VAAHTO GROUP’S FINANCIAL STATEMENT RELEASE FOR 1 SEPTEMBER 2011 - 31 DECEMBER 2012

Lahti, Finland, 2013-02-28 09:00 CET (GLOBE NEWSWIRE) --  VAAHTO GROUP PLC OYJ                  FINANCIAL STATEMENT RELEASE    28.2.2013 at 10.00 am

VAAHTO GROUP’S FINANCIAL STATEMENT RELEASE FOR 1 SEPTEMBER 2011 - 31 DECEMBER 2012

Turnover from Vaahto Group’s continuing operations for the financial year closing in December 2012 was 40.1M EUR (comparative: 30.3M EUR) and the operating loss from continuing operations 4.9M EUR (3.2M EUR). Scaled to annual figures, the company’s turnover showed a 1% increase from the reference period, but the operating result was clearly weaker. The primary reason for the negative result was Vaahto Paper Technology’s weak order book and low profitability. The Group’s outstanding orders stood at 24.8M EUR (22.4M EUR) at the closing of the financial year. The reference period is 12 months, while the financial period now ending is 16 months.

Vaahto Group Plc Oyj’s Extraordinary Meeting of Shareholders of 19 June 2012 approved an amendment to the company’s bylaws whereby the company’s financial year changes to run from 1 January to 31 December. For this reason, the duration of the financial period now being closed is 16 months (1 September 2011 to 31 December 2012). 

Vaahto Paper Technology

Vaahto Paper Technology’s turnover from continuing operations was 17.0M EUR (14.6M EUR) and the net result an operating loss of 4.2M EUR (loss of 2.0M EUR). Converted into annual terms, Vaahto Paper Technology’s turnover decreased by 13%, and the financial year’s result was very weak.

Therefore, the Group decided in December 2012 to sell the project business belonging to the Vaahto Paper Technology division and the spare-parts and small-project business belonging to the service-business unit. The Group made a preliminary contract with a buyer in January 2013, and the transaction is expected to be completed by the end of the first quarter of 2013. Because the sale was considered highly likely at the closing of the financial year, assets and liabilities belonging to the project business are included on the balance sheet as long-term assets on sale and related debts. In the income statement, the project business is presented as discontinuing operations. Also, reference data from the 2010–2011 financial period included in the income statement have been adjusted accordingly. The operating loss from discontinuing operations in the course of the financial period under review came to 1.6M EUR (the comparative figure was a profit of 2.0M EUR).

The most significant new order during the period under review was for modernisation of the pulp dryer at the Södra Cell Mönsterås pulp mill.

The financial year also saw continued efforts toward developing Vaahto Paper Technology’s service-business branch. Service and maintenance operations, however, fell short of the objectives set for the period.

Vaahto Process Technology

Vaahto Process Technology’s turnover was 24.1M EUR (15.7M EUR) and net result an operating loss of 0.7M EUR (an improvement from the previous period’s operating loss of 1.2M EUR). Scaled to annual figures, turnover increased by 15% from the level of the reference period. Though up 0.5M EUR from that of the reference period, the business result remained negative. The division’s negative operating result was principally caused by the low profitability of the tank business in the first eight months of the financial year.

Vaahto Process Technology’s market situation in the tank sector was weak but improved substantially toward the end of the financial period. In August 2012, Japrotek Oy Ab received an important order for the planning, manufacture, and installation of eight large tank structures for Sasol Technology (Pty) Limited in South Africa. As the end of the financial period approached, Japrotek’s order book was very strong, making the outlook for the next financial year good.

Vaahto Process Technology’s market situation in the agitator business was good, and new orders were received steadily over the course of the period. The business result of the agitator business unit is nearly in line with the business objectives set, and the outlook for the next financial year is good.

Financing and solvency

The cash flow of the Group’s business operations was -3.3M EUR (-3.8M EUR). The Group’s net financing costs came to 1.2M EUR (0.7M EUR). The cash flow for investments made during the period under review was -1.0M EUR (7.1M EUR). The Group’s consolidated balance sheet total was 30.5M EUR (36.5M EUR), with an equity ratio of -7.9% (17.8%).

The Group’s financing situation remains tight and requires that the plans made by the management succeed and that profitability improve. Plans must also be made, however, to prepare for rearrangement of short-term payment programmes or for obtaining additional funding. The Board of Directors has initiated negotiations with financiers to rearrange present payment plans.

Loans from financial institutions entail repayment covenants linked to the Group’s solvency ratio. The Group’s year-end accounts of 31 December 2012 are in breach of a covenant, but the Group at the closing of the 2011–2012 fiscal period received a commitment from the financier in question that no consequences of the breach will arise for the Group. This commitment does not, however, apply to the next 12 months, and for this reason debt to the financier in question is classified as short-term debt in the year-end accounts of 31 December 2012.

Investments

The Group’s capital expenditure during the period under review came to 1.3M EUR (1.9M EUR). This figure consists mainly of machine and equipment investments for the Vaahto Paper Technology division’s service business.

Environmental affairs

In November 2012, Vaahto Paper Technology Oy received the Supreme Administrative Court’s decision of rejection of the company’s appeal of the decision made by the Häme Regional Environment Centre. The company’s appeal dealt with the Environment Centre’s decision not to extend the time limit set for the work required by the company’s environmental permit for the processing of drainage water in the courtyard areas of the company’s production plant in Hollola. Asphalting of the courtyard area and installation of storm drains at the Hollola plant will therefore be completed in 2013 as the environmental permit requires. The estimated cost of this operation is 500 thousand euros.

Research and development

The Group’s research and development activities focused on expansion of Vaahto Paper Technology’s range of service products and improvements to the competitive features of the key components of paper and cardboard machines. The scope of the research and development activities remains at the previous financial year’s level.

Human resources

The average number of personnel employed by the Group during the period under review was 333 (348), with discontinuing operations accounting for 69 employees (91).

Extraordinary Meeting of Shareholders (19 June 2012)

Vaahto Group Plc Oyj’s Extraordinary Meeting of Shareholders of 19 June 2012 nominated a new member, Sami Alatalo, to the Board of Directors. The shareholders’ meeting also approved an amendment of the company’s bylaws that changes the company’s financial year to run from 1 January to 31 December. For this reason, the duration of the financial period now ending is 16 months (from 1 September 2011 to 31 December 2012). 

Risks and uncertainty factors

Demand for Vaahto Group’s products is highly dependent on trends and other developments in the global economy and the Group’s main customer industries. Attempts are made to balance out the risks caused by market fluctuations by adapting the Group’s sales operations to current trends in the relevant market areas and customer industries.

Large-scale projects entail the risk of inaccurate assessment of project costs and other risks inherent to projects in the tender stage, which may cause a project’s financial result to be lower than expected. Attempts are made to control the risks involved in large-scale projects by means of several quality-management systems, profitability analyses, operation guidelines, and approval procedures.

The objective of the efforts to manage the Group’s financing risks is to minimise the negative impact of changes in financing markets on the Group’s result and to ensure the availability of internal and external capital on competitive terms.  

The risk of property losses, consequential losses, and liability losses caused by business operations is addressed by means of appropriate insurance arrangements.

Equity capital

The Annual General Meeting of 12 December 2011 authorised the Board of Directors to decide on the issuing of new shares in one or more instalments. The maximum number of shares that may be issued is 1,000,000. This authorisation is valid until 31 December 2012 unless a general meeting amends or revokes the authorisation before that date. 

On 19 April 2012, the Vaahto Group Plc Oyj Board of Directors decided on two separate share issues:

Private issue to selected investors

In deviation from the subscription right of the current shareholders, the Vaahto Group Plc Oyj Board of Directors decided to issue an offering of 600,000 new shares in the company to a group of selected investors.  The issue price was set at 3.50 euros per share, for a total issue value of 2.1M EUR.  The issue sum paid for the new shares was allocated to the invested non-restricted equity capital reserve. 

Acquisition of shares in AP-Tela Oy and a private issue to minority shareholders of AP-Tela Oy

The Vaahto Group Board of Directors also decided to approve a share-exchange contract made with the company’s subsidiary AP-Tela Oy, signed on 19 April 2012, and to arrange a private issue to carry out the share exchange as specified in the contract. The share exchange was implemented as specified in Article 52 of the Law on the Taxation of Business Income, with Vaahto Group Plc Oyj issuing 317,602 new shares in Vaahto Group Plc Oyj to the minority shareholders of AP-Tela Oy as payment for 47.92% ownership of AP-Tela Oy (230 shares therein) held by the minority shareholders of AP-Tela Oy. The issue price of the shares issued in the share-exchange scheme was 3.50 euros per share. The total issue value of the new shares, 1,111,607 euros, was allocated to the invested non-restricted equity capital reserve.

New shares issued in both share issues, 917,602 shares in all, were entered in the trade register on 23 April 2012. The new shares give their owners right of ownership in the company with effect from the date of registration.

Private issue to Mikko Laakkonen

Additionally, the Vaahto Group Plc Oyj Board of Directors decided, on 2 December 2012, to issue 73,892 new shares of the company in a special rights issue to Mikko Laakkonen. The subscription price of the shares issued to Laakkonen was 2.03 euros per share, the closing rate for a share in the company on the Helsinki stock exchange, operated by NASDAQ OMX Helsinki Oy, on 30 November 2012. The total issue price of the shares issued to Laakkonen was 150,000.76 euros. These new shares, 73,892 shares in all, were entered in the trade register on 18 December 2012. The new shares give their owner a right of ownership in the company from the date of registration. The issue sum of the new shares was allocated to the invested non-restricted equity capital reserve. 

The share issues did not affect the company’s equity capital.

The Board of Directors has no authorisation to issue convertible bonds or warrant bonds or for purchasing or transferring the Group’s own stock.

Deferred tax liabilities and receivables

In total, 1.7M EUR of value adjustments for deferred tax liabilities from confirmed business losses has been booked for the 2011–2012 financial period.

Administration

The Annual General Meeting of 12 December 2011 nominated the following members for the Vaahto Group Plc Oyj Board of Directors:

Reijo Järvinen, as chairman

Rainer Häggblom, as deputy chairman

Topi Karppanen, as an ordinary member

Mikko Vaahto, as an ordinary member

Vaahto Group Plc Oyj’s Extraordinary Meeting of Shareholders of 19 June 2012 nominated a new member, Sami Alatalo, to the Board of Directors.

The company’s managing director was Anssi Klinga from 1 September 2011 to 4 April 2012. The acting managing director was Ari Viinikkala from 4 April 2012 to 30 November 2012.  Viinikkala has held the title Managing Director since 30 November 2012.

The Group’s accounts have been audited by certified auditing company Ernst & Young Oy. The head auditor was Certified Public Accountant Panu Juonala.

The company follows the 2010 Corporate Governance Code issued for companies listed on the NASDAQ OMX Helsinki exchange. A report on the Group’s management and steering system is available on the Group’s Web site.

Development prospects

The development of the international economy has shown alarming signals, and the market situation of Vaahto Group’s main customer industries remains uncertain. No significant change, however, has occurred in total demand for Vaahto Group’s products in the first few weeks of the new financial year, and the volume of outstanding orders is higher than it was at the start of the previous financial year.  Vaahto Group’s result is expected to increase substantially from that of the previous financial period.

Events after the end of the fiscal year

On 16 January 2013, Vaahto Group signed an initial agreement for the sale of the project business belonging to the Vaahto Paper Technology division and the spare-parts and small-project business falling under the service-business unit’s operations for a new company to be established by the German company Bellmer GmbH Maschinenfabrik. The transaction is expected to be completed by the end of the first quarter of 2013.  Vaahto Group and Bellmer GmbH are also in the process of negotiating a collaboration agreement between the project entity being sold and Vaahto Paper Technology’s service-business unit.

Distribution of profit

The parent company’s business loss for the financial year was 7,730,277.29 euros, and the company has no distributable funds.

The Board of Directors proposes to the general meeting that no dividend be distributed and that the loss be covered with funds from the profit account.

The Annual General Meeting

The Annual General Meeting of Vaahto Group Plc Oyj will be held on 10 April 2013 at 1.00 p.m. in the Sibelius Hall, Lahti.

Interim management statement

Instead of the interim report for the first three months of the accounting period 1 January – 31 December 2013, Vaahto Group Plc Oyj will disclose the interim management statement on 16 May 2013.

Figures are in thousand euros unless stated otherwise. Figures are unaudited.

Lahti 28 February 2013

VAAHTO GROUP PLC OYJ

Board of Directors

         Information:
         Ari Viinikkala, CEO, Vaahto Group Plc Oyj +358 400 127664
         www.vaaahto.fi