2012-11-13 08:00:00 CET
2012-11-13 08:00:06 CET
REGULATED INFORMATION
Cencorp - Interim report (Q1 and Q3)
CENCORP CORPORATION’S INTERIM REPORT JANUARY – SEPTEMBER 2012
Cencorp Corporation Stock exchange release 13.11.2012 at 09.00
Finnish time
CENCORP CORPORATION'S INTERIM REPORT JANUARY - SEPTEMBER 2012
The net sales of Cencorp Corporation's (“Cencorp”) continuing operations for
the reporting period January - September 2012 was EUR 12.1 million (EUR 16.5
million in 2011). The operating profit of continuing operations was EUR -2.4
million (-2.9), profit for the period EUR -2.9 million (-3.7), earnings per
share were EUR -0.008 (-0.011) and EBITDA was EUR -0.8 million (-1.2).
GENERAL
Cencorp belongs to the Finnish Savcor Corporation (“Savcor”). Savcor Group
companies owned approximately 78,9 % of the Cencorp shares on 30 September
2012.
More information on principle activities and events during the reporting period
can be found in the stock exchange releases published on Cencorp's website at
www.cencorp.com.
The interim report has been drawn up in compliance with the IAS 34 Interim
Financial Reporting standard. In the interim report, Cencorp has applied the
same accounting principles as in the annual report 2011. The interim report has
not been audited.
FINANCIAL DEVELOPMENT
The two business segments Cencorp reports of are Laser and Automation
Applications, and Special Components. The Laser and Automation Applications
segment comprises Cencorp's operations preceded the Face (Telecom) transaction
and the Special Components segment the business acquired through the Face
(Telecom) transaction in 2010. Since the Guangzhou plant closing announced in
May the Special Components segment comprises only special component production
at the Beijing plant.
The figures in brackets are comparison figures for the corresponding period in
2011, unless stated otherwise. 29 May 2012 Cencorp announced that it exits from
its unprofitable decoration business and closes down its plant in Guangzhou,
China, producing decoration applications. In consequence of the closing down of
the Guangzhou plant and the exit from decoration business Cencorp reports the
financial figures relating to the Guangzhou plant's decoration business as
discontinued operations from now on. In Cencorp's financial reports the profit
of discontinued operations is reported on a separate line, apart from continued
operations, thus, the income statement, except the discontinued operations
item, concern the company's continued operations only.
July - September 2012 (continued operations)
-- Cencorp Group's net sales decreased by 43.1 per cent to EUR 3.0 million
(EUR 5.4 million).
-- EBITDA was EUR -0.8 million(EUR -0.1 million).
-- Operating profit was EUR -1.3 million (EUR -0.5 million).
-- The Group's profit before taxes was EUR -1.6 million (EUR -0.3 million).
-- Profit for the period was EUR -1.6 million (EUR -0.3 million).
-- Earnings per share were EUR -0.005
(EUR -0.001) and
diluted earnings per share EUR
-0.005 (EUR -0.001).
-- Net sales of the Laser and Automation Applications segment decreased by
54.5 per cent to EUR 1.6 million (EUR 3.6 million) and operating profit was
EUR -0.7 million (EUR -0.2 million). The segment's EBITDA was EUR -0.5
million (EUR -0.0 million).
-- Net sales of the Special Components segment decreased by 19.7 per cent to
EUR 1.4 million (EUR 1.7 million) and operating profit was EUR -0.6 million
(EUR -0.3 million). The segment's EBITDA was EUR -0.3 million (EUR -0.0
million).
January - September 2012 (continued operations)
-- Cencorp Group's net sales decreased by 26.6 per cent to EUR 12.1 million
(EUR 16.5 million).
-- The order book at the end of September stood at ca. EUR 2.2 million (EUR
2.5 million).
-- EBITDA was EUR -0.8 million (EUR -1.2 million).
-- Operating profit was EUR -2.4 million (EUR -2.9 million).
-- The EBITDA and the operating profit include a one-off profit of EUR 1.2
million from the sale of Beijing plant.
-- The Group's profit before taxes was EUR -2.9 million (EUR -3.6 million).
-- Profit for the period was EUR -2.9 million (EUR -3.7 million).
-- Earning per share were EUR -0.008
(EUR -0.011) and
diluted earnings per share were EUR -0.008 (EUR -0.011).
-- The equity ratio at the end of September was 27.3 per cent (54.2 %). Sharp
drop in the equity ratio originates, among other things, from write-off of
ca. EUR 5.7 million relating to the closing of the Guangzhou plant.
-- Net sales of the Laser and Automation Applications segment decreased by
40.1 per cent to EUR 7.4 million (EUR 12.4 million) and operating profit
was EUR -2.1 million (EUR -1.2 million).
The segment accounted for 61.0 percent of the Group's net sales
. The segment's EBITDA was EUR -1.6 million (EUR -0.4) million.
-- Net sales of the Special Components segment increased by 12.6 per cent to
4.7 million (EUR 4.2 million) and operating profit was EUR -0.3 million
(EUR -1.6 million). The segment accounted for 39.0 per cent of the Group's
net sales. The segment's EBITDA was EUR 0.9 million (EUR -0.7 million).
-- The operating profit of the Special Components segment include a one-off
profit of EUR 1.2 million from the sale of the Beijing plant. The company
continues its operation in the same building as lessee.
MARKET OUTLOOK
Cencorp revised its market outlook on 21 August 2012. That time Cencorp
announced that the company has signed a Memorandum of Understanding (MOU) on
acquiring Avery Dennison's Conductive Back Sheet (CBS) business and related
intellectual property rights. The MOU is non-binding.
On 1 October 2012 Cencorp announced that Cencorp and a Dutch company, Sunweb
Solar Energy Holding B.V. (Sunweb Solar) have signed a Memorandum of
Understanding (MOU), according to which Cencorp acquires Sunweb Solar's
photovoltaic module business and related pilot production line, the Sunweb
trademark as well as the patents and other intellectual property rights
relating to the business. The Memorandum of Understanding is non-binding.
On 5 November 2012 Cencorp announced that it has signed a Memorandum of
Understanding on delivering Conductive Back Sheets (CBS) to one of the leading
Chinese photovoltaic module manufacturers. The value of the Memorandum of
Understanding is expected to be at its minimum ca. EUR 20 million over the
course of next three years. The Memorandum of Understanding is non-binding.
The aforesaid Memorandums of Understanding are expected to turn into binding
contracts by the end of 2012. However, in regard to the Memorandum of
Understanding on delivering CBS to the Chinese photovoltaic module
manufacturer, the estimated minimum value of EUR 20 million for the next three
years will probably stay non-binding even though the actual Memorandum of
Understanding turns into a binding supply contract. In this business customers
do not give binding order estimations.
Cencorp has previously emphasized in its strategy that the company's growth
will be based on new Cleantech solutions and especially applications for new
energies. If realized the Avery Dennison and Sunweb Solar transactions will
change the company's cost structure and the targets for the new future. As
Cencorp is now in a strong transition stage following the new strategy, Cencorp
cannot assess how the Avery Dennison and Sunweb Solar transactions and change
in company's business focus will impact the company, due to which Cencorp has
decided not to give any financial guidance for the time being, as stated in the
release of 21 August 2012.
Cencorp's future outlook will be highly dependent on the company's ability to
reach the targeted market position in the global photovoltaic module market as
well as on the company's long-term and short-term financing. Cencorp's goal is
to reach strong market position as provider of locally produced high-quality
photovoltaic modules.
LONG-TERM OBJECTIVES FOR MANAGING DIRECTOR
On 21 August 2012 Cencorp's Board of Directors published its long-term
financial and other objectives for Managing Director as follows:
In January 2012 Cencorp announced it had signed a remarkable frame agreement on
delivering flexible circuits for renewable energy solutions for Avery Dennison.
At that time the company estimated that the value of the frame agreement may
exceed EUR 50 million in the course of three years. Based on this evaluation,company's new strategy published in the spring 2012 and on the fact that the
Avery Dennison transaction, if realized, enables Cencorp providing its
customers with wider and multiple times of value offering related to the
photovoltaic modules and other renewable energy solutions, the Board of
Directors has set the following long-term objectives for the company's Managing
Director:
-- Thorough but fast transition from a company manufacturing only production
automation applications and special components into a company that develops
and provides Cleantech applications with a strong market position as
provider, using laser and automation technology, of locally in different
market areas produced, high-quality photovoltaic modules.
-- Cencorp's goal is to increase its shareholder value with growth and
profitability. Cencorp aims for growth in Cleantech business where the
company has good possibilities to achieve a strong global position and
faster growth.
-- Laser and Automation Applications segment has its main focus on the life
cycle management of systems and equipments with growth expectations for
service business.
-- In the long run Cencorp is aiming for remarkable growth in its net sales
with net sales target of more than EUR 200 million for 2016, provided the
company has sufficient capital with growth coming mainly from Cleantech
operations, especially from solar photovoltaic and fuel cell applications.
The Memorandum of Understanding with Sunweb Solar and the Memorandum of
Understanding on delivering Conductive Back Sheets (CBS) to one of the leading
Chinese photovoltaic module manufacturers have been signed after the long-term
objectives for the company's Managing Director were published.
The long-term objectives set for the Managing Director involve also risks and
the long-term objectives should not be considered as the company's financial
guidance. Even though the objectives are based on market knowledge and
technical surveys, the risks are significant and it is not certain if the
Managing Director reaches all or part of the targets set for him.
MANAGING DIRECTOR'S REVIEW
The third quarter of the fiscal year started in difficult conditions. Cencorp
had just started executing cost savings decided in the statutory negotiations.
Economic slowdown, started in the second quarter, got worse in July and the
sales of new machines almost stopped. However, there has been some improvement
in August - September and order intake has risen close to normal level.
In the third quarter Cencorp had a strong focus on the Cleantech technology
according to its strategy. The company is becoming more and more a technology
provider for solar photovoltaic modules instead of being a provider of
electronics automation. A concrete example is the Memorandum of Understanding,
announced on 21 August 2012, on acquiring Avery Dennison's Conductive Back
Sheet (CBS) business. Since the reporting period was closed Cencorp has
strengthen its position by signing the Memorandum of Understanding, announced
on 1 October 2012, on acquiring a Dutch company's, Sunweb Solar Energy Holding
B.V., photovoltaic module business, related pilot production line and
intellectual property rights.
Cencorp is targeting to take advantage of the technology transition stage going
on in the global solar energy business and to bring new products and solutions
using the latest photovoltaic technology on the further growing market.
As the first solar photovoltaic product Cencorp will introduce new generation
Conductive Back Sheet, used in photovoltaic modules, on the market. Cencorp has
also announced on 5 November 2012 that it has signed a Memorandum of
Understanding with one of the leading Chinese photovoltaic module manufacturers
on delivering Conductive Back Sheets. Deliveries and relating cash flow is
expected to start during the first quarter of 2013.
In accordance with Cencorp's Cleantech strategy future growth will be driven by
flexible circuits provided for the solar energy industry and photovoltaic
modules and by special components for fuel cells.
OPERATING ENVIRONMENT
Cencorp mainly operates in industries applying electronics and cleantech
technology. Its main geographical market areas are Europe, North America, South
America and Asia. Cencorp's key customers for laser and automation applications
operate globally and require local service. The global electronics industry,
including the manufacture of mobile phones, is mostly concentrated in Asia, the
domestic market area for the special components manufactured by Cencorp.
Special Components
In the near future the focus of Cencorp's Special Components business will also
be in component manufacturing for new generation photovoltaic modules. The
investment at the Beijing plant to enable mass production of large roll-to-roll
Conductive Back Sheets is almost finished. The Beijing plant will be one of the
world's most competitive plants of its kind. Cencorp's Memorandum of
Understanding with one of the leading photovoltaic module manufacturer,
announced on 5 November 2012, is one proof of this.
Even though Cencorp's growth expectations lie mainly on photovoltaic module
components, the company also provides tens of millions of NFC, RFID, WIFI and
other flexible circuits used in mobile devices. Cencorp believes it has become
the leading manufacturer of NFC (Near Field Communication) antennas. Cencorp
estimates that as NFC antennas become more commonly used in mobile phone,
Cencorp's own antenna production will also grow.
Laser and Automation Applications
Decrease in the demand for automation equipment, started in the second quarter,
continued also in the third quarter, due to which Cencorp's order book
decreased substantially. In order to decrease the influence of strong cycles
relating to automation applications deliveries business development will be
gradually focused more and more in life cycle management. With its current
structure and organization Cencorp can also better prepare itself to changes in
demand than before. The demand for life cycle management services continued to
be at reasonable level throughout the third quarter.
There has been a clear improvement in demand at the end of the third quarter
and the order book is estimated to grow also to acceptable level in the near
future. Cencorp's laser and automation applications have been updated and the
company finds no obstacle to growing demand, at least in terms of product
portfolio.
Beside the traditional depaneling, laser materials processing and odd-form
assembly Cencorp has started developing equipment used in photovoltaic module
production. The company believes that due to the technology change there will
be a remarkable increase in the demand for automation in the photovoltaic
module business. Cencorp estimates that the first new automation applications
designed for PV module production, will generate cash flow already in the
fiscal year 2013.
FINANCING
Cash flow from business operations before investments in January - September
was EUR 0.95 million (EUR -2.5 million). Trade receivables at the end of the
reporting period were EUR 2.2 million (EUR 5.4 million). Net financial items
amounted to EUR -0.5 million (EUR -0.8 million).
At the end of September, the equity ratio was 27.3 per cent (54.2 %) and equity
per share was EUR 0.02 (EUR 0.06). At the end of the reporting period, the
Group's liquid assets totaled EUR 0.3 million (EUR 1.3 million) unused export
credit limits, bank guarantee limits and factoring loans amounted to EUR 1.6
million (EUR 0.7 million). Sharp drop in the equity ratio originates, among
other things, from write-off of ca. EUR 5.7 million relating to the closing of
the Guangzhou plant.
As previously announced, Cencorp's financial position has been tight. Slowdown
in the equipment sales at the end of the second quarter followed by a decrease
in order book, and investments in the development of photovoltaic module
business have made the company's financial position even tighter. In order to
strengthen company's financial position Cencorp announced 21 August 2012 that
it will issue a convertible bond with the maximum amount of EUR 1,500,000, to
selected investors. However, the realization of the convertible bond is
delayed, which has also had a negative effect on the company's financial
position. The subscription period has been continued until 30 November 2012.
Cencorp has also commenced preparing a share issue. The objective of the share
issue is to finance establishing of photovoltaic module business plan. The
share issue is expected to be carried out by the end of this year. Cencorp will
inform later on the terms and schedule of the share issue.
Cencorp agreed with its financers on amendment of the financial agreements and
announced on 1 October 2012 that :
-- Sampo Pankki Oyj's financial facility agreement totaling EUR four million
was continued until 30 November 2012;
-- the maturity date of a convertible bond of some EUR 1.2 million from Savcor
Group Oy was extended until 30 November 2012; and
-- the maturity date of a loan of EUR one million from Savcor Invest BV
(former AC Invest BV), a daughter company of Savcor Group Oy, was extended
until 30 November 2012, and additionally Savcor Group Oy renewed its
commitment to extend the loan period until April 2013 if Cencorp's
financial position so requires.
With these actions Cencorp believes that the company has secured sufficient
working capital for the next twelve months.
RESEARCH AND DEVELOPMENT
The Group's research and development costs during the January-September period
amounted to EUR 1.0 million (EUR 1.0 million) or 8.1 (6.0) per cent of net
sales.
INVESTMENTS
Gross investments during the January - September period amounted to EUR 1.2
million (EUR 1.0 million). The largest investments were EUR 0.7 million in
development costs.
PERSONNEL
At the end of September the Group employed 177 (332) people, out of which 59
persons worked in Finland, 107 persons in China and 11 persons in other
countries. During the reporting period, salaries and fees totalled EUR 3.9
million (EUR 3.9 million).
SHARES AND SHAREHOLDERS
Cencorp's share capital amounts to EUR 3 425 059.10. The number of shares is
342 161 270. The company has one series of shares, which confer equal rights in
the company. Cencorp did not own any of its own shares at the end of the
financial year.
The company had a total of 4491 shareholder at the end of September, and 0.8
per cent of the shares were owned by foreigners. The ten largest shareholders
held 89.7 percent of the company's shares and voting rights on 30 September
2012.
The largest shareholders on 30 September 2012
Shares Votes
-----------------------------------------------------------
1. SAVCOR GROUP LIMITED 133 333 333 39,0
-----------------------------------------------------------
2. SAVCOR GROUP OY 119 235 078 34,8
-----------------------------------------------------------
3. SAVCOR INVEST BV 17 499 999 5,1
-----------------------------------------------------------
4. KESKINÄINEN ELÄKEVAKUUTUSYHTIÖ ETERA 16 389 735 4,8
-----------------------------------------------------------
5. GASELLI CAPITAL OY 11 000 000 3,2
-----------------------------------------------------------
6. PAASILA MATTI 2 660 578 0,8
-----------------------------------------------------------
7. GASELLI CAPITAL PARTNERS OY 2 050 000 0,6
-----------------------------------------------------------
8. JOKELA MARKKU 1 987 519 0,6
-----------------------------------------------------------
9. PARPOLA VILLE 1 478 759 0,4
-----------------------------------------------------------
10. FT CAPITAL OY 1 428 570 0,4
-----------------------------------------------------------
Others 35 097 699 10,3
-----------------------------------------------------------
TOTAL 342 161 270 100,0
-----------------------------------------------------------
Savcor Group Oy announced on 20 April 2012 that it has acquired AC Capital's
subsidiary AC Invest B.V. (currently Savcor Invest B.V.) who owned
approximately 5.1 percent of Cencorp Corporation's shares, resulting in Savcor
Group's ownership in Cencorp Corporation increasing into 78.9 percent.
The members of the Board of Directors and the President and CEO, either
directly or through companies under their control, held a total of 270 068 410
shares in the company on 30 September 2012, representing about 78.9 percent of
the company's shares and voting rights. Iikka Savisalo, Cencorp's Managing
Director, either directly or through companies under his control, held a total
of 270 068 410 shares in the company.
The price of Cencorp's share varied between EUR 0.05 and 0.12 during the
January - September period. The average price was EUR 0.09 and the closing
price at the end of September EUR 0.05. A total of 13.3 million Cencorp shares
were traded at a value of EUR 1.1 million during the January - September
period. The company's market capitalization at the end of September stood at
EUR 17.1 million.
No share options were granted to the company's management during the reporting
period. On 30 September 2012, the company had 8,931,000 options connected to
bond I/2010 with a subscription period ending on 25 May 2015. Savcor Group Oy
holds the options connected to bond I/2010. No 2006C series options have been
allocated and Cencorp Group continues to hold them.
SHARE ISSUE AUTHORIZATIONS IN FORCE
1,069,000 shares remain under the authorization given by Cencorp's Annual
General Meeting on 28 April 2009 to issue 10,000,000 new shares in Cencorp.
Cencorp's Extraordinary General Meeting held on 30 January 2012 decided to
authorize the Board of Directors to issue 100,000,000 new shares.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH AVERY DENNISON
On 21 August Cencorp announced that the company and Avery Dennison Corporation
(”Avery Dennison”), a US based company, have signed a Memorandum of
Understanding (MOU) according to which Cencorp acquires Avery Dennison's
Conductive Back Sheet (CBS) business and related intellectual property rights.
The MOU is non-binding. The purchase price stated in the MOU is USD 500,000
cash and 6,711,409 Cencorp shares. Avery Dennison agrees not to sell its
Cencorp shares received as purchase price payment within 12 months from the
effective date of the definitive purchase agreement. Cencorp will separately
enter into agreements with the key persons that were involved with the business
being acquired to join Cencorp team. The transaction is expected to take place
by the end of 2012. The risks related to the non-binding MOU signed with Avery
Dennison have been handled in more detail in the item “Risk management, risks
and uncertainties” of this interim report.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH SUNWEB SOLAR
Cencorp announced on 1 October 2012 that the company has signed a Memorandum of
Understanding with a Dutch company, Sunweb Solar on acquiring Sunweb Solar's
photovoltaic module business and related pilot production line, the Sunweb
trademark as well as the patents and other intellectual property rights
relating to the business. The Memorandum of Understanding is non-binding. The
purchase price stated in the MOU amounts to about one million Euros which will
be paid partly in cash and partly in Cencorp shares. Purchase price paid in
Cencorp shares is 4,000,000 registered Cencorp shares, which are, as a part of
the transaction, valued at the price of EUR 0.12 per share. Purchase price paid
in cash amounts to EUR 450,000. Sunweb Solar agrees not to sell its Cencorp
shares received as purchase price payment within 12 months from the directing
of the shares to Sunweb Solar. The transaction is expected to take place by the
end of 2012. The risks related to the non-binding MOU signed with Sunweb Solar
have been handled in more detail in the item “Risk management, risks and
uncertainties” of this interim report.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH A MAJOR CHINESE SOLAR
PHOTOVOLTAIC (PV) MODULE MANUFACTURER ON DELIVERING CONDUCTIVE BACK SHEETS
On 5 November 2012 Cencorp announced that the company has signed a Memorandum
of Understanding on delivering Conductive Back Sheets (CBS) to one of the
leading Chinese PV (photovoltaic) module manufacturers. The value of the
Memorandum of Understanding is expected to be at its minimum ca. EUR 20 million
over the course of next three years. The Memorandum of Understanding is
non-binding. As a result of the evaluation process the customer became
convinced of Cencorp's technology and production capability and decided to sign
with Cencorp a Memorandum of Understanding determining preliminary commercial
terms between the companies for the next three years. In the Memorandum of
Understanding the companies agreed for example on the following:
-- Cencorp prepares to increase its capacity to meet the customer's growing
demands.
-- The customer commits itself to purchase the volumes together agreed upon.
The customer's current capacity need corresponds to deliveries of ca. EUR
20 million in the course of next three years.
-- The customer commits itself to run required certification for the CBS.
-- Cencorp commits itself to further develop the product and its
competitiveness.
-- Besides the cooperation in manufacturing the parties agree to cooperate in
product development and marketing as well as in new innovations to enhance
the parties' competitiveness in solar modules and related production t
echnologies.
CBS deliveries, based on the Memorandum of Understanding, and relating cash
flow is expected to start during the first quarter of 2013. Supply contract
negotiations are expected to be finished by the end of 2012. The risks related
to the non-binding MOU signed with the Chinese solar photovoltaic module
manufacturer have been handled in more detail in the item “Risk management,
risks and uncertainties” of this interim report.
MAIN TERMS OF THE CONVERTIBLE BOND
In order to secure the financing required to strengthen Cencorp's capital
structure the company issues convertible bond with the maximum amount of EUR
1,500,000 and simultaneously issues stock options with maximum amount of
21,428,571 free of charge. One (1) stock option is issued per each subscribed
loan capital amount of EUR 0.07. The convertible bond is issued in deviation
from the shareholders' pre-emptive subscription rights to those current Cencorp
shareholders who directly on the record day of 31 July 2012 own at least one
million (1,000,000) Cencorp's shares or who otherwise are approved by the Board
of Directors. Convertible bond can also be subscribed against a loan receivable
from Cencorp, undisbuted on the record day, by converting the loan's capital or
interest into convertible bond according to the terms of the convertible bond.
Loan period starts as of the payment of a loan to the company and ends on 7
September 2014 when the convertible bond will be due in its entirety pursuant
to the loan terms. The shareholders' pre-emptive subscription rights are being
deviated from as the stock options are issued to secure financing required to
strengthen Cencorp's capital structure cost effectively and considering the
size of the financing. Thus, there is, from the company's point of view, a
weighty financial reason to issue the stock options.
An annual interest of eight (8) % will be paid on the convertible bond from the
withdrawal of the bond. A holder of the bond has a right to subscribe an amount
of shares, equivalent to the bondholders shareholding percentage at the time,
in Cencorp's possible future share issues with subscription period ending
latest by 7 September 2014, at a subscription price that is 10 % lower than the
subscription price in the share issue in question. The holder of the bond is
entitled to converse the promissory note into the shares of the Company. One
(1) stock option pursuant to the promissory note entitles the bond holder to
subscribe for one (1) new share of the company. Based on the subscriptions made
pursuant to the stock options, the Company shall issue in maximum of 21.428.571
new company shares. The Company has one (1) class of shares.
RISK MANAGEMENT, RISKS AND UNCERTAINTIES
Cencorp's Board of Directors is responsible for the control of the company's
accounts and finances. The Board is responsible for internal control, while the
President and CEO handles the practical arrangement and monitors the efficiency
of internal control. Business management and control are taken care of using a
Group-wide reporting and forecasting system.
The purpose of risk management is to ensure that any significant business risks
are identified and monitored appropriately. The company's business and
financial risks are managed centrally by the Group's financial department, and
reports on risks are presented to the Board of Directors as necessary.
Due to the small size of the company and its business operations, Cencorp does
not have an internal auditing organization or an audit committee.
The sufficiency of the company's financing and working capital involve risks
that are handled in more detail in the item Financing of this financial
statement release. Realization of a convertible bond and a share issue, which
the company announced on 21 August 2012, involves risks. It is not secured that
the company will be able to collect EUR 1.5 million with the convertible bond
to strengthen its capital structure or with the share issue to finance the
establishing of photovoltaic module business plan. If the convertible bond and
the share issue don't materialize as planned, there is a risk that the
establishment of Cencorp's Cleantech strategy will be postponed or even fail,
as the Avery Dennison and Sunweb Solar transactions cannot be realized without
the aforesaid financing.
As it is difficult to make forecasts in an industry that is dependent on
economic cycles, the biggest business risks are related to fluctuations in the
demand for products and to the adjustment of operations to meet demand.
In terms of profitability, the most essential risks are related to the
achievement of a sufficient invoicing volume in both business segments and the
success achieved with the programs underway at Cencorp to improve
profitability, such as improvements in productivity and business flexibility
through outsourcing production.
In terms of operations, the biggest risks are related to outsourcing in-house
equipment production to contract manufacturers, in particular to whether the
production chain efficiency targets are achieved as planned.
The execution of the non-binding Memorandum of Understanding signed with Avery
Dennison involves risks. The final terms of the transaction are still under
negotiations and realization of the acquisition is not yet certain.
Additionally, the transaction is still subject to several issues such as due
diligence and especially to Cencorp's short and long-term financing required to
run the business being acquired. Thus, Cencorp is not yet able to estimate
possible realization, effective date neither acquisition's influence in Cencorp
nor risks relating to the transaction. Cencorp will announce further
information on the matter as soon as the negotiations have been finished, which
is expected to take place before the end of 2012.
The execution of the non-binding Memorandum of Understanding signed with Sunweb
Solar involves risks. The final terms of the transaction are still under
negotiations and realization of the acquisition is not yet certain.
Additionally, the transaction is still subject to several issues such as due
diligence and especially to Cencorp's short and long-term financing required to
run the business being acquired. Thus, Cencorp is not yet able to estimate
possible realization, effective date neither acquisition's influence in Cencorp
nor risks relating to the transaction. Cencorp will announce further
information on the matter as soon as the negotiations have been finished, which
is expected to take place before the end of 2012.
The execution of the non-binding Memorandum of Understanding signed with a
major Chinese photovoltaic module manufacturer involves risks. The final terms
of an agreement are still under negotiations, thus execution of the agreement
is not yet guaranteed. Additionally, the agreement is subject to Cencorp's
short-term and long-term financing which is still under negotiation. Thus,
Cencorp is not yet able to estimate the agreement's possible execution,
effective date neither the agreement's impact in Cencorp nor the risks relating
to it. Cencorp will announce further information as soon as the negotiations
have been finished, which is expected to take place before the end of 2012.
However, in regard to the Memorandum of Understanding on delivering CBS to the
Chinese photovoltaic module manufacturer, the estimated minimum value of EUR 20
million for the next three years will probably stay non-binding even though the
actual Memorandum of Understanding turns into a binding supply contract. In
this business customers do not give binding order estimations.
The long-term objectives set for the Managing Director involves also risks and
the long-term objective should not be considered as the company's financial
guidance. Even though the objectives are based on market knowledge and
technical surveys, the risks are significant and it is not certain if the
Managing Director reaches all or part of the targets set for him.
Other risks connected to Cencorp have been presented in more detail in the
Annual Report for 2011 and in the base prospectus and its notes published on 25
October 2010.
In Mikkeli, 13 November 2012
Cencorp Corporation
BOARD OF DIRECTORS
Consolidated statement of comprehensive income
(unaudited)
1 000 EUR 7-9/2012 7-9/2011 1-9/2012 1-9/2011 1-12/2011
--------------------------------------------------------------------------------
Continuing operations
Net sales 3 045 5 351 12 129 16 517 21 608
Cost of sales -2 994 -4 594 -11 396 -14 985 -19 859
--------------------------------------------------------------------------------
Gross profit 52 757 733 1 532 1 748
Other operating income 49 10 1 358 60 130
Product development expenses -306 -248 -988 -998 -1 288
Sales and marketing expenses -487 -448 -1 452 -1 361 -1 987
Administrative expenses -614 -595 -2 007 -2 093 -2 717
Other operating expenses -7 -15 -56 -20 -157
Operating profit -1 314 -539 -2 412 -2 880 -4 271
Financial income 309 227 1 255 769 1 012
Financial expenses -605 -26 -1 747 -1 528 -1 583
Profit before taxes from -1 610 -339 -2 905 -3 639 -4 843
continuing operations
Income taxes 1 6 27 -43 -6
Profit/loss for the period -1 609 -333 -2 877 -3 682 -4 848
from continuing operations
Discontinued operations
Profit/loss after tax for the -255 -481 -9 079 -1 945 -2 667
period from discontinued
operations
Profit/loss for the period -1 864 -814 -11 956 -5 627 -7 516
--------------------------------------------------------------------------------
Profit/loss attributable to:
Shareholders of the parent -1 864 -814 -11 956 -5 627 -7 516
company
Earnings/share (diluted), eur -0,01 0,00 -0,03 -0,02 -0,02
Earnings/share (basic), eur -0,01 0,00 -0,03 -0,02 -0,02
Continuing operations:
Earnings/share (diluted), eur -0,005 -0,001 -0,008 -0,011 -0,014
Earnings/share (basic), eur -0,005 -0,001 -0,008 -0,011 -0,014
Other comprehensive income
Translation difference -5 814 59 231 794
Other comprehensive income 0 0 0 0 0
Total comprehensive income -1 870 1 -11 897 -5 396 -6 721
for the period
--------------------------------------------------------------------------------
Total comprehensive income
attributable to:
Shareholders of the parent -1 870 1 -11 897 -5 396 -6 721
company
Consolidated statement of financial position
(unaudited)
1 000 EUR 30.9.2012 30.9.2011 31.12.2011
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Property, plant and equipment 7 000 16 248 16 305
Consolidated goodwill 2 967 2 967 2 967
Other intangible assets 3 049 3 338 3 337
Available-for-sale investment 10 10 10
Deferred tax assets 9 0 10
--------------------------------------------------------------------------------
Total non-current assets 13 035 22 562 22 629
Current assets
Inventories 3 293 4 830 4 184
Trade and other 3 083 6 525 7 402
non-interest-bearing
receivables
Cash and cash equivalents 300 1 261 317
--------------------------------------------------------------------------------
Total current assets 6 676 12 616 11 903
Assets classified as held for 1 284 0 0
sale
Total assets 20 996 35 178 34 532
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity attributable to shareholders of the parent
company
Share capital 3 425 3 425 3 425
Other reserves 43 344 43 344 43 344
Translation difference 643 21 584
Retained earnings -41 692 -27 845 -29 735
--------------------------------------------------------------------------------
Total equity 5 721 18 945 17 618
Non-current liabilities
Non-current loans 519 2 900 0
Deferred tax liabilities 22 54 34
--------------------------------------------------------------------------------
Total non-current liabilities 542 2 954 34
Current liabilities
Current interest-bearing 4 824 6 737 8 475
liabilities
Trande and other payables 7 426 6 409 8 196
Current provisions 269 133 209
--------------------------------------------------------------------------------
Total current liabilities 12 519 13 279 16 880
Liabilities directly associated 2 214 0 0
with assets classified as held
for sale
Total liabilities 15 274 16 233 16 914
--------------------------------------------------------------------------------
Equity and liabilities total 20 995 35 178 34 532
--------------------------------------------------------------------------------
Consolidated statement of cash flows
(unaudited)
1 000 EUR 1-9/201 1-9/201 1-12/201
2 1 1
--------------------------------------------------------------------------------
Cash flow from operating activities
Income statement profit/loss from continuing -2 905 -3 639 -4 843
operations before taxes
Income statement profit/loss from discontinued -9 079 -1 945 -2 667
operations before taxes
---------------------------
Income statement profit/loss before taxes -11 984 -5 584 -7 510
Non-monetary items adjusted on income statement
--------------------------------------------------------------------------------
Depreciation and impairment + 7 977 2 633 3 949
Gains/losses on disposals of non-current +/- -1 166 0 88
assets
Unrealized exchange rate gains (-) and +/- 57 -91 -507
losses (+)
Other non-cash transactions +/- 0 0 62
Financial income and expense + 545 742 1 003
Interest gains - 0 0 0
Taxes - 0 0 0
--------------------------------------------------------------------------------
Total cash flow before change in working -4 570 -2 300 -2 915
capital
Change in working capital
Increase (-) / decrease (+) in inventories 298 144 520
Increase (-) / decrease (+) in trade and other 4 230 2 407 1 957
receivables
Increase (+) / decrease (-) in trade and 1 285 -2 000 -524
other payables
--------------------------------------------------------------------------------
Change in working capital 5 814 551 1 953
Adjustment of financial items and taxes to cash-based
accounting
Interest paid - -182 -339 -429
Interest received + 8 3 14
Other financial items - -135 -302 -397
Taxes paid - 15 -128 -120
--------------------------------------------------------------------------------
Financial items and taxes -294 -766 -932
NET CASH FLOW FROM BUSINESS OPERATIONS 950 -2 515 -1 894
CASH FLOW FROM INVESTING ACTIVITIES
Investments in tangible and intangible assets - -1 240 -1 276 -1 424
Proceeds on disposal of tangible and intangible + 3 677 0 70
assets
Loans given - 0 0 0
Repayment of loan receivables + 0 1 468 1 468
--------------------------------------------------------------------------------
NET CASH FLOW FROM INVESTMENTS 2 437 192 114
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from share issue + 0 862 862
Proceeds from current borrowings + 4 572 8 360 10 083
Repayment of current borrowings - -7 728 -7 177 -10 244
Dividends paid - 0 -4 -4
--------------------------------------------------------------------------------
NET CASH FLOW FROM FINANCING ACTIVITIES -3 155 2 041 697
INCREASE (+) OR DECREASE (-) IN CASH FLOW 231 -282 -1 083
Consolidated statement of changes in equity
(unaudited)
1 000 EUR Share Other Translati Distribu-table Retaine Total
capit reser on non-restricted d
al ves differen equity fund earnin
ce gs
--------------------------------------------------------------------------------
31.12.2011 3 425 4 908 584 38 436 -29 735 17 618
Directed issue - - - - - 0
Decrease from - - - - - 0
share issue
Direct entries in - - - - - 0
retained
earnings
Translation - - 59 - - 59
difference,
comprehensive
income
Profit/loss for - - - - -11 956 -11 956
the period
30.9.2012 3 425 4 908 643 38 436 -41 692 5 721
1 000 EUR Share Other Translati Distribu-table Retaine Total
capit reser on non-restricted d
al ves differen equity fund earnin
ce gs
--------------------------------------------------------------------------------
31.12.2010 3 425 4 908 -210 35 104 -22 082 21 145
Directed issue - - - 3 332 - 3 332
Decrease from - - - - -136 -136
share issue
Translation - - 231 - - 231
difference,
comprehensive
income
Profit/loss for - - - - -5 627 -5 627
the period
30.9.2011 3 425 4 908 21 38 436 -27 845 18 945
Segment information
(unaudited)
The segment information for profit/loss numbers and balance sheet per 30
September 2012 include only continuing operations. Information regarding
discontinued operations is given in attachment "Discontinued operations".
The Group has two reporting segments: Laser and Automation Applications, and
Special Components. The Laser and Automation Applications segment comprises
Cencorp's former business and the Special Components segment the business
acquired through the Face transaction in 2010. The segment information
presented by the Group is based on the management's internal reporting and the
organisational structure.
1 000 EUR 1-9/2012 1-9/2011 1-12/2011
--------------------------------------------------------------------------------
Net sales
Laser and Automation Applications 7 400 12 365 15 079
Special Components 4 735 4 206 6 581
Eliminations -5 -54 -53
Total 12 129 16 517 21 608
Operating profit
Laser and Automation Applications -2 143 -1 236 -2 517
Special Components -270 -1 595 -1 706
Eliminations 0 -49 -49
Total -2 412 -2 880 -4 271
EBITDA
Laser and Automation Applications -1 636 -439 -1 283
Special Components 851 -740 -387
Eliminations 0 -49 -49
Total -785 -1 228 -1 718
Profit/loss for the period
Laser and Automation Applications -2 375 -1 771 -2 969
Special Components -465 -2 030 -1 978
Eliminations -38 119 99
Total -2 877 -3 682 -4 848
Assets
Laser and Automation Applications 28 530 30 308 30 611
Special Components 11 378 24 738 25 962
Assets classified as held for sale 1 284 - -
Eliminations -20 196 -19 868 -22 040
Total 20 996 35 178 34 532
Liabilities
Laser and Automation Applications 11 025 9 340 8 965
Special Components 7 755 13 961 15 174
Liabilities directly associated with 2 214 - -
assets held for sale
Eliminations -5 719 -7 068 -7 225
Total 15 275 16 233 16 914
Investments
Laser and Automation Applications 412 605 729
Special Components 736 423 463
Assets classified as held for sale 4 - -
Total 1 152 1 028 1 191
Depreciation
Laser and Automation Applications 507 787 977
Special Components 1 121 855 1 214
Total 1 627 1 642 2 192
Impairment
Laser and Automation Applications 0 10 257
Special Components 0 0 105
Total 0 10 361
Discontinued
operations
(unaudited)
29 May 2012 Cencorp announced that it exits from its unprofitable decoration
business and closes down its plant in Guangzhou, China, producing decoration
applications. In consequence of the closing down of the Guangzhou plant and the
exit from decoration business Cencorp reports the financial figures relating to
the Guangzhou plant's decoration business as discontinued operations from now
on.
The results and major classes of assets and liabilities of Savcor Face
(Guangzhou) Technolgies Co., are as follows:
1 000 EUR 1-9/2012 1-9/2011 1-12/2011 --------------------------------------------------------------------------------
Revenue 1 876 3 395 4 857
Expenses -5 484 -5 446 -7 608
Loss recognised on -5 397 0 0
the remeasurement
to fair value
------------------------------------------------------------
Operating profit -9 005 -2 051 -2 751
Finance costs -74 106 84
--------------------
Profit/loss before -9 079 -1 945 -2 667
tax from
discontinued
operation
Income tax 0 0 0
------------------------------------------------------------
Profit/loss after -9 079 -1 945 -2 667
tax from
discontinued
operation
Assets
Property, plant and 757 - -
equipment
Inventories 184 - -
Trade and other 115 - -
non-interest-beari
ng receivables
Cash and cash 228 - -
equivalents
------------------------------------------------------------
Assets classified 1 284
as held for sale
Liabilities
Trande and other 2 164 - -
payables
Provisions 50 - -
------------------------------------------------------------
Liabilities 2 214
directly
associated with
assets classified
as held for sale
Net assets directly -930
associated with
disposal group
====================
Cumulative -2 315
translation
difference
Savcor Face
(Guangzhou)
Technolgies Co.,
Ltd:n net cash
flow:
1 000 EUR 1-9/2012 1-9/2011 1-12/2011
--------------------------------------------------------------------------------
Operating 204 153 -35
Investing -20 -157 -179
Financing 0 -232 -236
------------------------------------------------------------
Net cash flow 184 -236 -450
Earnings/share -0,03
(basic), from
discontinued
operations
Earnings/share -0,03
(diluted) from
discontinued
operations
Key figures
(unaudited)
1 000 EUR 7-9/201 7-9/20 1-9/20 1-9/20 1-12/20
2 11 12 11 11
--------------------------------------------------------------------------------
Net sales 3 045 5 351 12 129 16 517 21 608
Operating profit -1 314 -539 -2 412 -2 880 -4 271
% of net sales -43,1 -10,1 -19,9 -17,4 -19,8
EBITDA -796 -55 -785 -1 227 -1 718
% of net sales -26,1 -1,0 -6,5 -7,4 -8,0
Profit before taxes -1 610 -339 -2 905 -3 639 -4 843
% of net sales -52,9 -6,3 -23,9 -22,0 -22,4
Balance Sheet value 20 996 35 178 20 996 35 178 34 532
Equity ratio, % 27,3 54,2 27,3 54,2 51,2
Net gearing, % 88,1 44,2 88,1 44,2 46,3
Gross investments 298 212 1 152 1 028 1 191
% of net sales 9,8 4,0 9,5 6,2 5,5
Research and development costs 306 248 988 998 1 288
% of net sales 10,0 4,6 8,1 6,0 6,0
Order book 2 168 2 520 2 168 2 520 2 793
Personnel on average 182 334 264 345 343
Personnel at the end of the period 177 332 177 332 328
Non-interest-bearing liabilities 7 426 6 409 7 426 6 409 8 196
Interest-bearing liabilities 5 343 9 637 5 343 9 637 8 475
Share key indicators
Earnings/share (basic) -0,01 -0,002 -0,03 -0,02 -0,02
Earnings/share (diluted) -0,01 -0,002 -0,03 -0,02 -0,02
Earnings/share (basic), from -0,005 -0,001 -0,008 -0,011 -0,014
continuing operations
Earnings/share (diluted) from -0,005 -0,001 -0,008 -0,011 -0,014
continuing operations
Equity/share 0,02 0,06 0,02 0,06 0,05
P/E ratio -9,18 -37,85 -1,43 -5,33 -4,02
Highest price 0,06 0,13 0,12 0,20 0,20
Lowest price 0,05 0,07 0,05 0,07 0,07
Average price 0,05 0,09 0,09 0,13 0,12
Closing price 0,05 0,09 0,05 0,09 0,09
Market capitalisation, at the end of 17,1 30,8 17,1 30,8 30,8
the period, MEUR
Calculation of Key Figures
EBITDA, %: Operating profit + depreciation +
impairment
-----------------------------------------
Net
sales
Equity ratio, %: Total equity x
100
-----------------------------------------
Total assets - advances
received
Net gearing, %: Interest-bearing liabilities - cash and
cash equivalents
and marketable
securities x 100
-----------------------------------------
Shareholders' equity + minority
interest
Earnings/share (EPS): Profit/loss for the period to the owner
of the parent company
-----------------------------------------
Average number of shares adjusted for
share issue
at the end of the
financial year
Equity/share: Equity attributable to shareholders of
the parent company
-----------------------------------------
Undiluted number of shares on the
balance sheet date
P/E ratio: Price on the balance
sheet date
-----------------------------------------
Earnings per
share
Change in intangible and tangible assets
(unaudited)
1 000 EUR 30.9.2012 30.9.2011 31.12.2011
--------------------------------------------------------------------------------
Includes tangible assets, consolidated
goodwill and other intangible assets
Carrying amount, beginning of period 22 609 23 835 23 835
Depreciation and impairment -7 557 -2 633 -3 516
Additions 1 152 1 028 1 191
Disposals -2 507 0 -158
Discontinued operations -757 - -
Exchange rate difference 76 322 1 256
Carrying amount, end of period 13 016 22 552 22 609
Commitments and contingent liabilities
(unaudited)
1 000 EUR 30.9.2012 30.9.2011 31.12.2011
------------------------------------------------------------------------
Loans from financial institutions 1 195 5 791 5 206
Promissory notes secured by pledge 12 691 12 691 12 691
Mortgages on real estate 0 5 123 5 413
Deposits 0 580 0
Factoring loan and export credit limit 1 235 1 418 833
Trade receivables 841 1 414 833
Promissory notes secured by pledge 12 691 12 691 12 691
Operating leases
Payable within one year 51 45 60
Payable over one year 49 46 83
Commitments
Payable within one year 897 172 206
Payable over one year 896 278 302
Commitments discontinued operations
Payable within one year 629 549 580
Payable over one year 3 348 3 901 4 017
For more information please contact:
Cencorp: Iikka Savisalo, President and CEO, tel. +358 40 521 6082,
iikka.savisalo@savcor.com
Cencorp Corporation's financial statement release for 2012 will be published on
26 March 2013.
Distribution:
NASDAQ OMX, Helsinki
Main media
www.cencorp.com
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