- Net sales: EUR 144.9 (130.9) million.
- Operating profit: EUR 19.8 (15.6) million.
- Orders received: EUR 178.5 (148.9) million.
- Order book: EUR 87.7 (72.6) million.
- Profit before extraordinary items, provisions and taxes: EUR 18.8 (18.8) million.
- Net profit for the review period EUR 13.3 (13.7) million.
- Earnings per share: EUR 0.73 (0.79).
Overview
Vaisala's profit development for January-September 2006 has been as expected. The sustained maintenance and development of competitiveness has enabled Vaisala to retain its market share, and the company's market position is strong. Growth in demand and positive order book developments started during the second half of 2005 have continued. Demand remained on a good level, and the number of orders received was significantly higher during the review period than during the corresponding period in 2005.
Weather radar signal processing system provider Sigmet was acquired and merged as part of the Vaisala Measurement Systems division in January 2006. Parts of radiosonde production were outsourced to Malaysia while corresponding functions in Finland were downsized. Vaisala Instruments and Vaisala Solutions divisions' businesses have continued without major structural changes.
Due to the current business boom, some difficulties have started to emerge in the availability of some materials. This will cause some delays in product delivery times.
Exchange rates have weakened the result for January-September.
Net sales and order book
The Vaisala Group's net sales for the review period grew by 10.7% and were EUR 144.9 million (1-9/2005: EUR 130.9 million). Operations outside Finland accounted for 96% (96%) of net sales. The Group received new orders worth EUR 178.5 (148.9) million during the review period. The order book at the end of the review period was EUR 87.7 (72.6) million.
Performance and balance sheet
Operating profit for the review period grew by 26.7% and was EUR 19.8 (15.6) million. Profit before extraordinary items was 13.0% of net sales, or EUR 18.8 (18.8) million. Net profit for the review period was EUR 13.3 (13.7) million.
Change in hedging costs improved the operating profit by 1.9 MEUR compared to the comparison period. Thus the improvement in operating profit caused by operative measures was 2.3 MEUR. The profit of the review period was burdened by costs incurred from exchange rate changes and taxes, most of which have no impact on cash flow.
Financial costs are mainly due to exchange rate changes. The effective tax rate in the review period was 29% (27%).
The Vaisala Group's solvency and liquidity remained strong. On September 30, 2006, the balance sheet total was EUR 197.1 (167.1) million. The Group's solvency ratio at the end of the review period was 84% (82%).
The total of the Group's liquid assets was EUR 72.1 (58.2) million.
Research and development
Expenditure on research and development in the review period totaled EUR 14.7 (15.4) million, representing 10.1% of the Group's net sales.
Capital expenditure
Gross capital expenditure in non-current assets totaled EUR 18.6 million (EUR 7.7 million). The total for the review period includes the cost incurred from the acquisition of Sigmet, Inc, EUR 17.2 million.
Vaisala Measurement Systems
Vaisala Measurement Systems division generated net sales of EUR 59.5 (57.1) million. EUR 6.8 million of the growth is due to the Sigmet acquisition carried out in January. Decrease in comparable net sales is due to slower sales of wind profilers and lightning detection systems compared to the corresponding period in 2005.
Operating profits were EUR 8.5 million (EUR 12.1). The operating profits were burdened by the one-off costs caused by the reorganization of the radiosonde production, as well as the slower sales of wind profilers and lightning detection systems.
In March, the reorganization relating to the partial outsourcing of the Vaisala Measurement Systems division's production functions was started, as the codetermination negotiations started on January 19, 2006, were concluded. As a result, Vaisala gave notice to 37 employees. For other parts, the target reduction of approximately 60 productive labor years was realized through terminations of temporary employment, relocations and pension programs.
The one-off costs caused by the partial outsourcing of the radiosonde production incurred an accrual of approximately EUR 0.8 million in January-September. The outsourcing will not affect the fiscal year result in 2006.
The outsourcing has proceeded as planned, and the first radiosonde deliveries have been dispatched to customers from Malaysia.
The acquisition of the world's leading independent weather radar signal processor and application software manufacturer Sigmet Inc. was confirmed in January. The balance of the margin of the acquired order book, EUR 1.8 million, was fully depreciated according to IFRS 3 during the review period.
Vaisala Instruments
The Vaisala Instruments division generated net sales of EUR 47.2 (41.0) million. New products have been well received in the market. Operating profit for the review period was EUR 14.5 million (9.9). The operating profits have increased thanks to improvements in the production and procurement activities.
Fire at the VTT Technical Research Centre hampers the acquisition of components for Vaisala carbon dioxide products, but has not affected the result of the review period.
In May, Vaisala introduced a new product for oxygen concentration measurements in industrial processes.
Competition in all product categories remains fierce. Vaisala's global operating model, combined with significant investments in research and development, form the basis to retain market leadership and increase market share.
Vaisala Solutions
The Vaisala Solutions division generated net sales of EUR 38.2 (32.8) million. Operating loss in the review period was EUR -0.5 (-1.6) million.
The review period was typical for the Vaisala Solutions division. Due to the characteristics of the division's business, operating profits normally turn positive on the fourth quarter.
The division's goal is to increase the share of service sales in the net sales. The main ongoing development projects concentrate on customer-focus, increased service offering, and improved project business.
Changes in Vaisala Oyj's management
As former Vaisala CEO Pekka Ketonen has decided to retire, the Board of Directors has nominated Licentiate of Technology Kjell Forsén (47 years) as the new Vaisala CEO starting October 1, 2006. Pekka Ketonen's employment at Vaisala will terminate at the end of 2006.
M.Sc.(Eng) Jouni Lintunen was appointed as the new Chief Financial Officer of Vaisala beginning July 1, 2006.
Vaisala's share
The acquisition and conveyance of own shares
The Board of Directors had been authorized by the Annual General Meeting of March 22, 2005, to acquire and convey the company's own shares to launch a share-based incentive program. The authorization was valid until March 22, 2006. The program applied to approximately 50 Vaisala key personnel. Some of them were in the group of permanent insiders, as defined by the Securities Market Act. The number of A-shares conveyed within the share-based incentive program was max. 35,000 shares.
A total of 35,000 Vaisala A-shares were subscribed for with the warrants granted, corresponding the value of EUR 14,717.47. Of these, 25 850 A-shares, corresponding the value of EUR 10,869.90 were conveyed on March 6 and March 16 to the key personnel, according to the share-based incentive program. The average value of the acquisitions and conveyances was EUR 27.53.
Vaisala's share capital at the end of the review period was EUR 7,660,807.86 and the total number of shares was 18,218,364.
By January 31, 2006, a total of 739,364 Vaisala A-shares were subscribed for with the warrants granted in 2000 to the key personnel of Vaisala. All the shares have been registered in the Finnish Trade Register. Dividend was payable for the 186 450 A-shares subscribed for in 2005. The shares subscribed for in January 2006 did not qualify for dividend. Therefore Vaisala had two series of A-shares during the period February 22, 2006 - March 28, 2006: the A-share and the new A-share.
On February 27, 2006, Vaisala Oyj received the following notification of change in the share of ownership in accordance with the Security Markets Act, Chapter 2 § 9: Harris Associates L.P.'s holding in Vaisala Oyj falls below five (5) per cent of the outstanding share capital of Vaisala Oyj.
On June 14, 2006, Vaisala Oyj received the following notification of change in the share of ownership in accordance with the Security Markets Act, Chapter 2 § 9: Inkeri Voipio's holding in Vaisala Oyj has fallen below ten (10) per cent of the outstanding share capital of Vaisala Oyj.
The price of Vaisala's A share on the Helsinki Exchanges was EUR 24.00 on December 31, 2005, and EUR 27.50 at the end of the review period. The highest share price quoted during the review period was EUR 29.60 (new A-share EUR 27.67) and the lowest EUR 23.10 (new A-share EUR 25.35).
A total of 5,388,626 Vaisala shares were traded during the review period (new A-share 85,411), and 249,300 option rights.
Own and parent company's shares
The company holds a total of 9150 of its own shares at the end of the review period, representing 0.05% of the share capital and 0.01% of votes. The compensation for the shares owned by the company is EUR 251,899.69.
Dividend
The Annual General Meeting decided that a dividend of EUR 0.75 per share, corresponding to the total of EUR 13,437,037.50 will be distributed for the financial year 2005. Dividend is not paid to the A-shares that are held by
Vaisala Oyj. Dividend was paid on April 4, 2006.
Events in the permanent group of insiders
CEO Pekka Ketonen, who belongs to the permanent group of insiders, received 3 207 A-shares based on the 2005 share-based incentive program.
Personnel
The total number of employees in the Vaisala Group at the end of the review period was 1 060 (1 047).
Some 19% (17%) of the personnel worked in research and development. Approximately 40% (36%) of the Group's personnel worked outside Finland.
Events outside the review period
On October 19, Vaisala announced that is has signed a significant contract with a long-standing customer to provide two airports with automated weather observation solutions. In addition to the equipment and software, the turnkey contract includes site surveys, project management and training, as well as a maintenance contract for two years. The total value of the contract is EUR 7.5 million. Deliveries are scheduled to be completed by June 2008.
Outlook
The market situation is not expected to significantly change during the rest of the year. In 2006, the net sales are expected to grow somewhat organically, and thanks to the Sigmet Inc. business acquisition. Relative profitability is expected to remain on the previous year's level. Financial expenses and taxes will be higher than in the previous year, so net profit is expected to remain on the previous year's level. Organic growth is expected to continue in 2007.
Vaisala aims to be the global market leader in its selected business areas also in the future. Therefore investments in product development and competitiveness will continue to be substantial.
Vantaa, October 31, 2006
Vaisala Oyj
Board of Directors
The full report including tables can be downloaded from the following link.
