, any
further slowdown in that specific business can affect segment's results even
though it only represents a small portion of total sales. There is also some
uncertainty on how well the Group can benefit from co-operation between the
various sawmill units, but if any major benefits can be achieved that has only a
positive effect on short- and longer-term results. Also the changes in foreign
exchange rates can have major impact on Group's Sawmill segment's performance,
as the sawn timber products are commodities produced and traded on global
markets with only very minor differentiation between competitors.
For the House Building business, the current slump in the Finnish detached house
market is the key uncertainty. Regardless of the pressures on the sales prices
due to lower demand, the input costs have been rising rather than going down
over the past months, and hence there is a genuine risk that profit margins will
be lower in the foreseeable future. Even though the banking sector would be
willing to fund detached house projects, current low levels of consumer
confidence and increases in unemployment can hinder or postpone recovery in the
market. There is also risk that market shares between competitors in the
ready-to-move-in market segment change, which can have negative effect on Ruukki
Group's position.
The short-term success of Group's ferrochrome businesses is to large extent
dependant on the global demand for special grade stainless steel on which the
ferrochrome is one key raw material. There is currently major uncertainty as to
when and how the demand will recover from the current low tide. Group's Minerals
business segment's management expects the demand to pick up in the second half
of 2009, but if that does not stand, the revenue and results can change
accordingly. Also the transparency towards future market prices is very low, and
there can be unexpected changes in output or input prices, or exchange rate
which affect the EUR denominated prices realised. Since chrome metal and
indirectly nickel as well can be determined as substitutes for chrome metal,
then the prices of those commodities can also affect 2009 pricing of
ferrochrome. Due to the large-scale availability of chrome ore, from various
Turkish or other suppliers, to meet quality requirements, any adverse change in
Group's Turkish mining operations can probably be compensated with some delay.
As the Russian investment projects have been discontinued, there is risk that
the net realisable value of machinery and equipment deviates from the value of
those assets on 31 December 2008 balance sheet. The Group also faces additional
expenses, when closing down its Russian project operations.
As the Group has significant net cash position, the lower the interest rates the
lower the interest income, and vice versa. For the interest-bearing debt the
relation is the opposite. For Group's deposits there is a policy in place which
for example defines how the deposits are diversified between different financial
institutions. However, there still remain the counterparty risk, which can be
alleviated, in addition to the diversification, by placing the cash to the
parties that have good creditworthiness and ratings, but which also are known by
the Group. However, the counterparty risk cannot be eliminated, and its
significance has clearly been highlighted by many bank failures during 2008. The
counterparty risk for deposits is diversified between a number of financial
institutions, typically there has been about 3-5 financial institutions and the
counterparty risk comes from Western European financial institutions. The Group
has during 2008 converted its rouble-denominated deposits into euro, and has
also diminished to significant effect its exposure on Russian banks, so the cash
position has only minor exchange rate risk. The exposure to foreign currencies
at the end of 2008 was very minor, since the deposits are almost fully
denominated in EUR. At the end of 2008 the Group's cash and short-term deposits
at financial institutions were split in the following way:
--------------------------------------------------------------------------------
| Financial | Counterparty's | Ruukki Group's | % of cash and |
| institution's/ | domicile | cash and | interest-bearin |
| counterparty's rating | | short-term | g receivables, |
| | | deposits, 31 | 31 December |
| | | December 2008, | 2008 |
| | | EUR million | |
--------------------------------------------------------------------------------
| AA- (Standard&Poors, | Finland | 116.2 | 50 % |
| long-term), multiple | | | |
| banks | | | |
--------------------------------------------------------------------------------
| BBB+ (Standard&Poors, | Great Britain | 80.1 | 35 % |
| long-term) | | | |
--------------------------------------------------------------------------------
| BBB (Standard&Poors, | Russia | 28.1 | 12 % |
| long-term) | | | |
--------------------------------------------------------------------------------
| Not rated | various | 7.5 | 3 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total | | 231.9 | 100 % |
--------------------------------------------------------------------------------
Since the Group has made and might still carry out mergers and acquisitions,
both pre-transaction and post-transaction there are a number of implementation
and integration risks. There is also uncertainty whether in certain acquisitions
carried out, Ruukki Group as a buyer or the sellers will exercise the call or
put options. There are these options in both the Sawmill Business Segment
(Junnikkala, Tervolan Saha ja Höyläämö) and the Minerals Business segment (Türk
Maadin Sirketi and Elektrowerk Weisweiler). Consequently, the income statement,
balance sheet or cash flow statement can be changed and might not correctly
reflect the actual situation in retrospect. There is also uncertainty what is
the total purchase consideration for the these transactions, both related to
options' exercise prices and also related to earn-out purchase components, which
can only be verified when those prices are finally settled.
In addition to the above mentioned issues and aspects, the risk factors
presented in the previously published 2008 interim reports, to the extent
relevant to the current Group structure, affect or can affect Group's risk
position.
CHANGES IN PLEDGES AND CONTINGENT LIABILITIES DURING OR AFTER FOURTH QUARTER OF
2008
During the review period 1-12/2008, Group's interest-bearing debt has decreased
by a total of about EUR 3.8 million. The interest-bearing debt on 31 December
2008 totalled EUR 36.2 (31.12.2007: 40.0) million of which EUR 13.1 (16.0)
million was short-term debt and EUR 23.1 (24.0) million long-term debt.
On 31 December 2008, the Group companies had given company pledges as collateral
for loans and other liabilities totalling approximately EUR 18.5 million (EUR
13.3 million on 31 Dec 2007). The total amount of property pledges is
approximately EUR 13.5 (11.1) million. Moreover, Group companies have pledged
machinery as collateral for machinery and equipment purchases; these machinery
pledges totalled about EUR 7.1 million at the end of the accounting period. The
Group's parent company has given a total of EUR 5.6 (5.0) million in absolute
guarantees for the financing of Group companies. The amount of debt and
guarantees given has increased to major extent due to the acquisition of
Junnikkala subgroup and due to investments on fixed assets carried out in
Sawmill Business segment.
The total commitments at the end of the accounting period related to rental and
operating leases totalled approximately EUR 3.1 (14.0) million. The amount of
these commitments has decreased compared to 2007 mainly due to the disposals of
Care Services and Furniture Business segments.
On 31 December 2008, the net worth of forward exchange rate agreements' nominal
value totalled about EUR 14.8 (0.9) million, and the related unrealised exchange
rate loss was about EUR 2.5 (0.0) million. After the year-end 2008 all the
forward positions have been closed, and the realised foreign exchange loss was
altogether EUR 3.5 million, which was only to minor extent offset by commercial
currency denominated cash flows.
The irrevocable commitments and liabilities, not paid at the end of review
period, related to Ruukki Group's Russian sawmill project and investments of
domestic sawmills total about EUR 9.1 million, of which approximately EUR 7.3
million relates to the Russian projects. These liabilities arise due to the
machinery and equipment of the sawmill planned to be constructed in Russia and
due to expanding domestic sawmills' kiln capacity and efficiency. In addition
the Group subsidiary Oplax Oy has made investment commitments of EUR 2.0 million
during the review period.
In October 2008, Ruukki Group Plc finalised and closed the minerals business
acquisition in conjunction of which the Group has committed itself to a maximum
EUR 8.0 million intercompany loan to the acquired Turkish subsidiary in case
economic and technical preconditions of those investments are met and hence the
investment carried out. It is expected that the investment project is most
likely to be implemented during 2009, but its total capital expenditure and
amount of needed financing are not yet known. Relating to the same acquisition,
Ruukki Group has given altogether 73,170,731 option rights to Kermas Limited
related to earn-out purchase consideration. Based on forecasts on future
profitability Ruukki Group has in its 2008 financial statements assumed that
altogether about 39.7 million shares equalling about EUR 50.8 million would be
issued as earn-out payment. Hence there is about 33.4 million shares equalling
about EUR 42.8 million that is assumed not to be issued, but if the actual net
profits would be better than assumed part or all of those 33.4 million shares
might have to be issued as well.
MOST SIGNIFICANT RELATED PARTY TRANSACTIONS DURING OR AFTER FOURTH QUARTER OF
2008
Personnel expenses including incentive schemes' option expenses and other
expenses and excluding the related social expenses for members of Ruukki Group
Plc's Board and top management, totalled about EUR 2.0 million for the period
1-12/2008 (during 1-12/2007 correspondingly approximately EUR 2.0 million).
The Group's parent company has paid a total of EUR 1.3 (1.7) million in
dividends to related parties based on the dividend payout decision by Annual
General Meeting on 31 March 2008. Furthermore, Group companies have paid about
EUR 1.1 (1.4) million dividends to the related parties that are minority
shareholders of those companies.
There is about EUR 1.4 (1.4) million receivable in Ruukki Group Plc's balance
sheet from parent company's ex-CEO. Group's Minerals Business segment has about
EUR 15.3 million receivable from a company being controlled by a related party
of Ruukki Group Plc.
Based on 28 October 2008 resolutions by Extraordinary General Meeting, Ruukki
Group Plc paid Kermas Limited EUR 80 million in cash as purchase consideration
for the acquisition of chrome ore and ferrochrome businesses. In addition,
Ruukki Group Plc granted Kermas Limited a total of 73,170,731 option rights
related to potential future earn-out consideration, whose payment is conditional
upon realised financial performance. Kermas Limited is, via its subsidiary, a
major shareholder in Ruukki Group Plc, and is committed to acquire on its own
name altogether 15,000,000 Ruukki Group Plc's shares with a five-year lock-up
commitment.
The Extraordinary General Meeting decided on 28 October 2008 to grant Alwyn
Smit, Chairman of the Board and CEO of Ruukki Group Plc, altogether 2,900,000
option rights with EUR 2.30 exercise price (with dividend adjustment).
PENDING LEGAL AND ADMINISTRATIVE PROCESSES
Ruukki Group Plc and its subsidiaries have received final tax inspection reports
for the fiscal years 2004-2006. Altogether EUR 0.2 million additional taxes have
therefore been recognised in Group income statement. There are still open,
unresolved issues related to these tax inspections where the tax authorities and
Ruukki Group has different views, which might later adversely affect Group's
financial position if these processes cause expenses, additional taxes or other
detrimental ramifications.
FINANCIAL TABLES
FINANCIAL DEVELOPMENT BY SEGMENT, SUMMARY (EUR MILLION)
--------------------------------------------------------------------------------
| EUR MILLION | Revenue | Revenue | Revenue | Revenue |
| | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Sawmill Business | 96.3 | 59.4 | 23.1 | 14.4 |
--------------------------------------------------------------------------------
| House Building | 50.4 | 62.4 | 13.7 | 19.9 |
--------------------------------------------------------------------------------
| Investment Projects | 0.0 | 0.0 | 0.0 | 0.0 |
--------------------------------------------------------------------------------
| Minerals Business | 12.3 | 0.0 | 12.3 | 0.0 |
--------------------------------------------------------------------------------
| Other Operations | 3.3 | 8.7 | 0.2 | 2.9 |
--------------------------------------------------------------------------------
| Eliminations and | -3.6 | -2.1 | -0.8 | -1.2 |
| unallocated items | | | | |
--------------------------------------------------------------------------------
| Continuing Operations | 158.7 | 128.4 | 48.5 | 36.1 |
| Total | | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | 88.7 | 85.5 | 17.6 | 29.5 |
--------------------------------------------------------------------------------
| Group Total | 247.4 | 213.9 | 66.1 | 65.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR MILLION | EBITDA | EBITDA | EBITDA | EBITDA |
| | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Sawmill Business | 4.2 | 10.2 | -0.2 | 1.5 |
--------------------------------------------------------------------------------
| House Building | 10.4 | 13.6 | 3.1 | 4.9 |
--------------------------------------------------------------------------------
| Investment Projects | -7.8 | -3.5 | -1.3 | -0.8 |
--------------------------------------------------------------------------------
| Minerals Business | 1.9 | 0.0 | 1.9 | 0.0 |
--------------------------------------------------------------------------------
| Other Operations | -5.3 | -3.2 | -1.5 | -1.7 |
--------------------------------------------------------------------------------
| Eliminations and | -0.9 | 0.2 | -0.9 | 0.1 |
| unallocated items | | | | |
--------------------------------------------------------------------------------
| Continuing Operations | 2.3 | 17.3 | 1.2 | 4.0 |
| Total | | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | 15.3 | 7.5 | 0.5 | 4.1 |
--------------------------------------------------------------------------------
| Group Total | 17.6 | 24.7 | 1.7 | 8.2 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| % | EBITDA-% | EBITDA-% | EBITDA-% | EBITDA-% |
| | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Sawmill Business | 4.3 | 17.1 | -0.7 | 10.2 |
--------------------------------------------------------------------------------
| House Building | 20.6 | 21.8 | 22.5 | 24.5 |
--------------------------------------------------------------------------------
| Minerals Business | 15.3 | N/A | 15.3 | N/A |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Continuing Operations | 1.5 | 13.5 | 2.5 | 11.2 |
| Total | | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | 17.2 | 8.7 | 2.6 | 13.9 |
--------------------------------------------------------------------------------
| Group Total | 7.1 | 11.6 | 2.5 | 12.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR MILLION | EBIT | EBIT | EBIT | EBIT |
| | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Sawmill Business | -23.7 | 6.4 | -10.7 | 0.4 |
--------------------------------------------------------------------------------
| House Building | 10.1 | 13.3 | 3.0 | 4.8 |
--------------------------------------------------------------------------------
| Investment Projects | -25.6 | -3.5 | -9.3 | -0.8 |
--------------------------------------------------------------------------------
| Minerals Business | -1.0 | 0.0 | -1.0 | 0.0 |
--------------------------------------------------------------------------------
| Other Operations | -5.5 | -3.8 | -1.5 | -2.1 |
--------------------------------------------------------------------------------
| Eliminations and | -0.9 | 0.2 | -0.3 | 0.1 |
| unallocated items | | | | |
--------------------------------------------------------------------------------
| Continuing Operations | -46.7 | 12.7 | -19.8 | 2.4 |
| Total | | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | 9.1 | 3.0 | 5.3 | 2.8 |
--------------------------------------------------------------------------------
| Group Total | -37.6 | 15.7 | -14.5 | 5.2 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| % | EBIT-% | EBIT-% | EBIT-% | EBIT-% |
| | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Sawmill Business | -24.7 | 10.8 | -46.2 | 3.0 |
--------------------------------------------------------------------------------
| House Building | 20.0 | 21.4 | 21.8 | 23.9 |
--------------------------------------------------------------------------------
| Minerals Business | -8.1 | N/A | -8.1 | N/A |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Continuing Operations | -29.4 | 9.9 | -40.8 | 6.7 |
| Total | | | | |
--------------------------------------------------------------------------------
| Discontinued Operations | 10.2 | 3.5 | 29.9 | 9.5 |
--------------------------------------------------------------------------------
| Group Total | -15.2 | 7.3 | -22.0 | 8.0 |
--------------------------------------------------------------------------------
GOODWILL BY SEGMENT, EUR MILLION
--------------------------------------------------------------------------------
| EUR '000 | 31 Dec | % | 31 Dec | % | Change |
| | 2008 | | 2007 | | |
--------------------------------------------------------------------------------
| Continuing | | | | | |
| Operations | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| House Building | 25 418 | 29.1 % | 19 518 | 56.0 % | 5 900 |
--------------------------------------------------------------------------------
| Sawmill Business | 0 | 0.0 % | 6 554 | 18.8 % | -6 554 |
--------------------------------------------------------------------------------
| Minerals Business | 61 830 | 70.9 % | 0 | 0.0 % | 61 830 |
--------------------------------------------------------------------------------
| Total Continuing | 87 248 | 100.0 % | 26 071 | 74.7 % | 61 176 |
| Operations | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Discontinued | | | | | |
| Operations | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Care Services | 0 | 0.0 % | 5 669 | 16.3 % | -5 669 |
--------------------------------------------------------------------------------
| Furniture Business | 0 | 0.0 % | 1 681 | 4.8 % | -1 681 |
--------------------------------------------------------------------------------
| Metal Industry | 0 | 0.0 % | 1 460 | 4.2 % | -1 460 |
--------------------------------------------------------------------------------
| Total Discontinued | 0 | 0.0 % | 8 811 | 25.3 % | -8 811 |
| Operations | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Group Total | 87 248 | 100.0 % | 34 882 | 100.0 % | 52 365 |
--------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT SUMMARY, EUR THOUSAND
TOTAL GROUP
--------------------------------------------------------------------------------
| | 1 Jan - | 1 Jan - | 1 Oct - | 1 Oct - |
| | 31 Dec | 31 Dec | 31 Dec | 31 Dec 2007 |
| | 2008 | 2007 | 2008 | |
--------------------------------------------------------------------------------
| EUR ‘000 | 12 months | 12 months | 3 months | 3 months |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Revenue | 247 361 | 213 910 | 66 067 | 65 644 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other operating income | 15 652 | 6 874 | 158 | 3 395 |
--------------------------------------------------------------------------------
| Operating expenses | -245 581 | -195 431 | -64 565 | -61 000 |
--------------------------------------------------------------------------------
| Depreciation and | -14 168 | -8 022 | -5 457 | -3 073 |
| amortisation | | | | |
--------------------------------------------------------------------------------
| Share of profit of | 171 | -623 | 144 | 117 |
| associates | | | | |
--------------------------------------------------------------------------------
| Impairment | -41 034 | -1 034 | -10 851 | 150 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating profit | -37 599 | 15 674 | -14 504 | 5 233 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income and | 3 741 | 3 484 | -4 243 | 2 372 |
| expense | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit before tax | -33 858 | 19 158 | -18 747 | 7 605 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax | 1 171 | -5 478 | 3 414 | -2 039 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit | -32 687 | 13 680 | -15 333 | 5 566 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit attributable to | | | | |
--------------------------------------------------------------------------------
| equity shareholders | -31 386 | 12 651 | -13 935 | 5 365 |
--------------------------------------------------------------------------------
| minority interests | -1 301 | 1 030 | -1 399 | 201 |
--------------------------------------------------------------------------------
| Total | -32 687 | 13 680 | -15 333 | 5 566 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share (counted from profit attributable to equity | |
| shareholders): | |
--------------------------------------------------------------------------------
| basic (EUR) | -0,11 | 0,06 | | |
--------------------------------------------------------------------------------
| diluted(EUR) | -0,11 | 0,06 | | |
--------------------------------------------------------------------------------
CONTINUING OPERATIONS
--------------------------------------------------------------------------------
| | 1 Jan - | 1 Jan - | 1 Oct - | 1 Oct - |
| | 31 Dec | 31 Dec | 31 Dec | 31 Dec 2007 |
| | 2008 | 2007 | 2008 | |
--------------------------------------------------------------------------------
| EUR '000 | 12 months | 12 months | 3 months | 3 months |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Continuing operations | | | | |
--------------------------------------------------------------------------------
| Revenue | 158 665 | 128 378 | 48 465 | 36 114 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other operating income | 1 273 | 592 | -78 | 48 |
--------------------------------------------------------------------------------
| Operating expenses | -157 766 | -111 877 | -47 327 | -32 231 |
--------------------------------------------------------------------------------
| Depreciation and | -10 839 | -4 175 | -5 050 | -1 191 |
| amortisation | | | | |
--------------------------------------------------------------------------------
| Share of profit of | 171 | 184 | 144 | 117 |
| associates | | | | |
--------------------------------------------------------------------------------
| Impairment | -38 187 | -434 | -15 925 | -434 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating profit | -46 684 | 12 667 | -19 770 | 2 422 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income and | 5 143 | 5 314 | -3 713 | 3 017 |
| expense | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit before tax | -41 541 | 17 981 | -23 483 | 5 439 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax | 174 | -5 427 | 2 489 | -2 071 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit from | -41 367 | 12 555 | -20 994 | 3 368 |
| continuing operations | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Discontinued operations | | | | |
--------------------------------------------------------------------------------
| Net profit from | 8 680 | 1 126 | 5 660 | 2 198 |
| discontinued operations | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit | -32 687 | 13 680 | -15 333 | 5 566 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit attributable to | | | | |
--------------------------------------------------------------------------------
| equity shareholders | -31 386 | 12 651 | -13 935 | 5 365 |
--------------------------------------------------------------------------------
| minority interests | -1 301 | 1 030 | -1 399 | 201 |
--------------------------------------------------------------------------------
| Total | -32 687 | 13 680 | -15 333 | 5 566 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share (counted from profit attributable to equity |
| shareholders): |
--------------------------------------------------------------------------------
| basic (EUR), continuing | -0.14 | 0.05 | | |
| operations | | | | |
--------------------------------------------------------------------------------
| diluted (EUR), | -0.14 | 0.05 | | |
| continuing operations | | | | |
--------------------------------------------------------------------------------
| basic (EUR), | 0.03 | 0.01 | | |
| discontinued operations | | | | |
--------------------------------------------------------------------------------
| diluted (EUR), | 0.03 | 0.01 | | |
| discontinued operations | | | | |
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET SUMMARY, EUR THOUSAND
--------------------------------------------------------------------------------
| EUR '000 | 31 Dec 2008 | 31 Dec 2007 |
--------------------------------------------------------------------------------
| ASSETS | | |
--------------------------------------------------------------------------------
| Non-current assets | | |
--------------------------------------------------------------------------------
| Investments and intangible assets | | |
--------------------------------------------------------------------------------
| Goodwill | 87 248 | 33 422 |
--------------------------------------------------------------------------------
| Investments in associates | 1 770 | 1 702 |
--------------------------------------------------------------------------------
| Other intangible assets | 72 137 | 5 807 |
--------------------------------------------------------------------------------
| Investments and intangible assets total | 161 155 | 40 931 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Property, plant and equipment | 69 633 | 37 516 |
--------------------------------------------------------------------------------
| Other non-current assets | 23 366 | 3 209 |
--------------------------------------------------------------------------------
| Non-current assets total | 254 154 | 81 656 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Inventories | 40 419 | 29 635 |
--------------------------------------------------------------------------------
| Receivables | 36 672 | 29 955 |
--------------------------------------------------------------------------------
| Held-to-maturity investments | 186 485 | 131 212 |
--------------------------------------------------------------------------------
| Other investments | 133 | 176 112 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 45 413 | 48 527 |
--------------------------------------------------------------------------------
| Current assets total | 309 121 | 415 440 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Assets held for sale | 0 | 2 893 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | 563 275 | 499 990 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | |
--------------------------------------------------------------------------------
| Shareholders' equity | | |
--------------------------------------------------------------------------------
| Share capital | 23 642 | 23 642 |
--------------------------------------------------------------------------------
| Share premium reserve | 25 740 | 25 740 |
--------------------------------------------------------------------------------
| Revaluation reserve | 2 193 | 969 |
--------------------------------------------------------------------------------
| Paid-up unrestricted equity reserve | 328 025 | 340 690 |
--------------------------------------------------------------------------------
| Retained earnings | -30 658 | 18 614 |
--------------------------------------------------------------------------------
| Shareholders' equity | 348 943 | 409 655 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Minority interest | 7 768 | 1 995 |
--------------------------------------------------------------------------------
| Total equity | 356 710 | 411 650 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liabilities | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | 140 925 | 29 188 |
--------------------------------------------------------------------------------
| Current liabilities | | |
--------------------------------------------------------------------------------
| Deferred income | 13 215 | 16 481 |
--------------------------------------------------------------------------------
| Other current liabilities | 52 425 | 42 086 |
--------------------------------------------------------------------------------
| Current liabilities total | 65 640 | 58 566 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liabilities classified as held for sale | 0 | 585 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total liabilities | 206 565 | 88 340 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total equity and liabilities | 563 275 | 499 990 |
--------------------------------------------------------------------------------
SUMMARY OF CASH, INTEREST-BEARING RECEIVABLES AND INTEREST-BEARING LIABILITIES,
EUR THOUSAND
--------------------------------------------------------------------------------
| | 31 Dec 2008 | 31 Dec 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalent | 45 413 | 48 527 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Money market funds | 0 | 173 472 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest-bearing receivables | 31 Dec 2008 | 31 Dec 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current | 186 571 | 133 854 |
--------------------------------------------------------------------------------
| Non-current | 17 337 | 1 986 |
--------------------------------------------------------------------------------
| Interest-bearing receivables | 203 909 | 135 840 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 31 Dec 2008 | 31 Dec 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current | 13 092 | 15 991 |
--------------------------------------------------------------------------------
| Non-current | 23 095 | 23 958 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 36 187 | 39 949 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| NET TOTAL | 213 135 | 317 890 |
--------------------------------------------------------------------------------
During the fourth quarter of 2008 Ruukki Group Plc paid EUR 80.0 million in cash
as purchase consideration of its Minerals business acquisition, which had
significant effect on Group's cash reserves. It is possible that the Group could
possibly partially finance that payment later with debt, but there are no
agreements or commitments thereby. Moreover, it should be taken into account
that on 29 December 2008 a share buy-back trading plan implementation was
started, and by 30 January 2009 altogether 19,000,000 treasury shares were
bought with a cash effect for 2009 of about EUR 31.2 million.
Net cash position of the Group was at the end of December 2008 EUR 213.1
(31.12.2007: 317.9) million (cash + money market funds + interest-bearing
receivables - interest-bearing debt), corresponding to about EUR 0.73 (1.10) per
share.
SUMMARY OF GROUP'S PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS, EUR
THOUSAND
--------------------------------------------------------------------------------
| | Property, plant | Intangible |
| | and equipment | assets |
--------------------------------------------------------------------------------
| Acquisition cost 1 Jan 2008 | 49 351 | 45 962 |
--------------------------------------------------------------------------------
| Additions | 80 428 | 148 706 |
--------------------------------------------------------------------------------
| Disposals | -1 068 | -9 148 |
--------------------------------------------------------------------------------
| Acquisition cost 31 Dec 2008 | 128 711 | 185 521 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition cost 1 Jan 2007 | 23 412 | 37 938 |
--------------------------------------------------------------------------------
| Additions | 26 855 | 8 124 |
--------------------------------------------------------------------------------
| Disposals | -916 | -1 652 |
--------------------------------------------------------------------------------
| Acquisition cost 31 Dec 2007 | 49 351 | 44 411 |
--------------------------------------------------------------------------------
CHANGES IN PROVISIONS DURING THE ACCOUNTING PERIOD
--------------------------------------------------------------------------------
| | Warranty | Other | Total |
| | provisions | provisions | |
--------------------------------------------------------------------------------
| EUR '000 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Balance at 1 Jan 2008 | 119 | 70 | 189 |
--------------------------------------------------------------------------------
| Additions | 0 | 387 | 387 |
--------------------------------------------------------------------------------
| Acquisitions of subsidiaries | 0 | 6 074 | 6 074 |
--------------------------------------------------------------------------------
| Reductions | -27 | -1 328 | -1 355 |
--------------------------------------------------------------------------------
| Balance at 31 Dec 2008 | 92 | 5 202 | 5 294 |
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT SUMMARY, EUR THOUSAND
--------------------------------------------------------------------------------
| EUR ‘000 | 1 Jan - | 1 Jan - |
| | 31 Dec 2008 | 31 Dec 2007 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit | -32 687 | 13 681 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Adjustments to net profit | 26 736 | 7 173 |
--------------------------------------------------------------------------------
| Changes in working capital | 4 999 | -15 070 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash from operating activities | -952 | 5 783 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition of subsidiaries and associates | -89 162 | -6 487 |
--------------------------------------------------------------------------------
| Payment of earn-out liabilities and | -403 | -8 358 |
| exercises of call options related to | | |
| acquisitions | | |
--------------------------------------------------------------------------------
| Disposal of subsidiaries and associates | 11 111 | 7 068 |
--------------------------------------------------------------------------------
| Capital expenditures and other investing | -39 879 | -6 337 |
| activities | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash used in investing activities | -118 334 | -14 114 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share issues | 0 | 337 609 |
--------------------------------------------------------------------------------
| Share buy-back | -12 273 | 0 |
--------------------------------------------------------------------------------
| Dividends paid | -12 433 | -5 493 |
--------------------------------------------------------------------------------
| Deposits | -52 770 | -133 851 |
--------------------------------------------------------------------------------
| Other investments | 173 056 | -173 360 |
--------------------------------------------------------------------------------
| Interest received, other than operations | 14 741 | 3 940 |
| related | | |
--------------------------------------------------------------------------------
| Proceeds from borrowings | 16 731 | 10 630 |
--------------------------------------------------------------------------------
| Repayment of borrowings, and other financing | -10 839 | -7 386 |
| activities | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash used in financing activities | 116 214 | 32 089 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net increase in cash and cash equivalents | -3 071 | 23 758 |
--------------------------------------------------------------------------------
SUMMARY OF THE CHANGES IN SHAREHOLDERS' EQUITY OF THE GROUP, IN THOUSAND EUROS
--------------------------------------------------------------------------------
| A = Share capital |
--------------------------------------------------------------------------------
| B = Share premium reserve |
--------------------------------------------------------------------------------
| C = Fair value and revaluation reserves |
--------------------------------------------------------------------------------
| D = Paid-up unrestricted equity reserve |
--------------------------------------------------------------------------------
| E = Translation reserve |
--------------------------------------------------------------------------------
| F = Retained earnings |
--------------------------------------------------------------------------------
| G = Equity attributable to shareholders, total |
--------------------------------------------------------------------------------
| H = Minority interest |
--------------------------------------------------------------------------------
| I = Total equity |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EUR '000 | A | B | C | D | E | F | G | H | I |
--------------------------------------------------------------------------------
| Shareholde | 23 | 24 | 0 | 424 | 0 | 9 512 | 57 | 1 591 | 59 |
| rs' equity | 018 | 712 | | | | | 665 | | 256 |
| 1 Jan 2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| Free | | | | 1 | | | 1 035 | | 1 035 |
| directed | | | | 035 | | | | | |
| issue | | | | | | | | | |
| 4/2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | | | | 339 | | | 339 | | 339 |
| issue 6/ | | | | 232 | | | 232 | | 232 |
| and 7/2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | | | | | | -4 | -4 | -1 | -5 |
| distributi | | | | | | 079 | 079 | 142 | 221 |
| on | | | | | | | | | |
--------------------------------------------------------------------------------
| Net profit | | | | | | 12 | 12 | 1 030 | 13 |
| 1-12/2007 | | | | | | 651 | 651 | | 680 |
--------------------------------------------------------------------------------
| Translatio | | | | | -1 | | -1 | | -1 |
| n | | | | | 080 | | 080 | | 080 |
| difference | | | | | | | | | |
--------------------------------------------------------------------------------
| Conversion | 624 | 1 | | | | | 1 652 | | 1 652 |
| s of | | 028 | | | | | | | |
| convertibl | | | | | | | | | |
| e bonds | | | | | | | | | |
--------------------------------------------------------------------------------
| Acquisitio | | | 969 | | | 1 000 | 1 969 | 516 | 2 484 |
| ns and | | | | | | | | | |
| disposals | | | | | | | | | |
| of | | | | | | | | | |
| subsidiari | | | | | | | | | |
| es and | | | | | | | | | |
| other | | | | | | | | | |
| adjustment | | | | | | | | | |
| s | | | | | | | | | |
--------------------------------------------------------------------------------
| Share-base | | | | | | 576 | 576 | | 576 |
| d payments | | | | | | | | | |
--------------------------------------------------------------------------------
| Equity | | | | | | 34 | 34 | | 34 |
| component | | | | | | | | | |
| of | | | | | | | | | |
| convertibl | | | | | | | | | |
| e bonds | | | | | | | | | |
| and other | | | | | | | | | |
| changes in | | | | | | | | | |
| equity | | | | | | | | | |
--------------------------------------------------------------------------------
| Shareholde | 23 | 25 | 969 | 340 | -1 | 19 | 409 | 1 995 | 411 |
| rs' equity | 642 | 740 | | 690 | 080 | 694 | 655 | | 650 |
| 31 Dec | | | | | | | | | |
| 2007 | | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | | | | | | -12 | -12 | -986 | -13 |
| distributi | | | | | | 033 | 033 | | 019 |
| on | | | | | | | | | |
--------------------------------------------------------------------------------
| Net profit | | | | | | -31 | -31 | -1 | -32 |
| 1-12/2008 | | | | | | 386 | 386 | 301 | 687 |
--------------------------------------------------------------------------------
| Translatio | | | | | 646 | | 646 | | 646 |
| n | | | | | | | | | |
| difference | | | | | | | | | |
--------------------------------------------------------------------------------
| Share-base | | | | | | 878 | 878 | | 878 |
| d payments | | | | | | | | | |
--------------------------------------------------------------------------------
| Acquisitio | | | | -12 | | | -12 | | -12 |
| n of own | | | | 665 | | | 665 | | 665 |
| shares | | | | | | | | | |
--------------------------------------------------------------------------------
| Acquisitio | | | 1 | | | -7 | -6 | 8 060 | 1 906 |
| ns and | | | 224 | | | 378 | 154 | | |
| disposals | | | | | | | | | |
| of | | | | | | | | | |
| subsidiari | | | | | | | | | |
| es | | | | | | | | | |
--------------------------------------------------------------------------------
| Shareholde | 23 | 25 | 2 | 328 | -434 | -30 | 348 | 7 768 | 356 |
| rs' equity | 642 | 740 | 193 | 025 | | 224 | 943 | | 710 |
| 31 Dec | | | | | | | | | |
| 2008 | | | | | | | | | |
--------------------------------------------------------------------------------
OTHER KEY INDICATORS, CONTINUING OPERATIONS, EUR MILLION
--------------------------------------------------------------------------------
| | 2008 | 2007 |
--------------------------------------------------------------------------------
| | 12 months / 31 | 12 months / 31 |
| | Dec 2008 | Dec 2007 |
--------------------------------------------------------------------------------
| Gross capital expenditure | 235.4 | 12.1 |
--------------------------------------------------------------------------------
| % of revenue | 148.4 % | 9.4 % |
--------------------------------------------------------------------------------
| Personnel, average | 418 | 279 |
--------------------------------------------------------------------------------
| Personnel, at the end of the period | 721 | 283 |
--------------------------------------------------------------------------------
| Lowest share price, EUR | 1.02 | 1.18 |
--------------------------------------------------------------------------------
| Highest share price, EUR | 2.99 | 3.59 |
--------------------------------------------------------------------------------
| Average trade-weighted share price, EUR | 2.03 | 2.40 |
--------------------------------------------------------------------------------
| Market capitalisation | 333.5 | 817.9 |
--------------------------------------------------------------------------------
| Share turnover | 884.6 | 623.2 |
--------------------------------------------------------------------------------
| Share turnover, % | 149.9 % | 89.7 % |
--------------------------------------------------------------------------------
ACCOUNTING POLICIES
This Financial Statements Review is prepared in accordance with the IAS 34
standard. Ruukki Group Plc applies the same accounting and IFRS principles as in
2007 financial statements.
The preparation of the financial statements in accordance with IFRS requires
management to make estimates and assumptions that affect the valuation of the
reported assets and liabilities and other information, such as contingent
liabilities and the recognition of income and expenses in the income statement.
Although the estimates are based on the management's best knowledge of current
events and actions, actual results may differ from the estimates.
The reporting segment structure was redefined starting from 1 January 2008, to
include a separate Investment Projects segment, as explained in Q1/2008 interim
report. In addition, Minerals Business was added as a new segment from November
2008. Starting from 1 January 2009, the Group's segment structure will change so
that the Group will have two segments: Wood Processing Business and Minerals
Business. This change to segment reporting is based on the new IFRS 8 standard,
which came into effect in the beginning of 2009, and on Group strategy going
forward with two main business areas.
Moreover, due to the disposal of Care Services segment and partial divestment of
the shares of the Furniture Business's subsidiary, IFRS 5 was applied to those
discontinued operations.
Group's comparable revenue, EBITDA and earnings before interest and taxes were
calculated so that the effect of acquisitions and divestments has been
eliminated in both review period and previous year's corresponding period as
well as the effect of impairment losses.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) are
defined to equal the following formula:
EBITDA = EBIT + Depreciations + Amortisations + Impairment losses
Moreover, the share of associated companies' profits is included in both EBITDA
and EBIT.
In the segments' financial figures insurance compensation and impairment losses
are presented as non-recurring items, but they are not excluded when calculating
Group's comparable financial figures.
For the ferrochrome business SIC-12 interpretation has been used when the German
entity has been decided to be consolidated into the Group. As far as the
ferrochrome acquisition's earn-out liability is concerned, the options rights
given to the seller in advance have under IAS 39 standard's content been
interpreted to be shares rather than options, and have hence been booked at the
market price of Ruukki Group Plc's share at the time of the Extraordinary
General Meeting that decided on the transaction. The unit price per share will
not change in the subsequent accounting periods, but the number of shares is to
be adjusted in case the realised and/or projected financial results for the next
five financial years deviate from the forecast used for annual accounts 2008.
In addition to the changes to the segment reporting via the new IFRS 8 standard,
no major accounting changes are foreseen from any newly accepted or adopted IFRS
standards that became effective 1 January 2009. The revised standard IFRS 3 is
expected to be endorsed within the EU and it is expected to be effective 1 July
2009. When the revised standard becomes effective, it may affect Group's
financial statements to major extent if the Group will be active in mergers and
acquisitions.
The treasury shares acquired are presented as deduction in Group's paid-up
unrestricted equity reserve.
The figures in the tables have been rounded off to one decimal point, which must
be considered when calculating totals. Average annual exchange rates have been
used for income statement conversions, and year-end exchange rates for balance
sheet.
Financial ratios and indicators have been calculated with the same principles as
applied in 2007 financial statements.
The Financial Statements Review data are unaudited.
In Espoo, 26 February 2009
RUUKKI GROUP PLC
BOARD OF DIRECTORS
NOTES TO INCOME STATEMENT AND BALANCE SHEET AND OTHER DATA
SHAREHOLDERS
On 31 December 2008, the company had a total of 4,136 shareholders, of which 10
were nominee-registered. The number of shares in issue on 31 December 2008 was
290,034,022.
Largest shareholders, 31 December 2008:
--------------------------------------------------------------------------------
| | Shareholder | Shares | % |
--------------------------------------------------------------------------------
| 1 | Nordea Bank Finland Plc | 43 558 411 | 15.0 |
--------------------------------------------------------------------------------
| 2 | Nordea Bank Finland Plc | 38 382 014 | 13.2 |
| | nominee-registered | | |
--------------------------------------------------------------------------------
| 3 | Hanwa Company Limited | 30 000 000 | 10.3 |
--------------------------------------------------------------------------------
| 4 | Kermas Limited | 28 774 200 | 9.9 |
--------------------------------------------------------------------------------
| 5 | Atkey Limited | 26 884 864 | 9.3 |
--------------------------------------------------------------------------------
| 6 | Djakov Aida nominee-registered | 16 780 000 | 5.8 |
--------------------------------------------------------------------------------
| 7 | Oy Herttakakkonen Ab | 14 202 593 | 4.9 |
--------------------------------------------------------------------------------
| 8 | Danske Bank AS Helsinki Branch | 13 644 000 | 4.7 |
--------------------------------------------------------------------------------
| 9 | Bassanio Services Limited | 11 900 000 | 4.1 |
--------------------------------------------------------------------------------
| 10 | Ruukki Group Plc | 10 000 000 | 3.4 |
--------------------------------------------------------------------------------
| | Total | 234 126 082 | 80.7 |
--------------------------------------------------------------------------------
| | Other Shareholders | 55 907 940 | 19.3 |
--------------------------------------------------------------------------------
| | Total shares registered | 290 034 022 | 100.0 |
--------------------------------------------------------------------------------
CHANGES IN THE NUMBER OF SHARES AND SHARE CAPITAL IN 2008
Changes in the number of shares
No changes in the number of shares and share capital took place during 2008. On
31 December 2008, the number of registered Ruukki Group Plc shares was
290,034,022.
During 2008, based on authorisations resolved by Annual General Meeting on 31
March 2008 and by Extraordinary General Meeting on 28 October 2008, the Board of
Directors decided to buy back Ruukki Group Plc's own shares from the market. The
trades were executed under two separate trading plans so that at the end of
2008, Ruukki Group held 10,685,000 own shares (3.68 % of all shares) and on 30
January 2009 the company held altogether 29,000,000 own shares. All of the
purchased shares were cancelled on 17 February 2009, after which the company has
not held any treasury shares and after which the total shares outstanding have
been at 261,034,022. The company's subsidiaries do not hold any of Ruukki Group
Plc's shares. Based on the resolution by the Extraordinary General Meeting on 24
February 2009, the Board has currently been authorised for an additional
buy-back of maximum 26,000,000 shares. This authorisation is valid until 24
February 2010.
Dilution
The maximum dilution effect of the company's I/2005 option program is 2,700,000
shares. On 31 December 2008, of these option rights 900,000 have been granted to
the Group management and of these granted options 450,000 entitle their holders
to exercise the options. Furthermore, by 31 December 2008 altogether 75,000
options have been granted to a key employee previously being employed by the
Group.
Moreover, Chairman and CEO Alwyn Smit was granted 2,900,000 option rights under
option program I/2008 by the Extraordinary General Meeting on 28 October 2008.
Ruukki Group Plc's Board has in September 2008 decided to cancel the 2007
share-based incentive scheme, which was decided and implemented by Ruukki Group
Plc's Board in December 2007.
Related to the chrome ore and ferrochrome acquisition that was finalised during
the fourth quarter of 2008, Ruukki Group Plc has gave 73,170,731 option rights
to Kermas Limited, which is a major owner of Ruukki Group Plc. When calculating
the diluted EPS, the Group has used 39,725,720 shares as the probable dilution
factor based on forecasts on future profitability of the acquired businesses as
of the balance sheet date 31 December 2008 market situation, which might change
in the future.
Ruukki Group Plc's Board of Directors has authorisation, given by the Annual
General Meeting of 24 February 2009, to issue own shares or special rights to
shares up to 100,000,000 shares. This authorisation is valid until 24 February
2011.
COMPANY'S SHARE
Ruukki Group Plc's shares (RUG1V) are listed on Nasdaq OMX Helsinki in which the
shares of the Company are traded in the mid cap segment, in the industrials
sector.
CHANGES IN SHARE PRICE DURING THE REVIEW PERIOD
During 2008, the price of Ruukki Group's share varied between EUR 1.02 (2007:
1.18) and EUR 2.99 (3.59). A total of 434,714,427 (260,096,248) Ruukki Group
shares were traded in the accounting period, representing 149.9 % (89.7 %) of
all shares registered at the year end. The closing price of the company's share
on 31 December was EUR 1.15 (2.82). The market capitalisation of the Group's
entire capital stock 290,034,022 (290,034,022) shares at the closing price on 31
December was EUR 333.5 million (817.9).
RE-SPECIFIED PURCHASE PRICE ALLOCATION RELATED TO ACQUISITION OF JUNNIKKALA OY
Group's Sawmill Business area acquired a 51 % interest in Junnikkala Oy and the
group it forms in January. Junnikkala Oy is consolidated in Ruukki Group as a
100 % subsidiary based on a share option arrangement from February. Junnikkala
Oy practises saw milling and further processing of sawn wood targeted especially
for prefabricated housing business. At the same time, Junnikkala Oy acquired all
shares of Pyyn Saha ja Höyläämö Oy, which operates in Oulainen and has been
merged into its parent company 1 October 2008.
If this acquisition had taken place with a corresponding holding already on 1
January 2008, this would have changed the consolidated figures reported by
Ruukki Group for the accounting period 1 January - 31 December 2008 as follows:
consolidated revenue would have increased by about EUR 3,384 thousand (+1.4 %),
consolidated EBIT* would have increased by about EUR 118 thousand (0 %), and
consolidated net profit would have increased by about EUR 47 thousand (0 %) (all
these figures compared with the accounting period 2008 figures reported by the
Group). If Junnikkala group had been consolidated into Ruukki Group's sawmill
business area already on 1 January 2008, the business area's revenue would have
been about EUR 99.7 million (+3.5 % compared with the business segment's
accounting period 2008 revenue) and EBIT about EUR -23.6 million (+0.5 %
compared with the business segment's accounting period 2008 EBIT).
* when (i) taking into account the depreciations and deferred taxes related to
purchase price allocations, and (ii) assuming 31 January 2008 fair values to be
valid for the earlier periods as well
The following assets and liabilities were recognised relating to the Junnikkala
acquisition, which also gives information about the contribution of this
transaction to the Group balance sheet at the date of the transaction:
--------------------------------------------------------------------------------
| EUR '000 | Fair value of | Book value before |
| | acquired assets | acquisition |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Intangible assets | | |
--------------------------------------------------------------------------------
| Clientele | 3 869 | 0 |
--------------------------------------------------------------------------------
| Emission allowances | 795 | 0 |
--------------------------------------------------------------------------------
| Order book | 104 | 0 |
--------------------------------------------------------------------------------
| Other intangible assets | 318 | 318 |
--------------------------------------------------------------------------------
| Property, plant and equipment | | |
--------------------------------------------------------------------------------
| Land and water | 730 | 730 |
--------------------------------------------------------------------------------
| Buildings and constructions | 6 243 | 6 243 |
--------------------------------------------------------------------------------
| Machinery and equipment | 13 984 | 13 984 |
--------------------------------------------------------------------------------
| Investments | 59 | 59 |
--------------------------------------------------------------------------------
| Other tangible assets | 687 | 687 |
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Inventories | 11 761 | 10 873 |
--------------------------------------------------------------------------------
| Non-interest bearing receivables | 12 296 | 12 296 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 415 | 415 |
--------------------------------------------------------------------------------
| Total assets | 51 260 | 45 605 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities | 16 811 | 16 811 |
--------------------------------------------------------------------------------
| Non-interest bearing payables | | |
--------------------------------------------------------------------------------
| Deferred tax liability | 1 470 | 0 |
--------------------------------------------------------------------------------
| Other non-interest bearing payables | 10 538 | 10 538 |
--------------------------------------------------------------------------------
| Total liabilities | 28 820 | 27 350 |
--------------------------------------------------------------------------------
| Net assets 31 Jan 2008 | 22 440 | 18 255 |
--------------------------------------------------------------------------------
| Acquisition cost | 24 902 | |
--------------------------------------------------------------------------------
| Net assets | 22 440 | |
--------------------------------------------------------------------------------
| Goodwill | 2 462 | |
--------------------------------------------------------------------------------
| Net cash outflow on acquisition: | | |
--------------------------------------------------------------------------------
| Consideration paid in cash | 5 740 | |
--------------------------------------------------------------------------------
| Acquired cash and cash equivalents | -415 | |
--------------------------------------------------------------------------------
| Cash flow | 5 326 | |
--------------------------------------------------------------------------------
THE PRELIMINARY PURCHASE PRICE ALLOCATION RELATED TO ACQUISITION OF RCS LIMITED
AND TÜRK MAADIN SIRKETI A.S.
Ruukki Group Plc carried out at the end of October the acquisition of chrome ore
and ferrochrome businesses and purchased the shares of a Maltese Company called
RCS Limited and approximately 98.75 % of the shares of a Turkish company called
Türk Maadin Sirketi A.S. The execution of this acquisition has, in more detail,
been described in the ‘Key events during the fourth quarter of 2008' of this
financial statements review as well as in the 2008 interim reports and stock
exchange releases. The purchased Minerals Business has become a separately
reported business segment, which has been consolidated into Ruukki Group from
the beginning of November 2008.
If the acquired business entity had been acquired in corresponding way already
on 1 Jan 2008, this would have changed the consolidated figures reported by
Ruukki Group for the accounting period 1 January - 31 December 2008 as follows:
consolidated revenue would have increased by about EUR 98 million (+39 %),
consolidated EBIT* would have increased by about EUR 12 million (+31 %), and
consolidated net profit would have increased by about EUR 11 million (+34 %)
(all these figures compared with the accounting period 2008 figures reported by
the Group).
* when (i) taking into account the depreciations and deferred taxes related to
purchase price allocations, and (ii) assuming 31 January 2008 fair values to be
valid for the earlier periods as well
A preliminary purchase price allocation on the acquisition:
--------------------------------------------------------------------------------
| | Fair value of | Book value before |
| | acquired assets | acquisition |
--------------------------------------------------------------------------------
| ASSETS | | |
--------------------------------------------------------------------------------
| Intangible assets | | |
--------------------------------------------------------------------------------
| Intangible assets | 260 | 260 |
--------------------------------------------------------------------------------
| Customers | 66 587 | 0 |
--------------------------------------------------------------------------------
| Technology | 5 573 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Property, plant and equipment | | |
--------------------------------------------------------------------------------
| Land and buildings | 4 741 | 1 519 |
--------------------------------------------------------------------------------
| Machinery and equipment | 3 110 | 1 181 |
--------------------------------------------------------------------------------
| Other tangible assets | 1 170 | 1 170 |
--------------------------------------------------------------------------------
| Ore reserves | 10 435 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial Assets | 15 657 | 15 657 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Deferred tax assets | 2 009 | 1 615 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Inventories | 20 135 | 16 789 |
--------------------------------------------------------------------------------
| Order book | 237 | 0 |
--------------------------------------------------------------------------------
| Receivables | 16 870 | 16 870 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalents | 8 576 | 8 576 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| TOTAL ASSETS | 155 362 | 63 637 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| LIABILITIES | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | 87 | 87 |
--------------------------------------------------------------------------------
| Provisions | 17 716 | 15 746 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Deferred tax liabilities | 30 308 | 683 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current liabilities | 23 768 | 23 768 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| TOTAL LIABILITIES | 71 880 | 40 284 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| NET ASSETS (excl. goodwill) | 83 482 | 23 353 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition cost | 144 571 | |
--------------------------------------------------------------------------------
| Goodwill | 61 089 | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash outflow on | | |
| acquisition: | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Consideration paid in cash | 84 889 | |
--------------------------------------------------------------------------------
| Acquired cash and cash | -8 576 | |
| equivalents | | |
--------------------------------------------------------------------------------
| Cash flow | 76 313 | |
--------------------------------------------------------------------------------
SPECIFICATION OF DISCONTINUED OPERATIONS
The Care Services and Furniture Business segments have in 2008 financial
statements review been presented as discontinued operations, separate from the
continuing operations. The Care Services business segment was disposed of in
summer 2008 and has already been presented in the Q2/2008 interim report.
Furniture Business
Ruukki Group Plc sold part of its stake, lowering its ownership from about 72 %
to about 48 %, in Incap Furniture Oy at the end of December 2008, and
consequently, the Furniture Business's balance sheet was not consolidated into
the Group on 31 December 2008.
For the financial year 2008 Furniture Business contributed to the Group income
statement in the following way:
--------------------------------------------------------------------------------
| EUR million | 1-12/2008 | 1-12/2007 | 10-12/2008 | 10-12/2007 |
--------------------------------------------------------------------------------
| Revenue | 78.5 | 68.7 | 17.6 | 25.0 |
--------------------------------------------------------------------------------
| EBITDA | 2.1 | 6.2 | 0.4 | 4.1 |
--------------------------------------------------------------------------------
| EBITDA-% | 2.7 % | 9.1 % | 2.5 % | 16.6 % |
--------------------------------------------------------------------------------
| EBIT | -3.7 | 2.7 | 5.3 | 3.1 |
--------------------------------------------------------------------------------
| EBIT-% | -4.7 % | 3.9 % | 29.9 % | 12.5 % |
--------------------------------------------------------------------------------
For the last quarter of 2008, the Group has, for a total amount of EUR 5.2
million, partially reversed the impairment losses it recognised in Q3/2008
interim report, in order to reflect the change in Group balance sheet. Prior to
the partial sale of sales, the Furniture Business segment assets' fair value was
less than the corresponding fair value debt, but still the Group was able to
sell its 23 % stake for a positive amount.
At the end of 2008, Ruukki Group had no assets or liabilities on its balance
sheet related to the Furniture Business, and moreover, it has no contractual
commitments to contribute to any future capital requirements of the Group.
FLAGGING NOTIFICATIONS DURING OR AFTER THE FOURTH QUARTER OF 2008
Ruukki Group Plc has received the following flagging notifications during or
after the review period 1 Oct - 31 Dec 2008:
- Ruukki Group Plc gave notice on 10 October 2008 about the following potential
changes in shareholding based on the proposals by the Board of Directors
announced to the stock market on 10 October 2008. The Board of Directors has
proposed to the Extraordinary General Meeting to be convened on 28 October 2008
that as part of the proposed acquisition Ruukki Group Plc would issue altogether
73,170,731 option rights. If the proposed option rights would be issued and no
other ownership changes would take place, the combined actual and potential
ownership of Kermas Limited and its subsidiary RCS Trading Corporation Limited
would be about 52.35 percent of the shares and voting rights of Ruukki Group Plc
(in excess of 1/2). Furthermore, Kermas Limited's shareholding on its own
account would lead to about 25.23 % ownership (in excess of 1/4). If all the
option rights are exercised and new shares thereby issued, the amount of
Company's registered number of shares would increase to 363.204.753 shares. Then
the combined actual and potential ownership of Kermas Limited and its subsidiary
RCS Trading Corporation Limited would be about 41.81 percent(in excess of 3/10),
and Kermas Limited's shareholding on its own account, about 20.15 % (in excess
of 1/4). Nordea Bank Finland Plc's shareholding would thereby decline to about
23.27 % (below 1/4). Danske Bank A/S Helsinki Branch's shareholding would
decline to about 12.55 % (below 3/20). Hanwa Company Limited's shareholding
would decline to about 8.26 % (below 1/10). In addition, the shareholdings based
on share derivatives would change accordingly.
- Danske Bank A/S Helsingin Sivukonttori's (business ID 1078693-2) ownership of
the share capital and voting rights of Ruukki Group Plc fell below 10 % on value
date 17 October 2008 due to a share lending agreement made. At the time the
flagging notification was given, Danske Bank A/S Helsingin Sivukonttori
announced that as the share lending agreement expires on 21 October 2008, the
ownership of Danske Bank A/S Helsingin Sivukonttori will again exceed 15 % the
share capital and voting rights of Ruukki Group Plc.
- Danske Bank A/S Helsingin Sivukonttori's (business ID 1078693-2) ownership of
the share capital and voting rights of Ruukki Group Plc fell below 15 % on value
date 22 October 2008 due to expiration of derivatives.
- RCS Trading Corporation Ltd's (company number 65574B, Nassau, Bahamas) current
ownership of the share capital and voting rights of Ruukki Group Plc exceeded 10
% on value date 17 October 2008 due to a share lending agreement made. RCS
Trading Corporation Ltd's current ownership will again fall below 5 % as the
share lending agreement expires on 21 October 2008,. In addition, RCS Trading
Corporation Ltd announced that as a result of partially exercising forward
contracts that have expired in October the current ownership of RCS Trading
Corporation Ltd will exceed 5 % of the share capital and voting rights of Ruukki
Group Plc on 22 October 2008 as the transaction is settled on the stock
exchange.
- Kermas Limited (registration number 504889, Tortola, British Virgin Islands)
has on 29 October 2008 entered into binding agreements with Ruukki Group Plc
regarding acquisitions, related to which Kermas Limited will acquire in total
15,000,000 shares in Ruukki Group. Once such shares are acquired, Kermas'
holding in Ruukki Group will increase to approximately 5.17 per cent of the
total number of shares. These shares are acquired through exercising the forward
contracts of RCS Trading Corporation Ltd and pursuant to such exercise, the
current derivative ownership of RCS Trading Corporation Ltd will decrease from
24.47 % of the total number of shares in Ruukki Group Plc to 19.30 %. In
addition, Ruukki Group will offer Kermas Limited 73,170,731 options pursuant to
resolution of Ruukki Group's general meeting held on 28 October 2008. Based on
the arrangement the total number of shares in Ruukki Group may increase from
290,034,022 shares to 363,204,753 shares and upon Kermas exercising its right to
subscribe, Kermas Limited will own in total 24.28 % of the total number of
shares and votes in Ruukki Group. In the same flagging notification Kermas
Limited and RCS Trading Corporation Ltd (company number 65574B, Nassau, Bahamas)
that belongs to the same group of companies with Kermas Limited announced their
consolidated holdings and future holdings to be altogether 55.21 % of the share
capital and voting rights of Ruukki Group Plc.
- Bassanio Services Limited (register ID 1469894) and Alwyn Smit announced that
their combined potential future ownership has on 28 October 2008 exceeded 5 % of
the share capital and voting rights of Ruukki Group Plc based on the option
rights given to Alwyn Smit by the decision of Ruukki Group Plc's Extraordinary
General Meeting.
- Nordea Bank Finland Plc's (business ID 1680235-8) ownership of Ruukki Group
Plc's share capital and voting rights has fallen below 1/4 being 23.32 % as a
result of the share transactions carried out on 4 November 2008. In addition,
Nordea Bank Finland Plc has sold forward contract agreements regarding Ruukki
Group Plc. As the forward contracts expire in January 2009, the ownership of
Nordea Bank Finland Plc will fall below 1/20.
- Procomex S.A.'s (registration number R.C. Luxembourg B 57.877) holdings of the
share capital and voting rights of Ruukki Group Plc fell below one twentieth
(1/20) as a result of sold forward contracts on 4 November 2008.
- Nordea Bank Finland Plc's (business ID 1680235-8) ownership of Ruukki Group
Plc's share capital and voting rights has fallen below 1/5 being 16.32 % as a
result of the share transactions carried out on 6 November 2008. In addition,
Nordea Bank Finland Plc has sold forward contract agreements regarding Ruukki
Group Plc. As the forward contracts expire in January 2009, the ownership of
Nordea Bank Finland Plc will fall below 1/20.
- RCS Trading Corporation Ltd (company number 65574B, Nassau, Bahamas) announced
that its current existing ownership has fallen below 5 % of the share capital
and voting rights of Ruukki Group Plc based on share transactions carried out on
3 November 2008. In addition, RCS Trading Corporation Ltd and Kermas Limited
(registration number 504889, Tortola, British Virgin Islands) that belongs to
the same group of companies announced that at the same time their combined
current existing ownership has fallen below 10 % of the share capital and voting
rights of Ruukki Group Plc.
- Atkey Limited (register number 1456426, British Virgin Islands) and Aida
Djakov announced that their combined current existing ownership and potential
future ownership in total has, based on share transactions carried out on 6
October 2008, exceeded 10 % of the share capital and voting rights of Ruukki
Group Plc. In addition, Aida Djakov announced that her current existing
ownership has, based on share transactions carried out on 31 October 2008,
exceeded 5 % of the share capital and voting rights of Ruukki Group Plc. At the
same time Aida Djakov's and Atkey Limited's combined current existing ownership
exceeded 5 % of the share capital and voting rights of Ruukki Group Plc. In the
same flagging notification Atkey Limited and Aida Djakov announced that their
combined current existing ownership and potential future ownership in total has,
based on share transactions carried out on 4 November 2008, exceeded 15 % of the
share capital and voting rights of Ruukki Group Plc. In addition, Atkey Limited
announced that it has on 6 November 2008 sold all its forward contracts and
respectively purchased the same amount of shares. As a result, Atkey Limited's
current existing ownership exceeded 5 % of the share capital and voting rights
of Ruukki Group Plc. At the same time Atkey Limited's and Aida Djakov's combined
current existing ownership exceeded 15 % of the share capital and voting rights
of Ruukki Group Plc.
- Danske Bank A/S Helsingin Sivukonttori's (business ID 1078693-2) ownership of
the share capital and voting rights of Ruukki Group Plc fell below 5 % (1/20)
flagging threshold due to share transaction carried out on 21 November 2008.
- Oy Herttakakkonen Ab (business ID 0761602-7) announced that its ownership fell
to 4.95 % of the share capital and voting rights of Ruukki Group Plc based on
share transaction carried out on 24 November 2008 and to 7.86 % when taking into
account the personal ownership of Kai Mäkelä and the ownership of Oy Herttaässä
Ab.
- RCS Trading Corporation Ltd (company number 65574B, Nassau, Bahamas) announced
that its ownership has fallen below 15 % of the share capital and voting rights
of Ruukki Group Plc based on share transactions carried out on 5 December 2008.
RCS sold 10,000,000 shares and 219,370 forward contracts (21,937,000 shares) to
Kermas Limited (registration number 504889, Tortola, British Virgin Islands)
which belongs to the same group of companies. The combined ownership of RCS and
Kermas is unchanged.
- RCS Trading Corporation Ltd (company number 65574B, Nassau, Bahamas) announced
that its ownership had fallen below 5 % of the share capital and voting rights
of Ruukki Group Plc based on share transactions carried out on 16 January 2009.
RCS sold 352,553 forward contracts (35,255,300 shares) to Kermas Limited
(registration number 504889, Tortola, British Virgin Islands) which belongs to
the same group of companies. Simultaneously Kermas announced that its ownership
exceeded 25 %. The combined ownership of RCS and Kermas is unchanged.
- Danske Bank A/S Helsingin Sivukonttori's (business ID 1078693-2) ownership
reached one twentieth (1/20) of the share capital and voting rights of Ruukki
Group Plc due to share transaction carried out on 16 January 2009. Furthermore,
Danske Bank A/S Helsingin Sivukonttori announced that it had entered into
derivative agreements, which according to current terms will expire in February
2009. In case these derivative agreements are exercised, Danske Bank A/S
Helsingin Sivukonttori's ownership in Ruukki Group Plc will fall below 5 % on
value date 25 February 2009 at the earliest.
- Nordea Bank AB (publ) (Swedish registration number 516406-0120) announced that
the ownership of Nordea Bank Finland Plc (business ID 1680235-8) had fallen
below 3/20 of Ruukki Group Plc's share capital and voting rights as a result of
forward contact agreements regarding Ruukki Group Plc having expired on Friday
16 January 2009. In addition, Nordea Bank Finland Plc had sold forward contract
agreements so that 352,553 forward contracts (35,255,300 shares) will expire in
June 2009. As the forward contracts expire in June 2009, the ownership of Nordea
Bank Finland Plc will fall below 1/20.
- The ownership of corporations controlled by Kai Mäkelä, Oy Herttakakkonen Ab
(business ID 0761602-7) and Oy Herttaässä Ab (business ID 0761658-8), has fallen
to 4.87 % of the share capital and voting rights of Ruukki Group Plc based on
share transaction carried out on 23 January 2009.
- Based on the announcement Ruukki Group Plc made on Tuesday, 3 February 2009
related to the decision by the Board of Directors to cancel altogether
29,000,000 treasury shares held by the company, Ruukki Group made the following
announcement pursuant to Securities Market Act chapter 2, section 9 regarding a
change in shareholding. The announcement was based on information publicly
available at the time of the release. Based on Euroclear Finland Oy's
information, on 4 February 2009 Atkey Limited held altogether 26,884,864 Ruukki
Group Plc shares, which corresponds to about 9.27 % of current the share capital
and registered shares of Ruukki Group Plc. In case Atkey Limited's ownership
would be equal on the date when the treasury shares are cancelled, then Atkey
Limited's ownership would exceed one tenth (1/10) and be about 10.30 % of share
capital and voting rights of Ruukki Group Plc on the date of the cancellation.
Since there are a number of nominee-registered shareholders, there might be some
other shareholders whose ownership interest could exceed some of the thresholds
set out in the Finnish Securities Market Act on the date the cancellation of
treasury shares takes place.
- Danske Bank A/S Helsingin Sivukonttori's (business ID 1078693-2) announced on
20 February 2009 that its ownership is still above one twentieth (1/20) of the
share capital and voting rights of Ruukki Group Plc. Furthermore, Danske Bank
A/S Helsingin Sivukonttori announced that it has entered into derivative
agreements, which according to current terms will expire in March 2009. In case
these derivative agreements are exercised, Danske Bank A/S Helsingin
Sivukonttori's ownership in Ruukki Group Plc will fall below one twentieth
(1/20) on value date 25 March 2009 at the earliest.
RUUKKI GROUP PLC'S FINANCIAL STATEMENTS REVIEW FOR 1 JANUARY - 31 DECEMBER 2008
| Source: Afarak Group Plc
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