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