Kemira GrowHow Oyj STOCK EXCHANGE RELEASE 13.2.2007 at 9.00 Kemira GrowHow's Financial Statements 1 January - 31 December 2006 - The key fundamentals effecting fertilizer demand continued to develop favourably and from a historical point of view the price level was high. Sales volumes in Europe fell clearly from the previous year. - Kemira GrowHow's net sales decreased by 7 percent and were EUR 1,166.2 million. - Operating result during the first quarter was burdened by expensive natural gas that resulted in shut downs at ammonia plants, and higher raw material costs could not be passed on to finished product prices in their entirety. - Operating profit for the financial year was EUR 11.1 (45.3) million. Operating profit excluding non-recurring items was EUR 1.6 (40.6) million. - The last quarter net sales were EUR 282.5 (334.5) million and operating profit EUR 8.5 (-1.3) million. - The last quarter result was burdened by fair value changes of gas derivatives, EUR -7.7 million. The majority of the fair value changes were unrealized. - Kemira GrowHow and Terra Industries entered in October 2006 into a Memorandum of Understanding which sets out their agreement to create a joint venture to operate the fertilizer and process chemicals businesses of both companies in the United Kingdom. In January 2007 the Office of Fair Trading (UK) referred the proposed joint venture to the Competition Commission of the United Kingdom. - The Board of Directors proposes to the Annual General Meeting that EUR 0.15 per share be paid as dividend. Key figures Q4/2006 Q4/2005 Q1-Q4/2006 Q1-Q4/2005 Net sales, EUR 282.5 334.5 1,166.2 1,258.2 million Operating profit, 8.5 -1.3 11.1 45.3 EUR million Operating profit, 8.8 -2.9 1.6 40.6 non-recurring items excluded, EUR million Result before taxes, 5.3 -3.0 0.3 34.6 EUR million Net result attributable to equity holders of the parent company, EUR million 3.5 -3.3 -7.8 31.8 Earnings per share, 0.06 -0.05 -0.14 0.56 EUR Return on 2.4 8.3 investment, % Gearing, % 59.5 48.2 The fourth quarter of Kemira GrowHow Group Net sales, Q1 Q2 Q3 Q4 EUR million 2006 (* 272.9 304.2 306.6 282.5 2005 (** 307.6 333.0 283.2 334.5 EBIT, Q1 Q2 Q3 Q4 EUR million 2006 (* -19.1 2.6 19.1 8.5 2005 (** 21.1 17.1 8.3 -1.3 (* Q1 2006 restated (** 2005 restated A table of net non-recurring items is presented in the notes to the financial statements. Kemira GrowHow's fourth quarter net sales decreased by 16 percent and were EUR 282.5 (334.5) million. Net sales excluding the effect of the Baltic sales and marketing companies, of which 50 percent were sold to Danish DLA Agro Group at the end of the previous year, fell by 8 percent. Consolidated operating profit for the fourth quarter was EUR 8.5 (-1.3) million. The major reasons for the improved operating profit were higher fertilizer prices, less expensive natural gas and higher utilization rate of the production plants. Net non- recurring items totalled to EUR -0.3 (1.6) million. Comparable operating profit as a percentage of net sales, non-recurring items excluded, improved from -1 percent in 2005 to 3 percent in 2006. Fair value changes of natural gas derivatives weakened the last quarter operating by EUR 7.7 million. The majority of the fair value changes were unrealized. Kemira GrowHow's net financial expenses, excluding the share of the results of joint ventures and associated companies, were EUR -3.0 (-2.1) million during the fourth quarter. Net foreign exchange losses of financial activities were EUR -0.7 (-0.4) million. Kemira GrowHow's share of the results of joint ventures and associated companies was EUR -0.2 (0.3) million. Income taxes of the last quarter were EUR -1.6 (-0.2) million. The profit attributable to equity holders of the parent company for the October - December period of 2006 was EUR 3.5 (-3.3) million and earnings per share were EUR 0.06 (-0.05). Kemira GrowHow Group in January - December Kemira GrowHow's net sales were EUR 1,166.2 (1,258.2) million. However, net sales excluding the effect of the Baltic sales and marketing companies, of which 50 percent were sold to Danish DLA Agro Group at the end of the previous year, remained at last year's level. Consolidated operating profit for the financial year was EUR 11.1 (45.3) million. Operating profit excluding non-recurring items was EUR 1.6 (40.6) million. Comparable operating profit as a percentage of net sales, non-recurring items excluded, fell from 3.2 percent in 2005 to 0.1 percent in 2006. Operating profit for 2006 was particularly impacted by volatility in the price of the most important raw material, natural gas. Especially during the first half of 2006, expensive natural gas burdened operating profit and resulted in shut downs at ammonia plants in the UK and Belgium. On the other hand, decreasing natural gas prices at the latter part of the year improved operating profit. Fair value changes of natural gas derivatives, EUR -6.9 million, weakened operating profit. The majority of the fair value change were unrealized. Kemira GrowHow aims to decrease the negative impact of natural gas price volatility by improving the efficiency of those production units that use natural gas. Increasing efficiency reduces consumption of natural gas. In addition, Kemira GrowHow aims to increase the relative share of the Group's operations accounted for by businesses, that do not use natural gas, and to enter into contracts in which the price of future natural gas purchases is partly indexed to oil price. The fluctuation between natural gas and oil derivative prices has an effect on the market value of the contracts for the Group's natural gas purchases. As Kemira GrowHow does not apply hedge accounting - as defined in IFRS - to these contracts, changes in their market value are recognized in the income statement immediately, which can lead to significant result volatility as the contracts are mainly related to future years. In the long run, however, the use of oil indexation in natural gas pricing decreases price volatility. Kemira Growhow's target is to have roughly 50 percent of the Group's gas purchases based on oil indexed pricing. In addition, gas futures are used to fix gas prices for the coming months so that the closer the actual consumption is, the higher the share of purchases covered with fixed prices or indexed contracts. Kemira GrowHow's net financial expenses, excluding the share of the results of joint ventures and associated companies, were EUR - 11.0 (-9.3) million. Net foreign exchange losses of financial activities were EUR -1.8 (-1.2) million. Kemira GrowHow's share of the results of joint ventures and associated companies was EUR 0.1 (-1.3) million. Income taxes for the financial year were EUR -6.8 (-2.9) million. Income tax expense is calculated separately for each country in which the Group operates. The main reason for high effective tax rate was that income taxes were recorded from the profits generated in certain countries, but on the other hand, deferred tax assets have not been recorded from the results of loss-making units in accordance with the prudence principle. The loss attributable to equity holders of the parent company for the 2006 financial year was EUR -7.8 million (profit of EUR 31.8 million in 2005). Earnings per share were EUR -0.14 (0.56). Kemira GrowHow Oyj has not issued options, warrants, convertible bonds or similar instruments which would dilute the earnings per share. Dividend The distributable funds of Kemira GrowHow Oyj, the parent company of Kemira GrowHow Group, are EUR 146,120,448, of which EUR 14,972,834 represents the net profit for the financial year. The Board of Directors proposes to the Annual General Meeting that EUR 0.15 per share be distributed as dividend from the distributable funds. The total dividend would amount to EUR 8.6 million. EUR 6,391,505 would be left in retained earnings and EUR 131,147,614 in other non-restricted equity. The dividend paid for 2005 was EUR 0.30 per share. Kemira GrowHow Oyj's distributable funds 2006 (FAS), EUR Other non-restricted equity 142,184,338 Retained earnings 0 Treasury shares -11,036,724 Net profit for the year 14,972,834 Total 146,120,448 The financial position of the company has not materially changed after the balance sheet date, and it is the Board of Directors' opinion that the proposed distribution of funds does not compromise the company's liquidity. Strategic business units Kemira GrowHow's operations are organized under two strategic business units: Crop Cultivation and Industrial Solutions. The Industrial Solutions business unit has strong synergies with the Crop Cultivation business unit in production and sourcing. The Crop Cultivation strategic business unit produces and markets a broad range of fertilizers and other related products and services for agriculture, horticulture and home gardening in selected markets in Northern, Western and Eastern Europe and overseas. Kemira GrowHow has a significant market position in fertilizer business in Finland, Denmark, the Baltic states, the Benelux countries, France and the United Kingdom. The Industrial Solutions strategic business unit provides high performance products and innovative solutions, such as feed phosphates and feed acidifiers, a range of nitrogen-based chemicals and phosphoric acid. The Industrial Solutions business unit focuses on selected customer segments, that, in addition to the animal feed industry, include the chemical, pharmaceutical, metal, electronics and food industries. Industrial Solutions is one of the leading global suppliers of inorganic feed phosphates having sales in more than 80 countries. Kemira GrowHow's Process Chemicals business of is one of the two biggest suppliers in the Benelux countries, the United Kingdom, Finland and Denmark. The fourth quarter of strategic business units Crop Cultivation Net sales, Q1 Q2 Q3 Q4 EUR million 2006 (* 208.9 240.9 238.7 206.7 2005 (** 243.3 271.9 224.1 273.2 EBIT, Q1 Q2 Q3 Q4 EUR million 2006 (* -18.4 -0.7 13.3 5.4 2005 (** 18.4 12.6 5.7 -5.9 (* Q1 2006 restated (** 2005 restated The fertilizer business in Europe is highly seasonal in nature. Typically the sales and profitability of European fertilizer producers are stronger during the first and the second quarters of the year compared with the third and the fourth quarters, since spring is the main application season for fertilizers in Europe. During 2006 high natural gas prices substantially weakened the first half-year results. Producers were not able to pass on the gas price increases fully to fertilizer prices. Net sales of the Crop Cultivation business unit decreased during the fourth quarter by 24 percent compared with the corresponding period in 2005 and were EUR 206.7 (273.2) million. Net sales excluding the effect of the Baltic sales and marketing companies, of which 50 percent were sold to Danish DLA Agro Group at the end of the previous year, fell by 16 percent. The fourth quarter operating profit was EUR 5.4 (-5.9) million. The main reasons for result improvement were higher fertilizer prices and less expensive natural gas than in the previous year as well as improved utilization rate of the production plants. Operating profit as percentage of net sales, non-recurring items excluded, improved from -3 percent in 2005 to 2 percent in 2006. Sales volumes in thousands of metric tons Q1 Q2 Q3 Q4 Total 2006 881 1,013 1,045 875 3,814 2005 1,101 1,036 986 1,052 4,175 Taking into account the effect of the divested Baltic sales companies on sales volumes, the 2006 fourth quarter sales volumes were approximately 15 percent lower than in the fourth quarter of the previous year. The sales volumes decreased in all market areas with the exception of Finland compared with the corresponding period in the previous year. Part of the lower volumes is estimated to be postponed sales to 2007. The negative effect of lower volumes on operating profit was approximately EUR 3 million. The fourth quarter sales prices of nitrogen fertilizers were, depending on the nitrogen content, on average 2 - 8 percent higher and sales prices of NPK fertilizers were on average 2 - 10 percent higher than last year. The total effect of higher sales prices, including the sales prices of traded products, on operating profit was approximately EUR 7 million positive. The price of natural gas was during the fourth quarter on average about 25 - 30 percent lower than in the corresponding period of the previous year. The effect of cheaper prices of natural gas and ammonia as well as higher average utilization rate of ammonia plants improved the result in total by approximately EUR 10 million. Fair value changes of natural gas derivatives, EUR -7.0 million, weakened operating profit during the last quarter. The majority of the fair value change was unrealized. Industrial Solutions Net sales, Q1 Q2 Q3 Q4 EUR million 2006(* 75.8 72.2 76.0 84.9 2005(** 74.0 72.6 71.9 73.4 EBIT, Q1 Q2 Q3 Q4 EUR million 2006(* 0.9 6.4 6.3 6.3 2005(** 5.2 4.3 3.9 4.8 (* Q1 2006 restated (** 2005 restated The fourth quarter net sales of the Industrial Solutions business unit increased by 16 percent compared with the corresponding quarter in the previous year and were EUR 84.9 (73.4) million. Operating profit was EUR 6.3 (4.8) million. Operating profit as a percentage of net sales improved from 6 percent in the fourth quarter of 2005 to 7 percent. The fourth quarter feed phosphate volumes in Europe were higher than in the previous year and prices were slightly higher than in the corresponding period in 2005. Sales volumes of Process Chemicals decreased compared with the fourth quarter of the previous year. Total effect of volume changes on Industrial Solutions' operating profit was approximately EUR 1 million negative compared with the corresponding period in 2005. Increased prices of all products within the Industrial Solutions business unit improved operating profit by about EUR 2 million. On the other hand, mainly unrealized fair value changes of natural gas derivatives, EUR -0.7 million, weakened operating profit during the last quarter. In the beginning of October, Kemira GrowHow and Fortum Power and Heat Oy signed an agreement to start a co-operation to increase production of sulphuric acid and energy at Kemira GrowHow's Siilinjärvi plant in Finland. With this project Kemira GrowHow will invest in increasing its sulphuric acid production capacity and Fortum invests in building of a sulphur burning unit in the Siilinjärvi plant area. This new unit will provide raw material for Kemira GrowHow's sulphuric acid production. The sulphur that will be used in the sulphur burning unit is a by-product of the Finnish oil refining industry. The process will also generate heat which will be utilized in electricity production. Sulphuric acid is one of the main raw materials of phosphoric acid produced at the Siilinjärvi plant and it is used in fertilizer and animal feed phosphate production. Implementation of the project started in October 2006 and production is planned to be started at the beginning of 2008. January - December of strategic business units Crop Cultivation Net sales of the Crop Cultivation business unit fell in January - December by 12 percent compared with 2005 and were EUR 895.3 (1,012.5) million. Net sales excluding the effect of the Baltic sales and marketing companies, of which 50 percent were sold to Danish DLA Agro Group at the end of the previous year, decreased by 3 percent. January - December operating result was EUR -0.4 million (operating profit of EUR 30.9 million). The operating result was particularly burdened by expensive natural gas that resulted in shut downs at ammonia plants in the UK and Belgium during the first half of the year. The result was also burdened by the purchase prices of ammonia, which had increased from the previous year, and lower fertilizer sales. Sales prices of nitrogen fertilizers increased from the previous year and improved the result, but price improvements were not sufficient to compensate for the negative effect of higher costs. The result improvement in the last quarter - which was due to the lower price of natural gas than in the previous year and the higher utilization rate of factories - was not sufficient to cover the losses made in the beginning of the year. The result was improved by non-recurring items totalling EUR 12.4 (4.3) million. Operating profit as percentage of net sales, non-recurring items excluded, decreased from approximately 3 percent in 2005 to -1 percent in 2006. After taking into account the effect of the divested Baltic companies on the sales volumes, the January - December 2006 sales volumes fell approximately 6 percent from the previous year. Sales volumes decreased in the British Isles and Continental Europe, but January - December volumes grew compared with the previous year in Eastern Europe and in overseas export. Part of the lower volumes during the last quarter of 2006 is estimated to be postponed sales to 2007. The effect of the sales volumes was approximately EUR 13 million negative compared with 2005. The January - December sales prices of nitrogen fertilizers were, depending on the nitrogen content, on average 10 - 15 percent and sales prices of NPK fertilizers on average 4 - 13 percent higher than last year. Higher sales prices, including the sales prices of traded products, improved the operating result by approximately EUR 38 million. The price of natural gas in 2006 was on average about 15 - 20 percent higher than in the previous year. Higher prices of natural gas and ammonia as well as shut-downs and restarts of ammonia plants and resulting additional costs due to increased ammonia purchases weakened the result by approximately EUR 41 million compared with the previous year. Fair value changes of natural gas derivatives, EUR -6.2 million, weakened the result. In the previous year, operating profit included a total of EUR 3.5 million of the Baltic sales companies' operating profit, whereas in 2006 the share of their results, EUR 0.4 million, is included in financial items below operating profit. Higher prices of potash and electricity raised costs by approximately EUR 11 million. Purchase prices of traded products were also higher than last year, weakening the result by nearly EUR 10 million. In January 2006 Kemira GrowHow and the Danish agricultural distributor cooperative DLA Agro Group established a joint venture, AgrowLine A/S, in Denmark for fertilizer sourcing. Kemira GrowHow owns 50 percent of AgrowLine A/S. Operating activities of AgrowLine A/S started at the beginning of July 2006. The joint venture is consolidated using the equity method. Kemira GrowHow has also become a member of the cooperative DLA Agro Group. At the end of 2005, Kemira GrowHow sold a 50 percent stake in the Baltic sales and marketing companies to Baltic Agro Holding A/S, a company partly owned by the majority of DLA Agro Group members. These companies are therefore consolidated in 2006 as joint ventures using the equity method. At the end of April 2006, Kemira GrowHow and Hankkija-Maatalous agreed on partnering up to develop a new Growth program concept and offer it to farmers in Finland. Following the agreement, Kemira GrowHow Oyj acquired 19 percent of the shares in Hankkija- Maatalous Oy, a Finnish agricultural dealer, from SOK Corporation. The partnership seeks to meet the efficiency challenges facing the entire value chain. Cooperation aims to develop and deploy new solutions that help farmers increase their yields through better expertise and with lower unit costs. The shares in AS Fertimix, a wholly-owned Estonian subsidiary, were sold in August 2006. A minor gain was booked due to the sale. Industrial Solutions Net sales of the Industrial Solutions business unit grew by 6 percent in 2006 and were EUR 309.0 (291.9) million. Operating profit was EUR 19.9 (18.2) million. Shut-downs of ammonia plants and expensive natural gas during the first half of 2006 weakened the result of the Industrial Solutions business unit as well. Higher prices, on the other hand, improved operating profit. Operating profit as a percentage of net sales, non- recurring items excluded, remained at the same 6 percent level as in 2005. During January - December feed phosphate volumes in Europe were above the previous year's level and prices increased slightly. One of the reasons underlying the decline in the sales volumes of Process Chemicals was shut downs at ammonia plants. The total effect of volume changes on operating profit was approximately EUR 8 million negative compared with 2005. Increased prices of all products within the Industrial Solutions business unit improved operating profit by about EUR 15 million. Expensive natural gas weakened the Industrial Solutions business unit's result by approximately EUR 6 million. In addition, the result was weakened by fair value changes of natural gas derivatives, EUR -0.7 million. In March 2006, Kemira GrowHow acquired shares in the Irish company CetPro Limited., which is a joint venture with a Spanish company Maxam Chem S.L. CetPro started production in Tertre, Belgium, during the second quarter. CetPro produces and markets a 2EHN- based cetane improver for diesel fuels to be sold under the Micet brand. This joint venture enables Kemira GrowHow to expand synergistically into a growing downstream market segment. A Greenox AdBlue production line at GrowHow's Harjavalta site in Finland was ready for production by the end of the second quarter. Greenox AdBlue is a urea-based, exhaust gas reducing agent injected into the exhaust gas stream. It is used in diesel engines and it reduces the nitrogen oxide emissions of vehicles. Financing At 31 December 2006, the Group's net interest-bearing liabilities amounted to EUR 185.9 (164.9) million. The proportion of the total amount of the Group's interest-bearing loans represented by fixed interest loans was about 34 (32) percent at the end of the financial year. Pension loans are considered to be floating rate loans. The Group's equity ratio was 37.2 (38.3) percent at the end of the financial year, 31 December 2006. The gearing ratio was 59.5 (48.2) percent. Kemira GrowHow's main liquidity reserve is a syndicated revolving credit facility. The EUR 150 million credit facility is in place until the year 2010. The utilization of the revolving credit facility as of 31 December 2006 was EUR 80 (80) million. Kemira GrowHow also has a EUR 300 million domestic commercial paper program, a long-term bilateral bank loan and pension loans. Other funding sources are financial leasing arrangements and credit facilities with local house banks. At the end of the financial year, 31 December 2006, liquid funds amounted to EUR 20.0 (57.0) million. EUR 170 million of the committed credit facilities of the Group, whether drawn or undrawn, include covenants or other terms and conditions. These terms and conditions do not restrict the use of the respective credit facilities, but they can affect financing of the Group in the future or may require negotiations with the providers of funds. These credit facilities also include a condition that allows the lenders to cancel the facilities and declare outstanding loans due and payable if there is a change of control in Kemira GrowHow Oyj. Cash flow during 2006 was weaker than in the previous year, with cash flow from operations amounting to EUR 3.7 (69.4) million and to EUR -36.1 (22.3) million after investing activities. The main reasons for the decrease in cash flow compared with the previous year were weaker profitability and an increase in net working capital. EUR 9.6 million of 2005 capital expenditure was paid during the first quarter of 2006 affecting the cash flow from investing activities. The sale of holdings in the Baltic sales and marketing companies in 2005 released capital invested in these companies at the beginning of 2006 and improved the financing cash flow by approximately EUR 40 million. Capital expenditure, research and development Gross capital expenditure was EUR 66.3 (61.9) million during 2006. Depreciation and amortization during 2006 were EUR 44.2 (46.3) million. Carbon dioxide emission right allowances, EUR 9.4 (4.4) million, are included in gross capital expenditure. Emission rights were recorded initially at fair value when received, and at year-end they have been valued at fair value of the balance sheet date. The most significant investments in 2006 were related to investments in joint ventures 8CetPro Ltd. and joint ventures in the Baltic countries with DLA Agro Group) and in shares in Hankkija-Maatalous Oy. The modernization of Ince plant which started in 2005 was completed in early 2006. The modernization reduced energy consumption of the ammonia production at the plant. Proceeds from sale of fixed assets were EUR 25.2 (3.4) million and net gains were EUR 12.6 (4.3) million. Cash flow from investing activities during 2006 was EUR -39.9 (-47.1) million. In 2007, capital expenditure (excluding possible acquisitions) is estimated to be approximately EUR 50 million, including maintenance investments of approximately EUR 30 million. The primary task of Kemira GrowHow's research and development is to develop products, services and solutions. The most important R&D projects during 2006 were aimed to commercialize products for various business units. Research and development expenses during 2006 were EUR 3.4 (5.7) million, representing 0.29 (0.45) percent of net sales. Efficiency improvements Several projects aimed to improve profitability were carried out during 2006. The projects improved result in total by nearly EUR 20 million. The projects include among others improvement of energy efficiency, increasing production efficiency, cutting down fixed costs, savings in logistics and development of business in Eastern Europe. Kemira GrowHow's revised gas purchase strategy was taken into use in 2006. Personnel As at 31 December 2006 Kemira GrowHow had 2,489 (2,683) employees. The average number of personnel during 2006 was 2,589 (2,865). The number of personnel has decreased mainly because of efficiency improvements in several countries. The number of personnel in Finland was 1,043 (1,083) at the end of December and 1,080 (1,134) on average during 2006. Environmental issues A new environmental and water management permit was issued in October 2006 to Kemira GrowHow's Siilinjärvi (Finland) mine and plants. The enforcement of the permit is pending due to appeal. The current permit is valid until the appeal process ends. The new permit, after being enforced, will be valid until further notice and the terms of the permit will be reviewed in 2015. Kemira GrowHow estimates that the new environmental permit will not create any new material obligations. Kemira GrowHow estimates that Kemira GrowHow has sufficient carbon dioxide emission right allowances for 2007. Emission right quotas for the 2008 - 2012 period have not as yet been decided. However, on the basis of the preliminary national allocation plans, Kemira GrowHow estimates that the quotas proposed for these years will be sufficient as well. The effect of possible N2O emission right quotas is as yet impossible to estimate, because no decisions have been made on their inclusion in emission trading or on national emission right quotas. Decisions on these matters are expected to be made in the latter half of 2007 at the earliest. The inclusion of N2O emissions in emission right quotas would affect four of Kemira GrowHow's production sites. Board of Directors, Management Team and Auditor Kemira GrowHow Oyj's Annual General Meeting held on 4 April 2006 re-elected Mr Ossi Virolainen as the Chairman of the Board, Mr Lauri Ratia as the Vice Chairman of the Board and Ms Sari Aitokallio, Mr Arto Honkaniemi, Ms Satu Raiski, Ms Helena Terho and Mr Esa Tirkkonen as members of the Board. Kemira GrowHow's Management Team consists of the following persons: Mr Heikki Sirviö, Chief Executive Officer; Mr Kaj Friman, Deputy Chief Executive Officer; Timo Lainto, President, Crop Cultivation Business Unit; Mr Antti Orkola, President, Industrial Solutions Business Unit; Mr Ilkka Kruus, Senior Vice President, Research and Development; Mr Olavi Määttä, Senior Vice President, Crop Cultivation Business Unit; Mr Michael Christensson, Senior Vice President, Industrial Solutions Business Unit and Mr Jukka- Pekka Nieminen, Senior Vice President, Strategic Planning. The persons responsible for steering Kemira GrowHow's support processes are: Mr Heikki Liukas, Senior Vice President, Finance and Treasury; Ms Pirjo Nordman, Senior Vice President, Human Resources; Mr Jussi Ollila, Senior Vice President, Communications (until 31 January 2007); Mr Tuomo Orpana, Senior Vice President, Information Technology; Ms Annica Söderström, Senior Vice President, Risk Management and Mr Veli-Matti Tarvainen, General Counsel (from 18 September 2006). Kemira GrowHow Oyj's Annual General Meeting held on 4 April 2006 re-elected KPMG Oy Ab as the company's auditor, with Mr Petri Kettunen, APA as the responsible auditor. Other material events during the financial year In October 2006 Kemira GrowHow Oyj and Terra Industries Inc. entered into a Memorandum of Understanding which sets out their agreement to create a joint venture to operate the fertilizer and associated process chemicals businesses of both companies in the United Kingdom. The joint venture would be held 50/50 by Kemira GrowHow and Terra and would own and operate the site of Kemira GrowHow UK Limited at Ince and the sites of Terra Nitrogen (UK) Limited on Teesside and Severnside. Both companies produce ammonium nitrate, which is the main nitrogen fertilizer consumed in the UK, and Kemira GrowHow produces also compound fertilizers. The proposed joint venture would therefore provide a complete fertilizer offering for agricultural customers. Through the proposed joint venture, Kemira GrowHow and Terra expect to create significant cost and operational synergies that would enhance their ability to service and compete in increasingly challenging markets. The Memorandum of Understanding is subject, inter alia, to clearance from the UK competition authorities, negotiation of definite documents and lender consent. Events after the balance sheet date The Office of Fair Trading in the UK (OFT) referred the planned joint venture between the Kemira GrowHow and Terra Industries to the Competition Commission (UK) in January 2007. One of the three nitric acid factories of Kemira GrowHow's plant in Tertre, Belgium, suffered a fire in early February. There were no human injuries or environmental damages. According to preliminary estimates, the production interruptions in the nitric acid plant will last approximately 10 weeks. Also fertilizer production at the plant will be reduced during the shut-down. The nitric acid plant is insured for property damage and business interruptions. Market overview In 2006, fertilizer deliveries of European fertilizer producers to Europe fell nearly 6 percent from the previous year. Global fertilizer consumption is expected to increase by over 4 percent during the 2006/07 season. In the longer term, average annual growth in global consumption is expected to remain at about 2 percent. The decline in consumption in Western Europe is compensated for by increasing consumption in Eastern Europe. Consumption of nitrogen, one of the main nutrients, is even projected to increase in the European Union. Global nitrogen fertilizer production capacity is estimated to increase during the next five years, but European fertilizer supply is decreasing as the Greek company PFI has closed AN and NPK production capacity and the French company Grande Paroisse announced the closure of its NPK plants. In addition, the Norwegian company Yara has announced that it will stop fertilizer production at its plant in Sweden and switch to production of technical ammonium nitrate. These closures are estimated to reduce NPK capacity in Western Europe by approximately 15 percent. As a result of the reform of the common agricultural policy of the European Union, farm subsidies were mostly decoupled from production. The full long-term impact of these reforms is still difficult to assess, but they may reduce fertilizer consumption. These reforms and high fertilizer prices were a partial cause for the decline of fertilizer consumption during the season of 2005/06. On the other hand, the expanding cultivation of energy crops is assumed to increase fertilizer use. The European Commission forecasts that farm income in EU will grow at an average annual rate of 1 - 2 percent. Global cereal stocks continue to be the main driver of the fertilizer market. According to the FAO global cereal production in 2005 was 1 percent lower than in 2004, and in 2006 it is estimated to have decreased further by almost 3 percent. In the European Union, cereal production dropped by more than 10 percent in 2005 compared with 2004, mainly due to drought. In 2006 cereal production in the European Union is estimated to have declined further by 4 percent. The European Union has maintained the obligatory set aside agricultural area at 10 percent for the season of 2006/07. However, increasing energy crop cultivation might reduce the area to be set aside. The recovery of world meat production, the surge in bioethanol production in the United States and the currently prevailing rather favourable global economic conditions are expected to result in continuous growth in global cereal demand. Cereal stocks are at a historically low level and they are estimated to further decrease by 14 percent to their lowest level in 25 years. Global market prices for straight fertilizers and their raw materials, such as urea, ammonia, diammonium phosphate and potash, remained at a high level until late spring. During the summer the prices of urea and ammonia decreased slightly, but they strengthened again during the autumn and winter decreasing the pressure of fertilizer imports from outside of Europe. The prices of wheat and other cereals increased strongly during 2006, although the trend in cereal futures anticipates some stabilization. High cereal prices improve the farmers' financial situation and enable additional inputs in cereal production. Improving cereal prices have historically increased fertilizer consumption. During the winter of 2005706 the price of natural gas was very high and exceptionally volatile. This resulted partly from bottlenecks in gas transport capacity, production problems in the North Sea gas fields and technical problems in gas storages. There were also geographical differences in the gas markets, with gas being most expensive in the United Kingdom, Belgium and Northern France. During the spring and summer gas prices returned closer to the normal seasonal level and geographical price differences evened out. During the autumn and early winter a number of new gas pipelines connecting the United Kingdom to the Dutch gas network and to a new gas field in the North Sea were completed. This has decreased gas futures and is expected to improve the effectiveness of gas markets. Furthermore, the European Union has boosted its activities to open up European gas markets in order to guarantee better functionality of the markets. The feed phosphate market in Europe has remained stable. The supply-demand balance of phosphoric acid is anticipated to remain well in balance in the near future. Current outlook Fertilizer demand is expected to grow during the first half of 2007 and to be higher than during the corresponding period of 2006. Fertilizer prices are expected to remain at a high level during the first half of 2007 at the same time as the price of the most important raw material, natural gas, is estimated to be clearly lower than in 2006. The operations of the Industrial Solutions business unit are expected to continue to develop favourably. Kemira GrowHow's operating profit for 2007, excluding non-recurring items, is estimated to improve clearly from 2006. All forecasts and estimates mentioned in this report are based on current judgments of the economic environment and the actual result may be significantly different. Kemira GrowHow Oyj Board of Directors For further information, please contact: Kemira GrowHow Oyj Heikki Sirviö, CEO tel. +358 10 215 2442 Kemira GrowHow Oyj Kaj Friman, Deputy CEO, CFO tel. +358 (0)50 62 626 Distribution: Helsinki Stock Exchange Media KEMIRA GROWHOW GROUP FINANCIAL STATEMENTS 1 JANUARY - 31 DECEMBER 2006 The financial information in this stock exchange release is based on the audited financial statements of Kemira GrowHow. The Auditor's Report has been issued on 12 February, 2007. Quarterly information is unaudited. As a result of rounding differences, the figures may not add up to the total. Previous year figures have been adjusted due to restatement. The consolidated financial statements of Kemira GrowHow Group have been prepared in conformity with IFRS standards. Condensed income statement EUR million 10-12/2006 10-12/2005 1-12/2006 1-12/2005 Net sales 282,5 334,5 1 166,2 1 258,2 Other operating income 5,1 6,1 29,6 19,3 Cost of sales -260,0 -330,0 -1 134,2 -1 182,7 Fair value changes of -0,6 0,1 0,8 -2,2 currency derivatives, net Fair value changes of -7,7 0,3 -6,9 0,3 commodity derivatives, net Depreciation, -10,9 -12,2 -44,4 -47,7 amortization and impairment Operating profit/loss 8,5 -1,3 11,1 45,3 Financial income and -3,0 -2,1 -11,0 -9,3 expenses Share of the net result of associated companies and joint ventures -0,2 0,3 0,1 -1,3 Net financial items -3,2 -1,7 -10,8 -10,6 Result before income 5,3 -3,0 0,3 34,6 taxes Income taxes -1,6 -0,2 -6,8 -2,9 Net result 3,7 -3,3 -6,5 31,8 Attributable to minority 0,2 0,0 1,3 0,0 interests Attributable to equity 3,5 -3,3 -7,8 31,8 holders of the parent company Earnings per share, EUR 0,06 -0,05 -0,14 0,56 Operating profit/loss, % 3,0 -0,4 1,0 3,6 of net sales Net profit for the 1,2 -1,0 -0,7 2,5 period, % of net sales Condensed balance sheet EUR million 31.12.2006 31.12.2005 Assets Non-current assets Intangible assets and goodwill 14,9 17,5 Property, plant and equipment and 306,6 318,3 biological assets Holdings in associated companies and 20,4 10,8 joint ventures Available-for-sale shares 15,3 0,9 Other investments 4,5 4,7 Deferred tax assets 33,1 30,9 Defined benefit pension assets 19,1 20,8 Total non-current assets 414,0 403,8 Current assets Inventories 211,5 197,7 Receivables Interest-bearing receivables 3,2 46,6 Accounts receivable and other 195,6 189,6 interest-free receivables Tax receivables 0,6 0,7 Total receivables 199,3 236,9 Securities 3,3 41,2 Cash and bank 16,7 15,8 Total current assets 430,8 491,6 Total assets 844,7 895,4 EUR million 31.12.2006 31.12.2005 Equity and liabilities Equity Share capital 156,0 156,0 Share premium account 8,5 8,5 Other reserves 0,5 0,5 Other non-restricted equity 142,2 154,4 Treasury shares -11,0 -1,7 Fair value reserve - - Hedging reserve 1,5 0,1 Retained earnings and translation 20,3 -8,7 difference Net result for the period -7,8 31,8 attributable to equity holders of the parent company Attributable to equity holders of the 310,1 340,9 parent company Minority interest 2,2 1,0 Total equity 312,2 341,9 Non-current liabilities Non-current interest-bearing 103,9 114,6 liabilities Non-current interest-free liabilities 0,3 1,5 Provisions for liabilities and 2,7 2,7 charges Deferred tax liabilities 15,9 16,8 Defined benefit pension and other 96,3 95,8 long-term employee benefit liabilities Total non-current liabilities 219,2 231,4 Current liabilities Current interest-bearing liabilities 102,0 107,3 Short-term provisions 5,4 4,5 Accounts payable and other current 199,6 210,1 interest-free liabilities Income tax payables 6,3 0,3 Total current liabilities 313,3 322,1 Total liabilities 532,5 553,5 Total equity and liabilities 844,7 895,4 Statement of changes in equity EUR million Share Share Other Other Hedging Fair capital premium reserves non- reserve value account restricted reserve equity Equity at 1 156,0 8,5 0,6 154,4 -0,2 - January, 2005 Cash flow - - - - -0,2 - hedges, recognized in equity Cash flow - - - - 0,6 - hedges, transfer to income statement Other changes - - 0,0 - - - Tax effect of - - - - -0,1 - net income recognized directly in equity Net income - - 0,0 - 0,3 - recognized directly in equity Recognized 0,0 - 0,3 - income and expense for the period Equity at 31 156,0 8,5 0,5 154,4 0,1 - December, 2005 EUR million Share Share Other Other Hedging Fair capital premium reserves non- reserve value account restricted reserve equity Equity at 1 156,0 8,5 0,5 154,4 0,1 - January, 2006 Cash flow - - - - 1,8 - hedges, recognized in equity Cash flow - - - - 0,1 - hedges, transfer to income statement Available-for- - - - - - 0,1 sale shares, change in fair value Available-for- - - - - - -0,1 sale shares, transfer to income statement Divested - - 0,0 - - - subsidiaries Other changes - - 0,0 - - - Tax effect of - - - - -0,5 - net income recognized directly in equity Net income - - 0,0 - 1,4 - recognized directly in equity Recognized - - 0,0 - 1,4 - income and expense for the period Dividends paid - - - -12,2 - - Equity at 31 156,0 8,5 0,5 142,2 1,5 - December, 2006 EUR Treasury Retained Cumulative Attributable Minority Total million shares earnings translation to equity interest equity difference holders of parent company Equity - 8,6 -0,3 327,6 0,9 328,4 at 1 January, 2005 Exchange - - 0,2 0,2 - 0,2 rate differen ces Hedging - - -0,2 -0,2 - -0,2 of net investme nt in foreign entity Cash - - - -0,2 - -0,2 flow hedges, recogniz ed in equity Cash - - - 0,6 - 0,6 flow hedges, transfer to income statemen t Changes - - - - 0,2 0,2 in minority interest Translat - 0,0 0,0 - - - ion differen ces of divested subsidia ries Other - 0,0 - 0,0 - 0,0 changes Acquisit -1,7 - - -1,7 - -1,7 ion of treasury shares Tax - - 0,0 -0,1 - -0,1 effect of net income recogniz ed directly in equity Net -1,7 0,0 0,1 -1,3 0,2 -1,2 income recogniz ed directly in equity Share- - 0,1 - 0,1 - 0,1 based incentiv e plan Share- - 0,0 - 0,0 - 0,0 based incentiv e plan, tax effect Net - 31,8 - 31,8 0,0 31,8 result for the period Recogniz -1,7 31,9 0,1 30,5 0,2 30,7 ed income and expense for the period Dividend - -17,2 - -17,2 -0,1 -17,3 s paid Equity -1,7 23,3 -0,2 340,9 1,0 341,9 at 31 December, 2005 EUR million Treasury Retained Cumulative Attributable Minority Total shares earnings translation to equity equity difference holders of interest parent company Equity at 1 -1,7 23,3 -0,2 340,9 1,0 341,9 January, 2006 Exchange - - 0,0 0,0 0,0 0,0 rate differences Hedging of - - 0,3 0,3 - 0,3 net investment in foreign entity Cash flow - - - 1,8 - 1,8 hedges, recognized in equity Cash flow - - - 0,1 - 0,1 hedges, transfer to income statement Available- - - - 0,1 - 0,1 for-sale shares, change in fair value Available- - - - -0,1 - -0,1 for-sale shares, transfer to income statement Changes in - - - - - - minority interest Divested - 0,0 - - - - subsidiaries Share of - 1,1 - 1,1 - 1,1 changes recognized directly in associates' and joint ventures' equity Other - 0,0 - 0,0 - 0,0 changes Changes in - - - - 0,0 0,0 minority interest Acquisition -9,4 - - -9,4 - -9,4 of treasury shares Tax effect - - 0,1 -0,4 - -0,4 of net income recognized directly in equity Net income -9,4 1,1 0,4 -6,5 0,0 -6,5 recognized directly in equity Share-based - 0,1 - 0,1 - 0,1 incentive plan Share-based - 0,0 - 0,0 - 0,0 incentive plan, tax effect Net result - -7,8 - -7,8 1,3 -6,5 for the period Recognized -9,4 -6,6 0,4 -14,2 1,3 -12,9 income and expense for the period Dividends - -4,4 - -16,6 -0,1 -16,7 paid Equity at 31 -11,0 12,3 0,1 310,1 2,2 312,2 December, 2006 Cash flow statements EUR million 1-12/2006 1-12/2005 Cash flows from operating activities Cash flows from operating activities before change in net working capital 28,9 80,9 Change in net working capital -25,1 -11,5 Net cash flow from operating activities 3,7 69,4 Cash flows from investing activities Acquisition of subsidiary shares -0,8 -2,6 Acquisition of associated company and -3,4 - joint venture shares Other purchases of non-current assets -60,9 -48,0 Proceeds from sale of non-current assets 25,2 3,4 Net cash flow from investing activities -39,9 -47,1 Cash flow before financing activities -36,1 22,3 Cash flows from financing Changes in non-current liabilities -37,5 -36,3 (increase + / decrease -) Changes in non-current loan receivables -1,8 0,3 (increase - / decrease +) Short-term financing, net (increase + / 65,3 12,9 decrease -) Dividends paid -16,7 -17,3 Acquisition of own shares -11,0 - Other financing 0,4 -2,3 Net cash flow from financing -1,3 -42,8 Effect of exchange rate fluctuations 0,5 1,5 Net change in cash and cash equivalents -37,0 -19,0 Cash and cash equivalents at the beginning 57,0 76,0 of the period Cash and cash equivalents at the end of 20,0 57,0 the period Net change in cash and cash equivalents -37,0 -19,0 Key figures 31.12.200 31.12.2005 6 EBITDA, % of net sales (1 4,8 7,4 Operating profit/loss, % of net sales 1,0 3,6 Net result for the period attributable to -0,7 2,5 equity holders of the parent company, % of net sales Gross capital expenditure, EUR million 66,3 61,9 Gross capital expenditure, % of net sales 5,7 4,9 Equity ratio, % 37,2 38,3 Gearing, % 59,5 48,2 Interest-bearing net liabilities, EUR 185,9 164,9 million Invested capital, EUR million 518,1 563,7 Return on equity, % -2,0 9,5 Return on investment, % 2,4 8,3 Number of personnel during the period, 2 589 2 865 average Number of personnel at the end of the 2 489 2 683 period (1 EBITDA = operating profit / loss + depreciation, amortization and impairment Per share data 31.12.2006 31.12.2005 Number of shares at the end of the year, 55 348 56 931 treasury shares excluded (1,000) Weighted average number of shares, 55 519 57 207 treasury shares excluded (1,000) Dividend / share, EUR (* 0,15 0,30 Earnings/share (EPS), EUR -0,14 0,56 Equity attributable to equity holders of 5,60 5,99 the parent company /share, EUR Cash flow from operations/share, EUR 0,07 1,21 Dividend payout ratio, % (* -106,4 53,9 Dividend yield, % (* 2,2 5,0 Price per earnings per share (P/E) ratio -48,14 10,75 Market capitalization, EUR million 375,8 340,4 Number of shares traded, % of average 102 138 number of shares Number of shares traded, (1,000) 56 797 78 663 Closing price for the share, EUR 6,79 5,98 Highest quoted price, EUR 6,82 8,00 Lowest quoted price, EUR 4,11 5,48 Average quoted price, EUR 5,59 6,36 (* The 2006 dividend is the Board of Directors' proposal to the Annual General Meeting. Kemira GrowHow Oyj has not issued options or warrants or similar instruments which would dilute the earnings per share. CONDESATED NOTES TO THE FINANCIAL STATEMENTS Accounting policies The accounting policies applied in the consolidated financial statements of Kemira GrowHow as at and for the year ended 31 December 2006 are the same as those applied by in the consolidated financial statements as at and for the year ended 31 December 2005, with the exception of the following new or revised or amended standards and interpretations, which have been applied from 1 January 2006: - IFRIC 8 Scope of IFRS 2 - IFRIC 4 Determining Whether an Arrangement contains a Lease - Amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates: Net Investment in a Foreign Operation - IFRS 6 Exploration for and Evaluation of Mineral Resources - Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Cash Flow Hedge Accounting of Forecast Intragroup Transactions - Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Financial Guarantee Contracts The new standards and interpretations had no effect on the published 2005 figures so 2005 figures have not been restated due to the application of these standards and interpretations at 1 January 2006. IFRS 6 Exploration for and Evaluation of Mineral Resources might have an impact on Kemira GrowHow's future financial statements if Kemira GrowHow decides to expand its mine in Siilinjärvi, Finland. Other new or amended standards or interpretation are not material for Kemira GrowHow Group. The following new or amended standards and interpretations will be applied from 1 January 2007: - IFRS 7 Financial Instruments: Disclosures - Amendment to IAS 1 Presentation of Financial Statements: Capital Disclosures - IFRIC 9 Reassessment of Embedded Derivatives - IFRIC 10 Interim Financial Reporting and Impairment - IFRIC 11 IFRS 2 - Group and Treasury Share Transactions The new and amended standards will mainly have an effect on the disclosures of the consolidated financial statements. Other new or amended standards or interpretation are not material for Kemira GrowHow Group. Kemira GrowHow will apply the following new or amended standards and interpretations will be applied from 1 January 2009: - IFRS 8 Operating Segments Kemira GrowHow estimates that applying IFRS 8 does not have any material effect on the financial information of Kemira GrowHow. Changes in presentation of financial statements In the second quarter of 2006, Kemira GrowHow changed the way of presenting currency and commodity derivatives in the income statement. Previously Kemira GrowHow's subsidiaries recorded fair value changes of those currency derivatives, which hedge expected future cash flows arising from commercial transactions, immediately as adjustments of net sales or purchases based on the nature of the hedged transaction. After the change, subsidiaries record fair value changes of the currency derivatives, which hedge expected future cash flows, separately within other operating costs. Group treasury hedges the Group's expected future net currency cash flows with currency derivatives, and previously all fair value changes of currency derivatives hedging net future cash flows were recorded immediately as financial items. After the change, the part of future net currency cash flow hedging which represents hedging of expected transactions, has been separated, and fair value changes of those hedges are recorded separately within other operating costs. Fair value changes of currency derivatives which hedge currency denominated liabilities and receivables are still recorded as financial items. Also fair value changes of commodity derivatives, which were previously recorded as adjustments of net sales or purchases, are now recorded separately within other operating costs. These changes have changed the consolidated net sales, operating profit and financial items, but they had no effect on the consolidated result. The changes have changed cash flows from operating and financing activities. The result of Kemira GrowHow's ammonia business has previously been recorded as adjustment of ammonia purchases, and net sales of ammonia business as well as all other income and expenses have been recorded as adjustment of purchases. However, the trading of ammonia has grown to be substantial enough to be recognized as a separate business. For this reason Kemira GrowHow has changed the way of recognizing net sales, other income and expenses of the ammonia business and records them currently in the income statement according to their nature as net sales, other income and expenses. These changes have no result effect. Other restatements Kemira GrowHow has restated the balance sheet of 31 December 2004. The restatement concerns a defined benefit medical plan liability and amounts to EUR 0.8 million. The restatement decreases retained earnings by EUR 0.5 million. The result effect of the medical plan on 2005 and 2006 is immaterial. Restated condensed income statement 1-12/2005 Condensed income Before Effect of Restated statement restatement restatement EUR million 1-12/2005 1-12/2005 Net sales 1 220,9 37,3 1 258,2 Other operating income 18,2 1,1 19,3 Cost of sales -1 143,6 -41,0 -1 184,5 Depreciation, -47,7 - -47,7 amortization and impairment Operating profit/loss 47,8 -2,6 45,3 Financial income and -11,9 2,6 -9,3 expenses Share of the net result of associated companies and joint ventures -1,3 - -1,3 Net financial items -13,2 2,6 -10,6 Result before income 34,6 0,0 34,6 taxes Income taxes -2,8 0,0 -2,9 Net result 31,8 0,0 31,8 Attributable to minority 0,0 - 0,0 interests Attributable to equity 31,8 0,0 31,8 holders of the parent company Earnings per share, EUR 0,56 0,00 0,56 Operating profit/loss, % 3,9 -0,3 3,6 of net sales Net profit for the 2,6 -0,1 2,5 period, % of net sales Effect of restatement on cash flow statement 1-12/2005 Cash flow statement Before Effect of Restated restatement restatement EUR million 1-12/2005 1-12/2005 Cash flows from operating activities Cash flows from operating activities before change in net working 81,1 -0,2 80,9 capital Change in net working -11,2 -0,3 -11,5 capital Net cash flow from 69,9 -0,5 69,4 operating activities Net cash flow from -47,1 0,0 -47,1 investing activities Cash flow before 22,8 -0,5 22,3 financing activities Net cash flow from -42,6 -0,2 -42,8 financing Effect of exchange rate 0,7 0,7 1,5 fluctuations Net change in cash and -19,0 0,0 -19,0 cash equivalents Cash and cash 76,0 - 76,0 equivalents at the beginning of the period Cash and cash 57,0 - 57,0 equivalents at the end of the period Net change in cash and -19,0 - -19,0 cash equivalents Effect of restatement on equity ratio and gearing 1-12/2005 Equity ratio, % Before 38,4 restatement Effect of -0,1 restatement Restated 38,3 Gearing, % Before 48,2 restatement Effect of 0,0 restatement Restated 48,2 Effect of restatement quarterly and by segment EUR million Net sales 1-3/2006 10-12/2005 7-9/2005 4-6/2005 1-3/2005 1-12/2005 Crop Cultivati on 201,2 267,9 211,6 260,4 233,9 973,8 Before restateme nt 7,6 5,3 12,5 11,5 9,4 38,7 Effect of restateme nt Net 208,9 273,2 224,1 271,9 243,3 1 012,5 sales Industria l Solutions 75,8 73,4 72,1 72,2 73,7 291,5 Before restateme nt 0,0 0,0 -0,2 0,3 0,3 0,4 Effect of restateme nt Net 75,8 73,4 71,9 72,6 74,0 291,9 sales Internal eliminati ons -11,8 -12,0 -12,6 -10,1 -9,7 -44,3 Before restateme nt 0,0 -0,2 -0,2 -1,5 0,0 -1,9 Effect of restateme nt Net -11,8 -12,2 -12,8 -11,5 -9,7 -46,2 sales Kemira GrowHow total net sales 265,2 329,3 271,1 322,6 297,9 1 220,9 Before restateme nt 7,7 5,2 12,1 10,4 9,7 37,3 Effect of restateme nt Net 272,9 334,5 283,2 333,0 307,6 1 258,2 sales 1-3/2006 10-12/2005 7-9/2005 4-6/2005 1-3/2005 1-12/2005 Operating profit/lo ss Crop Cultivati on -17,8 -5,9 6,4 13,9 18,9 33,4 Before restateme nt -0,6 -0,1 -0,6 -1,3 -0,5 -2,5 Effect of restateme nt -18,4 -5,9 5,7 12,6 18,4 30,9 Operating profit/lo ss Industria l Solutions 0,9 4,8 3,9 4,3 5,2 18,2 Before restateme nt 0,0 0,0 0,0 0,0 0,0 0,0 Effect of restateme nt 0,9 4,8 3,9 4,3 5,2 18,2 Operating profit/lo ss Segments total -16,8 -1,1 10,3 18,2 24,1 51,6 Before restateme nt -0,6 -0,1 -0,6 -1,3 -0,5 -2,5 Effect of restateme nt Segments -17,4 -1,1 9,7 16,9 23,7 49,1 total, operating profit/lo ss Corporate centre and other -1,6 -0,2 -1,1 0,4 -2,9 -3,8 Before restateme nt 0,0 0,0 -0,2 -0,2 0,3 -0,1 Effect of restateme nt -1,7 -0,1 -1,3 0,2 -2,6 -3,9 Operating profit/lo ss Total corporate centre and other, operating profit/lo ss -18,4 -1,3 9,2 18,7 21,2 47,8 Before restateme nt -0,6 0,0 -0,8 -1,5 -0,2 -2,6 Effect of restateme nt Total -19,1 -1,3 8,3 17,1 21,1 45,3 operating profit/lo ss Shares and share capital At the end of the financial year, 31 December 2006, the share capital of Kemira GrowHow Oyj amounted to EUR 155,973,000 consisting of 57,208,857 shares (before the deduction of treasury shares). The shares have no nominal value. Each share, with the exception of the treasury shares, entitles its holder to one vote at the General Meetings of Shareholders of Kemira GrowHow Oyj. Kemira GrowHow Oyj continued to repurchase its own shares during the first quarter based on the authorization granted by the Annual General Meeting held on 6 April 2005. The shares were repurchased at market price through public trading on the Helsinki Stock Exchange. The number of own shares purchased during 2 - 10 January and 10 February - 24 March 2006 was 1,582,800 and the average price per share was EUR 5.92, amounting to EUR 9.4 million in total. The shares repurchased during the first quarter of 2006 represent approximately 2.77 percent of the share capital and votes in Kemira GrowHow Oyj. The repurchased shares have no material effect on the relative holdings of other shareholders of the Company or on their voting power. At 31 December 2006, Kemira GrowHow Oyj held 1,860,700 own shares, representing in total 3.25 percent of the number of issued shares. At the end of the financial year, the quoted price of Kemira GrowHow Oyj shares stood at EUR 6.79. The highest quoted price in 2006 was EUR 6.82 and the lowest was EUR 4.11. The average quoted price in 2006 was EUR 5.59. The share capital had a market value of EUR 375.8 million at the end of 2006. The volume of shares traded during the January - December period was equivalent to 102 percent of the average number of shares outstanding. Equity attributable to equity holders of the parent company was EUR 5.60 (5.99) per share at the end of 2006. The number of shares used in calculating this key ratio has been reduced by the number of treasury shares. As of 31 Decmber 2006, Kemira GrowHow's ownership structure was the following: The Government of Finland 30.0% International institutions 23.6% and nominee registered shareholders Finnish institutions 28.5% Finnish households 14.6% Kemira GrowHow Oyj 3.3% Authorizations of the Board of Directors The Annual General Meeting held on 4 April 2006 authorized the Board of Directors to purchase and dispose of the Company's own shares and to issue new shares. Authorizations have not been used. The authorization for share purchase covers, in addition to shares purchased based on the previous authorization, a maximum of 2,860,442 Company shares. Own shares held by the Company cannot exceed 10 percent of the total number of shares. The shares will be repurchased at market price in public trading at the time of the repurchase. The Annual General Meeting authorized the Board of Directors to dispose of a maximum of 4,721,142 Company shares repurchased by the Company. Through issuance of new shares, the share capital of the Company may be increased, in accordance with the authorization, by a maximum of 5,720,885 shares, corresponding to an aggregate amount of EUR 15,597,300. The amount covered by the authorization corresponds to 10 percent of the shares of the Company as currently registered. In accordance with the authorization, the Board of Directors may deviate from the shareholders' pre-emptive rights to subscribe for Company shares. Authorizations are effective only for a maximum duration of one year from the date of the Annual General Meeting. The Board of Directors of Kemira GrowHow Oyj has no authorization to issue convertible bonds or warrants or options. Share-based incentive plan Kemira GrowHow's Board of Directors decided on 19 December 2006 to adopt a new share-based incentive plan which is based on three performance periods: 2007, 2008 and 2009. The criteria for reward payments are based on the Group's key ratios earnings per share (EPS) and Economic Profit (EP). The possible reward for all performance periods shall be paid as a combination of shares and a cash payment by the end of April 2010. The cash payment will be 1.5 times the value of the shares. The maximum reward per person to be paid for each performance period is limited and will not be more than 12.5 times the monthly gross salary of the person in question at the time when the Board of Directors decides on the final allocated number of shares for the reward period. In order to be entitled to receive the shares and the cash payment, the persons have to be employed by Kemira GrowHow Group at the time the payment takes place. The persons included in the plan must keep any shares that they may have earned up to the worth of their annual salary for as long as they remain employed by the Group. The total number of key persons included in the plan for the 2007 performance period is 52. Contingent liabilities EUR million 31.12.2006 31.12.2005 Mortgages 27,0 24,6 Assets pledged On behalf of own 2,3 2,5 commitments Guarantees On behalf of joint - 4,5 ventures On behalf of others (* 29,5 32,6 Operating leasing commitments Maturity within one year 9,3 9,9 Maturity after one year 27,7 32,5 (* EUR 29.2 (31.8) million of this obligation is related to the guarantees for which Kemira Oyj has issued a counter indemnity to Kemira GrowHow Oyj. The Finnish Supreme Administrative Court gave a decision in April 2004 on Kemira GrowHow's appeal concerning the waste management permit for Kemira GrowHow's Siilinjärvi plant in Finland. Although the Court's decision was negative, the opinion of the management is that this will not have an impact on Kemira GrowHow's financial position. A new environmental and water management permit was issued in October 2006 to Siilinjärvi mine and plants. The enforcement of the permit is pending due to appeal. Kemira GrowHow estimates that the new environmental permit will not create any new material obligations. Derivative instruments 31.12.2006 31.12.2005 EUR million Nominal Fair Nominal Fair value value value value Currency derivatives Forward contracts 181,9 -2,4 139,6 -0,4 of which hedging 1,2 -0,1 2,5 -0,1 net investment in foreign entity Currency options Bought 61,7 0,7 147,6 0,7 Sold 61,7 -0,2 145,5 -0,8 Interest rate derivatives Interest rate swaps 70,0 1,7 70,0 0,0 Interest rate options Bought 10,0 0,3 10,0 0,1 Sold 10,0 0,0 10,0 0,0 Commodity derivatives Swaps 136,2 -7,9 - - Derivative instruments are used only for hedging purposes. Nominal values of derivative instruments do not necessarily correspond with the actual cash flows between the counterparties and do not therefore give a fair view of the risk position of the Group. The fair values are based on market valuation on the date of reporting. Segment information Kemira GrowHow's primary segment is business segment. Kemira GrowHow Group's business segments are Crop Cultivation and Industrial Solutions. Segment information is presented in the tables below. Net sales by segment EUR million 10-12/2006 10-12/2005 1-12/2006 1-12/2005 Net sales Crop Cultivation External sales 206,4 272,8 894,3 1 009,7 Internal sales 0,3 0,5 0,9 2,8 Total 206,7 273,2 895,3 1 012,5 Industrial Solutions External sales 76,1 61,7 271,9 248,5 Internal sales 8,8 11,7 37,1 43,4 Total 84,9 73,4 309,0 291,9 Internal -9,1 -12,2 -38,0 -46,2 eliminations Kemira GrowHow total 282,5 334,5 1 166,2 1 258,2 Result by segment EUR million 10-12/2006 10-12/2005 1-12/2006 1-12/2005 Operating profit Crop Cultivation 5,4 -5,9 -0,4 30,9 Industrial 6,3 4,8 19,9 18,2 Solutions Segments total 11,7 -1,1 19,5 49,1 Corporate centre -3,2 -0,2 -8,4 -3,9 and other Operating profit 8,5 -1,3 11,1 45,3 total Share of joint ventures' and associates' result Crop Cultivation -0,4 0,4 0,1 -0,2 Industrial 0,2 -0,1 0,0 -1,1 Solutions Unallocated - - - - associates Share of joint -0,2 0,3 0,1 -1,3 ventures' and associates' result total Total segment result Crop Cultivation 5,0 -5,5 -0,3 30,7 Industrial 6,5 4,7 19,9 17,2 Solutions Segments total 11,5 -0,8 19,7 47,9 Corporate centre -3,2 -0,2 -8,4 -3,9 and other Total segment result 8,3 -0,9 11,3 44,0 Depreciation, amortization and impairment EUR million Depreciation, 10-12/2006 10-12/2005 1-12/2006 1-12/2005 amortization and impairment Crop 8,2 9,0 33,4 35,8 Cultivation Industrial 2,6 3,0 10,6 11,5 Solutions Segments total 10,8 12,1 44,0 47,3 Corporate 0,1 0,1 0,4 0,4 centre and other Total depreciation, 10,9 12,2 44,4 47,7 amortization and impairment Assets EUR million 12/2006 12/2005 Crop Cultivation 575,9 574,7 Industrial Solutions 193,6 181,5 Corporate centre and unallocated 25,1 11,1 Eliminations -6,7 -7,1 Interest-bearing receivables 3,2 46,6 Tax receivables 0,6 0,7 Deferred tax assets 33,1 30,9 Cash and bank and current investments 20,0 57,0 Total assets 844,7 895,4 Liabilities EUR million 12/2006 12/2005 Crop Cultivation 253,5 268,7 Industrial Solutions 55,6 46,8 Corporate centre and unallocated 7,1 6,1 Eliminations -11,9 -6,9 Interest-bearing liabilities 205,9 221,8 Tax liabilities 6,3 0,3 Deferred tax liabilities 15,9 16,8 Total liabilities 532,5 553,5 Gross capital expenditure EUR million Gross capital expenditure 1-12/2006 1-12/2005 Crop Cultivation 51,2 50,6 Industrial Solutions 15,2 11,3 Corporate centre and unallocated - - Total 66,3 61,9 Quarterly development by strategic business unit EUR million Net sales 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2006 2006 2006 2006 2005 2005 2005 2005 Crop Cultivation External 206,4 238,5 240,7 208,7 272,8 223,5 270,4 243,1 sales Internal 0,3 0,2 0,2 0,2 0,5 0,6 1,5 0,2 sales Total 206,7 238,7 240,9 208,9 273,2 224,1 271,9 243,3 Industrial Solutions External 76,1 68,1 63,5 64,2 61,7 59,7 62,6 64,5 sales Internal 8,8 8,0 8,7 11,6 11,7 12,2 10,0 9,5 sales Total 84,9 76,0 72,2 75,8 73,4 71,9 72,6 74,0 Internal -9,1 -8,2 -8,9 -11,8 -12,2 -12,8 -11,5 -9,7 eliminations Kemira 282,5 306,6 304,2 272,9 334,5 283,2 333,0 307,6 GrowHow total Operating 10-12/ 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ profit/loss 2006 2006 2006 2006 2005 2005 2005 2005 Crop 5,4 13,3 -0,7 -18,4 -5,9 5,7 12,6 18,4 Cultivation 6,3 6,3 6,4 0,9 4,8 3,9 4,3 5,2 Industrial Solutions Segments 11,7 19,5 5,7 -17,4 -1,1 9,7 16,9 23,7 total -3,2 -0,5 -3,1 -1,7 -0,1 -1,3 0,2 -2,6 Corporate centre and other Operating 8,5 19,1 2,6 -19,1 -1,3 8,3 17,1 21,1 profit/loss total Non-recurring items Non-recurring items mainly include capital gains and losses from sale of assets, impairment losses, releases of provisions and restructuring expenses. Non-recurring 1 - 3 4 - 6 7 - 9 10 - 12 2006 items, net , EUR million Crop Cultivation 1,4 3,7 6,0 1,2 12,4 Industrial -0,1 0,0 0,3 0,2 0,4 Solutions Other 0,0 -1,5 0,0 -1,7 -3,1 Total 1,3 2,3 6,3 -0,3 9,6 Non-recurring 1 - 3 4 - 6 7 - 9 10 - 12 2005 items, net , EUR million Crop Cultivation 0,9 1,4 0,7 1,4 4,3 Industrial 0,1 0,0 0,0 0,2 0,3 Solutions Other 0,0 0,0 0,0 0,0 0,0 Total 1,0 1,4 0,7 1,6 4,6 Acquisitions Kemira GrowHow acquired at the end of March 2006 shares in Irish CetPro Limited. Kemira GrowHow consolidates CetPro Group in its financial statements as a joint venture using the equity method from the end of March 2006 as it has obtained 50 percent of control of CetPro by virtue of a shareholders' agreement. Ownership of the shares in CetPro, 49 percent, was transferred to Kemira GrowHow in January 2007. The purchase consideration to be paid, EUR 3 million, was recorded as a liability in the year end 2006 balance sheet. The amount of goodwill included in acquisition cost of the shares is EUR 0.2 million. Goodwill consists of, among others, value added to raw materials produced by Kemira GrowHow when it expands to a new market. In total EUR 2.5 million of purchase consideration has been allocated to intangible assets (customer relationships and trademark). CetPro Group has not had activities and thus no net sales or result from the period before acquisition and consolidation in Kemira GrowHow Group. The net profit of the acquired companies in the result attributable to equity holders of the parent company since the acquisition date is EUR 0.2 million. CetPro Group EUR million Carrying amount Fair value of of acquired net acquired net assets before assets business combination Cash and cash equivalents 0,2 0,2 Tangible assets 0,2 0,2 Intangible assets 0,0 2,5 Net working capital 0,3 0,3 Deferred taxes and income 0,0 -0,3 taxes Total 0,8 2,9 Goodwill 0,2 Total acquisition cost 3,1 Purchase consideration 3,0 Directly attributable cost 0,1 Total 3,1