Market situation
Growth in demand stopped in early 2002 and has been unstable ever since in most divisions.
The demand for Vaisala products follows business cycles with a time lag. Therefore, when an upswing in the global economy starts, its effects are visible only after a delay.
Sustained maintenance and development of competitiveness has enabled (Vaisala to retain its market share, and its market position is still strong.
Net sales and order book
The Vaisala Group's net sales fell by 3.6% to EUR 189.2 million compared with EUR 196.2 the year before. The Group's operations outside Finland accounted for 96.6% of net sales. New orders for the financial year totaled EUR 180.7 (213.3). The order book at the end of the year stood at EUR 62.9 (77.1) million.
Without the effect of exchange rate changes, the Group's net sales would have risen by 4%.
Performance
Operating profit for the financial year was EUR 25.9 (22.6) million. Operating profit grew by 14.7% compared with 2002. Profit before extraordinary items was 12.4% of net sales, or EUR 23.4 (21.5) million.
The improved result, despite lower net sales, can be attributed to measures to improve profitability. These measures will have full effect in 2004.
Balance sheet
The Vaisala Group's solvency and liquidity remained strong. The balance sheet total as at December 31, 2003 was EUR 173 (175) million. The Group's solvency ratio at the end of the review period was 84% (84%), while cash and bank balances totaled EUR 46.8 (38.9) million.
Capital expenditure
Gross capital expenditure in non-current assets during the financial year totaled EUR 14.1 (28.4) million.
Vaisala took up new US premises in Boulder, Colorado at the beginning of 2003. The investment amounted to approximately EUR 5.5 million. The new facility will improve productivity and profitability in the United States. The share of the investment booked for 2003 was EUR 3.1 million.
The new cleanroom was completed in Vantaa on schedule before the end of 2003. The cleanroom will be brought into production in April 2004. The share of the investment booked for 2003 was EUR 3.4 million.
Other capital expenditure concerned machinery and equipment and information technology.
Changes in the Group structure
Vaisala's divisions and their product distributions were streamlined. The purpose of the changes was to create better conditions for the continuous improvement of business models. As a result, the division names were changed on April 1, 2003 as follows: The Upper Air Division is now Vaisala Soundings. The Surface Weather Division is now Vaisala Solutions. The Sensor Systems Divisions is now Vaisala Instruments, and the Vaisala Remote Sensing Division is now simply Vaisala Remote Sensing.
In the United States, Vaisala-GAI Inc., bought in March 2002 under the name Global Atmospherics Corporation, was merged with Vaisala Inc.
Business performance
Vaisala Soundings
Vaisala Soundings develops, manufactures and markets instruments and systems for observing the weather in the upper atmosphere. The division's main products are radiosonde and dropsonde instruments and related ground equipment for collecting and processing the information gathered by the radiosondes. The division's core customer groups are meteorological institutes, meteorological research organizations and defense forces. Vaisala is the world market leader in upper air sounding systems.
The net sales in 2003 for Vaisala Soundings totaled EUR 64.5 million, compared to EUR 63.2 million in the previous financial year. This was a good result.
In 2003 Vaisala introduced a new product family of digital radiosondes. Together with the Vaisala sounding equipment it will provide more accurate pressure, temperature, relative humidity, and wind measurement data than before. The new product family strengthens Vaisala's position as a global market leader in high-quality sounding applications for the upper atmosphere.
Vaisala Solutions
Vaisala Solutions develops, manufactures and markets meteorological sensors and systems, which are used to observe weather conditions near and on the earth's surface. The division's main products are automatic weather stations and observation systems as well as road and aviation weather systems. The main customers are meteorological institutes, aviation and road authorities, defense forces and land and water resource management agencies.
The division's net sales totaled EUR 56.8 million compared to EUR 67.5 million for the previous financial year. As a result of the drop in net sales, the result was weaker than the year before and unsatisfactory.
In February, Vaisala launched a new low-level windshear alert system issues warnings about rapid wind condition changes in runway corridors. Windshear is dangerous to aircraft during take-off and landing. The new alert system thus improves airport safety and efficiency.
In May, Vaisala introduced a new product family for the measurement of present weather and visibility. Road and aviation authorities as well as meteorological organizations use the products for automating weather observations.
In August a new meteorological data management system used in hydrological and meteorological observation networks was introduced. The new systems can be connected with more automatic weather stations than before and now also include hydrology applications.
Vaisala Remote Sensing
Vaisala Remote Sensing develops, manufactures and markets wind profilers and lightning detection systems.
Remote sensing is a growing area in aviation, meteorology, climatology, hydrology and air quality research. The Division's customer groups include meteorological and climatological research institutes, authorities monitoring air quality, civil aviation authorities, insurance companies and power utilities. In the field of remote sensing technology, Vaisala is a world market leader in wind profilers and lightning detection systems.
Vaisala Remote Sensing generated net sales of EUR 21.5 million compared to EUR 18 million in the previous financial year. The division was not profitable during the financial year. Net sales for 2003 increased from the previous year mainly because the Global Atmospherics Corporation, bought in 2002, was included in the net sales only for 9 months in 2002.
The operational priorities in the Remote Sensing Division were the further consolidation of products and operations.
The wind profiler business continued to integrate new signal processing algorithms into the wind profiler product range.
Vaisala delivered the first wind profilers into operational use in Europe in 2003. The first three-dimensional lightning detection network was delivered in the summer to an important customer in Asia.
Vaisala Instruments
The Vaisala Instruments division develops, manufactures and markets electronic measurement instruments for the measurement of relative humidity, dewpoint, material moisture, barometric pressure, carbon dioxide and ammonia. The division's products are used to control production processes, improve equipment performance, maintain safety and measure human and product environments in industry, meteorology and metrology. Vaisala is a leading manufacturer of relative humidity and barometric pressure measurement equipment intended for professional use.
The division's net sales in 2003 totaled EUR 46.5 million, compared to EUR 47.5 million in the previous financial year. Profit remained at a good level, in spite of heavy investments in product development.
In June, Vaisala launched a new relative humidity and temperature transmitter module. The instrument offers fast and reliable detection of moisture in lubrication, hydraulic and transformer oils.
Moreover, the division introduced a miniature dewpoint transmitter. The device extends Vaisala's product range for dewpoint measurement, and it is designed for air moisture measurements in industrial OEM applications, such as plastic and compressed air dryers.
Research and development
Expenditure on research and development in the review period totaled EUR 21.1 (22.1) million, representing 11.2% of the Group's net sales.
The Vaisala Group is working closely in several projects with leading research institutes, such as NOAA (the National Oceanic and Atmospheric Administration, USA), NCAR (National Center for Atmospheric Research, USA) and VTT (Technical Research Centre of Finland).
The Vaisala Group participates in the THORPEX program (The Observing-System Research and Predictability Experiment). THORPEX is a 10-year program, implemented under the auspices of the WMO (World Meteorological Organization).
Other events during the review period
The Annual General Meeting of Vaisala Oyj decided on March 19, 2003 to offer 896,000 warrants for subscription by the key employees of the Vaisala Group and by the company's wholly owned subsidiary, Vaisala GmbH. The issued warrants give the right to subscribe, in total, for 896,000 Vaisala A shares. The terms and conditions of the year 2000 warrants were published in a stock exchange release on February 24, 2003. The Board of Directors of Vaisala Oyj has decided that, of the 896,000 warrants issued, 752,000 warrants are to be allocated to 79 key employees and 140,000 to Vaisala GmbH.
The divisions and distribution channels were restructured during the spring. Related proceedings, taken in compliance with the Act on Co-operation within Undertakings, were completed on May 19, 2003.
In November, Vaisala opened a sales office in Shanghai, China. The new office strengthens the representation of the Vaisala Instruments division in the growing market in the area. Vaisala has had representation in Beijing since 1986.
Trading in the A warrants of Vaisala's year 2000 warrant program started on the Helsinki Exchanges on December 1, 2003.
Adoption of IAS reporting
Vaisala's Board of Directors decided that Vaisala Group will prepare its financial statements in accordance with the IAS/IFRS accounting standards from January 1, 2005.
Vaisala share
Share price performance (EUR)
During 2003
Highest Lowest 31.12.2003 31.12.2002
25.00 16.70 24.50 22.98
Vaisala's share capital on December 31, 2003 was EUR 7,349,905.88 and the total number of shares was 17,479,000.
A total of 1,495,572 Vaisala shares were traded during the financial year.
Vaisala does not hold any of its own shares.
A total of 35,000 Vaisala A shares were subscribed for in February 2003 with the A warrants issued in 1997, and they were entered in the Trade Register on February 25, 2003. Due to the subscriptions, Vaisala's share capital increased by 35,000 A shares, or EUR 14,717.47.
A total of 7,000 Vaisala A shares were subscribed for in March 2003 with the B warrants issued in 1997, and they were entered in the Trade Register on March 31, 2003. Due to the subscriptions, Vaisala's share capital increased by 7,000 A shares, or EUR 2,943.49. Vaisala's registered share capital on March 31, 2003 was EUR 7,349,905.88 and the company's shares numbered 17,479,000.
Personnel
During the financial year, the Vaisala Group employed an average of 1,141 (1,208) people, 738 (764) of whom worked in the parent company and 403 (444) in the subsidiaries. Some 21% (22%) of the Group's personnel worked in research and development.
The total number of people employed by the Vaisala Group at the end of the financial year was 1,113 (1,213), of whom 717 (771) worked in the parent company and 396 (442) in the subsidiaries. Some 37% (38%) of the Group's personnel worked outside Finland.
Salaries
During the financial year, the parent company paid salaries totaling EUR 307 (297) thousand to the members of the Board of Directors and the President & CEO, and EUR 26,141 (26,077) thousand to the rest of the personnel. Salaries paid to the Group Management totaled EUR 1,165 (1,043) thousand and salaries to the rest of the Group personnel EUR 46,274 (49,040) thousand.
Board of Directors, President & CEO and auditors
The members of the Board of Directors are Raimo Voipio M.Sc.(Eng.) (Chairman); Professor Pekka Hautojärvi; Professor Yrjö Neuvo, Executive Vice President: Mikko Niinivaara M.Sc.(Eng.); Mikko Voipio M.Sc.(Eng) and Gerhard Wendt Ph.D. The Group's President & CEO is Pekka Ketonen, D.Tech.(h.c.).
The Group's auditors are PricewaterhouseCoopers Oy, Authorized Public Accountants, and Jukka Ala-Mello APA.
Dividend
The Board of Directors will propose to the Annual General Meeting to be held on March 18, 2004 that a dividend of EUR 0.75 per share be paid for the 2002 financial year.
According to the proposal, the dividends will total EUR 13,109,250, representing on 90.4% of the operating profit for the financial year.
Outlook
The market outlook does not anticipate an essentially better operating environment for 2004. Net sales will increase only slightly. Currency exchange rates will also affect competition, growth and profitability.
Vaisala aims to be the global market leader in its selected areas of business in the future, too. This is why the investments in product development and competitiveness will be substantial.
Annual General Meeting
The Annual General Meeting will be held on 18 March 2004 at 5 p.m. in Vaisala Oyj's head office in Vantaa, Finland.
Press conference
Vaisala Oyj is arranging a press conference concerning the financial statements for financial analysts and media representatives on Thursday 12 February 2004 at 12.30 pm in restaurant Palace Gourmet, 10th floor, Eteläranta 10, Helsinki.
Vantaa, February 12, 2004
VAISALA GROUP
Board of Directors
The full report including tables can be downloaded from the followinf link.
