LÄNNEN TEHTAAT PLC Interim Report 8 May 2008 8.30 am
INTERIM REPORT 1 January - 31 March 2008
- Net sales for the Group's continuing operations totalled EUR 90.9 (71.5)
million, up 27% on the same quarter in 2007;
- Continuing operations showed a first-quarter profit of EUR 5.0 (0.1) million,
and earnings per share came to EUR 0.78 (0.01);
- Operating profit in continuing operations (excluding non-recurring items) was
EUR 0.6 (0.1) million.
The figures for this interim report have not been audited.
CEO Matti Karppinen:
“Net sales growth in our continuing operations has remained high, and growth
occurred in all segments. The operating profit in continuing operations,
excluding non-recurring items, was higher than in the same quarter a year ago.
The January-March profit was boosted by the recognition of substantial one-off
items from the associated company Sucros Ltd.
We've achieved good results with the measures to improve productivity,
cost-efficiency and operational quality, and we'll be making a determined effort
to continue this work.
The Group carried out a number of restructuring measures in support of its
business strategy during January-March. In line with the Frozen Foods strategy,
Apetit Pakaste sold its jams business to Saarioisten Säilyke Oy. In Grain
Trading, a commitment plan was introduced for personnel in Avena Nordic Grain,
giving them the opportunity to obtain a stake in the ownership of Avena Nordic
Grain Oy.
The international raw material and food markets are becoming increasingly
volatile. Higher world demand for raw materials and low raw material stocks have
resulted in rapid increases in both raw material and product prices. At the same
time, the global economy is slowing down and there is a great deal of
uncertainty about the future. In this kind of uncertainty, where significant
changes can occur very quickly, it is essential to be ready to react.
The current economic situation has put more pressure on the food industry to
consolidate. There are more companies on offer on the acquisitions market and
buyers are now in a stronger position than before.”
KEY INDICATORS, EUR million
Continuing operations Q1/2008 Q1/2007
Net sales 90.9 71.5
Operating profit 5.4 0.2
Operating profit without non-recurring items 0.6 0.1
Profit before taxes 5.0 0.1
Profit for the period 5.0 0.1
Earnings per share, EUR 0.78 0.01
RESTRUCTURING
Ownership arrangements in Avena Nordic Grain Oy
In February, Lännen Tehtaat plc decided to offer Avena Nordic Grain personnel
the chance to become indirect owners of their company. The offer was part of the
commitment plan for Avena Nordic Grain personnel. The arrangement was put into
effect by setting up a new company Foison Oy, which acquired 20% of the shares
in Avena Nordic Grain Oy from Lännen Tehtaat. Nearly all Avena Nordic Grain's
personnel joined the scheme, subscribing 73.1% of the new company's shares. The
remaining 26.9% of the shares was subscribed by Lännen Tehtaat plc. The Foison
shares owned by Lännen Tehtaat can be used for share-based commitment
arrangements covering new Avena staff should Lännen Tehtaat plc so decide.
Following the arrangements, Lännen Tehtaat plc owns, directly and indirectly,
85.4% of Avena Nordic Grain's shares. There are restrictions concerning the
transfer of Foison Oy's shares as they may only be sold to Lännen Tehtaat plc.
At the same time, Lännen Tehtaat plc has a buy-back obligation on the shares.
Under the arrangement, Avena's profits will be distributed to shareholders as
dividends each year. Consequently, the ownership of Foison Oy will appear as a
liability in the consolidated financial statements and the obligation to pay
dividends on the basis of the financial year's results to Foison Oy will be
treated as a financing cost.
The arrangements referred to above had no other impact on the profits of the
Lännen Tehtaat Group.
Sale of the jams business
In March, Apetit Pakaste Oy concluded an agreement with Saarioisten Säilyke Oy
on the sale of the Apetit Pakaste jams business. Under the agreement, the
development, production, sales and marketing of jams and marmalades will be
transferred to Saarioisten Säilyke Oy in autumn 2008. The deal also includes
transfer of the Dronningholm trademark.
CHANGE IN REPORTING PRACTICE
Lännen Tehtaat has decided to alter its reporting practice in respect of the way
in which it presents its share of the profit/loss of associated companies from
the start of 2008. Under the new practice, the share of the profit/loss of
associated companies related to the food businesses will be included in the
operating profit, and the share of the profit/loss of associated companies not
forming part of Lännen's core businesses will be shown below the operating
profit. The share of the profit/loss from Sucros Ltd and Ateriamestarit Oy is
included in Other Operations. The figures for the previous year have been
adjusted accordingly. The share of the profit/loss from Sandanger AS from 1
March to 31 August 2007 is reported above the operating profit for the Fish
business.
Lännen Tehtaat's share of the profit from the associated company Suomen Rehu is
shown below the operating profit.
DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
In the consolidated balance sheet the assets and liabilities directly associated
with discontinued operations and with assets held for sale are presented
separately from other assets and liabilities as non-current assets held for sale
and as liabilities associated with non-current assets held for sale. In the
balance sheet and income statement for the first quarter of the previous year
the Suomen Rehu Group was reported under discontinued operations. In the balance
sheet for the first quarter 2008, the assets of the jams business sold to
Saarioinen are disclosed as assets held for sale.
NET SALES AND PROFIT
The January-March profit for continuing and discontinued operations totalled EUR
5.0 (1.9) million, and earnings per share amounted to EUR 0.78 (0.31).
Continuing operations
January-March net sales for the Group's continuing operations totalled EUR 90.9
(71.5) million, which was 27% higher than in the first quarter the previous
year. There was growth in all business segments.
The operating profit of the continuing operations came to EUR 5.4 (0.2) million.
The operating profit without non-recurring items was 0.6 (0.1) million.
Non-recurring items amounted to EUR 4.8 (0.1) million. The reported operating
profit includes EUR 4.9 (-0.4) million as the share of associated companies'
profits/losses. The figure of EUR 4.9 million consists of non-recurring items
received as compensation for the sale of sugar and isoglucose quotas in
connection with the sugar reform.
The net financial expenses of the continuing operations totalled EUR 0.7 (0.1)
million. Included in this total is Foison Oy's EUR 0.2 million share of Avena
Nordic Grain's first-quarter profit. Lännen Tehtaat's share of the associated
company Suomen Rehu's profits came to EUR 0.3 million. Profit before taxes
amounted to EUR 5.0 (0.1) million, and the profit for the period came to 5.0
(0.1) million.
Discontinued operations
Net sales of discontinued operations totalled EUR 0.0 (47.2) million, and the
profit for the period was 0.0 (1.8) million.
FINANCING AND CASH FLOW
The Group's financial position and liquidity remained good throughout the
period. Cash flow from operations in January-March, after interest and taxes,
totalled EUR -7.4 (5.5) million. The impact of the change in working capital was
EUR -7.2 (7.3) million. Net cash flow from investments totalled EUR 3.6 (-10.2)
million, and cash flow from financing activities was EUR 4.2 (3.3) million. The
cash flows of the previous year include those of the discontinued operations.
At the end of the first quarter, interest-bearing liabilities came to EUR 37.8
(59.2) million, and liquid assets amounted to EUR 9.5 (6.0) million. Net
interest-bearing liabilities totalled EUR 28.4 (53.2) million. The figures for
the first quarter a year earlier include the interest-bearing liabilities and
liquid assets of the discontinued operations. The consolidated balance sheet
total stood at EUR 207.6 (235.8) million and equity ratio was 64.0 (49.1)%.
Commercial papers issued for the Group's short-term financing totalled EUR 32.0
(28.0) million at the end of the quarter. Liquidity is secured with committed
credit facilities, and at the end of the quarter, the credit facilities
available totalled EUR 25 (23) million.
INVESTMENT
In the period January-March, gross investment in non-current assets in
continuous operations came to EUR 1.3 (0.8) million.
PERSONNEL
The average number of personnel in continuing operations in January-March
totalled 746 (617). The number of personnel working in Frozen Foods was 220
(224), in Fish 448 (317), in Vegetable Oils 35 (36), in Grain Trading 30 (29)
and in Other Operations 13 (11). The personnel at Apetit Suomi Oy are allocated
under both Frozen Foods and Fish in proportion to the services charged. The
increase in the number of personnel in the Fish business is mainly due to the
acquisition of Maritim Food.
BUSINESS SEGMENTS
Frozen Foods
Net sales of Frozen Foods in January-March totalled EUR 13.5 (13.3) million,
which was about 2% up on the first quarter of the previous year. Sales of retail
products grew by about one per cent overall, and at the same time there was a
further decline in the sales of retailers' private label brands. The number of
sales days in the first quarter of the previous year was two more than in the
quarter under review. New products and active marketing gave a further boost to
the sales of Apetit frozen potato products. Apetit's creamed potatoes have
gained in popularity and the new, larger pack of traditional mashed potato has
also been well received. Furthermore, new frozen vegetable products, such as
potatoes and chopped vegetables for soup, are also selling well. Sales in the
hotel, restaurant and catering sector were 7% up on the figure for the same
quarter the previous year, adjusted to allow accurate comparison, while sales to
the food industry were unchanged. Exports of peas to other European countries
continued during the early months of the year. Total exports were up 30% from
the same quarter in 2007.
Excluding non-recurring items, the Frozen Foods business posted an operating
profit of EUR 0.4 (0.5) million, which was almost the same as a year earlier.
Higher raw material and energy prices have resulted in substantial increases in
production costs. Lännen Tehtaat has been able to soften the impact of these by
raising sales prices and by keeping fixed costs under tight control.
In order to ensure that operations in the Frozen Foods business area are more
customer-oriented and demand-driven, the sales and product development functions
were reorganized. As part of these changes, the sales and product development
staff were transferred from the service company Apetit Suomi Oy to Apetit
Pakaste Oy.
In March, Apetit Pakaste and Saarioisten Säilyke Oy concluded an asset deal
under which the development, production, sales and marketing of jams and
marmalades will be transferred to Saarioisten Säilyke Oy in autumn 2008. The
deal also includes transfer of the Dronningholm trademark. The sale will
generate a one-off sales profit of approximately EUR 2.5 million, which will be
entered in the third quarter results. As a consequence of the sale, Apetit
Pakaste can, in accordance with its strategy, focus on frozen foods. The net
sales of the jams and marmalades business in 2007 totalled about EUR 6 million
and had a slightly positive impact on the operating profit.
The facilities used for jam production will be converted to handle the frozen
food production transferred from Turku. Moving this production from Turku will
generate almost thirty new jobs in Säkylä. Most of these jobs will be taken up
by former jam production employees now offered jobs in frozen food production.
Construction of the packaging plant required as part of the transfer of
production from Turku continued during the period under review. The Turku
production is scheduled for transfer to Säkylä by the end of 2008. The
centralization of production is expected to result in greater productivity and
cost-efficiency and, consequently, an increase of about EUR 0.9 million in
operating profits from 2009.
The project to introduce a new enterprise resource planning system continued
during the first quarter. The aim is to introduce the new system in Frozen Foods
during 2008.
Investment in the Frozen Foods business in January-March totalled EUR 0.8 (0.2)
million. The most important investment concerned the construction of new
facilities at Säkylä required for the production transfer from Turku and the
updating of the enterprise resource planning system.
Fish
The net sales of the Fish business totalled EUR 21.5 (16.4) million, which was
31% higher than the same quarter in 2007. Maritim Food and Sandanger,
incorporated into the Group in March and September 2007, respectively, increased
the segment's net sales by EUR 6.5 million.
The operating profit of the Fish business (excluding non-recurring items)
totalled EUR -0.5 (-0.2) million. Non-recurring items amounted to EUR -0.1 (0.0)
million. The non-recurring items resulted from the organizational changes
carried out during the period under review. The Fish business did not achieve
its result targets on the Finnish market. However, the results of the Maritim
Food Group were in line with expectations.
The first-quarter net sales of the Fish business in Finland were down on those
for the same period a year earlier, primarily as a result of a decline in prices
for salmon and rainbow trout and the consequent drop in the sales prices of
fresh-fish products. Since autumn, sales have also been affected by poor
availability of wild fish and the raw material for hot-smoked whitefish. The
shellfish products produced by Maritim Food and sold under the Apetit Maritim
brand, introduced on the Finnish market in autumn, have been selling better than
expected. There was tougher price competition in low value-added consumer-packs
of salmon and rainbow trout fillets and in salmon and rainbow trout fillets sold
at service counters. Measures aimed at improving productivity and price
competitiveness in this product category were started during the period under
review.
The work to improve internal efficiency and processes at Apetit Kala, which was
started in the autumn, has proceeded as planned. Labour and raw-material
productivity have improved and delivery reliability has remained at targeted
levels. The reorganization of sales, production, product development and
logistics continued, with the aim of clarifying responsibilities, achieving
higher reaction speeds and increasing cost-efficiency. As part of the
organizational changes, the staff responsible for product sales and customer
accounts at Apetit Kala were transferred from Apetit Suomi Oy to Apetit Kala Oy.
The aim is to ensure that operations are more customer-oriented and
demand-driven.
Apetit Kala has signed an agreement with Saarioinen Oy concerning cooperation in
the hotel, restaurant and catering sector, starting on 1 September 2008. The aim
is to achieve substantial improvements in the availability of Apetit Kala and
Maritim Food products for customers in the catering sector.
Regarding the Kalatori service counters, Apetit Kala has decided to take over
those sales points previously run under the franchise model, in order to expand
sales and introduce greater standardization. Most of these franchised Kalatori
sales points were taken over by Apetit Kala in April 2008.
The net sales of Maritim Food Group increased compared with the same period in
2007. Sales of Maritim Food in Norway remained at the previous year's level. On
the Norwegian market the product group posting the strongest growth in sales was
shellfish products. A drop in the sales prices of salmon products led to a fall
in net sales of fish products. With Easter occurring in March, there were two
sales days fewer in the first quarter than a year ago, which had a negative
impact on sales. On the Swedish market, first-quarter sales grew by about one
third from the previous year's figure. This growth occurred in sales to both
existing and new customers.
Delivery reliability of the Norwegian and Swedish companies has remained good.
Work productivity has improved, raw-material losses have decreased and
short-term absenteeism has dropped, particularly at the end of the period. To
achieve further improvements in productivity and to ensure adequate service
levels for HoReCa customers, the Swedish company will make investments in
production lines and packaging machinery during 2008.
The integration of Maritim Food into Lännen Tehtaat has continued as planned and
its operations have now been largely separated from those of the previous owner
group. Key resources such as procurement and financial administration, which
until now have been provided by the previous owner as outsourced services, are
now part of Maritim Food.
Sami Haapasalmi, appointed to head the Fish business, took up his duties in
mid-April. He is responsible for the profitability of the Fish business and for
developing and expanding the business through organic growth and acquisitions.
Investment in the Fish business totalled EUR 0.3 (0.5) million. The most
important investments concerned the renewal of the company's enterprise resource
planning system, and productivity improvements in Maritim Food.
Vegetable Oils
In Vegetable Oils, net sales totalled EUR 14.2 (10.0) million, up 42% on the
first quarter figure for the previous year. The increase was due to higher sales
prices, higher volumes of rapeseed oil and rapeseed expeller, and the higher
added value of products sold.
Operating profit totalled EUR 0.2 (0.4) million. The drop was caused by a
decline in the refining margin and higher energy and wage costs compared with
the same period in 2007. The rapid rise in the prices of rapeseed and rapeseed
oils that began a year ago continued in January-February. Since then, the market
has been characterized by sharply fluctuating prices.
Investment in the Vegetable Oils business totalled EUR 0.0 (0.1) million and
consisted of small replacement investments.
Grain Trading
The strong growth in Grain Trading continued during the first quarter. Net sales
totalled EUR 42.1 (32.1) million, which was 32% more than a year earlier. The
growth was the result of higher prices. Grain Trading posted higher net sales in
both exports and in trading between third countries. In Finland, however, sales
were slightly lower than in the same quarter of 2007.
Poorer than expected harvests in the most important grain production areas, low
stocks and growing demand led to sharp increases in the world prices of grain,
oilseeds and feed raw materials during the autumn. Prices remained at fairly
high levels during the early part of the first quarter, but, in anticipation of
the new harvest and with larger areas now under cultivation, started declining
at the end of the first quarter.
Grain Trading was successful in seizing opportunities in different markets and,
as a result, was able to increase its first-quarter operating profit to EUR 1.7
(0.8) million.
Other Operations
The Other Operations segment is made up of the service company Apetit Suomi Oy,
Group Administration, items not belonging to any of the other business segments,
and the associated companies Sucros Oy and Ateriamestarit Oy. The cost effect of
services produced by Apetit Suomi Oy is an encumbrance on the operating result
in proportion to the use of services. Apetit Suomi's sales and product
development staff were transferred to the Frozen Foods and Fish businesses at
the end of the period under review.
The first-quarter net sales of the Other Operations segment were unchanged from
the previous year, totalling EUR 1.0 (1.0) million.
The operating profit of the segment (excluding non-recurring items) was EUR
-1.2 (-1.5) million. The non-recurring items amounted to EUR 4.9 (0.1) million.
The operating profit for January-March contains a share of the associated
companies' profits/losses amounting to EUR 4.9 (-0.4) million. The sum of EUR
4.9 million consists of non-recurring items received as compensation in
connection with the EU sugar reform. About EUR 3.5 million of this total is
related to the EU restructuring aid in connection with the closure of the Salo
sugar factory, and now all the compensation for the closure of the Salo factory
has been recognized in the accounts. Other non-recurring items, totalling about
EUR 1.5 million, are compensation granted in March under the EU sugar reform for
the sale of sugar quota of the Säkylä factory and isoglucose quota of the
Jokioinen plant. Excluding the non-recurring items, Lännen Tehtaat's share of
the associated company's profits/losses totalled EUR 0.0 (-0.4) million.
Investment in Other Operations totalled EUR 0.1 (0.0) million.
DECISIONS BY THE ANNUAL GENERAL MEETING
The Annual General Meeting of Lännen Tehtaat plc, held on 2 April 2008, approved
the financial statements of the parent company and the consolidated financial
statements and discharged the members of the Supervisory Board and the Board of
Directors and the CEO from liability for the 2007 financial year.
Dividend
The Annual General Meeting decided to distribute as dividend EUR 0.85 per share
on the financial year 2007. The AGM decided to pay the dividend on 15 April
2008.
Amending the Articles of Association
The Annual General Meeting approved the Board of Directors' proposal concerning
an increase in the maximum age at which a person may be elected to the Board of
Directors and to the Supervisory Board. Under the decision, a member of the
Board of Directors or the Supervisory Board who has attained the age of 68 is
ineligible for re-election to the post.
Authorization to acquire Lännen Tehtaat shares
The Annual General Meeting authorized the Board of Directors to decide on the
acquisition of a maximum total of 250,878 Lännen Tehtaat shares for the company
using non-restricted equity, under the following conditions:
Shares may be acquired for the purpose of developing the company's capital
structure, financing or implementing corporate acquisitions or other
arrangements, implementing share-based incentive systems, or for onward transfer
or annulment.
Shares may be acquired in one or more lots, to a maximum total of 250,878
shares. The combined number of Lännen Tehtaat shares held by the company
following this acquisition must not, however, exceed five (5) per cent of the
total number of Lännen Tehtaat shares. The Board is entitled to decide on how to
proceed in acquiring shares.
The shares will be acquired in public trading on the OMX Nordic Exchange
Helsinki, and the current value at the time of the transaction will be paid for
the shares. During the validity of the authorization, the minimum price of the
shares shall be the lowest price quoted in public trading, and the maximum price
correspondingly shall be the highest price quoted in public trading. The
acquisition price will be paid to the parties selling the shares within the
period of payment specified by the rules of the OMX Nordic Exchange Helsinki and
the Finnish Central Securities Depository.
Because this acquisition will be performed by buying shares in public trading,
the shares will not be acquired in accordance with the holding percentages of
the shareholders. The share acquisition will decrease the company's
distributable non-restricted equity. The Board was authorized to decide on any
other terms and conditions related to the company's acquisition of its own
shares.
The authorization is valid until the next AGM.
Authorization for share issue
The Annual General Meeting authorized the Board of Directors to decide on the
issuing of new shares and on the transfer of Lännen Tehtaat shares held by the
company in one or more lots in a share issue, to a total of no more than 947,635
shares, under the following conditions:
The share issue authorization covers all the Lännen Tehtaat shares already held
by the company (65,000 shares). The authorization further covers all the Lännen
Tehtaat shares to be acquired by the company under the authorization, given on 2
April 2008, to acquire Lännen Tehtaat shares. The maximum number of Lännen
Tehtaat shares that may be acquired under this authorization is 250,878. The
maximum number of new shares that can be issued is 631,757, and the maximum
number of Lännen Tehtaat shares held by the company that can be issued is
315,878.
The subscription price for each of the new shares must be at least the nominal
share value of EUR 2. The transfer price for Lännen Tehtaat shares held by the
company must be at least the current value of the share at the time of transfer,
which is determined by the price quoted in public trading on the OMX Nordic
Exchange Helsinki. However, in the case of share-based incentive systems, shares
can be issued without remuneration.
The authorization includes the right:
to deviate from the shareholders' pre-emptive subscription right (targeted
issue) if the company has a substantial financial reason to do so, such as
development of the company's capital structure, financing and implementing
corporate acquisitions or other arrangements, or building a share-based
incentive system;
to offer shares not only against money payment but also against capital
consideration in kind or under other specified terms or by exercising right of
set-off; and
to decide on the subscription price of shares and other conditions of and
matters related to the share issue.
The authorization is valid until the next AGM. The authorization will revoke the
earlier authorization to issue shares, given on 29 March 2007, and the
authorization to transfer Lännen Tehtaat shares held by the company given on the
same date.
SHARES AND TRADING
During the period under review, a total of 383,666 (322,015) company shares, or
6.1 (5.1)% of the total number of shares, were traded in the stock exchange. The
highest share price was EUR 16.46 (24.50) and the lowest EUR 13.20 (22.20).
Share turnover in January-March totalled EUR 5.4 (7.7) million. At the end of
the period, the market value of the share stock stood at EUR 94.6 (145.3)
million.
FLAGGING ANNOUNCEMENTS
No flagging announcements were made during the period under review.
GOVERNANCE
In its organizational meeting on 7 April 2008, the Supervisory Board of Lännen
Tehtaat plc elected Helena Walldén as its chairman and Juha Nevavuori as deputy
chairman.
At the same meeting, the Supervisory Board elected Harri Eela, Heikki
Halkilahti, Aappo Kontu, Matti Lappalainen, Hannu Simula, Soili Suonoja and Tom
v. Weymarn as members of the Board of Directors of the company. Tom v. Weymarn
was elected chairman and Hannu Simula as vice chairman of the Board of
Directors.
SEASONAL NATURE OF OPERATIONS
Under the IAS 2 standard, the acquisition cost of inventories includes a
systematically allocated portion of the fixed production overheads. In
production based on seasonal harvests, raw materials are mostly processed into
finished products during the final quarter, which means that inventories and
their balance-sheet values peak at the end of the year. As fixed production
overheads included in acquisition costs are not entered as an expense until the
time of sale, the Group generates most of its annual profits during the final
quarter. Because of the emphasis on seasonal harvests, the seasonal nature of
Lännen Tehtaat's operations is most marked in the Frozen Foods business and the
operations of the associated company Sucros Ltd.
Apetit Kala generates a considerable proportion of its sales during weekends and
public holidays. The full-year result for the Fish business depends to a great
extent on the success of Christmas sales.
Annual and quarterly net sales in the Grain Trading business depend very much on
demand and supply factors and on the price level in Finland and other markets.
RISKS AND UNCERTAINTIES IN THE NEAR FUTURE
The most significant near-future risks for the Lännen Tehtaat Group are
connected with the management of changes in raw material prices, changes
occurring in the Group's business sectors and in customer relationships, the
transfer of production from the Turku plant, the introduction of the new
enterprise resource planning system, corporate acquisitions and the integration
of acquired operations.
IMPORTANT EVENTS AFTER THE PERIOD UNDER REVIEW
On 2 April 2008, the Lännen Tehtaat plc Board of Directors decided to introduce
a share reward scheme as part of a long-term commitment plan for the Group's key
personnel. Under the plan, key personnel will have the opportunity to receive
company shares as a reward for achieving defined targets for the earning period.
The earning period is 1 January 2008 to 31 December 2008. Any reward paid on
this 2008 earning period will be paid during 2009 partly in company shares and
partly in cash. The aim is that the amount paid in cash would cover the taxes
and tax-related charges incurred on the reward. Transfer of all or any of the
shares within the restriction period of two years after the end of earning
period is prohibited. If a key personnel member terminates his or her employment
contract or contract of engagement during the restriction period, any shares the
person has received under the reward scheme must be returned to the company
without compensation. The amount of any reward available under the scheme for
the 2008 earning period will be based on the Group's earnings per share for its
continuing operations (EPS). A maximum of 17,000 Lännen Tehtaat plc shares and
additionally a maximum cash payment equal to the total value of these shares
will be paid on the 2008 earning period. A quota equal to a maximum 14,300
shares had been allocated to 13 key staff members by the end of the period under
review.
In early April, Apetit Kala signed an agreement with Saarioinen Oy concerning
cooperation in the hotel, restaurant and catering (HoReCa) sector. Under the
agreement, Saarionen will, as of 1 September 2008, sell and market Apetit Kala
and Maritim Food products to customers in the Finnish HoReCa sector. The aim of
the arrangement is to achieve substantial improvements in the availability of
the products in the HoReCa sector.
OUTLOOK FOR 2008
The full-year net sales for the continuing operations are expected to be up and
the operating profit excluding non-recurring items is expected to improve on the
previous year.
Following the sale of the jams business, the net sales of Frozen Foods are
expected to remain at the previous year's level. Sales of Apetit's own brands
are expected to grow, while sales to the hotel, restaurant and catering sector
and to the food industry are likely to remain steady and exports are expected to
decline. Apetit Pakaste's financial performance will be adversely affected by
higher raw material and energy costs and by the overlapping and non-recurring
expenses from the transfer of production from Turku to Säkylä and the
introduction of the enterprise resource planning system. The positive impact of
production centralization will begin to show in 2009.
The net sales of the Fish business are expected to grow with the first full year
of the added net sales of Maritim Food and Sandanger. Apetit Kala's net sales
are expected to increase through livelier demand and improved delivery
performance, and as existing Kalatori franchises are transferred to Apetit Kala.
The performance of the Fish business is expected to improve and to end up
significantly in profit as a result of process development and
productivity-improving measures. The operating profit will also improve with the
first full year of Maritim Food being part of the Group.
Higher product prices are expected to increase the net sales of the Vegetable
Oils business compared with 2007. Because of higher raw material prices and
market volatility during the early part of the year, the segment's operating
profit is expected to remain at previous year's level.
With good performance during the early months of 2008, Grain Trading is expected
to post higher net sales and operating profits than in 2007.
The use of IFRS reporting standards means that the Group will generate most of
its profits during the final months of the year.
CONSOLIDATED INCOME STATEMENT
EUR million
1-3/ 1-3/ 1-12/
2008 2007 2007
3 mths 3 mths 12 mths
Continuing operations
Net sales 90.9 71.5 309.6
Other operating income 0.3 0.3 1.4
Operating expenses -89.4 -70.2 -302.3
Depreciation -1.3 -1.1 -5.0
Impairments - - -0.5
Share of profit/loss of accociated companies 4.9 -0.4 2.1
Operating profit 5.4 0.2 5.3
Financial income and expenses -0.7 -0.1 -0.8
Share of profit of associated
companies 0.3 0.0 1.4
Profit before taxes 5.0 0.1 6.0
Income taxes 0.0 0.0 -0.4
Profit for the period,
continuing operations 5.0 0.1 5.6
Discontinued operations
Profit for the period,
discontinued operations - 1.8 7.8
Profit for the period 5.0 1.9 13.4
Attributable to:
Equity holders of the parent 4.9 1.9 13.3
Minority interests 0.1 - 0.1
Earnings per share, calculated of
the profit attributable to the
shareholders of the parent company
Basic and diluted earnings per
share, EUR, total 0.78 0.31 2.13
Basic and diluted earnings per
share, EUR, continuing operations 0.78 0.01 0.88
Basic and diluted earnings per
share, EUR, discontinued operations - 0.29 1.25
CONSOLIDATED BALANCE SHEET
EUR million
31 March 31 March 31 Dec
2008 2007 2007
ASSETS
Non-current assets
Intangible assets 4.8 3.3 4.7
Goodwill 7.0 6.2 7.0
Tangible assets 43.1 38.0 43.5
Investment in associated companies 44.9 23.4 39.2
Available-for-sale investments 0.1 0.1 0.1
Receivables 4.5 5.7 4.6
Deferred tax assets 0.6 0.2 0.3
Non-current assets total 105.0 76.9 99.4
Current assets
Inventories 63.2 24.3 64.4
Receivables 28,3 10.1 28.6
Income tax receivable 0.4 0.9 0.4
Financial assets at fair value
through profit and loss 4.0 - 8.1
Cash and cash equivalents 5.5 4.6 5.1
Current assets total 101.4 39.9 106.6
Non-current assets classified
and held for sale 1.2 119.0 -
Total assets 207.6 235.8 205.9
EQUITY AND LIABILITIES
Equity attributable to the equity
holders of the parent company 132.1 115.6 127.3
Minority interest 0.8 - 0.7
Total equity 132.9 115.6 128.0
Non-current liabilities
Deferred tax liabilities 4.1 4,5 4.8
Long-term financial liabilities 5.0 3.2 5.3
Non-current provisions 0.1 0.2 0.1
Non-current liabilities total 9.2 7.9 10.2
Current liabilities
Short-term financial liabilities 32.8 12.6 28,2
Income tax payable 1.2 0.6 0.7
Trade payables and other liabilities 31.4 23.9 38.7
Current liabilities total 65.4 37.1 67.6
Liabilities directly associated with
non-current assets classified as held for sale 0.0 75.3 -
Total liabilities 74.7 120.3 77.9
Total equity and liabilities 207.6 235.8 205.9
CONSOLIDATED CASH FLOW STATEMENT
EUR million
1-3/ 1-3/ 1-12/
2008 2007 2007
Net profit for the period 5.0 1.9 13.4
Adjustments, total -4.4 -2.6 -1.5
Change in working capital -7.2 7.3 -3.3
Interests paid from
operating activities -0.6 -0.8 -2.8
Interests received from
operating activities 0.3 0.2 0.7
Taxes paid -0.4 -0.4 -1.2
Net cash flow from operating activities -7.4 5,5 5.3
Investments in tangible and intangible assets -1.3 -1.1 -7.6
Proceeds from sales of tangible
and intangible assets 0.1 0.0 0.2
Acquisition of subsidiaries deducted by cash -0.4 -8.1 *) -9.9
Proceeds from sales of subsidiaries - - 42.0
Transactions with minority 1.5 - -
Acquisition of associated companies -0.4 -1.1 *) 0.0
Proceeds from sales of associated companies - - 0.6
Purchases of other investments 0.0 - -35.1
Proceeds from sales of other investments 4.0 - 27.0
Dividends received from investing activities - - 5.3
Net cash flow from investing activities 3.6 -10.2 22.5
Raising of short-term loans 4.5 5.0 -
Repayments of short-term loans - - -16.7
Repayments of long-term loans -0.2 -1.7 -8.1
Payment of financial lease liabilities 0.0 0.0 -0.1
Dividends paid - - -5.3
Cash flows from financing activities 4.2 3.3 -30.2
Net change in cash and cash equivalents 0.4 -1.5 -2.4
Cash and cash equivalents at the
beginning of the the period 5.1 7.5 7.5
Cash and cash equivalents at the
end of the period 5.5 6.0 5.1
*) Control over Sandanger AS was obtained during the third quarter in 2007 when
share ownership raised to 51% after additional share acquisition.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
EUR million
A = Share capital
B = Share premium account
C = Net unrealised gains
D = Other reserves
E = Own shares
F = Translation differences
G = Retained earnings
H = Attributable to equity holders of the parent company
I = Minority interest
J = Shareholders' equity total
A B C D E F G H I J
Shareholders'
equity at
1 Jan 2007 12.6 23.4 0.4 7.3 -0.8 -0.2 76.5 119.2 0.0 119.2
Cash flow hedges:
gains/losses
recorded in equity - - -0.1 - - - - -0.1 - -0.1
Taxes related to
items entered into
equity and removed
from equity - - - - - - - 0.0 - 0.0
Translation
differences - - - - - -0.1 - -0.1 - 0.0
Other changes - - - - - - -0.1 -0.1 - -0.1
Profit for the period - - - - - - 2.0 2.0 - 2.0
Total recognised
income and
expenses - - -0.1 - - -0.1 1.9 1.7 - 1.8
Dividend
distribution - - - - - - -5.3 -5.3 - -5.3
Shareholders'
equity at
31 March 2007 12.6 23.4 0.3 7.3 -0.8 -0.3 73.2 115.6 0.0 115.6
Shareholders'
equity at
1 Jan. 2008 12.6 23.4 0.4 7.2 -0.8 0.1 84.5 127.3 0.7 128.0
Cash flow hedges:
gains recorded
in equity - - -0.4 - - - - -0.4 - -0.4
Taxes related to
items entered into
equity and removed
from equity - - 0.1 - - - - 0,1 - 0,1
Increase/decrease
in subsidiary - - - - - - 0.4 0.4 - 0.4
Translation
differences - - - - - -0.1 - -0.1 - -0.1
Other changes - - - - - - -0.1 -0.1 - -0.1
Profit for the
period - - - - - - 4.9 4.9 0.1 5.0
Total recognised
income and
expenses - - -0.3 - - -0.1 5.2 4.8 0.1 4.9
Dividend
distribution - - - - - - - - - -
Shareholders'
equity at
31 March 2008 12.6 23.4 0.1 7.2 -0.8 0.0 89.7 132.1 0.8 132.9
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The interim report has been prepared in accordance with IAS 34, Interim
Financial Reporting, as adopted by the EU. The accounting policies adopted are
consistent with those of the Group's annual financial statements for the year
ended 31 December 2007.
SEGMENT INFORMATION
A Frozen Foods
B Fish
C Vegetable Oils
D Grain trading
E Other Operations
F Continuing operations total
G Discontinued operations
H Total
Business segments 1-3/2008
EUR million A B C D E F G H
Total external sales 13.5 21.5 14.2 42.1 1.0 92.2 - 92.2
Intra-group sales 0.0 0.0 0.0 -0.4 -0.9 -1.3 - -1.3
Net sales 13.5 21.5 14.2 41.7 0.1 90.9 - 90.9
Share of profit/loss
of associated companies
included in operating
profit/loss - - - - 4.9 4.9 - 4.9
Operating profit/loss 0.4 -0.5 0.2 1.7 3.7 5.4 - 5.4
Share of profit/loss
of associated companies - - - - 0.3 0.3 - 0.3
Gross investments in
non-current assets 0.8 0.3 0.0 - 0.1 1.3 - 1.3
Corporate acquisitions
and other share
purchases - - - - - - - -
Depreciations 0.4 0.6 0.2 0.0 0.1 1.3 - 1.3
Impairments - - - - - - - -
Personnel 220 448 35 30 13 746 - 746
Business segments 1-3/2007
EUR million A B C D E F G H
Total external sales 13.3 16.4 10.0 32.1 1.0 72.8 47.2 120.0
Intra-group sales 0.0 0.0 0.0 -0.4 -0.9 -1.3 -6.3 -7.6
Net sales 13.3 16.4 10.0 31.7 0.1 71.5 40.9 112.4
Share of profit/loss
of associated companies
included in operating
profit/loss - 0.0 - - -0.4 -0.4 - -0.4
Operating profit/loss 0.5 -0.2 0.4 0.8 -1.4 0.2 2.7 2.8
Share of profit of
associated companies - - - - - - 0.1 0.1
Gross investments in
non-current assets 0.2 0.5 0.1 - 0.0 0.8 0.3 1.1
Corporate acquisitions
and other share
purchases - 10.5 - - - 10.5 - 10.5
Depreciations 0.4 0.2 0.1 0.0 0.3 1.1 0.2 1.3
Impairments - - - - - - - -
Personnel 224 317 36 29 11 617 294 911
Business segments 1-12/2007
EUR million A B C D E F G H
Total external sales 49.3 81.7 46.0 132.8 4.4 314.2 78.8 393.0
Intra-group sales -0.1 -0.1 0.0 -1.2 -3.2 -4.6 -11.6 -16.2
Net sales 49.2 81.6 46.0 131.6 1.2 309.6 67.2 376.8
Share of profit/loss
of associated companies
included in operating
profit/loss 0.0 0.1 - - 2.0 2.1 - 2.1
Operating profit/loss 3.3 -1.7 0.9 3.9 -1.0 5.3 9.1 14.5
Share of profit of
associated companies - - - - 1.4 1.4 0.1 1.5
Gross investments in
non-current assets 1.6 4.1 0.4 - 0.8 6.9 0.6 7.5
Corporate acquisitions
and other share
purchases - 11.6 - - - 11.6 - 11.6
Depreciations 1.7 1.6 0.6 0.1 1.0 5.0 0.2 5.2
Impairments 0.2 0.3 - - - 0.5 - 0.5
Personnel 248 379 36 29 11 705 123 827
GEOGRAPHICAL SEGMENTS
Net sales
EUR million
1-3/ 1-3/ 1-12/
2008 2007 2007
3 mths 3 mths 12 mths
Finland 46.9 47.0 189.2
Scandinavia 19.9 7.1 45.8
Baltic states and Russia 1.0 1.1 10.0
Other countries 23.1 16.3 64.6
Continuing operations total 90.9 71.5 309.6
Discontinued operations - 40.9 67.2
Total 90.9 112.4 376.8
DISCONTINUED OPERATIONS
The sale of the majority holding in Suomen Rehu Ltd was completed at the start
of June 2007, when Suomen Rehu and its subsidiaries were transferred to
Hankkija-Maatalous Oy. Suomen Rehu Ltd is presented as discontinued operations
apart from continuing operations of Lännen Tehtaat till the point of sale. In
2007 the net profit from discontinued operations includes a sale profit related
to the sold 51% share ownership totalling EUR 5.6 million. From the beginning of
June 2007 Lännen Tehtaat's 49% ownership in Suomen Rehu Ltd is presented as an
associated company.
In connection with the sale of the majority shareholding an option scheme has
also been agreed under which Lännen Tehtaat will, if it wishes, have the right
to sell the remaining 49% of the shares in Suomen Rehu Ltd to
Hankkija-Maatalous. The latter, for its part, has a right to buy for the
remaining shares, which it will be able to put into effect at the earliest 15
months after the purchase of the majority holding.
In the case of option exercise, Lännen Tehtaat receives the same price per share
for the remaining 49% ownership as for the sold majority shareholding in Suomen
Rehu Ltd, including the share price adjustment. In addition, the sale price is
affected by the financial result of Suomen Rehu Ltd from the beginning of June
2007.
NON-CURRENT ASSETS HELD OF SALE
Lännen Tehtaat's group company Apetit Pakaste Oy sells its jams and marmelades
business to Saarioinen group's Saarioinen Säilyke Oy. The sale transaction is
executed in fall 2008. Assets held for sale are presented separately on the
balance sheet apart from continuing operations' assets and liabilities.
Non-current assets held for sale in the comparison period include Suomen Rehu
group.
KEY INDICATORS
31 March 31 March 31 Dec
2008 2007 2007
Shareholders' equity per share, EUR 21.12 18.50 20.36
Equity ratio, % 64.0% 49.1% 62.1%
Gearing, % 21.3% 46.0% 16.0%
Gross investments in non-
current assets, EUR million,
continuing operations 1.3 0.8 6.9
Corporate acquisitions and other
share purchases, EUR million,
continuing operations - 10.5 11.6
Average number of personnel,
continuing operations 746 617 705
Average number of shares, 1 000 pcs 6 253 6 253 6 253
The key figures in this interim financial report are calculated with same
accounting principles than presented in year 2007 annual financial statements.
CONTINGENT LIABILITIES
EUR million
31 March 31 March 31 Dec
2008 2007 2007
Mortgages given for debts:
Real estate mortgages 9.6 37.5 7.3
Corporate mortgages 1.3 51.4 1.3
Shares pledged - 13.0 -
Other quarantees 5.5 - 7.7
Guarantees 5.1 1.6 5.1
Additional purchase price, estimate - 0.0-2.0 -
Non-cancellable other leases,
minimum lease payments:
Real estate leases 4.7 5.5 5.3
Other leases 0.8 1.0 0.8
SUOMEN REHU - OPTION SCHEME
The calculatory unrecognised value for the result based component included in
the option scheme as of 31 March 2008 is approximately EUR 0.2 million.
DERIVATIVE INSTRUMENTS
Outstanding nominal values of
derivative instruments
Forward currency contracts 6.4 0.8 5.0
Commodity derivative instruments 4.4 3.1 2.6
Interest rate swaps 15.0 25.0 25.0
INVESTMENT COMMITMENTS
Lännen Tehtaat has investment commitments in Frozen Foods segment a total of EUR
4.2 million as of 31 March 2008.
TANGIBLE ASSETS
EUR million
1-3/ 1-3/ 1-12/
2008 2007 2007
3 mths 3 mths 12 mths
Book value at the beginning of the period 43.5 67.4 67.4
Acquisitions 0.9 1.1 6.5
Acquisitions of operations - 3.2 7.6
Disposals -0.1 0.0 -0.2
Disposals of operations - - -32.6
Depreciations and impairments -1.2 -1.2 -5.1
Other changes 0.0 -0.1 -0.1
Book value at the end of the period 43.1 70.4 43.5
TRANSACTIONS WITH ASSOCIATED COMPANIES AND JOINT VENTURES
EUR million
1-3/ 1-3/ 1-12/
2008 2007 2007
3 mths 3 mths 12 mths
Sales to associated companies 3.7 0.7 14.3
Sales to joint ventures 2.2 2.3 8.1
Purchase from associated companies 0.0 0.1 12.0
Purchase from joint ventures 0.0 2.7 0.1
Long-term receivebles from associated
companies 3.8 5.2 3.9
Trade receivables and other
receivables from associated companies 3.0 2.9 3.1
Trade receivables and other
receivables from joint ventures 0.7 0.8 0.8
Trade payables and other liabilities
to associated companies 0.1 0.0 0.0
The sale of goods and services to the associated companies and joint ventures
are based on valid price catalogues of the Group.
LÄNNEN TEHTAAT PLC
Board of Directors
Further information: CEO Matti Karppinen, tel. 010 402 4001
Copies to:
OMX Nordic Exchange Helsinki
Principal media
www.lannen.fi
