RUUKKI GROUP PLC'S FINANCIAL STATEMENTS REVIEW 1 JANUARY - 31 DECEMBER 2007
SUMMARY
THE TRANSFORMATION OF RUUKKI GROUP INTO INDUSTRIAL GROUP FOCUSING ON WOOD-BASED
PRODUCTS STARTED IN 2007 - BUSINESS OPPORTUNITIES IN RUSSIA HAVING SUBSTANTIAL
ROLE DURING THE CURRENT YEAR
GROUP KEY FIGURES (EUR MILLION)
--------------------------------------------------------------------------------
| | 2007 | 2006 | 2005 |
--------------------------------------------------------------------------------
| | 12 months / | 12 months / | 12 months / |
| | 31 Dec 2007 | 31 Dec 2006 | 31 Dec 2005 |
--------------------------------------------------------------------------------
| Revenue | 213.9 | 125.5 | 91.9 |
--------------------------------------------------------------------------------
| Operating profit (EBIT) | 15.7 | 13.0 | 9.3 |
--------------------------------------------------------------------------------
| Net income | 13.7 | 8.0 | 5.5 |
--------------------------------------------------------------------------------
| Return on equity, % | 5.8 % | 19.1 % | 29.9 % |
--------------------------------------------------------------------------------
| Return on capital employed, % | 8.8 % | 17.7 % | 25.4 % |
--------------------------------------------------------------------------------
| Equity ratio, % | 85.1 % | 60.1 % | 32.9 % |
--------------------------------------------------------------------------------
| Earnings per share, undiluted, | 0.06 | 0.07 | 0.07 |
| EUR | | | |
--------------------------------------------------------------------------------
| Earnings per share, diluted, EUR | 0.06 | 0.06 | 0.05 |
--------------------------------------------------------------------------------
CEO MATTI VIKKULA:
- ”The transformation of Ruukki Group's businesses into an industrial group
focusing on wood-based products proceeds. The expanded investment agreements to
build a sawmill and a pulp mill were signed without prejudice with the Kostroma
region's administration in Russia. Partly associated with the opportunities
identified in Russia the Company successfully executed a share offering in the
summer 2007.”
- ”Ruukki Group's current businesses succeeded extremely well in the financial
year that ended - the profitability of the business operations stood at
record-high level and at the end of the year the previously loss-making
furniture business turned profitable. During this year the structure of the
Group will change and the target-oriented effort on Russian business operations
will continue.”
- ”Ruukki Group has set a long-term target of revenue over EUR one billion and
exceeding the average profitability within the same industry. These targets are
extremely challenging and inspiring - we will aim to the target with our
strengthening organisation with committed people and willingness to win.”
- ”The investments of international forest industry companies in Russia are
still being formed, and on the other hand there is only little practical
experience on execution of the renewed Russian forest code. The needs of
developing infrastructure for large investment projects are significant and
there are no concrete examples of the procedures relating to them and especially
of their implementation. It would be extremely important for the development of
the Russian forest industry that the ongoing projects currently in planning, and
to certain extent implementation phases could proceed in reasonably foreseeable
operational environment.”
RUUKKI GROUP PLC'S FINANCIAL STATEMENTS REVIEW 1 JANUARY - 31 DECEMBER 2007
This Financial Statements Review has been prepared according to the principles
of the International Financial Reporting Standards (IFRS). The presented
information is unaudited.
FINANCIAL PERFORMANCE, SUMMARY
Ruukki Group's consolidated revenue 1-12/2007 totalled EUR 213.9 million
(1-12/2006: EUR 125.5 million). Revenue growth year-over-year was about 71 %.
Comparable pro forma revenue increased approximately 28 % compared to the
previous year.
Group revenue was split by the reporting segments as follows: House Building 29
% (43 %), Sawmill Business 28 % (22 %), Furniture Business 32 % (20 %), Care
Services 8 % (8 %).
Of the total revenue exports accounted for roughly 43 % (32 %).
Earnings before interest and taxes (EBIT) for fiscal year 2007 was EUR 15.7
million (EUR 13.0 m), corresponding to 7.3 % (10.4 %) of revenue. Comparable
2007 EBIT, excluding items not presented in both 2007 and 2006, totalled EUR
13.6 million, whereas last year it was EUR 8.9 million.
There were about EUR 3.5 million expenses, included in 2007 EBIT, related to the
preparations for the Russian Kostroma investment projects (1-12/2006: EUR 0.5
m). The impairment losses for the fiscal year totalled EUR 1.1 million (EUR 0.4
m). The insurance compensations received in the fiscal year were EUR 5.8 million
(EUR 0.1 m). The effect of one-off gains in 2006 on the sales of subsidiaries
and associates totalled EUR 4.9 million.
Earnings before taxes was EUR 19.2 million (EUR 12.2 m) corresponding to about
9.0 % (9.7 %) of revenue.
Net income attributable to equity shareholders for the full year 2007 was EUR
12.7 million (EUR 8.4 m), i.e. 5.9 % (6.7 %) of revenue. Net income including
minority interests for the full year 2007 was EUR 13.7 million (EUR 8.0 m), i.e.
6.4 % (6.4 %) of revenue.
The Board of Directors of Ruukki Group Plc has decided to propose the Annual
General Meeting to be held in spring 2008 a dividend payout of four cents per
share, i.e. totalling approximately EUR 11.6 million.
Especially due the share issues finalised in June and July 2007, Group's equity
ratio increased to 85.1 % (60.1 %) at the year-end.
GROUP KEY FIGURES (EUR MILLION)
--------------------------------------------------------------------------------
| | 2007 | 2006 | 2005 |
--------------------------------------------------------------------------------
| | 12 months / | 12 months / | 12 months / |
| | 31 Dec 2007 | 31 Dec 2006 | 31 Dec 2005 |
--------------------------------------------------------------------------------
| Revenue | 213.9 | 125.5 | 91.9 |
--------------------------------------------------------------------------------
| Operating profit (EBIT) | 15.7 | 13.0 | 9.3 |
--------------------------------------------------------------------------------
| % of revenue | 7.3 % | 10.4 % | 10.2 % |
--------------------------------------------------------------------------------
| Earnings before taxes | 19.2 | 12.2 | 8.5 |
--------------------------------------------------------------------------------
| % of revenue | 9.0 % | 9.7 % | 9.2 % |
--------------------------------------------------------------------------------
| Net income | 13.7 | 8.0 | 5.5 |
--------------------------------------------------------------------------------
| % of revenue | 6.4 % | 6.4 % | 6.0 % |
--------------------------------------------------------------------------------
| Return on equity, % | 5.8 % | 19.1 % | 29.9 % |
--------------------------------------------------------------------------------
| Return on capital employed, % | 8.8 % | 17.7 % | 25.4 % |
--------------------------------------------------------------------------------
| Equity ratio, % | 85.1 % | 60.1 % | 32.9 % |
--------------------------------------------------------------------------------
| Earnings per share, undiluted, | 0.06 | 0.07 | 0.07 |
| EUR | | | |
--------------------------------------------------------------------------------
| Earnings per share, diluted, | 0.06 | 0.06 | 0.05 |
| EUR | | | |
--------------------------------------------------------------------------------
| Equity per share, EUR | 1.41 | 0.42 | 0.26 |
--------------------------------------------------------------------------------
| Average number of shares, | 217,889 | 118,052 | 83,188 |
| undiluted (1,000) | | | |
--------------------------------------------------------------------------------
| Average number of shares, | 221,432 | 135,996 | 106,468 |
| diluted (1,000) | | | |
--------------------------------------------------------------------------------
| Number of shares outstanding, | 290,034 | 135,964 | 93,301 |
| end of period (1,000) | | | |
--------------------------------------------------------------------------------
GROUP STRATEGY AND GUIDANCE FOR 2008
The company's Board has decided to focus the Group's business more intensively
on wood-based operations so that the future industrial operations and
investments will be focused on Russia in particular and on a substantially
larger scale than before.
Ruukki Group's strategic aim is to concentrate on wood processing within the
Northern coniferous wood zone. Group business operations will be focused on
mechanical wood processing, and furthermore on pulp business. The target is to
reach revenue of over EUR one billion by the first half of the 2010 decade, and
the Group EBIT percentage should be in excess of the average profitability
within the same industry.
Ruukki Group's consolidated revenue in 2008 is expected to be about 20 per cent
higher than the 2007 group revenue. The Group's 2008 operating profit (EBIT) in
euros is expected to be at about the same level as during 2007 despite the
cyclical changes in the House Building and Sawmill businesses. Earnings before
taxes for the financial year 2008 are expected to increase by approximately one
fourth. These guidances are based on forecasts by the Group's and subsidiaries'
management, market prognosis in various industries and the Group order book at
the end of 2007. Furthermore, the guidance is valid for the current Group
structure, which is assumed to be unchanged during the full year 2008.
KEY EVENTS DURING THE FINANCIAL YEAR
General
In Spring 2007 Group entered into two investment agreements with Russian
Kostroma region to construct a sawmill and a pulp mill. These agreements
replaced the previous investment agreements signed in December 2007. In case
these investment projects are finalised they will have significant effect on
Group's operations, its geographical focus and its risk position.
In June and July, the parent company Ruukki Group Plc executed a directed paid
share offering and related over-allotment share issue. These share issues were
specifically aimed at partial financing of Kostroma investment projects. By the
share issues the company gathered a net total of approximately EUR 339 million
in equity when taking into account the deferred tax effect related to the share
offering costs.
Russian investments
Ruukki Group targets to implement investment projects in Russia so that as a
result a modern integrated forest industry entity will be created. Also third
parties will be offered opportunities to join the integrate with their own areas
of expertise.
In February 2007, Ruukki Group Plc announced that it had registered investment
agreements concerning a sawmill and a chemi-mechanical market pulp (bleached
chemi thermo mechanical pulp, BCTMP) mill in the investment project register of
the Kostroma region. In May 2007, Ruukki Group made an agreement with the
administration of the Kostroma region to expand the BCTMP mill investment
agreement with a new agreement that was registered by the Kostroma region's
administration at the end of June.
In accordance with the investment agreement registered previously in February
2007, Ruukki Group had the opportunity to invest in a BCTMP mill with an annual
production capacity of 300,000-500,000 tons. Pursuant to the expanded investment
agreement concluded in May and registered in June, Ruukki Group can either
invest in a chemical pulp mill (BKP, bleached kraft pulp) with an annual
production capacity of 800,000 tons or alternatively in the BCTMP mill agreed
upon earlier.
According to the investment agreements Ruukki Group is able to get tax
concessions. The concessions will be given for regional income tax and property
tax, and their amount depends on the final timetable, on the investments costs
and on the profitability of the investment projects.
In November 2007 Ruukki Group made applications, both for the sawmill project
and for the pulp mill project, for the priority investor status related to
forest harvesting rights. If Ruukki Group will be granted the priority investor
status, a 50 per cent discount on forest rents will be given and the forest
areas can be leased without the auction process that would otherwise be
followed.
The combined total wood consumption of the 500,000 cubic meters conifer sawmill
and the 800,000-ton BKP mill planned by Ruukki Group will, if realised, reach
over four million cubic meters of industrially usable wood per year. To enable
this, in conjunction with signing the investment agreements it was agreed with
the Kostroma region that the annual harvesting rights included in the investment
agreements can be increased from the previously agreed 2.5 - 3.1 million cubic
meters to a total of 6.0 million cubic meters per year.
The planning and preparations for the pulp mill are currently in process with
BKP as the primary alternative. The ongoing pre-engineering study thereby will
be finalised during summer 2008. In case the pulp mill will be constructed as a
BKP mill, for example the development of special steel prices will be affecting
the final amount of the investment.
Based on current information and calculations, Ruukki Group estimates the total
investments in the BKP mill and sawmill and in the necessary harvesting and
transport machinery to be approximately EUR 1.1 billion. The total investment
will however essentially depend on the technical set-up and the annual
production capacity of the pulp mill.
It is targeted that the sawmill starts its production at the end of 2008 if
needed permits from authorities and required forest resources have been granted
promptly. Especially important in relation to the timetable is that the pending
priority investor status has been given during the first quarter of 2008. The
targeted start-up for the planned pulp mill is at the end of 2010. To be able to
reach that timetable is also dependant upon the availability of needed permits
and raw material resources. The planned location for the pulp mill and sawmill
is the city of Manturovo on the Unzha River in the Kostroma region some 600 km
northeast of Moscow.
The sawmill business segment signed in autumn 2007 purchase agreements with
Heinolan Sahakoneet Oy, which belongs to Sorb Industri Ab, for the main
production machinery and equipment for the Kostroma sawmill. The annual capacity
of the sawmill is set at 500,000 cubic meters of sawn wood per year, to be
produced in three shifts. Moreover, Ruukki Group has delivery agreements for the
Kostroma sawmill in place for the log sorting and feeder machinery and equipment
with Nordautomation Oy, for the kilns with WSAB Oy, for the debarking equipment
with Valon Kone Oy and for the bio energy boiler plant utilising the bark of
logs for Wärtsilä Biopower Oy.
Furthermore, large-scale frame agreement was signed with John Deere in autumn.
This agreement includes the delivery of harvesters and forwarders to the planned
harvesting operations in Kostroma regions, as well as the related training and
spare parts services.
In August Ruukki Group's Russian subsidiary made rental agreements in Manturovo,
Kostroma for the land plots to be used for both the planned sawmill and the pulp
mill. In conjunction with the preparations ongoing for the pulp mill project the
Group has purchased certain old buildings situated on the site with the purpose
of mainly demolishing them later.
The final implementation of the investments also depends on obtaining
environmental and other official permits in Russia, as well as a number of other
factors. At this time, no assurance can be given that such permits will be
obtained or that favourable decisions will be made by the relevant authorities.
Share offerings
On 12 June 2007 Ruukki Group Plc's Extraordinary General Meeting decided on a
directed paid share offering, in which a minimum of 100,000,000 and a maximum of
130,000,000 new shares were to be offered. The share offering's success met the
company's expectations, and the number of subscription commitments clearly
exceeded the number of new shares to be offered. Based on the subscription
commitments submitted by institutional investors in the book building process,
the final subscription price was confirmed at EUR 2.30 per share. Ruukki Group
Plc's Board of Directors decided on 21 June 2007, in accordance with the general
meeting decision, to execute the share offering. In addition, Ruukki Group's
Board decided in June, in accordance with the share offering's terms and
conditions, to give Evli Bank Plc, the manager of the issue, the right to
subscribe for up to 19,500,000 new shares at a subscription price of EUR 2.30
per share to cover the over-allotment. Resulting from the offerings of a total
of 149,500,000 shares less the estimated costs net of deferred taxes, Ruukki
Group received altogether EUR 339 million equity.
In the same context, the company's Board approved the allocation of new shares
to investors who had made subscription commitments, the total number of who at
the final subscription price level were 363. In accordance with the share
offering's terms and conditions, at least one third of the minimum amount of new
shares offered were reserved for the company's current shareholders and
comparable parties.
In accordance with the terms and conditions of the issue, the subscription price
was recognised in full in the paid-up unrestricted equity fund. At the end of
financial year 2007 the funds received from the share issues are to major extent
placed in short-term euro-denominated deposits or diversified money market
mutual funds. About one tenth of those funds were at the end of 2007 placed in
short-term rouble-denominated deposits.
Acquisitions
In February 2007, Ruukki Group Plc carried out an ownership arrangement
concerning Incap Furniture Oy, the furniture manufacturer, taking part in its
directed share issue. After all share and financing transactions finalised
during the financial year, Ruukki Group owned altogether 71.0 % of Incap
Furniture's shares at the end of the year. At the end of 2006 the corresponding
ownership was about 47.3 %. Due to the effect of the joint financing package of
shareholders and providers of finance, the financial situation of Incap
Furniture was strengthened in this conjunction by about EUR 3 million. Through
the options issued by Incap Furniture Oy, Ruukki Group Plc's holding may
decrease to about 65 per cent, if all the options are exercised. A total of EUR
0.9 million of Ruukki Group's cash assets was tied up in this arrangement.
Through a transaction carried out in March 2007, Ruukki Group Plc acquired
approximately 68% of Oplax Oy's stock. Oplax Oy had previously been an
associated company. After the acquisition Ruukki Group has held the entire stock
of Oplax Oy. Oplax Oy is engaged in the production of wooden packaging products
and packaging pallets and the provision of logistics services in Oulu, Tornio
and Kemi. Oplax Oy annually produces over one million packaging pallets, using
about 30,000 m3 of timber. Oplax Oy has been consolidated in the Ruukki Group's
sawmill business area as a Group company since March 2007.
In June, Pohjolan Design-Talo Oy, the parent company of Ruukki Group's house
building business segment, acquired a majority holding in Pohjolan Design-Sähkö
Oy, a non-Group electrical contractor company, at a price of EUR 1.5 million.
Pohjolan Design-Sähkö has previously been a long-term subcontractor and partner
of Pohjolan Design-Talo. After the transaction, Ruukki Group has a consolidated
holding of about 63.2 % in Pohjolan Design-Sähkö Oy, which has been renamed as
RG Design-Talotekniikka Oy. The company's operating management retains a
minority holding in the company.
As part of the Group's strategic restructuring, in December 2007 a letter of
intent was signed of the sale of all the shares of Pan-Oston Oy, a subsidiary in
Other Businesses, metal industry. The closing of the divestment did occur in the
beginning of January 2008.
Other events
The Annual General Meeting held in April 2007 decided to pay out a dividend of
EUR 0.03 per share, partly amend the Articles of Association, execute a bonus
share offering to pay for the additional transaction price liabilities relating
to old share exchange agreements and update the terms and conditions of the
I/2005 option program as enabled by the new Companies Act. The Annual General
Meeting re-elected the existing Board in its entirety and the auditors.
Additionally, the Annual General Meeting authorised the Board to decide on a
share issue and on granting options and other special rights that give
entitlement to shares. By virtue of this authorisation, the maximum number of
shares to be issued in one or more lots is 25,000,000 new shares or Ruukki Group
shares already held in the company's treasury, corresponding approximately 18 %
of total number of registered shares at the moment when decision was made and
approximately 8.6 per cent of the total number of shares registered on 31
December 2007. Based on this authorisation the board of directors has issued
300,000 shares to CEO Matti Vikkula in June 2007 and decided in December 2007 to
set up new management incentive scheme with a maximum of 7,350,000 share
options. The share issue authorisation given by the Annual General Meeting is
valid until 20 April 2009.
An Extraordinary General Meeting held in June decided, in accordance with the
Board proposal, to execute a paid directed share offering and related
over-allotment share issue option primarily to finance part of planned
investments in Russia. Arno Pelkonen and Timo Poranen were elected as new
members to Ruukki Group Plc's Board of Directors, and Fredrik Danielsson and
Timo Honkala left the Board. The company's Articles of Association were amended
in part, for example, by adding Ruukki Group Plc as the company's English
business name.
In May 2007, Ruukki Group Plc's Board decided to revise the company's dividend
distribution policy. The number of dividends distributed by the Company in the
future will depend on the Company's financial status, need for capital and other
factors. The planned investments to Russia will restrict the company's
possibility to distribute dividends in the coming years. It is possible that no
dividend at all will be distributed on the company's shares in the next few
years.
The Lestijärvi factory of Ruukki Group's furniture business segment was to major
extent destroyed by a fire that took place at the end of June 2007. The
insurance compensations, net of impairment losses, related to the fire totalled
EUR 4.3 million in financial year 2007. There are no major pending insurance
processes at the end of 2007. The operations and production in Lestijärvi were
decided to be terminated. Based on that decision and after the co-determination
negotiations process forty employees were given immediate notice after due to
financial and production-related reasons. The costs related to workforce layoffs
or relocating, and factory closure were not substantial.
In June, Ruukki Group Plc's Board appointed Matti Vikkula, M.Sc. (Econ.) as the
company's new CEO. He commenced as CEO in the beginning of September 2007.
The Extraordinary General Meeting of 12 June 2007 elected Timo Poranen, M.Sc.
(Eng.) and Arno Pelkonen, M.Sc. (Econ.) as new members of the company's Board.
Mr. Arno Pelkonen resigned from the Board on 25 January 2008.
Ruukki Group Plc's Board of Directors decided in May 2007 to establish an Audit
Committee. In August Matti Lainema (committee chairman), Mikko Haapanen and Timo
Poranen were appointed as members of the Audit Committee.
There will be a separate summary at company's webpage www.ruukkigroup.fi of all
stock exchange releases and investor news published during 2007.
EVENTS AFTER THE BALANCE SHEET DATE
In January 2008 Ruukki Group acquired a majority interest in Junnikkala Oy and
the group it forms. Junnikkala group practises sawmill business in Kalajoki,
Ostrobothnia, and its subsidiary Juneropt Oy specialises in further processing
of sawn wood targeted especially for prefabricated housing business. The annual
production capacity of the Junnikkala sawmill is at present 130,000 cubic meters
of sawn wood. At the same time, Junnikkala Oy acquired all shares of Pyyn Saha
ja Höyläämö Oy, which operates in Oulainen. The current annual production
capacity of Pyyn Saha ja Höyläämö Oy is close to 40,000 cubic meters. The
business and investment plans for the newly formatted Junnikkala group are
based on increasing the total combined capacity to 300,000 cubic meters during
the next two to three years. In addition, further processing will be developed
in the planing and painting operations. The Oulainen sawmill will be focusing
on sawing smaller logs, whereas Kalajoki sawmill will be concentrating on
further processing in addition to sawing operations. The consolidated revenue
of the newly formed Junnikkala group totalled nearly EUR 50 million in 2007 and
the profitability was positive. As a result of these arrangements, the annual
production capacity of Ruukki Group's sawmill business will increase
immediately from approximately 200,000 cubic meters to nearly 400,000 cubic
meters, and by 2010 the total capacity is to reach 500,000 cubic meters level.
In January 2008 it was announced that the board of directors of Ruukki Group has
decided to explore opportunities to make structural arrangements in the house
building business segment and in the care services segment with a target to
dispose of those businesses.
The implementation of the investment agreements is continuing by Ruukki Group
and its Russian subsidiary according to the investment agreements. In order to
get the needed forest resources in the Kostroman region in accordance with the
new Russian Forest Code, Ruukki Group's Russian subsidiary filed in November
2007 applications for the so-called priority investor status within the Kostroma
region's administration. At the date of the announcement of this Financial
Statements Review the processes related to these applications are open. On 17
January 2008 initiative was presented by the Kostroma region to make amendments
in the investment agreements. For this purpose both parties have nominated
experts into joint working groups to handle the issue. The claims by Kostroman
region's administration to change the tax concessions and the forest harvesting
rights are not based on the registered investment agreements. The priority
investor status applications will be actively processed further with the
Kostroma region's administration. The confirmation of the priority investor
status will be done by the responsible ministry of the Russian Federation.
DEVELOPMENT BY BUSINESS SEGMENT
House Building
The house building business area specialises in the design, manufacture and
assembly of ready-to-move-in detached wooden houses in the whole of Finland. The
business area's customers are Finnish families and private persons.
The House Building business area has delivered wooden ready-to-move-in houses to
customers as follows:
--------------------------------------------------------------------------------
| 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| 473 | 458 | 146 | 141 |
--------------------------------------------------------------------------------
Revenue and operating profit of the House Building segment:
--------------------------------------------------------------------------------
| in EUR million | 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| Revenue | 62.4 | 53.7 | 19.9 | 16.0 |
--------------------------------------------------------------------------------
| EBIT | 13.3 | 13.4 | 4.8 | 4.1 |
--------------------------------------------------------------------------------
| EBIT margin, % | 21.4 % | 24.9 % | 23.9 % | 25.4 % |
--------------------------------------------------------------------------------
The revenue from ready-to-move-in houses delivered by the business area is
recognised upon delivery to the customer, for which reason sites in progress
have no effect on the Group's revenue or profit.
The steep and rapid climb of the costs of raw materials and supplies in the
first half of 2007 weakened the relative operating profitability. The cost
increases started to level off in the autumn. The number of houses delivered to
customers increased slightly from the previous year. Business area's revenue
grew more than the volume of delivered houses due to an increase in the average
selling price and since starting from June 2007 electricity contractor
subsidiary acquired has been consolidated into the segment. Deliveries in the
house building business are generally very seasonal, which in practice means
that more deliveries are made during the first, and particularly the fourth,
quarters than over the summer. However, during 2007 the timing of deliveries
differed slightly from the historical seasonal variation.
The business area's order book excluding VAT stood at approximately EUR 17.9
million at the end of 2007 (31 Dec 2006: EUR 36.0 m). The order book contains no
significant risks. At the end of the review period, the house building area's
personnel totalled 118 (31 Dec 2006: 101).
The following companies belong to the segment: the parent company of the group
Pohjolan Design-Talo Oy (Ruukki Group Oyj owns 90.1 %) and its subsidiaries
Nivaelement Oy (100 %) and RG Design-Talotekniikka Oy (Pohjolan Design-Talo Oy
owns 70,1 %).
Sawmill Business
The Sawmill Business segment specialises in the efficient processing of softwood
logs from Northern Finland into various timber products for both domestic and
export markets. The construction industry forms the business area's main
customer group in both Finland and elsewhere, because the Group's products are
very well suited to house building thanks to their strength properties.
Revenue and operating profit of the Sawmill Business segment:
--------------------------------------------------------------------------------
| in EUR million | 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| Revenue | 59.4 | 27.8 | 14.4 | 9.7 |
--------------------------------------------------------------------------------
| EBIT | 5.4 | 1.4 | -0.5 | 0.1 |
--------------------------------------------------------------------------------
| EBIT margin, % | 9.0 % | 4.9 % | -3.3 % | 1.0 % |
--------------------------------------------------------------------------------
In the segment's operating profit (EBIT) for the 2007 last quarter, there are
altogether EUR 0.8 million expenses included related to the Russian projects
(1-12/2006: EUR 0.0 m) and about EUR 1.1 million for the full financial year
2007 (1-12/2006: EUR 0.0 m).
Excluding the Russian investment projects' expenses, the operating profit (EBIT)
of the Sawmill Business totalled EUR 0.4 million for the last quarter of 2007
(1-12/2006: EUR 0.1 m). The corresponding EBIT margin of the domestic operations
was 2.5 % (10-12/2006: 1.3 %) of revenue. For the full financial year 2007 the
domestic operations' EBIT totalled EUR 6.4 million (EUR 1.4 m), which is 10.8 %
(5.0 %) of revenue. A one-off insurance compensation of EUR 0.4 was recognised
during the first quarter of 2007.
Both the market prices of the end-products and the costs of raw materials and
transportation have risen, the net result of which the profit and relative
profitability have improved during 2007. The log stumpage prices have levelled
off during the autumn. Market demand for the products of the business segment
has been strong in Finland as well as in export markets, but especially abroad
there has been deterioration the market situation from the end of the financial
year 2007. There have been many factors affecting the whole sector that have
lowered the profitability of the segment: declining exports prices, weak demand
abroad, profound structural changes in the Finnish forest industry and the
implications of the introduced Russian round wood duties into the business
environment.
The exports accounted about 42 % of the Sawmill segment's revenue (1-12/2006: 56
%). The order book excluding VAT was approximately EUR 8.9 million (1-12/2006:
EUR 13.2 m). There were totally 112 employees employed by the segment at the end
of 2007 (31.12.2006: 72).
The coniferous sawmill planned in the Kostroma region, Russia, is still at the
preparation phase. During 2007 the total costs recognised in the group profit
and loss account related to the investment projects in Kostroma were EUR 3.5
million (for the previous financial year EUR 0.5 million). Furthermore,
prepayments on the investments have been paid. During the last quarter of 2007,
the Kostroma projects' expenses totalled about EUR 0.8 million, which almost
fully has been related to the sawmill business.
After the financial year 2007 Junnikkala group has been acquired into the
Sawmill Business segment (Ruukki Group's ownership share 51 %), which will to a
large extent increase the revenue of the segment in 2008. When the new acquired
unit is integrated, the target is to intensify the co-operation of various
sawmills and to get synergy benefits in for example purchases.
The major subsidiaries of the segment are: Lappipaneli Oy (100 %), Tervolan Saha
ja Höyläämö Oy (91.4 %), Oplax Oy (100 %) and Ruukki Invest Oy (100 %), which
has a Russian subsidiary OOO Ruukki Invest Oy Kostroma.
Furniture Business
The Furniture Business segment manufactures wooden, ready-to-assemble furniture
at four production plants in Finland.
Revenue and operating profit of the Furniture segment:
--------------------------------------------------------------------------------
| in EUR million | 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| Revenue | 68.7 | 25.7 | 25.0 | 0.0 |
--------------------------------------------------------------------------------
| EBIT | 2.6 | -5.3 | 3.1 | -1.7 |
--------------------------------------------------------------------------------
| EBIT margin, % | 3.8 % | -20.8 % | 12.2 % | - |
--------------------------------------------------------------------------------
In the above table the EBIT includes both the shares of profit relating to
holdings in associated companies corresponding with the Group's respective
holdings and all income statement items corresponding with holdings in
subsidiaries. In January and February 2007 the furniture business company Incap
Furniture and all of its subsidiaries were associated companies of Ruukki Group,
and from March 2007 onwards subsidiaries.
The business environment of the furniture business has continued to be very
challenging, and the operating result without non-recurring items has remained
negative. However, during the last quarter of the financial year, the operative
volumes and capacity utilisation increased notably and the business area's
profit before non-recurring items returned to profit. During the year 2007 a net
insurance compensation in total of approximately EUR 5.4 million has been
recognised, by for the same period a EUR 1.1 million impairment of inventories
has been booked as well. At the end of the accounting period, the area's order
book excluding VAT stood at approximately EUR 10.4 million. On 31 December 2007,
the segment employed a total of 331 people.
The following companies belong to the segment: Incap Furniture Oy (Ruukki
Group's ownership 71.0 %) and its subsidiaries.
Care Services
The Care Services business area provides high-quality care and rehabilitation
services for municipalities, cities, communities and businesses.
Revenue and operating profit of the Care Services segment:
--------------------------------------------------------------------------------
| in EUR million | 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| Revenue | 16.8 | 9.8 | 4.5 | 3.3 |
--------------------------------------------------------------------------------
| EBIT | 0.3 | 0.6 | -0.4 | -0.1 |
--------------------------------------------------------------------------------
| EBIT margin, % | 1.6 % | 6.2 % | -8.2 % | -3.7 % |
--------------------------------------------------------------------------------
During the financial year 2007, the organic growth of the business was strong as
a result of new service unit openings and the Mendis acquisition carried out
last year. During the last quarter of 2007 the business segment's expenses were
above the average due to the autumn salary increases, the personnel or premises
costs for new or planned care services units as well as one-off purchases at the
existing care homes.
At the end of the accounting period, the business area employed 344 persons (229
on 31 Dec 2006). The structure of the subgroup will be simplified further in
2008 by merging one of the subsidiaries into the parent company. The business
area has service units in 21 locations, and the combined number of these unit's
customers was about 550 at year end (420 on 31 Dec 2006).
The comparable increase in the revenue of the care services business area was
approximately 30%, when eliminating the effect of the acquisition of
Terveyspalvelut Mendis Oy during the 2006 financial year. Correspondingly, the
comparable change in operating profit is about -75%.
The following companies belong to the segment: the parent company of the group
Mikeva Oy (100 %) and its subsidiaries Mikon Kuntoutuskodit Oy (100 %) and
Terveyspalvelut Mendis Oy (100 %) that also has Mendis Palvelukodit Oy (100 %)
as its subsidiary.
Other Businesses
In addition, Ruukki Group has business operations within the metal industry that
are not reported as separate segments as well as some holdings in associated
companies.
The following companies belong to the metal industry sub-group: Alumni Oy (100
%) and its subsidiaries Pan-Oston Oy (100 %), the entire stock of which was sold
upon transactions carried out on 2 January 2008, and Selka-line Oy (100 %).
During the accounting period 2007, the metal industry sub-group's revenue was
EUR 8.2 million (EUR 8.2 million in 2006) of which Pan-Oston Oy generated about
65 %, and operating profit EUR 0.1 million (EUR 0.3 million in 2006).
Ruukki Group Plc also has some minority holdings in Finnish companies that
operate in logistics and ICT businesses. The combined profit effect of
associates was approximately EUR 0.1 million in 2007 (EUR 0.4 million in 2006).
The profit effect of associates belonging to sawmill and furniture business
segments is presented within the operating profit of these segments. During the
accounting period 2007 Ruukki Group Plc reduced its ownership in Valtimo
Components Oyj from 39.2 % to 24.9 %. All the associates have been consolidated
in the consolidated financial statements by applying the equity method.
GROUP EMPLOYEES
At the end of the financial year Ruukki Group's number of employees was 958
(2006: 452), and accordingly for the parent company 7 (5). The average headcount
was 866 (579) during the financial year. Group's personnel expenses were EUR
32,037,200.86 (18,368,867.34) for 2007 (2006). There were altogether EUR
576,147.77 (105,304.50) expenses recognised in the profit and loss account based
on option and other share-based payments as depicted by IFRS 2 standard.
The Group has several different business areas. The number of personnel,
geographical location and tasks vary significantly between the business
segments. The number of personnel by segment was the following at the end of the
accounting period:
--------------------------------------------------------------------------------
| | 31 Dec 2007 | 31 Dec 2006 |
--------------------------------------------------------------------------------
| House Building | 118 | 101 |
--------------------------------------------------------------------------------
| Sawmill Business | 112 | 72 |
--------------------------------------------------------------------------------
| Furniture Business * | 331 | 0 |
--------------------------------------------------------------------------------
| Care Services | 344 | 229 |
--------------------------------------------------------------------------------
| Other Operations | 46 | 45 |
--------------------------------------------------------------------------------
| Group management | 7 | 5 |
--------------------------------------------------------------------------------
| Total personnel | 958 | 452 |
--------------------------------------------------------------------------------
* Incap Furniture Oy was an associate on 31 Dec 2006
In the care services business area there are authority requirements in relation
to the relative number of personnel (in proportion to the number of customer
units) and the educational level of the personnel.
OUTLOOK FOR THE FUTURE
The company's Board has decided to focus the Group's business more intensively
on wood-based operations so that the future industrial operations and
investments will be focused on Russia in particular and on a substantially
larger scale than before.
Ruukki Group's strategic aim is to concentrate on wood processing within the
Northern coniferous wood zone. Group business operations will be focused on
mechanical wood processing, and furthermore on pulp business. The target is to
reach revenue of over EUR one billion by the first half of the 2010 decade, and
the Group EBIT percentage should be in excess of the average profitability
within the same industry. Ruukki Group Plc's Board of Directors has decided to
set a long-term goal of having equity ratio of 40 per cent at the group level.
Considering the Group's size, the planned projects, particularly relating to the
planned pulp business, are extremely large and entail a number of different
kinds of risks for both implementation and investment processes as well as the
business operation phase.
Ruukki Group's consolidated revenue in 2008 is expected to be about 20 per cent
higher than the 2007 group revenue. The Group's 2008 operating profit (EBIT) in
euros is expected to be at about the same level as during 2007 despite the
cyclical changes in the House Building and Sawmill businesses. Earnings before
taxes for the financial year 2008 are expected to increase by approximately one
fourth. These guidances are based on forecasts by the Group's and subsidiaries'
management, market prognosis in various industries and the Group order book at
the end of 2007. Furthermore, the guidance is valid for the current Group
structure, which is assumed to be unchanged during the full year 2008.
Future outlook for each segment's market development:
House Building
There are signs that the rapid growth of the detached house market in recent
years has levelled off; this may affect the number of detached house deliveries
during next year, and therefore it is generally expected that the amount of
house deliveries will fall from the level achieved in 2007.
Competition, especially in the ready-to-move-in niche, can be harder and affect
the needed marketing resources and the average sales prices.
Changes in market interest rates or the prices of production inputs may have a
negative impact on the short-term and long-term performance of the business.
Sawmill Business
After the positive markets and rapid hike in the sales prices last year, the
future market situation is expected to be challenging. Especially in the export
market a negative change in the prices and demand is expected in the near
future.
The price of standing timber is expected to stabilise, but it is likely that the
proportion of raw material imported from Russia to Finland will shrink, which
might have considerable impact on future availability and price of raw
materials.
The volume and geographic distribution of the production capacity in the sector
is likely to change, and the focus in new investments probably will be on the
areas neighbouring Finland.
Furniture Business
In the furniture business the operating environment is estimated to improve in
general from previous years, but possible changes may rapidly affect the
situation.
In short-term, demand is expected to be high, but the conditions can change
rapidly during the second half of 2008.
Care Services
The bidding competitions and service outsourcing from the public sector to
private operators offer good growth opportunities for the field, particularly in
elderly care and mental health services.
Availability of competent workforce and rise in personnel costs due to given
material rises in salaries are factors that can slow down growth in the field
and affect the short-term profitability.
RISKS RELATED TO OPERATIONS
In addition to the issues presented below, the risks on businesses and
investment projects have been described in the share offering prospectus
published on 13 June 2007.
STRATEGIC RISKS
Competitive situation and position in the production chain
The competitive situation is expected to remain strong or tighten in the
company's key business sectors and main markets. This might affect the Group's
profitability through unfavourable development in sales prices and price of raw
materials. The Group aims to intensify its production and service processes
which will guarantee sustained competitiveness as well as sufficient capacity
and quality.
The house building business area deals directly with customers, which means that
it has a responsibility toward the end clients for a package delivery of
ready-to-move-in houses. However, in the production and delivery process
subcontractors play a significant role as they increase the division's
flexibility and ability to react to major market changes. The sawmill business
area is involved in the relatively early stages of the processing chain and
delivers part of its production output to other processing plants or the
wholesale industry. This may affect its ability to react to major structural
changes affecting the sector.
Geographic and political risks and customer concentration
The Group companies' production facilities, personnel, and customers are mainly
located in Finland. The Group previously operated mainly in Finnish markets, but
a growing share of customers are abroad. Geographical decentralisation has
decreased the direct impact of home markets especially in sawmill and furniture
business areas. However, the risk arising from unfavourable development in
individual market areas or changes in their currencies may continue to be
significant.
The Group's new strategy to explore and implement business opportunities in
Russia will presumably increase geographical risks related to operating in
Russia. The execution and timing of investment projects in Russia are
considerably depending on obtaining permits from the Russian Federation, local
regional administration and municipal authorities of the locality where the
planned production facilities are situated. The execution of the investment
projects also requires that the Group obtains the obligatory permits and
harvesting and other rights stipulated by law, as well as existence and
construction of adequate infrastructure.
The relative importance of Japanese export markets in the sawmill business and
the house building business in Finland are high even if individual customers are
not very significant. In the pallet manufacturer unit, the number of customers
is small but the company has entered into partnerships as well as long-term
delivery agreements with the customers. This decreases the risk arising from
centralised customers. An individual customer may, however, entail a significant
risk in the furniture business, which may significantly affect the segment's
business. The care services business area is subject to licence, and the key
customer group consists of Finnish municipalities. If for social or regional
policy reasons structural changes were made to the system of outsourcing social
services to the private sector, a major impact could be seen in terms of future
business opportunities in the care services sector.
Risks associated with business reorganisation
A significant proportion of the Group's operations consist of business
reorganisations, which is why the implementation, timing, and pricing of
acquisitions and divestments, as well as integration of these activities at
Group level, have a key impact on both short- and long-term performance. The
estimated synergy benefits related to business reorganisation might be realised
in different time frame and in different magnitude than originally planned.
Moreover, these operations essentially involve various financing arrangements
that typically include covenants that may affect the chances of securing further
financing, or the terms and conditions of such financing. The launch of the
planned new business in Russia involves significant exercising of financing and
investment solutions, involving risks that, especially in the Russian business
environment, are likely to be greater than average. The terms of the needed
financing, especially if the turmoil in the global financial markets, which
started in the second half of 2007, would continue, can be affected for the
coming months and years by these factors.
OPERATIONAL RISKS
Market situation in sectors of operation
The sectors in which the Group operates are clearly different in terms of their
sensitivity to economic fluctuations, their operational profitability, and
volume variations, and the individual divisions have only a very limited amount
of direct co-operation. As a result, the dissimilar and mutually independent
business operations diversify the Group's market risk and reduce the overall
cyclicality of operations. The board's decision to focus on wood-based
industrial business operations is expected to increase the risk related to
changes in the market prices of timber raw materials, especially soft wood logs.
Moreover, the change in the Group structure changes the decentralisation to
different market areas and customer groups.
As the planned sawmill and pulp mill projects are completed, the Group will move
to new business and market areas which would change the Group's risk profile.
Expansion to new business areas will, as realised, have also an effect on
customer and market risks. The planned pulp mill operations are large compared
to the Group's current businesses.
Raw material price and availability risks
The price risk associated with the Group companies' main raw materials should be
relatively easy to manage, and the sales prices can, at least in part, be
revised to match the raw material price development. To minimise price and
availability risks, Ruukki Group utilises long-term co-operation agreements and
extensive partnership and subcontracting networks. The remote location of
certain units increases the risks related to customer deliveries on the one
hand, but on the other hand it ensures better raw material quality and
availability, and it helps in retention of skilled personnel.
The estimated use of timber raw material in the Group's sawmill business in 2008
is in total about 800.000 cubic meters of soft wood log annually when the
Junnikkala group is consolidated to Ruukki Group as of February 2008. As a
result, a one euro change in the logs' purchase price (EUR/m3) will affect the
Group's operating profit EUR 0.8 million if the sales prices stay unchanged.
Environmental risks
The Group companies conduct self-assessment with regard to environmental permits
and risks, and they implement revisions and apply for the necessary permits if
the business environment or regulations change. Environmental risks have to do
firstly with direct potential harm to the environment and secondly with
post-production rehabilitation or landscaping obligations. Due to the nature of
the business, the group's Sawmill Business has the largest potential exposure to
environmental risks. Based on studies carried out, the group does not have any
knowledge that any significant environmental risks would exist in its current
operations.
Changes in regulations
Some of the Group's business activities are officially regulated. In the House
Building business, operations are guided by regulations dealing with the
technical quality requirements for construction. Furthermore, activities in the
Care Services division require official permits, and certain members of staff
must meet specific educational criteria. The Group keeps a close eye on any
changes in regulations and attempts to respond to them as early as possible. If
the planned Russian investments are realised, future investment claims will
arise as well as forestry obligations set by authorities and different security
and other permit requirements.
Personnel
The work carried out in the Care Services division is particularly
labour-intensive and is subject to statutory requirements regarding staff
training and education, and concerning the ratio between staff and customers as
well as consumer legislation. The potential difficulties in recruiting and
retaining skilled personnel may impose some restrictions on future growth in
this business area. Moreover, as some of the Group companies are located
relatively far from major towns and cities, individual companies may have
trouble retaining sufficient personnel. In addition, obtaining skilled personnel
will have an effect on the success of the Russian investments. This, however,
may be challenging and require major training inputs.
Intellectual property rights
The Group is not currently involved in any business activity in which
intellectual property rights, patents, or product development would be of
significance.
FINANCIAL RISKS
Exchange rate risks
As a rule, short-term forward contracts are used to hedge against direct
exchange rate risk exposure of the business segment's exports. The most
significant exchange rate risks in export operations currently are linked with
the Japanese yen, the Swedish krona, and the UK pound. A large percentage of the
sale and purchase agreements are denominated in euros.
If the new projects in the works in Russia are carried out, they will affect the
Group's currency risks, which by default are going to gain a great deal of
significance owing to the risks linked to the Russian rouble and to the growing
relative weighting of export markets. At the end of the accounting period 2007
the Group had rouble-denominated deposits totalling about EUR 30 million that
are not hedged against exchange rate risk.
Interest rate and financial risks
Majority of the company's debt finance involves variable interest, which means
that the Group's interest expenses will, without any hedging measures, follow
the movements in short-term market interest rates. As the average weighted
maturity of the loans is not very long, the interest rate risk is no different
from the standard risk. Furthermore, a considerable proportion of the Group's
liabilities, including the acquisitions related earn-out liabilities, are
non-interest bearing in nature. The interest rate risk is closely monitored, and
hedging measures are taken when necessary. For example, the nominal value of
interest rate swaps made to hedge against interest rate risk related to debt
finance is about EUR 5 million. To ensure the availability of financing, the
Group's parent company has increased its equity-based funding and also taken
other measures to expand its range of financing sources and alternatives for
future projects.
Carrying out the business operations in Russia will require significant new
financing solutions, which will, if finalised, significantly affect group's
financing position, interest rate risk and liquidity issues in short-term and
long-term perspective, but the actual timing and financing structure is still
not yet finalised.
Credit loss risks
Some of the credit loss risks of the sawmill business segment are hedged against
with credit insurance. The House Building business segment generates a
considerable proportion of Group's cash flows, which follow a payment scheme
prepared in advance following degree of completion. This reduces credit loss
risk significantly. In some business segments or companies, individual customers
may be particularly important, which is why customer concentration risks could
have a negative effect on the value of the Group's receivables and its future
business opportunities.
Risks related to the availability and terms of financing
The Group is planning investments and it also has ongoing investment projects.
Implementation of these projects requires financing for both the investment and
to some extent also for the net working capital tied up with the investment.
Especially the planned pulp mill investment in Russia is large compared with the
Group's current operations and it will require significant amounts of both
equity and debt financing. The overall situation in the financial markets and
willingness to take risks and risk pricing may have a significant effect on the
Group's ability to implement the projects profitably. The Group has no certainty
that it will obtain the debt financing for the pulp mill investments on
financially acceptable interest and other terms. The Group has worked on
persistent manner with several financers and advisors in order to diminish the
risks related to the availability of financing. On balance sheet date, the Group
does not have a complete financing arrangement or any financing commitments for
the planned pulp mill in Russia. Neither the Group has any certainty of
obtaining sufficient debt financing on acceptable terms or in planned schedule.
DAMAGE RISKS
Property and damage risks
Property risks have been as extensively as possible covered with insurance,
except for the excess portion. In addition, Ruukki Group has sought to cover
indirect liability for damages, for example as related to transportation, by
insurance. The insurance cover for property risks is reviewed regularly.
Guarantee risks
In number of cases, the products delivered by Ruukki Group companies involve
quality or quantity guarantees to customers, consisting of a short-term duty to
make repairs, and in the house building segment, a statutory 10-year guarantee
of structural safety issues. These risks are covered only partly, but the Ruukki
Group companies pay particular attention to quality assurance and product
development. Furthermore, non-group subcontractors are responsible to a certain
extent for their own guarantee issues.
Legal proceedings
The Group's parent company has been involved in legal actions related to the
company name for a long time. The District Court has in 2007 and the Market
Court in 2008 given their rulings for these proceedings dismissing Ruukki
Group's claims. According to the Company's view, there are no liabilities
relating to these processes that have not been taken into account in the
financial statements. The Company has not received reports of the ongoing tax
audit. There are no other significant ongoing legal proceedings.
SPECIFIC RISKS RELATED TO RUSSIAN KOSTROMA INVESTMENT PROJECTS
If the planned projects in Kostroma would not be realised in planned schedule or
their implementation would change from the original plans, it may cause delays
of cash flows or additional costs. Changes in schedule or implementation may
also affect the profitability of the investments or lead to decline in value of
the assets and resources that already have been invested.
Russian administrative culture and political risks
The administrative procedures and changes in the Russian decision making
mechanisms at the Russian Federation's level, regional level and municipality
level may have adverse effect on the implementation possibilities of the
projects. Ruukki Group has no certainty of obtaining the so-called priority
investor status, which may complicate or delay the implementation or affect the
profitability of the projects. Moreover, for instance, changes in implementation
of timber export duties that Russian Federation has decided to carry out, may
affect the regional price competitiveness from the current estimates.
The start-up of a new business segment
The planned start-up of a new business segment (pulp business) contains
significant risks relating to both the ability to implement the pulp mill
project, and the operational risks of the pulp business. Ruukki Group must also
have the ability to bring up the complete supply chain on required volume. In
addition, Ruukki Group also faces the risk of delays in recruiting and training
of employees.
Adequate infrastructure
Obtaining good and high quality functionality of the projects requires clear
improvement in infrastructure in Kostroma region. There is no certainty of
realising any infrastructure improvement or information on schedule of such
projects. The production facilities require adequate electricity-, heat- and gas
connections as well as road and railway connections. Moreover, the soil and
other examinations of sites chosen for the production plants are not fully
completed until near future.
Market risks
The Russian or world market price changes in the production inputs, end products
or investment goods and changes in the availability of these inputs, may affect
significantly the profitability. The profitability of the projects may therefore
differ from the current estimates of the company and its advisors.
Environmental issues
The planned investments, especially the pulp business, require obtaining
environmental licenses and fulfilling environmental requirements stipulated by
Russian legislation and official regulations. The environmental impact
assessment processes are completed for the planned saw mill and they are in
preparation phase for the pulp mill.
Contractual issues
It is possible that the conditions and schedule of the existing investment and
supplier contracts are not met for reasons not depending on Ruukki Group. This
may require amendments or expansions for the contracts made with the regional
administration of Kostroma or with the suppliers.
CHANGES IN PLEDGES AND CONTINGENT LIABILITIES DURING AND AFTER THE REVIEW PERIOD
During the financial year, Group's interest-bearing debt has increased by a
total of about EUR 26.2 million. The interest-bearing debt balance at 31
December 2007 totalled EUR 39.9 million of which EUR 16.0 million was short-term
debt and EUR 23.9 million long-term debt.
To finance an acquisition carried out during the accounting period, Ruukki Group
Plc has drawn a EUR 4.5 million long-term loan from a financial institution. The
loan has been covered by pledging the purchased subsidiary shares, and there are
covenant terms relating to the loan both at the level of the Group and the
acquired company. On 31 December 2007 the unpaid portion of the loan totalled
EUR 4.1 million.
A change in the financing and ownership structure of the furniture business area
has increased Ruukki Group Plc's direct liabilities, but at the same time
reduced various guarantee liabilities relating to the business area, which means
that the net amount of the parent company's financial liabilities has not
changed materially. However, the Group's total liabilities increased
substantially particularly due to the Incap Furniture transaction carried out in
February 2007: on 31 December 2007, the Incap Furniture group had loans from
financial institutions totalling approximately EUR 18.4 million, subordinated
loans from external parties totalling approximately EUR 1.8 million and leasing
liabilities totalling approximately EUR 2.7 million. Loans from financial
institutions have been collateralised with company and property pledges and
equipment, for example.
On 31 December 2007, Group companies had given company pledges as collateral for
loans and other liabilities totalling approximately EUR 13.3 million (EUR 5.7
million on 31 Dec 2006). The total amount of property pledges is approximately
EUR 11.1 million (EUR 2.2 million on 31 Dec 2006). The Group's parent company
had given a total of EUR 5.0 million in direct-liability guarantees for the
financing of Group companies (EUR 6.6 million on 31 Dec 2006).
On 31 December 2007, the net worth of forward exchange agreements in terms of
nominal value totalled about EUR 0.9 million (EUR 2.7 million on 31 Dec 2006),
and the related unrealised exchange rate loss was about EUR 0.0 million
(unrealised gain on 31 Dec 2006: EUR 0.1 million).
Based on the delivery agreements the direct irrevocable liabilities related to
the equipment of the planned Kostroma sawmill amount to about EUR 30 million at
the end of financial year 2007. The liabilities of these investment made and to
be made are expected to change during 2008 in line with the final timetable to
be achieved in the sawmill, harvesting and pulp mill projects and their
progress.
RELATED PARTY TRANSACTIONS
Salaries and other remuneration paid to the Board and management of the Group's
parent company totalled approximately EUR 0.9 million during the accounting
period. Additionally, salary expenses in accordance with IFRS2-standard of EUR
0.6 million relating to the options granted to management, the synthetic option
granted to the CEO and shares acquired through the bonus share offering were
allocated for the accounting period 2007 (1-12/2006: EUR 0.1 million). In paid
share offerings carried out during the accounting period, related parties or
entities controlled by them have subscribed for a total of 44,217,038 new shares
of the company. In September 2007 the Group's parent company has granted Matti
Vikkula a loan of approximately EUR 1.4 million to finance the purchase of the
company shares as a part of his incentive scheme.
The Group's parent company paid a total of EUR 1.7 million in dividends to
related parties 1 January - 31 December 2007. Furthermore, group companies paid
about EUR 1.4 million dividends to the related parties being minority
shareholders of those companies.
During the accounting period, related parties subscribed for a total of
1,561,000 shares with a subordinated convertible loan.
Ruukki Group has paid by cash a total of approximately EUR 8.2 million and by
Ruukki Group Plc shares about EUR 1.0 million in acquisition-related earn-out
payments to persons belonging or having belonged to the management of the
Group's business areas relating to acquisitions made by the Group.
CHANGES IN THE NUMBER OF SHARES AND SHARE CAPITAL IN 2006 - 2007
--------------------------------------------------------------------------------
| Changes in share | Share capital | Number of shares | Share capital |
| capital | increase | after | (EUR) after |
| | (EUR) | registration | registration |
--------------------------------------------------------------------------------
| Share capital 1 Jan | | 86,300,880 | 14,583,700.12 |
| 2006 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Bonus issue (11 Jan | 87,449.49 | 86,300,880 | 14,671,149.60 |
| 2006) | | | |
--------------------------------------------------------------------------------
| Directed share issue | 1,190,000.00 | 93.300,880 | 15,861,149.60 |
| (13 Jan 2006) | | | |
--------------------------------------------------------------------------------
| Share issue (6 Apr | 5,100,000.00 | 123,300,880 | 20,961,149.60 |
| 2006) | | | |
--------------------------------------------------------------------------------
| Conversion of | 610,810.00 | 126,893,880 | 21,571,959.60 |
| convertible bonds (21 | | | |
| Jul 2006) | | | |
--------------------------------------------------------------------------------
| Conversion of | 116,110.00 | 127,576,880 | 21,688,069.60 |
| convertible bonds (23 | | | |
| Aug 2006) | | | |
--------------------------------------------------------------------------------
| Conversion of | 102,000.00 | 128,176,880 | 21,790,069.60 |
| convertible bonds (6 | | | |
| Oct 2006) | | | |
--------------------------------------------------------------------------------
| Free directed share | 0.00 | 128,741,737 | 21,790,069.60 |
| offering (10 Nov 2006) | | | |
--------------------------------------------------------------------------------
| Conversion of | 259,250.00 | 130,266,737 | 22,049,319.60 |
| convertible bonds (12 | | | |
| Dec 2006) | | | |
--------------------------------------------------------------------------------
| Conversion of | 968,490.00 | 135,963,737 | 23,017,809.60 |
| convertible bonds (27 | | | |
| Dec 2006) | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share capital | | 135,963,737 | 23,017,809.60 |
| 31 Dec 2006 | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Conversion of | 620,840.00 | 139,615,737 | 23,638,649.60 |
| convertible bonds (13 | | | |
| Feb 2007) | | | |
--------------------------------------------------------------------------------
| Free directed share | 0.00 | 140,214,022 | 23,638,649.60 |
| offering (3 May 2007) | | | |
--------------------------------------------------------------------------------
| Conversion of | 3,400.00 | 140,234,022 | 23,642,049.60 |
| convertible bonds (29 | | | |
| Jun 2007) | | | |
--------------------------------------------------------------------------------
| Paid directed share | 0.00 | 270,234,022 | 23,642,049.60 |
| offering (29 Jun 2007) | | | |
--------------------------------------------------------------------------------
| Free directed share | 0.00 | 270,534,022 | 23,642,049.60 |
| offering (6 Jul 2007) | | | |
--------------------------------------------------------------------------------
| Paid directed share | 0.00 | 290,034,022 | 23,642,049.60 |
| offering (18 Jul 2007) | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share capital 31 Dec | | 290,034,022 | 23,642,049.60 |
| 2007 | | | |
--------------------------------------------------------------------------------
At the end of the above accounting periods, neither Ruukki Group Plc nor any of
its subsidiaries held any Ruukki Group shares. At the end of December 2007, a
subsidiary of Ruukki Group's furniture business segment held approximately 1.0%
of Incap Furniture Oy's shares. Ruukki Group Plc's Board doesn't have a valid
authorisation to buy back shares.
On 31 December 2007, the number of registered Ruukki Group Plc shares totalled
290,034,022. The convertible bond issued by the company in 2004 was entirely
converted to company shares during the first half of 2007. The maximum dilution
effect of the company's I/2005 option program is 2,700,000 shares. The maximum
dilution effect of the option rights related to the share-based incentive scheme
2007 is 7,350,000 shares. In conjunction with the implementation of the
share-based scheme the Board might issue further shares. The company's Board has
a share issue authorisation granted by the Annual General Meeting on 20 April
2007, based on which the Board decided in June 2007 to issue 300,000 shares. The
unused authorisation thus stands at 24,700,000 shares. The authorisation is
valid until 20 April 2009.
SHAREHOLDERS
On 31 December 2007, the company had a total of 4,283 shareholders (3,226
shareholders on 31 Dec 2006), of which 12 were nominee-registered. The number of
shares in issue on 31 December 2007 was 290,034,022.
Largest shareholders, 31 December 2007:
--------------------------------------------------------------------------------
| | Shareholder | Shares | % |
--------------------------------------------------------------------------------
| 1 | Nordea Bank Finland Plc | 75,883,960 | 26.16 |
--------------------------------------------------------------------------------
| 2 | Nordea Bank Finland Plc, nominee-registered | 57,776,322 | 19.92 |
--------------------------------------------------------------------------------
| 3 | Skandinaviska Enskilda Banken, | 43,135,512 | 14.87 |
| | nominee-registered | | |
--------------------------------------------------------------------------------
| 4 | Oy Herttakakkonen Ab | 41,075,297 | 14.16 |
--------------------------------------------------------------------------------
| 5 | Evli Bank Plc | 14,522,884 | 5.01 |
--------------------------------------------------------------------------------
| 6 | Kankaala Markku | 9,601,791 | 3.31 |
--------------------------------------------------------------------------------
| 7 | Svenska Handelsbanken Ab, nominee-registered | 8,841,036 | 3.05 |
--------------------------------------------------------------------------------
| 8 | Hukkanen Esa | 5,007,500 | 1.73 |
--------------------------------------------------------------------------------
| 9 | Procomex S.A. | 4,629,215 | 1.60 |
--------------------------------------------------------------------------------
| 10 | Glitnir Bank Oy | 3,998,068 | 1.38 |
--------------------------------------------------------------------------------
| | Total | 264,471,585 | 91.19 |
--------------------------------------------------------------------------------
| | Other shareholders | 25,562,437 | 8.81 |
--------------------------------------------------------------------------------
| | Total shares registered | 290,034,022 | 100.00 |
--------------------------------------------------------------------------------
Ruukki Group Plc's board members and CEO owned in total 146,202,923 Ruukki Group
Plc shares (83,146,388 on 31 Dec 2006) On 31 December 2007 when including shares
and derivative contracts owned either directly, through persons closely
associated with them or through controlled companies. This corresponds to
approximately 50.4 % (61.2 %) of all outstanding shares that were registered to
the Trade Register on 31 December.
Shareholders by category:
--------------------------------------------------------------------------------
| Shares | | Number of | % share of | Number of | % of |
| | | shareholde | shareholder | shares held | shares |
| | | rs | s | | held |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 1-100 | | 584 | 13.64 % | 39,091 | 0.01 % |
--------------------------------------------------------------------------------
| 101-1.000 | | 2,353 | 54.94 % | 1,287,509 | 0.44 % |
--------------------------------------------------------------------------------
| 1.001-10.000 | | 1,188 | 27.74 % | 4,002,438 | 1.38 % |
--------------------------------------------------------------------------------
| 10.001-100.00 | | 127 | 2.97 % | 3,055,480 | 1.05 % |
| 0 | | | | | |
--------------------------------------------------------------------------------
| 100.001-1.000.000 | 14 | 0.33 % | 4,896,396 | 1.69 % |
--------------------------------------------------------------------------------
| 1.000.000-10.000.000 | 12 | 0.28 % | 44,311,633 | 15.28 % |
--------------------------------------------------------------------------------
| over | | 5 | 0.12 % | 232,393,975 | 80.13 % |
| 10.000.000 | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total | | 4,283 | 100.00 % | 289,986,522 | 99.98 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| of which nominee | 12 | | 113,305,072 | 39.07 % |
| registered | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| On common account | | | 47,500 | 0.02 % |
--------------------------------------------------------------------------------
| Total outstanding | | | 290,034,022 | 100.00 % |
--------------------------------------------------------------------------------
Shareholders by shareholder type on 31 December 2007
--------------------------------------------------------------------------------
| | | % of shares |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Finnish shareholders | 97.83 % |
--------------------------------------------------------------------------------
| | of which: | |
--------------------------------------------------------------------------------
| | Companies and business enterprises | 17.45 % |
--------------------------------------------------------------------------------
| | Banking and insurance companies | 70.80 % |
--------------------------------------------------------------------------------
| | Non-profit organizations | 0.00 % |
--------------------------------------------------------------------------------
| | Households | 9.59 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Foreign shareholders | 2.15 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Shares on common account | 0.02 % |
--------------------------------------------------------------------------------
| Total | 100.00 % |
--------------------------------------------------------------------------------
| | Of which nominee-registered | 39.07 % |
--------------------------------------------------------------------------------
COMPANY'S SHARE
Ruukki Group Plc's share (RUG1V) is listed on the Helsinki Stock Exchange. The
company's share was quoted on the OMX Nordic Exchange under Small Cap segment
till 30 June 2007 and has been quoted under Mid Cap segment since 1 July 2007.
CHANGES IN SHARE PRICE DURING THE REVIEW PERIOD
During the year 2007, the price of Ruukki Group's share varied between EUR 1.18
(1-12/2006: 0.64) and EUR 3.59 (1.23). A total of 260,096,248 (87,827,858)
Ruukki Group shares were traded in the accounting period, representing 89.7%
(64.6%) of all shares registered at the year end. The closing price of the
company's share on 31 December 2007 was EUR 2.82 (1.20). The market
capitalisation of the Group's entire capital stock at the closing price on 31
December 2007 was EUR 817.9 million (163.2).
FLAGGING NOTICES DURING OR AFTER THE REVIEW PERIOD
Ruukki Group has received the following flagging notices during or after the
accounting period 1 January - 31 December 2007:
- Mandatum Securities Oy's ownership of the share capital and voting rights of
Ruukki Group Plc exceeded one twentieth (1/20) on 2 January 2007.
- Mandatum Securities Oy's ownership of the share capital and voting rights of
Ruukki Group Plc fell below one twentieth (1/20) on 16 March 2007.
- Nordea Bank Finland Plc's ownership of the share capital and voting rights of
Ruukki Group Plc exceeded three twentieths (3/20) on 16 March 2007. At the time
of this disclosure, Nordea Bank Finland Plc also announced that its ownership
will fall below one tenth (1/10) as the forward contracts mature in April 2007.
- Nordea Bank Finland Plc acquired Ruukki Group Plc shares and made forward
contracts concerning the shares on 20 April 2007, with the forward agreements
maturing in June 2007, December 2007 and January 2008. As the forward contracts
mature in January 2008, the ownership of Nordea Bank Finland Plc will fall below
one twentieth (1/20).
- Evli Bank Plc's ownership of the share capital and voting rights of Ruukki
Group Plc fell below one twentieth (1/20) upon the transaction made on 21 June
2007.
- Markku Kankaala's ownership of the share capital and voting rights of Ruukki
Group Plc fell below one twentieth (1/20) upon the transaction made on 21 June
2007.
- Oy Herttakakkonen Ab's ownership of the share capital and voting rights of
Ruukki Group Plc fell below one fifth (1/5) as a result of the share issue
decisions and share subscriptions made on 21 June 2007.
- The combined ownership of Helsingin Mekaanikontalo Oy and Procomex S.A. of the
share capital and voting rights of Ruukki Group Plc fell below one quarter (1/4)
as a result of share issue decisions and share subscriptions made on 21 June
2007. At the same time, Helsingin Mekaanikontalo Oy announced that its ownership
of the share capital and voting rights of Ruukki Group Plc fell below one tenth
(1/10).
- Nordea Bank Finland Plc's ownership of the share capital and voting rights of
Ruukki Group Plc fell below three twentieths (3/20) upon the share lending
agreement made on 25 June 2007. As the forward contracts mature in January 2008,
the ownership will fall below one twentieth (1/20).
- JPMorgan Chase & Co has announced that its subsidiaries have acquired
12,666,818 Ruukki Group Plc shares in a share issue commencing on 25 June 2007.
JPMorgan Chase & Co's ownership of the share capital and voting rights of Ruukki
Group Plc exceeded one twentieth (1/20) as a result of the transaction.
- Nordea Bank Finland Plc's ownership of the share capital and voting rights of
Ruukki Group Plc has, upon the share transaction made on 26 June 2007 and
considering the share lending agreement concerning 9,500,500 Ruukki Group Plc's
RUG1V shares made on 25 June 2007 with a value date of 29 June 2007, exceeded
three twentieths (3/20). Upon the maturity of the forward contracts maturing in
December 2007, the ownership will fall below three twentieths (3/20). Upon the
maturity of Ruukki Group Plc's forward contracts in January 2008, the ownership
will fall below one tenth (1/10).
- Nordea Bank Finland Plc announced on 16 July 2007 that its ownership of the
share capital and voting rights of Ruukki Group Plc has exceeded one fifth
(1/5). Upon the maturity of forward contracts maturing in December 2007, the
ownership of Nordea Bank Finland Plc will fall below three twentieths (3/20),
and upon the maturity of forward contracts maturing in January 2008 the
ownership will fall below one twentieth (1/20).
- Moncheur & Cie SA (registration number 660.0.096.997-7, Geneva) and Pierre
Moncheur announced in August that as a result of share transactions concluded
on 27 June 2007, the combined ownership of Moncheur & Cie SA, Pierre Moncheur
and their controlled or related parties in Ruukki Group Plc now represents less
than one twentieth (1/20) of the share capital and voting rights of Ruukki
Group Plc.
- According to the announcement of Oy Herttakakkonen Ab (business ID number
0761602-7) its ownership exceeded one fifth (1/5) of the share capital and
voting rights of Ruukki Group Plc in consequence of forward contract
transactions carried out on 11 September 2007.
- JPMorgan Chase & Co. (English registration number 2711006) announced that
ownership of its subsidiaries exceeded one tenth (1/10) of the share capital and
voting rights of Ruukki Group Plc in consequence of transactions carried out on
20 September 2007.
- Nordea Bank AB (publ) (Swedish registration number 516406-0120) announced on
22 November 2007 that its subsidiary Nordea Bank Finland Plc (business ID
1680235-8) has purchased 2,848,000 Ruukki Group shares today November 22 2007,
as a consequence of which its ownership in Ruukki Group Plc has exceeded one
fourth (1/4). Nordea Pankki Suomi Plc now holds 74.133.044 Ruukki Group Plc
shares, that is 25.56 % of the share capital and voting rights of Ruukki Group
Plc.
- Evli Bank Plc (business ID number 0533755-0) announced on 12 December 2007
that its ownership exceeds one twentieth (1/20) of the share capital and voting
rights of Ruukki Group Plc in consequence of transactions carried out on 7
December 2007.
- Procomex S.A (registration number R.C.Luxembourg B 57.877) announced on 27
December 2007 that its ownership exceeds three twentieth (3/20) of the share
capital and voting rights of Ruukki Group Plc in consequence of forward contract
transactions carried out on 19 and 21 December 2007. Furthermore, in consequence
of the aforementioned forward transactions, the combined ownership of Procomex
S.A. and Helsingin Mekaanikontalo Oy (business ID number 1076761-9) together
exceeds one fourth (1/4) of the share capital and voting rights of Ruukki Group
Plc.
- Nordea Bank AB (publ) (Swedish registration number 516406-0120) announced on
28 December 2007 that forward contracts that were due in December have been
rolled forward to longer maturities. Consequently Nordea Pankki Suomi Plc's
ownership in Ruukki Group Plc has not fallen below 1/5 but is over 1/4. Nordea
Bank AB referred to announcement that was made on November 22 2007. Nordea Bank
AB (publ) announced then that as forward contracts expire in December, the
ownership of its Finnish subsidiary Nordea Pankki Suomi Plc (business ID
1680235-8) will fall below 1/5 of the share capital and voting rights of Ruukki
Group Plc.
- Nordea Bank AB (publ) (Swedish registration number 516406-0120) announced on
21 January 2008 that forward contracts that were due in January have been rolled
forward to longer maturities. Consequently Nordea Pankki Suomi Plc's ownership
in Ruukki Group Plc has not fallen below 1/10 but is over 1/4. Nordea Bank AB
referred to announcement that was made on December 28 2007. Nordea Bank AB
(publ) announced then that as forward contracts expire in January 2008, the
ownership of its Finnish subsidiary Nordea Pankki Suomi Plc (business ID
1680235-8) will fall below 1/10 of the share capital and voting rights of
Ruukki Group Plc.
- Moncheur & Cie SA (registration number 660.0.096.997-7, Geneva) announced on
23 January 2008 that as a result of share transactions concluded on 21 January
2008, the ownership of Moncheur & Cie SA in Ruukki Group Plc now exceeds one
twentieth (1/20) of the share capital and voting rights of Ruukki Group Plc.
- Procomex S.A (registration number R.C.Luxembourg B 57.877) announced on 13
February 2008 that its ownership will fall below one tenth (1/10) of the share
capital and voting rights of Ruukki Group Plc based on agreement entered into on
12 February 2008. In case the agreement will be fully implemented the ownership
of Procomex S.A. will fall below one tenth after the share transactions are
finalised. Furthermore, in consequence of the aforementioned agreement, when
fully implemented the combined ownership of Procomex S.A. and Helsingin
Mekaanikontalo Oy (business ID number 1076761-9) will fall below one fifth (1/5)
of the share capital and voting rights of Ruukki Group Plc.
- Russian JSC VTB Bank (state registration number 1027739609391) announced on 15
February 2008 that its or its affiliate's ownership will exceed one tenth (1/10)
of the share capital and voting rights of Ruukki Group Plc based on agreements
entered into on 12 February 2008. In case the agreements will be fully
implemented, the ownership of JSC VTB Bank or its affiliate will exceed one
tenth after the share transactions are finalised.
BOARD'S DIVIDEND PAYOUT PROPOSITION TO THE ANNUAL GENERAL MEETING
The Company's Board of Directors has decided to propose to the Annual General
Meeting, which will be later convened separately, that the company would pay
out, from the retained earnings, a dividend of four (4) cents per share. Hence,
the total dividend proposed is EUR 11,601,360.88.
As of 31 Dec 2007 balance sheet date the total distributable equity of the
parent company Ruukki Group Plc totalled 357,932,084.55 euros, as detailed
below:
--------------------------------------------------------------------------------
| Retained earnings 1 January 2007 | 6,211,977.35 |
--------------------------------------------------------------------------------
| Dividends paid out during 2007 | - 4,078,912.11 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Retained earnings 31 Dec 2007 | 2,133,065.24 |
--------------------------------------------------------------------------------
| Net income 1 Jan - 31 Dec 2007 | 10,490,343.72 |
--------------------------------------------------------------------------------
| Total free equity | 12,623,408.96 |
--------------------------------------------------------------------------------
| Invested equity fund | 345,308,675.59 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total distributable equity | 357,932,084.55 |
--------------------------------------------------------------------------------
During 2007 the company has, within the range of total distributable equity,
given a loan to the related party the sum of which totalled EUR 1,398,478.66 at
the end of 2007 when taking into account the principal and accrued interest.
FINANCIAL DEVELOPMENT BY SEGMENT, SUMMARY (EUR MILLION)
--------------------------------------------------------------------------------
| MEUR | Revenue | Revenue | Revenue | Revenue |
| | 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| House Building | 62.4 | 53.7 | 19.9 | 16.0 |
--------------------------------------------------------------------------------
| Sawmill Business | 59.4 | 27.8 | 14.4 | 9.7 |
--------------------------------------------------------------------------------
| Furniture Business | 68.7 | 25.7 | 25.0 | 0.0 |
--------------------------------------------------------------------------------
| Care Services | 16.8 | 9.8 | 4.5 | 3.3 |
--------------------------------------------------------------------------------
| Other Operations | 8.7 | 8.8 | 2.9 | 2.6 |
--------------------------------------------------------------------------------
| Eliminations and | -2.1 | -0.4 | -1.2 | -0.3 |
| unallocated items | | | | |
--------------------------------------------------------------------------------
| Group total | 213.9 | 125.5 | 65.6 | 31.4 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| MEUR | EBIT | EBIT | EBIT | EBIT |
| | 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| House Building | 13.3 | 13.4 | 4.8 | 4.1 |
--------------------------------------------------------------------------------
| Sawmill Business | 5.4 | 1.4 | -0.5 | 0.1 |
--------------------------------------------------------------------------------
| Furniture Business | 2.6 | -5.3 | 3.1 | -1.7 |
--------------------------------------------------------------------------------
| Care Services | 0.3 | 0.6 | -0.4 | -0.1 |
--------------------------------------------------------------------------------
| Other Operations | -6.4 | 2.9 | -2.2 | -0.8 |
--------------------------------------------------------------------------------
| Eliminations and | 0.5 | 0.1 | 0.5 | 1.0 |
| unallocated items | | | | |
--------------------------------------------------------------------------------
| Group total | 15.7 | 13.0 | 5.2 | 2.6 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| % | EBIT | EBIT | EBIT | EBIT |
| | 1-12/2007 | 1-12/2006 | 10-12/2007 | 10-12/2006 |
--------------------------------------------------------------------------------
| House Building | 21.4 % | 24.9 % | 23.9 % | 25.4 % |
--------------------------------------------------------------------------------
| Sawmill Business | 9.0 % | 4.9 % | -3.5 % | 1.0 % |
--------------------------------------------------------------------------------
| Furniture Business | 3.8 % | -20.8 % | 12.2 % | - |
--------------------------------------------------------------------------------
| Care Services | 1.6 % | 6.2 % | -8.2 % | -3.7 % |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Group total | 7.3 % | 10.4 % | 8.0 % | 8.4 % |
--------------------------------------------------------------------------------
* Other operations includes, as a result of ownership changes in Group companies
during the review period Q1/2006, approximately EUR 0.4 million non-recurring
gain on disposal (the ownership change in the House building business area is
included in the income statement under Other operating income) and approximately
EUR 0.6 million non-recurring loss on disposal (Metal industry, Operating
expenses).Moreover, in Q3/2006, a gain of EUR 4.6 million related to sale of an
associate has been recorded.
* The furniture business has been an associate partly during the accounting
periods.
GOODWILL BY SEGMENT, EUR MILLION
--------------------------------------------------------------------------------
| | 31 Dec 2007 | % | 31 Dec 2006 | % |
--------------------------------------------------------------------------------
| House Building | 19.5 | 56 % | 19.3 | 62 % |
--------------------------------------------------------------------------------
| Sawmill Business | 6.5 | 19 % | 4.8 | 15 % |
--------------------------------------------------------------------------------
| Furniture Business | 1.7 | 5 % | 0.0 | 0 % |
--------------------------------------------------------------------------------
| Care Services | 5.7 | 16 % | 5.7 | 18 % |
--------------------------------------------------------------------------------
| Other Operations | 1.4 | 4 % | 1.4 | 4 % |
--------------------------------------------------------------------------------
| TOTAL | 34.9 | 100 % | 31.2 | 100 % |
--------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT SUMMARY, EUR THOUSAND
--------------------------------------------------------------------------------
| | 1 Jan - | 1 Jan - | 1 Oct - | 1 Oct - |
| | 31 Dec | 31 Dec | 31 Dec | 31 Dec |
| | 2007 | 2006 | 2007 | 2006 |
--------------------------------------------------------------------------------
| 1000 EUR | 12 | 12 months | 3 months | 3 months |
| | months | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Revenue | 213,910 | 125,460 | 65,644 | 31,354 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other operating income | 6,874 | 5,712 | 3,395 | 473 |
--------------------------------------------------------------------------------
| Operating expenses | -195,431 | -112,399 | -61,000 | -26,887 |
--------------------------------------------------------------------------------
| Depreciation and | -8,022 | -4,403 | -3,073 | -970 |
| amortisation | | | | |
--------------------------------------------------------------------------------
| Share of profit of | -623 | -968 | 117 | -974 |
| associates | | | | |
--------------------------------------------------------------------------------
| Impairment | -1,034 | -354 | 150 | -354 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating profit | 15,674 | 13,048 | 5,233 | 2,641 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income and expense | 3,484 | -891 | 2,372 | -29 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit before tax | 19,158 | 12,156 | 7,605 | 2,612 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax | -5,478 | -4,177 | -2,039 | -1,498 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit | 13,680 | 7,979 | 5,566 | 1,114 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit attributable to | | | | |
--------------------------------------------------------------------------------
| equity shareholders | 12,651 | 8,442 | 5,365 | 845 |
--------------------------------------------------------------------------------
| minority interests | 1,030 | -464 | 201 | 269 |
--------------------------------------------------------------------------------
| | 13,680 | 7,979 | 5,566 | 1,114 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share (counted from profit attributable to equity |
| shareholders): |
--------------------------------------------------------------------------------
| basic (EUR) | 0.06 | 0.07 | | |
--------------------------------------------------------------------------------
| diluted (EUR) | 0.06 | 0.06 | | |
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET SUMMARY, EUR THOUSAND
--------------------------------------------------------------------------------
| 1000 EUR | | 31 Dec 2007 | 31 Dec 2006 |
--------------------------------------------------------------------------------
| ASSETS | | | |
--------------------------------------------------------------------------------
| Non-current assets | | | |
--------------------------------------------------------------------------------
| Investments and intangible assets | | |
--------------------------------------------------------------------------------
| Goodwill | | 33,422 | 31,237 |
--------------------------------------------------------------------------------
| Investments in associates | | 1,702 | 5,568 |
--------------------------------------------------------------------------------
| Other intangible assets | | 5,807 | 4,001 |
--------------------------------------------------------------------------------
| Investments and intangible assets total | 40,931 | 40,807 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Property, plant and equipment | | 37,516 | 15,855 |
--------------------------------------------------------------------------------
| Other non-current assets | | 3,209 | 528 |
--------------------------------------------------------------------------------
| Non-current assets total | | 81,656 | 57,189 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Inventories | | 29,635 | 17,057 |
--------------------------------------------------------------------------------
| Receivables | | 29,955 | 9,805 |
--------------------------------------------------------------------------------
| Held-to-maturity investments | | 131,212 | |
--------------------------------------------------------------------------------
| Other investments | | 176,112 | 7,271 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | | 48,527 | 24,768 |
--------------------------------------------------------------------------------
| Current assets total | | 415,440 | 58,901 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Assets held for sale | | 2,894 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | | 499,990 | 116,089 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | | |
--------------------------------------------------------------------------------
| Shareholders' equity | | | |
--------------------------------------------------------------------------------
| Share capital | | 23,642 | 23,018 |
--------------------------------------------------------------------------------
| Share premium reserve | | 25,740 | 24,712 |
--------------------------------------------------------------------------------
| Revaluation reserve | | 969 | 0 |
--------------------------------------------------------------------------------
| Paid-up unrestricted equity reserve | 340,690 | 424 |
--------------------------------------------------------------------------------
| Retained earnings | | 18,614 | 9,511 |
--------------------------------------------------------------------------------
| Shareholders' equity | | 409,655 | 57,665 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Minority interest | | 1,995 | 1,591 |
--------------------------------------------------------------------------------
| Total equity | | 411,650 | 59,256 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liabilities | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | | 29,188 | 13,489 |
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Deferred income | | 16,481 | 17,576 |
--------------------------------------------------------------------------------
| Other current liabilities | | 42,086 | 25,769 |
--------------------------------------------------------------------------------
| Current liabilities total | | 58,567 | 43,345 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Liabilities classified as held for sale | 585 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total liabilities | | 88,340 | 56,834 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total equity and liabilities | | 499,990 | 116,089 |
--------------------------------------------------------------------------------
SUMMARY OF INTEREST-BEARING RECEIVABLES AND LIABILITIES IN THE CONSOLIDATED
BALANCE SHEET, EUR THOUSAND
--------------------------------------------------------------------------------
| | 31 Dec 2007 | 31 Dec 2006 |
--------------------------------------------------------------------------------
| Interest-bearing receivables | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current | 131,462 | 7,271 |
--------------------------------------------------------------------------------
| Non-current | 1,986 | 453 |
--------------------------------------------------------------------------------
| Interest-bearing receivables, | 133,448 | 7,724 |
| total | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Interest-bearing liabilities | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current | 15,991 | 4,510 |
--------------------------------------------------------------------------------
| Non-current | 23,958 | 9,205 |
--------------------------------------------------------------------------------
| Interest-bearing liabilities, | 39,949 | 13,715 |
| total | | |
--------------------------------------------------------------------------------
SUMMARY OF GROUP'S PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS, EUR
THOUSAND
--------------------------------------------------------------------------------
| | Property, plant | Intangible |
| | and equipment | assets |
--------------------------------------------------------------------------------
| Acquisition cost 1 Jan 2006 | 16,056 | 34,020 |
--------------------------------------------------------------------------------
| Additions | 29,758 | 11,195 |
--------------------------------------------------------------------------------
| Disposals | -22,406 | -7,369 |
--------------------------------------------------------------------------------
| Acquisition cost 31 Dec 2006 | 23,412 | 37,487 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition cost 1 Jan 2007 | 23,412 | 37,847 |
--------------------------------------------------------------------------------
| Additions | 26,855 | 8,124 |
--------------------------------------------------------------------------------
| Disposals | -916 | -1,652 |
--------------------------------------------------------------------------------
| Acquisition cost 31 Dec 2007 | 49,351 | 44,411 |
--------------------------------------------------------------------------------
CONSOLIDATED CASH FLOW STATEMENT SUMMARY, EUR THOUSAND
--------------------------------------------------------------------------------
| | 1 Jan - | 1 Jan - | 1 Oct - | 1 Oct - 31 |
| | 31 Dec | 31 Dec | 31 Dec | Dec 2006 |
| | 2007 | 2006 | 2007 | 3 months |
| | 12 months | 12 months | 3 months | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit attributable to | 12,651 | 8,442 | 4,536 | 1,578 |
| equity shareholders | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Adjustments to net profit | 12,248 | 10,793 | 2,588 | 2,702 |
--------------------------------------------------------------------------------
| Changes in working capital | -14,029 | -4,973 | -2,550 | -1,545 |
--------------------------------------------------------------------------------
| Interest paid | -2,028 | -1,717 | -286 | -341 |
--------------------------------------------------------------------------------
| Interest received from | 1,370 | 826 | 156 | 291 |
| operations | | | | |
--------------------------------------------------------------------------------
| Income taxes paid | -4,429 | -6,313 | -2,726 | -1,280 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash from operating | 5,783 | 7,058 | 1,718 | 1,405 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Acquisition of subsidiaries | -6,487 | -13,401 | -680 | -5,589 |
| and associates | | | | |
--------------------------------------------------------------------------------
| Payment of earn-out | -8,358 | -8,875 | -878 | 0 |
| liabilities and exercises | | | | |
| of call options related to | | | | |
| acquisitions | | | | |
--------------------------------------------------------------------------------
| Disposal of subsidiaries | 7,068 | 4,183 | 0 | 1,500 |
| and associates | | | | |
--------------------------------------------------------------------------------
| Capital expenditures and | -6,336 | -3,203 | -163 | -2,702 |
| other investing activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash used in investing | -14,113 | -21,296 | -1,721 | -6,791 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share issues | 337,608 | 21,218 | 0 | 0 |
--------------------------------------------------------------------------------
| Dividends paid | -5,493 | -3,146 | -339 | -1,280 |
--------------------------------------------------------------------------------
| Deposits | -133,851 | 0 | -133,851 | 0 |
--------------------------------------------------------------------------------
| Other investments | -173,360 | 0 | -173,360 | 0 |
--------------------------------------------------------------------------------
| Interest received, other | 3,940 | 0 | 3,940 | |
| than operations related | | | | |
--------------------------------------------------------------------------------
| Proceeds from borrowings | 10,630 | 5,561 | 1,741 | 3,188 |
--------------------------------------------------------------------------------
| Repayment of borrowings, | -7,386 | -2,611 | -4,009 | -2,326 |
| and other financing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash used in financing | 32,088 | 21,022 | -305,878 | -418 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net increase in cash and | 23,758 | 6,784 | -305,881 | -5,804 |
| cash equivalents | | | | |
--------------------------------------------------------------------------------
In the cash flow statement above, the group's liquid funds other than cash or
cash equivalents placed or invested have been presented in the financing
activities as from the beginning of the last quarter of 2007. This is based on
the decisions by the company's board on the financing and placing policies.
Consequently, the investments into money market mutual funds have mainly been
re-categorised into financing activities since the assets have been transferred
to deposits done for predetermined periods, or the corresponding decisions on
the transfer have been made.
Moreover, the exercise of call options and the payments of earn-out liabilities
elated to acquisitions have retroactively been presented in the investing
activities, whereas during the last financial year there were shown in the
financing activities.
SUMMARY OF THE CHANGES IN SHAREHOLDERS' EQUITY OF THE GROUP, IN THOUSAND EUROS
--------------------------------------------------------------------------------
| | | | Equity attributable to shareholders | Mino | Total |
| | | | | rity | equit |
| | | | | inte | y |
| | | | | rest | |
--------------------------------------------------------------------------------
| 1000 EUR | Sha | Sha | Sha | Fai | Pai | Tra | Reta | Total | | |
| | re | re | re | r | d-u | nsl | ined | | | |
| | cap | iss | pre | val | p | ati | earn | | | |
| | ita | ue | miu | ue | unr | on | ings | | | |
| | l | | m | and | est | res | | | | |
| | | | res | rev | ric | erv | | | | |
| | | | erv | alu | ted | e | | | | |
| | | | e | ati | equ | | | | | |
| | | | | on | ity | | | | | |
| | | | | res | res | | | | | |
| | | | | erv | erv | | | | | |
| | | | | es | e | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Shareholde | 14, | 4,3 | 2,1 | 9 | 0 | 0 | 3,38 | 24,45 | 0 | 24,45 |
| rs' equity | 584 | 40 | 44 | | | | 0 | 7 | | 7 |
| 1 Jan 2006 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Bonus | 87 | | -87 | | | | | 0 | | 0 |
| issue | | | | | | | | | | |
| 1/2006 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | 1,1 | -4 | 3,1 | | | | | 0 | | 0 |
| issue | 90 | 340 | 50 | | | | | | | |
| 12/2005 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | 5,1 | | 16, | | | | | 21,21 | | 21,21 |
| issue | 00 | | 118 | | | | | 8 | | 8 |
| 3/2006 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Free | | | | | 424 | | | 424 | | 424 |
| directed | | | | | | | | | | |
| issue | | | | | | | | | | |
| 10/2006 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Conversion | 2,0 | | 3,3 | | | | | 5,444 | | 5,444 |
| s of | 57 | | 87 | | | | | | | |
| convertibl | | | | | | | | | | |
| e bonds | | | | | | | | | | |
--------------------------------------------------------------------------------
| Equity | | | | | | | 123 | 123 | | 123 |
| component | | | | | | | | | | |
| of | | | | | | | | | | |
| convertibl | | | | | | | | | | |
| e bonds | | | | | | | | | | |
| and other | | | | | | | | | | |
| changes in | | | | | | | | | | |
| equity | | | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | | | | | | | -3 | -3,14 | | -3,14 |
| distributi | | | | | | | 148 | 8 | | 8 |
| on | | | | | | | | | | |
--------------------------------------------------------------------------------
| Share-base | | | | | | | 105 | 105 | | 105 |
| d payments | | | | | | | | | | |
--------------------------------------------------------------------------------
| Other | | | | -9 | | | 608 | 600 | 2,05 | 2,654 |
| changes in | | | | | | | | | 5 | |
| equity | | | | | | | | | | |
--------------------------------------------------------------------------------
| Net profit | | | | | | | 8,44 | 8,442 | -464 | 7,979 |
| 2006 | | | | | | | 2 | | | |
--------------------------------------------------------------------------------
| Shareholde | 23, | 0 | 24, | 0 | 424 | 0 | 9,51 | 57,66 | 1,59 | 59,25 |
| rs' equity | 018 | | 712 | | | | 2 | 5 | 1 | 6 |
| 31 Dec | | | | | | | | | | |
| 2006 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Free | | | | | 1 | | | 1,035 | | 1,035 |
| directed | | | | | ,03 | | | | | |
| issue | | | | | 5 | | | | | |
| 4/2007 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Share | | | | | 339 | | | 339,2 | | 339,2 |
| issues 6/ | | | | | 232 | | | 32 | | 32 |
| and 7/2007 | | | | | | | | | | |
--------------------------------------------------------------------------------
| Dividend | | | | | | | -4, | -4,07 | -1 | -5,22 |
| distributi | | | | | | | 079 | 9 | 142 | 1 |
| on | | | | | | | | | | |
--------------------------------------------------------------------------------
| Net profit | | | | | | | 12, | 12,65 | 1,03 | 13,68 |
| 2007 | | | | | | | 651 | 1 | 0 | 0 |
--------------------------------------------------------------------------------
| Translatio | | | | | | -1 | | -1,08 | | -1,08 |
| n | | | | | | 080 | | 0 | | 0 |
| difference | | | | | | | | | | |
--------------------------------------------------------------------------------
| Conversion | 624 | | 1,0 | | | | | 1,652 | | 1,652 |
| s of | | | 28 | | | | | | | |
| convertibl | | | | | | | | | | |
| e bonds | | | | | | | | | | |
--------------------------------------------------------------------------------
| Fair value | | | | 969 | | | 1 | 1,969 | | 1,969 |
| on | | | | | | | 000 | | | |
| acquisitio | | | | | | | | | | |
| ns of | | | | | | | | | | |
| subsidiari | | | | | | | | | | |
| es | | | | | | | | | | |
--------------------------------------------------------------------------------
| Share-base | | | | | | | 576 | 576 | | 576 |
| d payments | | | | | | | | | | |
--------------------------------------------------------------------------------
| Net change | | | | | | | | | 516 | 516 |
| in | | | | | | | | | | |
| minority | | | | | | | | | | |
| interests | | | | | | | | | | |
| generated | | | | | | | | | | |
| by | | | | | | | | | | |
| acquisitio | | | | | | | | | | |
| ns and | | | | | | | | | | |
| disposals | | | | | | | | | | |
--------------------------------------------------------------------------------
| Equity | | | | | | | 34 | 34 | | 34 |
| component | | | | | | | | | | |
| of | | | | | | | | | | |
| convertibl | | | | | | | | | | |
| e bonds | | | | | | | | | | |
| and other | | | | | | | | | | |
| changes in | | | | | | | | | | |
| equity | | | | | | | | | | |
--------------------------------------------------------------------------------
| Shareholde | 23, | 0 | 25, | 969 | 340 | -1, | 19, | 409,6 | 1,99 | 411,6 |
| rs' equity | 642 | | 740 | | , | 080 | 694 | 55 | 5 | 50 |
| 31 Dec | | | | | 690 | | | | | |
| 2007 | | | | | | | | | | |
--------------------------------------------------------------------------------
MERGERS AND ACQUISITIONS DURING THE FINANCIAL YEAR
Ruukki Group has carried out the following acquisitions by business segment
during financial year 2007:
House Building: acquisition of controlling interest (70.1 %) in Pohjolan
Design-Sähkö Oy in June 2007
Sawmill Business: increase in ownership in Oplax Oy (32.0 % 100.0 %) in March
2007
Furniture Business: increase in ownership in Incap Furniture Oy (47.2 % 70.3
%) in February 2007 (ownership has later increased to 71.0 % as a result of
transactions carried out by Incap Furniture group)
Other operations: increase in ownership in Alumni Oy (69.4 % 100.0 %) in
August 2007
The financial effects of the aforementioned acquisitions have been discussed in
the interim reports published during the accounting period.
ACQUISITION FINALISED AFTER THE END OF FINANCIAL PERIOD, JUNNIKKALA OY
After the end of the accounting period in January 2008, the Group's sawmill
business area acquired a majority interest in Junnikkala Oy and the group it
forms. Junnikkala Oy practises sawmilling business in Kalajoki, Ostrobothnia,
and its subsidiary Juneropt Oy specialises in further processing of sawn wood
targeted especially for prefabricated housing business. The annual production
capacity of the Junnikkala sawmill is at present 130,000 cubic meters of sawn
wood. At the same time, Junnikkala Oy acquired all shares of Pyyn Saha ja
Höyläämö Oy, which operates in Oulainen.
If this acquisition had taken place with a corresponding holding already on 1
January 2007, this would have changed the consolidated figures reported by
Ruukki Group for the accounting period 1 January - 31 December 2007 as follows:
The consolidated revenue would have increased by about EUR 47,651 thousand
(+22%), the consolidated EBIT* would have increased by about EUR 2,338 thousand
(+15%), and the consolidated net profit would have increased by about EUR 928
thousand (+7 %) (all these figures compared with the accounting period 2007
figures reported by the Group). If Junnikkala group had been consolidated into
Ruukki Group's sawmill business area already on 1 January 2007, the business
area's revenue would have been about EUR 107 million (+80 % compared with the
business segment's accounting period 2007 revenue) and EBIT about EUR 7.7
million (+44 % compared with the business segment's accounting period 2007
EBIT).
* when (i) taking into account the depreciations and deferred taxes related to
purchase price allocations, and (ii) assuming 31 January 2008 fair values to be
valid for the earlier periods as well
Preliminary purchase price allocation has been made on the acquisition. The
following assets and liabilities were recognised relating to the acquisition
which also gives information about the contribution of this transaction to the
group balance sheet at the date of the transaction:
--------------------------------------------------------------------------------
| 1,000 EUR | Fair value of | Book value of |
| | acquired assets | assets before |
| | | acquisition |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Intangible assets | | |
--------------------------------------------------------------------------------
| Clientele | 3,869 | 0 |
--------------------------------------------------------------------------------
| Emission allowances | 795 | 0 |
--------------------------------------------------------------------------------
| Order book | 104 | 0 |
--------------------------------------------------------------------------------
| Other intangible assets | 906 | 906 |
--------------------------------------------------------------------------------
| Property, plant and equipment | | |
--------------------------------------------------------------------------------
| Land and water | 7,235 | 7,235 |
--------------------------------------------------------------------------------
| Machinery and equipment | 13,942 | 13,942 |
--------------------------------------------------------------------------------
| Investments | 59 | 59 |
--------------------------------------------------------------------------------
| Other non-current assets | 687 | 687 |
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Inventories | 11,761 | 10,873 |
--------------------------------------------------------------------------------
| Accounts receivable | 4,953 | 4,953 |
--------------------------------------------------------------------------------
| Accruals | 788 | 788 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 415 | 415 |
--------------------------------------------------------------------------------
| Total assets | 45,513 | 39,858 |
--------------------------------------------------------------------------------
| Interest bearing debt | 17,758 | 17,758 |
--------------------------------------------------------------------------------
| Non-interest bearing debt | | |
--------------------------------------------------------------------------------
| Accounts payable | 6,244 | 6,244 |
--------------------------------------------------------------------------------
| Convertible bonds | 400 | 400 |
--------------------------------------------------------------------------------
| Accrued expenses | 1,745 | 1,745 |
--------------------------------------------------------------------------------
| Other liabilities | 2,549 | 2,549 |
--------------------------------------------------------------------------------
| Deferred tax liabilities | 1,470 | 0 |
--------------------------------------------------------------------------------
| Total liabilities | 30,167 | 28,697 |
--------------------------------------------------------------------------------
| Net assets 31 Jan 2008 | 15,346 | 11,161 |
--------------------------------------------------------------------------------
| Acquisition cost | 24,811 | |
--------------------------------------------------------------------------------
| Net assets | 15,346 | |
--------------------------------------------------------------------------------
| Goodwill | 9,465 | |
--------------------------------------------------------------------------------
| Cash flow effect: | | |
--------------------------------------------------------------------------------
| Consideration paid in cash | 5,740 | |
--------------------------------------------------------------------------------
| Acquired cash and cash equivalents | -415 | |
--------------------------------------------------------------------------------
| Cash flow effect | 5,326 | |
--------------------------------------------------------------------------------
DIVESTMENT FINALISED AFTER THE END OF FINANCIAL YEAR, PAN-OSTON OY
In January 2008 all the shares of Pan-Oston Oy, the subsidiary of Ruukki Group's
metal industry sector were sold in an all-cash transaction as a part of the
implementation of the Group's strategy to focus on wood-based industries. This
transaction does not have major effect to Group's 2008 financials.
OTHER KEY INDICATORS, EUR MILLION
--------------------------------------------------------------------------------
| | 2007 | 2006 | 2005 |
--------------------------------------------------------------------------------
| | 12 months / | 12 months / | 12 months / |
| | 31 Dec 2007 | 31 Dec 2006 | 31 Dec 2005 |
--------------------------------------------------------------------------------
| Gross capital expenditure | 34.4 | 14.3 | 5.7 |
--------------------------------------------------------------------------------
| % of revenue | 16.1 % | 11.4 % | 6.2 % |
--------------------------------------------------------------------------------
| Personnel, average | 866 | 570 | 387 |
--------------------------------------------------------------------------------
| Personnel, at the end of the | 958 | 452 | 418 |
| period | | | |
--------------------------------------------------------------------------------
| Dividends * | | 4.1 | 3.1 |
--------------------------------------------------------------------------------
| Dividend per share, EUR * | | 0.03 | 0.02 |
--------------------------------------------------------------------------------
| Dividend per earnings, % * | | 41.9 % | 34.7 % |
--------------------------------------------------------------------------------
| Effective dividend yield, % | | 2.5 % | 3.7 % |
--------------------------------------------------------------------------------
| Price to earnings (P/E), EUR | 48.6 | 16.8 | 9.4 |
--------------------------------------------------------------------------------
| Lowest share price, EUR | 1.18 | 0.64 | 0.30 |
--------------------------------------------------------------------------------
| Highest share price, EUR | 3.59 | 1.23 | 0.70 |
--------------------------------------------------------------------------------
| Average trade-weighted share | 2.40 | 0.84 | 0.54 |
| price, EUR | | | |
--------------------------------------------------------------------------------
| Market capitalisation | 817.9 | 163.2 | 54.4 |
--------------------------------------------------------------------------------
| Share turnover | 623.2 | 84.8 | 24.7 |
--------------------------------------------------------------------------------
| Share turnover, % | 89.7 % | 86.0 % | 53.7 % |
--------------------------------------------------------------------------------
* Board of Directors proposes to the Annual General Meeting that a dividend of
EUR 0.04 per share shall be paid out from company's retained earnings as of 31
Dec 2007. The proposed dividend would therefore total EUR 11,601,360.88.
ACCOUNTING POLICIES
This Financial Statements Review has been prepared in accordance with IFRS
principles. Ruukki Group Plc has applied the same accounting policies as in the
2006 financial statements, with the following exception. Based on a decision of
the company's Board of Directors, the sawmill and furniture businesses have been
reported as separate primary segments since the beginning of the 2007 financial
year, rather than as the wood product industry segment as in the reporting for
the 2006 financial year. The figures in the tables have been rounded off to one
decimal point, which must be considered when calculating totals. The Financial
Statements Review data are unaudited.
PRESS AND ANALYSTS BRIEFING
Ruukki Group Plc holds a press and analysts briefing in Helsinki on Wednesday 27
February 2008 at Restaurant Bank (Unioninkatu 20, 2nd floor). The event will
start at 12:00 p.m. In the briefing Matti Vikkula, the CEO of Ruukki Group Plc,
will present the Financial Statements Review for financial year 2008. Moreover
there will a conference call at 4:00 pm Finnish time held in English. Press
representatives, investors, analysts and persons interested in the company are
invited to attend the briefing.
RUUKKI GROUP PLC
BOARD OF DIRECTORS
Ruukki Group focuses on wood-based industrial business operations. Currently the
group operations are located mainly in Finland, but in future the targeted
emphasis is principally in Russia. Ruukki Group Plc's share is listed on
Helsinki Stock Exchange. In the OMX Nordic Exchange the shares of the company
are traded in the mid cap sector, in the industrials segment.
For any further information, please contact:
Matti Vikkula
Chief Executive Officer
Ruukki Group Plc
Telephone +358 45 6700 606
www.ruukkigroup.fi
This Financial Statements Review is based on translation into English of a
document written in Finnish. In case there would be any potential discrepancies,
inconsistencies or inaccuracies, the Finnish version of the Financial Statements
Review shall prevail.
RUUKKI GROUP PLC'S FINANCIAL STATEMENTS REVIEW 1 JANUARY - 31 DECEMBER 2007
| Source: Afarak Group Plc