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Vaahto Group’s Preview of Results for Fiscal Year 1.9.2008 – 31.8.2009

VAAHTO GROUP PLC OYJ STOCK EXCHANGE BULLETIN 13.11.2009 at 10.00

VAAHTO GROUP’S PREVIEW OF RESULTS FOR FISCAL YEAR 1.9.2008–31.8.2009

Vaahto Group’s turnover for the fiscal period was 75.7 MEUR (73.2 MEUR) and operating loss 2.3 MEUR (operating profit 0.6 MEUR). Earnings per share were -0.81 euros. The Board of Directors will propose that no dividends be paid.

Business developments

Vaahto Group’s turnover for the fiscal period ending in August 2009 was 75.7 million euros (comparative: 73.2 million euros), with an operating loss of 2.3 million euros (operating profit of 0.6 million euros). The loss accumulated during the first half of the fiscal year, when the turnover was clearly below the previous year’s levels. In the latter half of the fiscal year, the economic development improved as a consequence of recognition of delivery projects and cost-adjustment procedures. With the project deliveries completed at the end of the fiscal year, Vaahto Group’s order backlog decreased clearly in the final months of the period, coming to 17.1 million euros (54.4 million euros) on August 31.

Pulp & Paper Machinery

The Pulp & Paper Machinery division’s turnover for the period under review was 52.1 million euros (39.5 million euros), with an operating loss of 2.4 million euros (operating loss of 3.3 million euros). The division’s loss in the period under review was accumulated in the first half of the fiscal year. In the latter half of the fiscal year, the turnover increased as a result of recognition of delivery projects completed at the end of the period. Cost-adjustment procedures also contributed to the improved development. The division’s result for the second half was slightly to the positive.

During the period under review, the forest industry’s investment rate has been at a very low level throughout the world. In this difficult market situation, the period’s most significant orders for the Pulp & Paper Machinery division were for the tissue machine rebuild at Metsä Tissue’s Mänttä mill, the rebuild of the board factory at Stora Enso’s Inkeroinen mill, and the headbox project for Stora Enso’s mill in Imatra. Also, the division received an additional order from the Kama paper mill, in Russia. This order is related to the contract concluded in August 2008 for paper machine modernization, which involves conversion of the machine in question from newsprint to LWC paper production.

The fiscal year saw the division merge its Vaahto Roll Service Oy with Vaahto Oy. The purpose of the merger was to simplify the Group’s structure, reduce costs, and streamline the operations of the Pulp & Paper Machinery division. Following the merger, the division has two profit centers: Vaahto Projects and Vaahto Service.

Vaahto Pulp & Paper Machinery’s goal is to keep strengthening its position as one of the leading suppliers of technology and services in the demanding international paper and board machine markets. In pursuit of this goal, one measure is to establish a production unit in China, which was approved by the Board of Directors of the parent company after the end of the fiscal year. The objective is to start production in China during 2010.

Process Machinery

The Process Machinery division’s turnover for the fiscal year was 24.7 million euros (34.4 million euros), with an operating profit of 0.1 million euros (4.0 million euros). The turnover decreased by 28.3% from that of the previous period, making the result lower than in the 2007–2008 fiscal year.

The division’s market situation was very weak during the period under review, and the order book was adversely affected for both vessels and agitators. The market picked up slightly at the end of the fiscal year, and the number of projects in the offer phase has been on the increase.

Results

Vaahto Group’s operating loss for the fiscal period was 2.3 million euros, compared to an operating profit of 0.6 million euros in the previous fiscal year. The operating loss for the period was 3.1% (operating profit of 0.9%) of the group’s turnover. The main reason for the result, which was lower than in the previous fiscal year, was the considerable decrease in the Process Machinery division’s turnover and profitability. The Pulp & Paper division’s poor figures in the first half of the fiscal year also undermined the result.

Financing

The Group’s cash flow totaled 16.5 million euros (1.2 million euros), and its net financial expenses were 0.9 million euros (0.7 million euros), or 1.2% (1.0%) of turnover. Investment cash flow for the fiscal year was -3.6 million euros (-4.4 million euros). The decrease in interest-bearing debt was 0.9 million euros.

Total assets and liabilities on the consolidated balance sheet stood at 50.1 million euros (41.8 million euros), and the parent company’s balance sheet showed 23.0 million euros (17.0 million euros). The Group’s equity ratio decreased to 23.2% (37.3%). The Group’s gearing increased to 11.1% (99.8%).

The increase in the balance sheet total is mostly because of a payment received at the end of the fiscal year for delivery of a significant project, but payments to suppliers have been made, for the most part, during the current fiscal year. This is also reflected in the operating cash flow and key figures in the cash flow calculation.

Investments

The Group’s investments in capital assets for the fiscal period totaled 3.7 million euros (4.6 million euros). The most significant investments were acquisition of a broaching drill for Vaahto Oy and AP-Tela Oy’s office building. Other investments consisted mainly of smaller machinery and equipment acquisitions.

Information systems

The Group’s information systems and information management were developed further, in accordance with the centralized operations model.

Research and development

The Group’s research and development activities were focused for the most part on improvement in the competitiveness of roll servicing and of the Pulp & Paper Machinery division’s key components for paper and board machines. The scope of the Group’s R&D activities remained the same as in the previous fiscal period.

Personnel

Group personnel averaged 410 (426) over the fiscal year and numbered 392 (424) at the end of the period.

Risks and business uncertainties

Demand for Vaahto Group products depends largely on economic cycles and developments in the world economy and the customer industries. Risk caused by fluctuations in demand is being compensated for through adjustment of the Group’s sales operations in line with the economic cycles of various markets and customer industries.

Large-scale projects involve the risk of the final result falling short of expectations, since the project’s future costs and other risks that could affect the delivery cannot be assessed explicitly enough at the tender stage. Risks associated with large projects can be managed by applying various quality management systems, profitability analyses, directives, and acceptance procedures.

The Group’s financial risk management objectives are to minimize harmful effects on the Group’s result caused by fluctuations in financial markets and to ensure that the Group can gain equity and liability financing on competitive terms.

Business-related risks of material, consequential, and liability losses are covered by appropriate insurance policies.

Shareholders’ equity

Information concerning Vaahto Group Plc Oyj’s shares is provided in item 24 of the Notes to the Consolidated Financial Statements, “Notes on the shareholders’ equity.”

The Board of Directors has no authority to issue new shares, convertible bonds, or bonds with warrants, nor the authorization to obtain or surrender shares.

Administration

The Annual General Meeting of December 15, 2008, elected the following to the Board of Vaahto Group Plc Oyj:

Seppo Jaatinen, chairman

Mikko Vaahto, vice-chairman

Martti Unkuri, member

Antti Vaahto, member

Antti Vaahto served as CEO until April 30, 2009, and Anssi Klinga has been CEO since May 1, 2009.

The Group companies have been audited by the certified public auditing firm Ernst & Young Oy, with Panu Juonala, CPA, as chief auditor.

The company follows the NASDAQ OMX Helsinki Corporate Governance Code (2008) for Finnish listed companies. The Corporate Governance Statement of the Group has been published on the Group’s Web site.

Forecast of developments

The international financial climate led to great insecurity in the markets and to postponement of investment decisions. Some signs of improvement have been detected lately in the market in Asia, particularly in China. In Europe and North America, on the other hand, the market situation is still quite difficult and the forest industry, in particular, is investing very cautiously. However, the international market situation is expected to improve in the next fiscal year.

Vaahto Group’s order backlog decreased during the period under review, and the starting point for the new fiscal year is difficult. In the course of the period under review, the Group companies have performed extensive measures to adjust their operations to the weaker demand and market situation.

As a consequence of the poor order book, the first half of the current fiscal year will be challenging. Since the international market situation seems to be picking up, the development of Vaahto Group’s results is expected to improve towards the end of the fiscal year and to show a small profit for the entire fiscal year.

Proposal for distribution of profits

Parent company funds available for distribution of profits total 3,553,365.18 euros, of which 285,281.45 euros represents profits for the fiscal period.

The Board will propose to the Annual General Meeting that no dividends be paid and that the operating profit be transferred to the earnings account.

The Annual General Meeting

The Annual General Meeting of Vaahto Group Plc Oyj will be held on December 16, 2009 at 1.00 p.m. in the Sibelius Hall, Lahti.

Interim management statement

Instead of the interim report for the first three months of the accounting period, Vaahto Group Plc Oyj will disclose the interim management statement on January 15, 2010.

 

VAAHTO GROUP CONSOLIDATED FIGURES
CONSOLIDATED

2008/09

% of

2007/08

% of

INCOME

12

turn-

12

turn-

STATEMENT,IFRS

months

over

months

over

1000 EUR
NET TURNOVER

75 694

73 207

Change in finished
goods and work
in progress

-3 109

92

Production
for own use

834

693

Other operating
income

401

688

Share of results of
affiliated companies

13

14

Material and
services

-43 503

-39 404

Employee benefits
expenses

-19 708

-21 082

Depreciations

-2 423

-2 220

Other operating
expenses

-10 520

-11 339

OPERATING PROFIT
OR LOSS

-2 320

-3,1

649

0,9

Financing income
and expenses

-915

-726

PROFIT BEFORE TAXES

-3 235

-4,3

-77

-0,1

Tax on income
from operations

857

396

PROFIT OR LOSS
FOR THE PERIOD

-2 378

-3,1

320

0,4

Net profit
attributable:
To equity holders
of the parent

-2 316

238

To minority
interest

-62

82

Total

-2 378

320

Earnings per share calculated on profit attributable
to equity holders of the parent:
EPS undiluted,
euros/share

-0,81

0,08

EPS diluted,
euros/share

-0,81

0,08

Average number of
shares (1000 shares):
undiluted

2 872

2 872

diluted

2 872

2 872

CONSOLIDATED

31.8.09

31.8.08

BALANCE SHEET,IFRS
1000 EUR
ASSETS
NON-CURRENT ASSETS:
Intangible assets

2 495

3 127

Goodwill

1 702

1 702

Tangible assets

16 012

14 198

Shares in affiliated
companies

50

39

Non-current trade
and other
receivables

12

13

Other long-term
investments

44

44

Deferred tax asset

1 225

471

NON-CURRENT ASSETS

21 540

19 594

CURRENT ASSETS:
Inventories

4 627

8 508

Trade receivables
and other
receivables

11 519

12 392

Tax receivable,
income tax

0

624

Cash and bank

12 400

730

CURRENT ASSETS

28 546

22 253

TOTAL ASSETS

50 086

41 847

CONSOLIDATED

31.8.09

31.8.08

BALANCE SHEET, IFRS
1000 EUR
EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY:
Share capital

2 872

2 872

Share premium
account

6

6

Other reserves

1 835

2 006

Retained earnings

4 960

7 537

Equity attributable
to equity holders
of the parent

9 673

12 421

Minority share

1 229

1 336

SHAREHOLDERS’
EQUITY

10 902

13 757

NON-CURRENT LIABILITIES:
Deferred
tax liability

528

736

Long-term
liabilities,
interest-bearing

6 928

7 378

Non-current
provisions

355

271

NON-CURRENT
LIABILITIES

7 812

8 385

CURRENT LIABILITIES:
Short-term
liabilities,
interest-bearing

6 679

7 087

Trade payables and
other liabilities

24 628

12 618

Tax liability,
income tax

65

1

CURRENT LIABILITIES

31 372

19 705

TOTAL EQUITY AND
LIABILITIES

50 086

41 847

KEY FIGURES, IFRS

2008/09

2007/08

Shareholders’
equity per share,
euros

3,37

4,32

Earnings per
share, euros

-0,81

0,08

Solidity, %

23,2

37,3

Gross investments,
1000 EUR

3 656

4 613

Total average
number of
personnel

410

426

Order backlog at
the end of the fiscal
period, 1000 EUR

17 098

54 384

The amount of contract revenue recognized as revenue has
been deducted from the order backlog.
OTHER LIABILITIES

31.8.09

31.8.08

1000 EUR
Bank guarantees:
Bank guarantee
limits total

33 700

33 700

Bank guarantee
limits used

18 038

16 523

Lease liabilities,
excluded financial
lease liabilities:
Current lease
liabilities

516

208

Lease liabilities
maturing
in 1-5 years

801

242

Total

1 317

450

Other liabilities:
Granted guarantees

1 603

38

Guarantees granted
to secure bank
guarantees

31 000

31 000

Guarantees granted
to secure loans

1 040

1 300

Derivative contracts:
Currency forward agreements are as a rule used to hedge
against exchange rate risks. The currency forward agreements
have been used to protect receivables and future assets.
Interest rate agreements are used to hedge against the
changes of the interests.
The derivative agreements of the group are booked according
to IAS 39: Financial instruments. Derivative agreements are
initially recognized at their purchase cost which is
equivalent to the fair value and they are subsequently
remeasured at fair value.
Fair values

Nominal

Fair

Fair

Fair

of derivative

value

value,

value,

value

agreements

pos.

neg.

total

31.8.2009
1000 EUR
Interest rate swap
agreements

5 380

0

-349

-349

Fair values of derivative agreements are determined by using
the market prices for the equivalent agreements on the day of
the closing of  the accounts. Fair values state for the income
or expenses the group would book if the derivative agreements
were closed at the end of the fiscal period.
CONSOLIDATED FLOW

2008/09

2007/08

OF FUNDS

12

12

STATEMENT, IFRS

months

months

1000 EUR
Flow of funds
from operations:
Profit before taxes

-3 235

-77

Adjustments

3 199

1 817

Change in working
capital

17 453

336

Financial income and
expenses and taxes

-960

-840

Flow of funds from
operations

16 456

1 236

Flow of funds from
investments:
Investments in
tangible and
intangible assets

-3 656

-4 613

Income from sales
of tangible and
intangible assets

61

650

Payments of loans

1

0

Flow of funds from
investments

-3 595

-3 963

Flow of funds from
financial items:
Withdrawals of
short-term loans

5 000

5 688

Payments of
short-term loans

-5 000

-5 840

Withdrawals of
long-term loans

2 349

4 878

Payments of
long-term loans

-3 207

-1 515

Dividends

-333

-1 287

Flow of funds from
financial items

-1 191

1 923

Change of liquid
funds

11 670

-804

Lahti November 13, 2009

VAAHTO GROUP PLC OYJ

Anssi Klinga

President (CEO)

Information:

Anssi Klinga

CEO, Vaahto Group Plc Oyj

tel. +358 50 4661470