NURMINEN LOGISTICS PLC'S INTERIM REPORT 1 JANUARY - 30 JUNE 2011

Nurminen Logistics Plc                Interim report 5 August 2011 at 9.00 a.m.

REVIEW PERIOD IN BRIEF

Review period 1 January – 30 June 2011

- Net sales were EUR 36.3 million (2010: EUR 32.4 million).
- Reported operating result was EUR -0.4 million (EUR -0.6 million).
- Operating margin was -1.2% (-1.8%).
- Operating result excluding non-recurring items was EUR -0.7 million (EUR -1.5 million).
- EBT was EUR -1.1 million (EUR -0.1 million).
- Net result was EUR -1.4 million (EUR -0.7 million).
- Earnings per share: -0.15 Euros (-0.09 Euros).

Second quarter 1 April – 30 June 2011

- Net sales were EUR 18.6 million (2010: EUR 17.0 million).
- Reported operating result was EUR 0.2 million (EUR -0.4 million).
- Operating margin was 1.0% (-2.2%).
- Operating result excluding non-recurring items was EUR -0.1 million (EUR -0.8 million).
- EBT was EUR -0.1 million (EUR -0.4 million).
- Net result was EUR -0.3 million (EUR -0.7 million).
- Earnings per share: -0.05 Euros (-0.07 Euros).

MARKET SITUATION 1 JANUARY – 30 JUNE 2011

Finnish foreign trade and Nurminen Logistics' most important market, trade between Finland and the CIS countries, developed favourably. However, the competitive situation was challenging especially due to increase of the Russian railway tariffs. The increase had a negative effect on price competitiveness of railway transports. In April and May the strike of the Finnish paper industry’s office workers affected company’s demand and transported volumes negatively.

Despite the above-mentioned facts both demand and volumes improved in railway transports compared to 2010 except for the drop in April. The special and heavy transportation market did not develop as positively as expected although the demand situation was better than in the comparable period in 2010. The harbour logistics market remained challenging although there was slight increase in demand inter alia in transit traffic towards the end of the review period.

Demand of the forest industry improved compared to 2010. Also the demand of mechanical engineering industry improved compared to 2010, but the price competition remained intense especially in project transportations.

NET SALES AND FINANCIAL PERFORMANCE 1 JANUARY– 30 JUNE 2011

The net sales for the review period amounted to EUR 36.3 (2010: 32.4) million. Compared to the corresponding period last year the increase of the net sales was 12.2%. Reported operating result was EUR -440 (-582) thousand. The increase was 24.5%. Operating result includes non-recurring items of EUR 248 (+868) thousand. Therefore, comparable operating result was EUR -688 thousand. Compared to the corresponding period last year the increase was 52.6%. The non-recurring item in 2010 was a result of the company's decision to give up its purchase option and first refusal right to the logistics centre in Vuosaari as published on 18 June 2009. The company has a long-term lease agreement in Vuosaari. The non-recurring item in the review period was a result of a partial payment of a receivable written down in the financial statements 2010.

The growth of net sales was based on the recovery of demand especially in the rail transport exports from Finland to CIS countries. Also the demand of mechanical engineering industry's clientele developed positively in all market segments. In the company's harbour logistics services the development was varying. In Kotka and Hamina the transit volumes to CIS countries are still on a low level. In Vuosaari the volumes started to grow during the review period as a result of new customer agreements.

Operating result remained negative. This is mainly due to the increase of the losses of the Vuosaari logistics centre. The increase of the losses was due to the changes in the customer structure and increase in lease costs of the logistics centre. The lease of the Vuosaari logistics centre increased in the review period according to the lease agreement by EUR 0.2 million compared to the corresponding period in 2010. In the review period the operating loss of the Vuosaari logistics centre was EUR 1.7 (1.5) million. Also the intense price competition of special and heavy transport affected profitability negatively. The operating profit of the company's operations in the Baltic countries weakened as expected by EUR 0.4 million compared to the strong first half of 2010.

The personnel cost savings based on the results of the co-determination negotiations held in 2010 were in the review period EUR 0.6 million, in line with the target.

The appreciation of the Russian rouble during the review period increased the company's financial result by EUR 0.1 million.

NET SALES AND FINANCIAL PERFORMANCE OF THE SECOND QUARTER

The 2011 second quarter net sales amounted to EUR 18.6 (2010: 16.9) million. Compared to the corresponding period last year the increase of the net sales was 9.7%. Reported operating result was EUR 195 (-382) thousand. The operating result increased by 150.9%. Operating result includes non-recurring profits EUR 248 (2010: 434) thousand. Therefore comparative operating result increased 93.5% compared to the corresponding period last year. The non-recurring item in 2010 was a result of the company's decision to give up its purchase option and first refusal right to the logistics centre in Vuosaari as published on 18 June 2009. The company has a long-term lease agreement in Vuosaari. The non-recurring item in the second quarter 2011 was a result of a partial payment of a receivable written down in the financial statements 2010.

Net sales continued to grow. Demand situation recovered slightly in railway transportations, terminal services and forwarding services although demand growth was hindered by the paper industry’s office workers’ strike in April and May. Demand for special and project transports services recovered during the second quarter.

Profitability continued to be burdened by weak volume situation, price competition that remained tough and the start-up of new customers in Vuosaari logistics centre.

OUTLOOK

The company's outlook published in the financial statement release on 25 February 2011 is unchanged.

The net sales of the company are expected to increase by approximately 10% in 2011 compared to 2010. The company's operating result is expected to be slightly better than in 2010.

The company’s unchanged long-term goal is to increase its net sales annually by approximately 20% on average, including acquisitions, and to reach an operating profit level of over 7%. The general economic situation is assessed to delay achieving of the growth objectives in the short term.

The company is actively following the structural changes in the logistics market as well as acquisition opportunities.

SHORT-TERM RISKS AND UNCERTAINTIES

Increased uncertainty in the world economy might result in lower industrial production volumes. That would have a negative effect on company’s net sales and result development.

Over-capacity of Finnish ports maintains tough price competition. The company operates in Vuosaari, Kotka and Hamina harbours and therefore the volume development of those harbours is relevant to the company. Volume development is effected, among other things, by development of the transit trade that decreased during the recession. Its outlook is unclear at the moment.

The railway tariff changes of different countries might affect the price competitiveness of rail transports significantly. In addition, price competition situation might burden the company's profitability also in the future. Weaker than expected volume growth of foreign trade would burden the development of the company's net sales and profitability.

FINANCIAL POSITION AND BALANCE SHEET

Company’s cash flow from operations was EUR 3,766 thousand. Cash flow from investments was EUR -231 thousand. Cash flow from financing activities amounted to EUR -3,585 thousand.

At the end of the review period, cash and cash equivalents amounted to EUR 2,514 thousand. Liquidity improved during the second quarter as a result of new financing agreements and is good.

Group’s interest bearing debt was EUR 29,5 million and correspondingly the net interest bearing debt was EUR 27.0 million.

Balance sheet totaled EUR 73.7 million and equity ratio was 39.0%.

CHANGES IN THE TOP MANAGEMENT

The Board of Directors of Nurminen Logistics Plc appointed on 6 April 2011 Mr Topi Saarenhovi, M.Sc. (Tech.), the new President and CEO of the company. Saarenhovi (born 1967) started in his new position on 1 May 2011. Mr Antti Sallila, who was the Acting CEO of Nurminen Logistics Plc during 25 November 2010 – 30 April 2011 continued his duties as the CFO of the company. The changes in the top management were published in stock exchange release on 6 April 2011.

CAPITAL EXPENDITURE

The Group's gross capital expenditure for review period amounted to EUR 343 (263) thousand, accounting for 0.9% of net sales. Depreciation totaled EUR 2.1 (2.3) million, or 5.9% of net sales.

GROUP STRUCTURE

The Group comprises the parent company, Nurminen Logistics Plc, as well as the following subsidiaries and associated companies, owned directly or indirectly by the parent (ownership, %): RW Logistics Oy (100 %), JN Ferrovia Oy (100 %), OOO John Nurminen, St. Petersburg (100 %), OOO John Nurminen, Moscow (100 %), Nurminen Maritime Latvia SIA (51 %), Pelkolan Terminaali Oy (20 %), ZAO Irtrans (100 %), OOO Huolintakeskus (100 %), OOO John Nurminen Terminal (100 %), ZAO Terminal Rubesh (100 %), Nurminen Logistics LLC (100 %), UAB Nurminen Maritime (51 %), Nurminen Maritime Eesti AS (51 %), CMA CGM Latvia SIA (23 %), CMA CGM Estonia Oü (23 %), Team Lines Latvia SIA (23 %) and Team Lines Estonia Oü (20,3 %).

PERSONNEL

At the end of the review period the Group staff was 342 (339 on 31 December 2010). The number of personnel working abroad was 71. Management and administrative staff numbered to 26.

SHARE-BASED INCENTIVE PLAN FOR THE GROUP PERSONNEL

The Board of Directors of Nurminen Logistics Plc has approved on 7 March 2011 a share-based incentive plan for the Group key personnel. The plan was described in stock exchange release published on 7 March 2011.

SHARES AND SHAREHOLDERS

The trading volume of Nurminen Logistics Plc's shares was 334,984 in 1 January - 30 June 2011. This represented 2.60% of the total number of shares. The value of the turnover was EUR 887,299. The lowest price for the period was EUR 2.28 per share and the highest EUR 3.00 per share. The closing price for the period was EUR 2.30 per share and the market value of the entire share capital EUR 29,620,499.

At the end of the review period Nurminen Logistics Plc had 474 shareholders.

The company owns 705 of its own shares, which represent 0.005% of the votes in the company.

DECISIONS OF THE ANNUAL GENERAL MEETING

The decisions of the Nurminen Logistics Plc's Annual General Meeting of Shareholders were published in stock exchange release on 6 April 2011.

DIVIDEND POLICY

Company’s Board has on 14 May 2008 determined company’s dividend policy, according to which Nurminen Logistics Plc aims to, in case company’s financial policy so allows, annually distribute as dividends approximately one third of its net profit.

AUTHORISATIONS GIVEN TO THE BOARD

Authorising the Board of Directors to decide on the repurchase of the company's own shares

Annual General Meeting authorised the Board to decide on the repurchasing a maximum of 30,000 of the company's shares. The authorisation will be used for the paying of remuneration of the Board members. The own shares may be repurchased pursuant to the authorisation only by using unrestricted equity. The price payable for the shares shall be based on the price of the company's shares in public trading. The own shares may be repurchased in deviation from the proportional shareholdings of the shareholders (directed repurchase). The authorisation includes the right whereby the Board is authorised to decide on all other matters related to the acquisition of own shares.

The authorisation remains in force until 30 April 2012.

Authorising the Board of Directors to decide on the issuance of shares as well as the issuance of options and other special rights entitling to shares

Annual General Meeting authorised the Board to decide on issuance of shares and/or special rights entitling to shares pursuant to chapter 10 section 1 of the Finnish Companies Act.

Based on the aforesaid authorisation the Board is entitled to release or assign, either by one or several resolutions, shares and/or special rights up to a maximum equivalent of 20,000,000 new shares so that aforesaid shares and/or special rights can be used, e.g., for the financing of company and business acquisitions corporate and business trading or for other business arrangements and investments, for the expansion of owner structure, paying of remuneration of the Board members and/or for the creating incentives for, or encouraging commitment in, personnel.

The authorisation gives the Board the right to decide on share issue with or without payment. The authorisation for deciding on a share issue without payment also includes the right to decide on the issue for the company itself, so that the number of shares granted to the company is no more than one tenth of all shares of the company.

The authorisation includes the right whereby the Board is entitled to decide of all other issues of shares and special rights. Furthermore, the Board is entitled to decide on share issues, option rights and other special rights in every way similarly as the Annual General Meeting could decide on these. The authorisation also includes right to decide on directed issues of shares and/or special rights.

The authorisation remains in force until 30 April 2012. Based on this authorisation the company issued 26,250 new shares on 13 July 2011. The new shares were used for reward payments from the earning period 2010 of the Nurminen Logistics Group key personnel Share-Based Incentive Plan 2008–2010 according to achievement of targets established for the earnings criteria approved by the Board of Directors.

OTHER EVENTS DURING THE REVIEW PERIOD

Closing of terminal in Hakkila

In order to adjust terminal capacity and cost structure the company has decided to close its terminal in Hakkila by giving notice to terminate the lease agreement and moving its operations to Vuosaari logistics centre. Operations in Hakkila will end by the end of 2011. By this closure the company targets EUR 0.3 million annual profit increase as from 2012.

Share-Based Incentive Plan 2008–2010; directed share issue without consideration

The Board of Directors of Nurminen Logistics Plc decided on 20 June 2011 on a directed share issue without consideration by authorisation of the company’s Annual General Meeting of Shareholders held on 6 April 2011. The new shares issued in the share issue were used for reward payments from the earning period 2010 of the Nurminen Logistics Group key personnel Share-Based Incentive Plan 2008–2010 according to achievement of targets established for the earnings criteria approved by the Board of Directors.

In the share issue, a total of 26,250 new shares in Nurminen Logistics were issued to the key personnel entitled to rewards on the basis of earning period 2010 of the Nurminen Logistics Group key personnel Share-Based Incentive Plan 2008–2010 according to the terms and conditions of the Share-Based Incentive Plan 2008–2010 and the decision by the Board of Directors.

The number of the company’s shares is 12,904,728 after the Trade Register entry of the new shares. The shares issued in the share issue represent 0.2% of the number of shares and votes after the share issue.

EVENTS AFTER THE REVIEW PERIOD

New shares entered into the trade register

The Board of Directors of Nurminen Logistics Plc decided on 20 June 2011 on a directed share issue without consideration by authorisation of the company’s Annual General Meeting of Shareholders held on 6 April 2011. In the share issue, a total of 26,250 new shares in Nurminen Logistics were issued to the key personnel entitled to rewards on the basis of earning period 2010 of the Nurminen Logistics Group key personnel Share-Based Incentive Plan 2008–2010. The new shares were entered into the Trade Register on 13 July 2011. The shareholder rights commenced after the new shares were entered into the Trade Register.

After the Trade Register entry of the new shares, the number of the company’s all shares is 12,904,728 shares. The shares entered into the Trade Register were applied for public trading on NASDAQ OMX Helsinki Ltd on 14 July 2011.

Disclaimer

Certain statements in this bulletin are forward-looking and are based on the management's current views. Due to their nature, they involve risks and uncertainties and are susceptible to changes in the general economic or industry conditions.

NURMINEN LOGISTICS PLC
Board of Directors

For more information, please contact Topi Saarenhovi, President and CEO (tel. +358 10 545 2431)

DISTRIBUTION

NASDAQ OMX Helsinki
Major media
www.nurminenlogistics.com

Nurminen Logistics provides high-quality logistics services, such as railway transports, terminal services, forwarding and special and heavy transports.

The company has collected logistics know-how from three centuries, starting in 1886. Nurminen Logistics' main market areas are Finland, the Baltic Sea region, Russia and other Eastern European countries. The company's share is listed on NASDAQ OMX Helsinki.

TABLES

A= Share capital

B= Share premium account

C= Reserve fund

D= Unrestricted equity reserve

E= Translation differences

F= Retained earnings

G= Non-controlling interest

H= Total

SEGMENT INFORMATION

The figures of the operating segment are equal to the Group’s figures.

RELATED PARTY TRANSACTIONS

The related parties comprise the members of the Board of Directors and Executive Board of Nurminen Logistics and companies in which these members have control. Related parties are also deemed to include shareholders with direct or indirect control or substantial influence.
 

KEY FIGURES

OTHER LIABILITIES AND COMMITMENTS 

Accounting policies

The interim financial information has been prepared in accordance with IAS 34
'Interim Financial Reporting'. The IFRS recognition and measurement principles as described in the annual financial statements for 2010 have also been applied in the preparation of the interim financial information, with the changes mentioned below. Other adopted new and amended IFRS-standards and interpretation have not had significant impact on reported figures.

The Group has applied e.g. the following revised and amended standards as of 1

January 2011:

Amendment to IAS 32 Financial Instruments: Presentation - Classification of rights issues. The amendment relates to accounting (classification) for share, option or rights issues denominated in a foreign currency.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. The interpretation clarifies accounting treatment in cases where a company renegotiates a financial liability, and as a result issues equity instruments to the creditor to extinguish all or part of the financial liability.

Revised IAS 24 Related Party Disclosures. The definition of a related party is clarified and certain disclosure requirements for government related entities are changed.

All figures have been rounded and consequently the sum of individual figures can deviate from the presented sum figure. Key figures have been calculated using exact figures. This Interim Report is unaudited.

Calculation of Key Figures

Equity ratio (%) =

Total equity 

______________________________________ x 100

Total assets – advances received 

Earnings per share (EUR) =

Profit for the period attributable to equity holders of the parent company 

_________________________________________________________ x 100

Number of shares (average during the period)

Equity per share (EUR) =

Equity

________________________________________ x 100

Number of shares at the end of the period