2013-05-15 12:45:00 CEST
2013-05-15 12:45:04 CEST
REGULATED INFORMATION
Cencorp - Interim report (Q1 and Q3)
CENCORP CORPORATION’S INTERIM REPORT JANUARY – MARCH 2013
Cencorp Corporation Interim Report 15 May 2013 at 13.45 Finnish time
CENCORP CORPORATION'S INTERIM REPORT JANUARY - MARCH 2013
The net sales of Cencorp Corporation's (“Cencorp”) continuing operations for
the reporting period January - March 2013 was EUR 2.5 million (EUR 4.4 million
in 2012). The operating profit of continuing operations was EUR -0.7 million
(0.3), profit for the period EUR -0.7 million (-0.1), earnings per share were
EUR -0.002 (-0.0002) and EBITDA was EUR -0.2 million (0.9).
GENERAL
Cencorp belongs to the Finnish Savcor Corporation (“Savcor”). Savcor Group
companies owned approximately 78,9 % of the Cencorp shares on 31 March 2013.
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 2012. The Interim Report has
not been audited.
FINANCIAL DEVELOPMENT
14 May 2013 Cencorp announced that the company changes its reporting system to
comply with the company's Cleantech strategy. As from 1 January 2013 Cencorp
reports of three business segments. The segments are Laser and Automation
Applications (LAS), Life Cycle Management (LCM) and Clean Energy Solutions
(CES). CES also includes the former Special Components segment. The comparison
figures for the corresponding period in 2012 are only available of the net
sales. Other figures that would be comparable and reliable enough are not
available. Cencorp's new segment information is based on the management's
internal reporting and on the organisation structure of the company.
The figures in brackets are comparison figures for the corresponding period in
2012, 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 components for decorative applications. In consequence of the
closing down of the Guangzhou plant and the exit from the decoration business
Cencorp reports the financial figures relating to the Guangzhou plant's
decoration business as discontinued operations. 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.
January - March 2013 (continued operations)
- Cencorp Group's net sales decreased by 43.2 per cent to EUR 2.5 million (EUR
4.4 million).
- EBITDA was EUR -0.2 million (EUR 0.9 million).
- Operating profit was EUR -0.7 million (EUR 0.3 million).
- The Group's profit before taxes was EUR -0.7 million (EUR -0.1 million).
- Profit for the period was EUR -0.7 million (EUR -0.1 million).
- Earnings per share were EUR -0.002 (EUR -0.0002) and diluted earnings per
share EUR -0.002 (EUR -0.0002).
- Net sales of the Laser and Automation Applications segment (LAS) decreased by
47 per cent to EUR 0.8 million (EUR 1.5 million) and operating profit was EUR
-0.6 million. The segment's EBITDA was EUR -0.4 million.
- Net sales of the Life Cycle Management segment (LCM) decreased by 16.6 per
cent to EUR 0.9 million (EUR 1.1 million) and operating profit was EUR 0.1
million. The segment's EBITDA was EUR 0.1 million.
- Net sales of the new Clean Energy Solutions segment (CES) decreased by 52 per
cent to EUR 0.9 million (EUR 1.9 million) and operating profit was EUR -0.2
million. The segment's EBITDA was EUR 0.1 million.
MANAGING DIRECTOR IIKKA SAVISALO'S REVIEW
I found Cencorp Group's result for the first quarter contradictory. Decline in
the comparable net sales and negative EBITDA of ca. EUR -0.188 million (profit
in 2012 was ca. EUR 0.935 million) are showing that this year started poorly.
Weak order book originating from 2012 caused troubles also at the beginning of
2013 in Cencorp's traditional automation business. Also the production volumes
of the component plant in Beijing was on exceptionally low level in the first
quarter of 2013. On the other hand, the company made a major leap, not yet to
be seen in the figures, both in its traditional automation related segments
(Laser and Automation Solutions, LAS, and Life Cycle Management, LCM) and in
its new Clean Energy Solutions segment (CES). More and more quotations for new
machine sales were made and the order book started to increase. On 12 February
2013 the company received an EUR 0.6 million order for odd-form automation
solutions from an European customer. After the reporting period the demand has
continued to be relatively strong.
As the company has previously announced it has started to report of three
business segments. The segments are CES (Clean Energy Solutions), LCM (Life
Cycle Management) and LAS (Laser and Automation Solutions) which is
specializing in new machine sales. At the beginning the Beijing factory's
component deliveries for the electronics industry are included in the CES
segment.
The decline in the net sales is mainly due to the weak new machine sales as
well as to the continuously low level of the electronics component production.
The LCM segment's EBITDA turned to profit during the reporting period, even
though the segment's net sales declined slightly. Notably, the result of the
North American operations was reasonable. Deliveries of Clean Energy Solutions
were not yet commenced in the first quarter. However, in February 2013 the CES
segment booked a grant of EUR 0.6 million from Suur-Savon Energiasäätiö (The
Suur-Savo Energy Fund) as one-off income.
As announced earlier, Cencorp is going through the biggest transition in the
company's history into a company with main business operations in providing
cleantech applications. At the first stage the company will provide its own
component family for photovoltaic modules, out of which Conductive Back Sheet
(CBS) will be first brought into the market. Additionally, the company is
preparing to launch a next generation photovoltaic module family, based on
Cencorp's own CBS technology and a related fully automated production line. The
first fully automated production line will be taken into use in Mikkeli,
Finland in early 2014. A pilot factory for module production will commence its
operation in Mikkeli already in the next few weeks. Cencorp's own module
structures as well as new module production methods will be tested at the pilot
factory.
OPERATING ENVIRONMENT
Cencorp operates in industries applying electronics and Cleantech technology.
Cencorp's operating environment is global. The company's traditional customers
in the electronics industry as well as new CES customers are companies that
provide products and services worldwide. 91,6 per cent of Cencorp's products
and services are either exported from Finland or they are manufactured by
Cencorp in the US and in China.
Last year Cencorp's traditional customers in the electronics industry seemed to
start changing the strategies they have followed already for some time. In
particular, the American and European companies started to establish production
lines in new geographical areas instead of China. This kind of development was
the most significant in Mexico where e.g. car manufacturers and their suppliers
made significant investments. Conventionally Cencorp's products and services
have been most competitive in the North American and European markets. Cencorp
is now carefully reviewing the market potential the new production locations
may create for Cencorp's automation business, not forgetting the potential of
the still labor intensive markets in Asia.
In the cleantech business, particularly in the photovoltaic industry, many big
changes took place in 2012. Many of the European and American solar module
manufacturers were forced to close down due to the Chinese price competition.
Also Chinese manufacturers suffered from the price competition and several
Chinese companies were driven into financial troubles. Due to the price
competition and dumping allegations the authorities both in the US and in
Europe took preventive actions. The US set significant extra tariffs for the
specific Chinese PV modules already last year. EU's exceptionally strong action
plan against the PV module dumping leaked out on 8 May 2013 including company
specific tariffs of 37 - 68 per cent for the Chinese PV modules. However, the
challenging market environment created a unique opportunity for Cencorp to
cost-effectively and fast develop and apply its technology and accelerate its
investment plan not fully completed, yet.
The growing market combined with decreasing production capacity and the actions
of the authorities are creating an opportunity for Cencorp, utilizing its
Cleantech technologies, to achieve a market position in the global cleantech
market. According to external experts' estimations the CBS related market for
PV modules may grow up to USD 25 billion by 2020. Cencorp believes it will
achieve a position in this market provided its transition into a cleantech
company proceeds as planned and it has sufficient capital required for the
growth.
MARKET OUTLOOK
Short-term market outlook in the LAS and LCM segments has improved. There is a
positive upswing particularly in the North American market. However, the slow
economic development in Europe is clearly reflected in the demand in some
countries. Yet, the amount of Cencorp's quotations is increasing and there are
good opportunities to increase the revenues in the near future.
The demand for LCM services has also increased recently and the company's
organization and products are ready, to better meet the demand. The LCM
operations are expected to continue being mainly profitable also in the future.
In the CES segment the expectations lie in solar modules, module components and
in related technology. The share of the electronics component deliveries is
expected to decline in this segment. Cencorp has announced that it has signed a
Memorandum of Understanding (MOU) on delivering Conductive Back Sheets (CBS) to
one of the leading Chinese photovoltaic module manufacturers. In relation to
the MOU Cencorp has commenced test production and sample deliveries to finalize
product certification. The company has started to deliver samples to several
other Chinese manufacturers.
For about one year Cencorp has been developing fully automated production
technology for CBS modules. The technology has been introduced to almost all of
the most significant solar module manufacturers. Cencorp has taken actions to
patent the related innovations. There is only a limited amount of competitors
in the market and the customer feedback on Cencorp's production technology has
been positive. Cencorp's production technology has a special niche: production
lines have high level of automation, they are easy to use and require only
little space. Start-up cost for setting up solar module production from zero
amounts to only EUR 10 - 15 million depending on the existing level of existing
infrastructure and required capacity. Cencorp is negotiating with several
existing module manufacturers as well as with companies planning to establish
local module production. Cencorp's first full-size production plant, based on
the company's own design, planned to operate as the company's sample factory,
is expected to be opened in Mikkeli in early 2014, provided the company has
sufficient capital for the project.
The third product family in Cencorp's solar module strategy includes a series
of PV modules based on Cencorp's own CBS technology. The solar module structure
that bases on the technology Cencorp acquired from Sunweb Solar at the end of
January 2013 and that has been further developed by Cencorp is one of the most
efficient according to the international experts Cencorp has quoted. The first
ready products are expected to be introduced in the markets during 2013.
Cencorp is negotiating with several traditional energy companies and with
global companies producing solar energy on providing module installations for
their use.
In relation to the traditional electronics components production Cencorp
continues to provide mainly NFC and RFID antennas.
Cencorp's Cleantech strategy, if realized, will remarkably change the company's
cost structure and the targets set for the near future. As Cencorp is now in a
strong transition phase, following the new strategy, Cencorp cannot assess how
the change in company's business focus will impact to the company and Cencorp
has decided not to give any financial guidance for the time being, as stated in
the release of 21 August 2012. As the transition phase is still continuing
Cencorp does not give any financial guidance either during 2013.
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. Risks are handled in more detail in the item Risk
management, risks and uncertainties of this Interim Report.
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:
-- Thorough but fast transition from a company manufacturing only production
automation systems and special components into a company that develops and
provides Cleantech applications using laser and automation technology, a
company with a strong market position as a provider, of locally, produced,
high-quality photovoltaic modules and a company operating in various
geographical markets.
-- 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 on equipment 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, with growth
coming mainly from Cleantech operations, especially from solar photovoltaic
and fuel cell applications, provided the company has sufficient capital.
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.
FINANCING
Cash flow from business operations before investments in January - March was
EUR 0.2 million (EUR 1.3 million). Trade receivables at the end of the
reporting period were EUR 1.8 million (EUR 4.6 million). Net financial items
amounted to EUR -0.01 million (EUR 0.5 million).
At the end of March, the equity ratio was 22.9 per cent (55.5 %) and equity per
share was EUR 0.01 (EUR 0.05). At the end of the reporting period, the Group's
liquid assets totaled EUR 0.4 million (EUR 0.5 million) unused export credit
limits, bank guarantee limits and factoring loans amounted to EUR 1.3 million
(EUR 2.2 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 financing position has been tight and it
involves risks. The loan arrangement of about EUR 3 million made with Tekes in
December 2012 and the EUR 1.5 million convertible bond subscribed in December
2012 have had positive effects in Cencorp's financing position. However, the
Cencorp's ongoing transition into a company that develops and provides
Cleantech applications requires major investments. According to estimates
available, the company's financing position continues to be tight until the
transition phase and relating financing have been completed successfully.
Cencorp has commenced preparations for a share issue. The objective of the
share issue is to finance the execution of the company's photovoltaic module
business plan. Cencorp will inform later on the terms and schedule of the share
issue. The company is also negotiating various options of financing with other
investors in order to be able to exercise its business plans.
Cencorp agreed with its financiers on amendment of the financial agreements and
announced on 3 December 2012 that:
- Sampo Pankki Oyj's financial facility agreement totaling EUR 4 million was
continued until the end of June 2013;
- the maturity date of a convertible bond of some EUR 1.2 million from Savcor
Group Oy was extended until the end of June 2013; 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 the
end of June 2013.
According to estimates available, the company's financing position will
continue to be tight. According to the opinion of Cencorp management the
working capital of the company is not sufficient to complete the ongoing
investment plan, based on the company's strategy, for next twelve (12) months.
From the company's point of view, one of the most important risks is
sufficiency of working capital. Cencorp has loans which will be due in
following twelve (12) months. Cencorp's operational conditions will be highly
dependent on whether Cencorp manages to rearrange the loans. Therefore the
company has, in addition to the above-mentioned measures, started negotiations
with its main financiers and owners on measures to strengthen the financing
position until the company's cash flow is expected to return to positive. With
these actions Cencorp believes that the company has secured sufficient working
capital for the next twelve (12) months and will be able to complete its
strategic investments.
RESEARCH AND DEVELOPMENT
The Group's research and development costs during the January - March period
amounted to EUR 0.5 million (EUR 0.4 million) or 19.1 (8.0) per cent of net
sales.
INVESTMENTS
Gross investments during the January - March period amounted to EUR 1.8 million
(EUR 0.4 million). The largest investments were EUR 1.3 million in development
costs.
PERSONNEL
At the end of March the Group employed 160 (330) people, out of which 54
persons worked in Finland, 97 persons in China and 9 persons in other
countries. During the reporting period, salaries and fees totalled EUR 1.0
million (EUR 1.2 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
reporting period.
The company had a total of 4721 shareholder at the end of March 2013, and 0.8
per cent of the shares were owned by foreigners. The ten largest shareholders
held 89.2 per cent of the company's shares and voting rights on 31 March 2013.
The largest shareholders on 31 March 2013
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 16 394 735 4,8
-----------------------------------------------------------
5. GASELLI CAPITAL OY 11 000 000 3,2
-----------------------------------------------------------
6. GASELLI CAPITAL PARTNERS OY 2 050 000 0,6
-----------------------------------------------------------
7. JOKELA MARKKU 1 804 728 0,5
-----------------------------------------------------------
8. PARPOLA VILLE 1 478 759 0,4
-----------------------------------------------------------
9. OY TROBE 1 268 431 0,4
-----------------------------------------------------------
10. OY ETRA INVEST AB 1 105 262 0,3
-----------------------------------------------------------
OTHERS 36 990 945 10,8
-----------------------------------------------------------
TOTAL 342 161 270 100,0
-----------------------------------------------------------
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 31 March 2013, representing about 78.9 per cent 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, 8,931,000 options connected to bond
I/2010 and 21,428,571 options connected to bond I/2012.
The price of Cencorp's share varied between EUR 0.06 and 0.10 during the
January - March period. The average price was EUR 0.08 and the closing price at
the end of March EUR 0.07. A total of 8.4 million Cencorp shares were traded at
a value of EUR 0.7 million during the January - March period. The company's
market capitalization at the end of March stood at EUR 24.0 million.
No share options were granted to the company's management during the reporting
period excluding the below mentioned options connected to bond I/2012 that were
subscribed by SCI Invest Oy which is under control of Iikka Savisalo and Tuukka
Savisalo, who is responsible for photovoltaic module development at Cencorp. On
31 December 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. On 31 December 2012 the company hold
21,428,571 options connected to bond I/2012 with subscription period ending on
7 September 2014. Options connected to bond I/2012 are held by SCI Invest Oy
and Savcor Group Oy.
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. There were no
other resolutions made at the Extraordinary General Meeting. 78,571,429 shares
remain under the authorization. In the first half of 2013, 4,000,000 shares,
under the authorization, will be issued in a directed share issue for Sunweb
Solar to pay part of the purchase price of the transaction carried out in
January.
DECISIONS BY THE ANNUAL GENERAL MEETING
Cencorp Corporation's Annual General Meeting was held on 29 April 2013 in
Mikkeli, Finland. The AGM approved the 2012 financial statements and released
the members of the Board and the President and the CEOs from liability for the
financial year 2012. According to the Board's proposal, it was decided that no
dividend for the financial year 2012 will be distributed. It was also decided
that the loss for the financial period that ended on 31 December 2012 will be
entered in retained earnings.
Mrs Marjukka Karttunen (born 1967) was elected as a new member of the Board of
Directors of Cencorp Corporation. Karttunen in an entrepreneur operating in the
field of public relations and lobbying. Previously she was a Member of
Parliament of Finland for eight years in the National Coalition Party's
parliamentary group and acted as CEO of the Central Association of Women
Entrepreneurs in Finland. Marjukka Karttunen is Chairman of the Board of Port
of Turku and a Board Member of TVT Asunnot Oy. Industrial counsellor Hannu
Savisalo and Iikka Savisalo continue as old Board members in the Cencorp
Corporation's Board of Directors.
At its organizing meeting following the AGM, Cencorp's Board of Directors
elected Hannu Savisalo as the Chairman and Marjukka Karttunen as the Vice
Chairman of the Board. The Board of Directors decided, due to the scope of the
company's business, that it is not necessary to establish any separate Board
committees.
The AGM decided that an annual remuneration of EUR 40,000 will be paid to the
Chairman and to the Vice Chairman of the Board, and EUR 30,000 to the members
of the Board of Directors.
Ernst & Young Oy, Authorized Public Accounting Firm, continues as the company
auditor and Mikko Rytilahti, APA, as the responsible auditor.
MAIN TERMS OF THE MEMORANDUM OF UNDERSTANDING SIGNED WITH SUNWEB SOLAR
On 29 January 2013 Cencorp announced that the company and Sunweb Solar
completed a transaction in which Cencorp acquired 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 purchase price amounting to ca. one million Euros is 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. The shares, a part of the payment of
this transaction, have not been issued, yet, however, a directed share issue
will be arranged in the first half of the year. Purchase price paid in cash
amounts to EUR 450,000. Sunweb Solar agrees not to sell its Cencorp shares
received as purchase price payment before 31 December 2013.
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. Negotiations with Avery Dennison are still
going on. 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 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 technologies.
According to the customer's latest written estimate received from the customer
at the end of January 2013 CBS mass deliveries commences during the first half
of 2013.
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 TEKES LOAN ARRANGEMENT
The Finnish Funding Agency for Technology and Innovation - Tekes has given
Cencorp a loan, of ca. EUR 3 million, to develop a business and production
model relating to the design and production of cost effective photovoltaic
modules as well as to the development of module components. The loan can amount
maximum to 50 per cent of the project's total costs which are estimated to be
ca. EUR 6 million. The loan will be withdrawn in the course of the years 2013
and 2014. The loan period is ten years.
Among other things, the Tekes funding decision is subject to capital
investments, amounting totally to EUR 3 million at the minimum, to be made in
Cencorp during the period from 20 September 2012 to 30 June 2013. Half of the
required investments was already secured on 3 December 2012 as Savcor Group Oy
and SCI Invest Oy, a company under the control of Iikka Savisalo, the CEO of
Cencorp, subscribed totally 1.5 million Euros of Cencorp's convertible bond
issued as a capital loan.
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 Interim Report.
According to available estimates, the company's financing position will
continue to be tight. According to the opinion of the Cencorp management the
working capital of the company is not sufficient for the next twelve (12)
months to realize the strategic investment plan going on in the company. From
the company's point of view one of the most significant risks is the
sufficiency of working capital. Cencorp has loans which will be due in the
following twelve (12) months, and whether the company succeeds or fails to
rearrange the loans will have a significant effect in the company's operations.
Therefore the company has, in addition to the above-mentioned measures, started
negotiations with its main financiers and owners on measures to strengthen the
financing position until the company's cash flow is expected to return to
positive. By these actions Cencorp believes to secure sufficiency of working
capital for the next twelve (12) months and to finalize investments according
to the company's strategy.
Realization of 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
capital to finance the establishing of photovoltaic module business plan. If
the share issue doesn't materialize as planned, there is a risk that the
establishment of Cencorp's Cleantech strategy will be postponed or even fail,
partly or totally.
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 all three 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.
Cencorp's transition from a company manufacturing only production automation
systems and special components into a company that develops and provides
Cleantech applications using laser and automation technology, a company with a
strong market position as a provider, of locally, produced, high-quality
photovoltaic modules and a company operating in various geographical markets,
involves risks. Even though Cencorp's strategy and objectives are based on
market knowledge and technical surveys,the risks are significant and it is not
certain if the company reaches all or part of the targets set for it. 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 financing. Cencorp's goal is to reach strong market
position as provider of locally produced high-quality photovoltaic modules.
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.
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 final risks
relating to it. 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.
The Tekes loan arrangement involves risks. Among other things, the Tekes
funding decision is subject to capital investments, amounting totally to 3
million Euros at the minimum, to be made in Cencorp during the period from 20
September 2012 to 30 June 2013. Half of the required investments was already
secured on 3 December 2012 as Savcor Group Oy and SCI Invest Oy, a company
under the control of Iikka Savisalo, the CEO of Cencorp, subscribed totally 1.5
million Euros of Cencorp's convertible bond which is a capital loan.
Other risks connected to Cencorp have been presented in more detail in the
Annual Report for 2012.
In Mikkeli, 15 May 2013
Cencorp Corporation
BOARD OF DIRECTORS
For more information please contact:
Cencorp: Iikka Savisalo, President and CEO, tel. +358 40 521 6082,
iikka.savisalo@savcor.com
Distribution:
NASDAQ OMX, Helsinki
Main media
www.cencorp.com
Cencorp Corporation is a leading provider of industrial automation solutions.
The equipment included in the product portfolio designed for depaneling,
odd-form assembly, testing and laser materials processing substantially
improves the efficiency of customers' production. The product range also
includes EMI shielding solutions, RFID antennas, other flexible circuits
including for example conductive back sheets used in photovoltaic modules and
mobile phone antennas. Cencorp's customers are manufacturers of automotive
electronics, mobile phone antennas and photovoltaic modules as well as
manufacturers operating in telecommunications and in industrial automation.
Cencorp's head office is located in Mikkeli, Finland. The company is part of
the Finnish Savcor Group.
Consolidated statement of comprehensive income
(unaudited)
1 000 EUR 1-3/2013 1-3/2012 1-12/2012
--------------------------------------------------------------------------------
Continuing operations
Net sales 2 492 4 385 15 441
Cost of sales -2 327 -3 885 -14 731
Gross profit 165 500 710
--------------------------------------------------------------------------------
Other operating income 702 1 227 1 791
Product development expenses -475 -353 -1 458
Sales and marketing expenses -414 -412 -2 072
Administrative expenses -540 -594 -2 669
Other operating expenses -121 -19 -235
Operating profit -684 350 -3 932
Financial income 367 183 380
Financial expenses -354 -636 -1 224
Profit before taxes from continuing operations -670 -103 -4 776
Income taxes 2 24 26
Profit/loss for the period from continuing -669 -79 -4 750
operations
Discontinued operations
Profit/loss after tax for the period from -9 -937 -8 606
discontinued operations
Profit/loss for the period -678 -1 016 -13 356
--------------------------------------------------------------------------------
Profit/loss attributable to:
Shareholders of the parent company -678 -1 016 -13 356
Earnings/share (diluted), eur -0,002 -0,003 -0,04
Earnings/share (basic), eur -0,002 -0,003 -0,04
Continuing operations:
Earnings/share (diluted), eur -0,002 0,000 -0,01
Earnings/share (basic), eur -0,002 0,000 -0,01
Profit/loss for the period -678 -1 016 -13 356
Other comprehensive income
Translation difference 23 -260 93
Net other comprehensive income to be
reclassified to
profit or loss in subsequent periods 23 -260 93
Total comprehensive income for the period -654 -1 276 -13 263
--------------------------------------------------------------------------------
Total comprehensive income attributable to:
Shareholders of the parent company -654 -1 276 -13 263
Consolidated statement of financial position
(unaudited)
1 000 EUR 31.3.2013 31.3.2012 31.12.2012
--------------------------------------------------------------------------------
ASSETS
Non-current assets
Property, plant and equipment 6 923 7 315 6 688
Consolidated goodwill 2 967 2 967 2 967
Other intangible assets 3 864 2 783 2 979
Available-for-sale investment 10 10 10
Deferred tax assets 9 10 9
Total non-current assets 13 772 13 085 12 652
--------------------------------------------------------------------------------
Current assets
Inventories 2 850 3 140 2 693
Trade and other 2 693 3 847 2 695
non-interest-bearing
receivables
Cash and cash equivalents 439 537 583
Total current assets 5 981 7 523 5 971
--------------------------------------------------------------------------------
Assets classified as held for 37 8 812 79
sale
Total assets 19 790 29 420 18 702
--------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity attributable to shareholders of the parent
company
Share capital 3 425 3 425 3 425
Other reserves 43 691 43 344 43 691
Translation difference 701 324 677
Retained earnings -43 289 -30 751 -43 091
Total equity 4 528 16 342 4 703
--------------------------------------------------------------------------------
Non-current liabilities
Non-current loans 2 554 520 2 095
Deferred tax liabilities 24 26 26
Total non-current liabilities 2 578 546 2 121
--------------------------------------------------------------------------------
Current liabilities
Current interest-bearing 4 760 4 120 4 731
liabilities
Trande and other payables 7 679 6 065 6 850
Current provisions 244 255 257
Total current liabilities 12 683 10 440 11 839
--------------------------------------------------------------------------------
Liabilities directly associated 1 2 093 40
with assets classified as held
for sale
Total liabilities 15 262 13 079 14 000
--------------------------------------------------------------------------------
Equity and liabilities total 19 790 29 420 18 702
--------------------------------------------------------------------------------
Consolidated statement of cash flows
(unaudited)
1 000 EUR 1-3/201 1-3/201 1-12/201
3 2 2
--------------------------------------------------------------------------------
Cash flow from operating activities
Income statement profit/loss from continuing -670 -103 -4 776
operations before taxes
Income statement profit/loss from discontinued -9 -937 -8 606
operations before taxes
Income statement profit/loss before taxes -679 -1 041 -13 382
---------------------------
Non-monetary items adjusted on income statement
--------------------------------------------------------------------------------
Depreciation and impairment + 496 936 8 682
Gains/losses on disposals of non-current +/- -8 -1 143 -655
assets
Unrealized exchange rate gains (-) and +/- -286 294 108
losses (+)
Other non-cash transactions +/- 139 0 -1 181
Financial income and expense + 273 231 845
Total cash flow before change in working -65 -723 -5 583
capital
--------------------------------------------------------------------------------
Change in working capital
Increase (-) / decrease (+) in inventories -114 252 827
Increase (-) / decrease (+) in trade and 231 1 420 4 863
other receivables
Increase (+) / decrease (-) in trade and 253 490 -162
other payables
Change in working capital 370 2 162 5 529
--------------------------------------------------------------------------------
Adjustment of financial items and taxes to
cash-based accounting
Interest paid - -91 -92 -257
Interest received + 0 1 4
Other financial items - -29 -31 -258
Taxes paid - 0 16 18
Financial items and taxes -121 -106 -492
--------------------------------------------------------------------------------
NET CASH FLOW FROM BUSINESS OPERATIONS 185 1 333 -547
CASH FLOW FROM INVESTING ACTIVITIES
Investments in tangible and intangible assets - -776 -469 -1 757
Proceeds on disposal of tangible and intangible + 19 3 605 4 465
assets
Repayment of loan receivables + 0 0 0
NET CASH FLOW FROM INVESTMENTS -743 3 136 2 708
--------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from non-current borrowings + 404 0 1 559
Stock options of the convertible bond + 0 0 347
Proceeds from current borrowings + 621 905 5 404
Repayment of current borrowings - -592 -5 204 -9 174
Dividends paid - 0 0 0
--------------------------------------------------------------------------------
NET CASH FLOW FROM FINANCING ACTIVITIES 431 -4 300 -1 865
INCREASE (+) OR DECREASE (-) IN CASH FLOW -127 169 296
Consolidated statement of changes in equity
(unaudited)
1 000 EUR Share Other Translatio Distributable Retained Total
capit reser n non-restricted earning
al ves differenc equity fund s
e
--------------------------------------------------------------------------------
31.12.2012 3 425 4 908 677 38 783 -43 091 4 703
Share related - - - - 480 480
payments
Translation - - 23 - - 23
difference,
comprehensive
income
Profit/loss for - - - - -678 -678
the period
31.3.2013 3 425 4 908 701 38 783 -43 289 4 528
1 000 EUR Share Other Translatio Distributable Retained Total
capit reser n non-restricted earning
al ves differenc equity fund s
e
--------------------------------------------------------------------------------
31.12.2011 3 425 4 908 584 38 436 -29 735 17 618
Translation - - -260 - - -260
difference,
comprehensive
income
Profit/loss for - - - - -1 016 -1 016
the period
31.3.2012 3 425 4 908 324 38 436 -30 751 16 342
Segment information
(unaudited)
14 May 2013 Cencorp announced that the company changes its reporting system to
comply with the company's Cleantech strategy and as from 1 January 2013 Cencorp
reports of three business segments. The segments are Laser and Automation
Applications, Life Cycle Management and Clean Energy Solutions (including also
the former Special Components segment). The comparison figures for the
corresponding period in 2012 concern only the net sales. Other figures that
would be compareble and reliable enough are not available. Cencorp's new
segment information is based on the management's internal reporting and on the
organisation structure.
The segment information include only continuing operations. Information
regarding discontinued operations is given in attachment "Discontinued
operations".
1 000 EUR 1-3/2013 1-3/2012 1-12/2012
--------------------------------------------------------------------------------
Net sales
Laser and Automation 779 1 471 5 909
Applications
Life Cycle Management of 878 1 053 3 708
Laser and Automation
Applications
Clean Energy Solutions 893 1 861 5 865
Eliminations -59 0 -41
Total 2 492 4 385 15 441
Operating profit
Laser and Automation -592 - -
Applications
Life Cycle Management of 88 - -
Laser and Automation
Applications Clean Energy Solutions -185 - -
Eliminations 6 - -
Total -684 - -
EBITDA
Laser and Automation -442 - -
Applications
Life Cycle Management of 122 - -
Laser and Automation
Applications
Clean Energy Solutions 126 - -
Eliminations 6 - -
Total -188 - -
Depreciation
Laser and Automation 137 - -
Applications
Life Cycle Management of 35 - -
Laser and Automation
Applications
Clean Energy Solutions 311 - -
Total 482 - -
Impairment
Laser and Automation 14 - -
Applications
Life Cycle Management of 0 - -
Laser and Automation
Applications
Clean Energy Solutions 0 - -
Total 14 - -
Segment information
(unaudited)
When the comparison figures that would be comparable and reliable enough are not
available for the corresponding period in 2012, Cencorp reports the segment
information also according the old reporting system with two segments. The
segment information include only continuing operations.
The Group had two reporting segments till 31 December 2012: Laser and Automation
Applications, and Special Components. The Laser and Automation Applications
segment comprised Cencorp's former business and the Special Components segment
the business acquired through the Face transaction in 2010.
1 000 EUR 1-3/2013 1-3/2012 1-12/2012
--------------------------------------------------------------------------------
Net sales
Laser and Automation Applications 1 604 2 527 9 624
Special Components 889 1 861 5 858
Eliminations -1 -2 -41
Total 2 492 4 385 15 441
Operating profit
Laser and Automation Applications -284 -750 -3 221
Special Components -425 1 105 -712
Eliminations 25 -5 1
Total -684 350 -3 932
EBITDA
Laser and Automation Applications -93 -571 -2 401
Special Components -120 1 511 812
Eliminations 25 -5 1
Total -188 935 -1 588
Profit/loss for the period
Laser and Automation Applications -410 -905 -3 644
Special Components -277 852 -1 120
Eliminations 19 -26 14
Total -669 -79 -4 750
Assets
Laser and Automation Applications 15 425 30 016 27 995
Special Components 10 582 12 685 10 964
Assets classified as held for sale 37 8 812 79
Eliminations -6 254 -22 093 -20 336
Total 19 790 29 420 18 702
Liabilities
Laser and Automation Applications 13 625 9 230 11 873
Special Components 8 360 9 037 8 003
Liabilities directly associated with 1 2 093 40
assets held for sale
Eliminations -6 724 -7 281 -5 917
Total 15 262 13 079 14 000
Gross investments
Laser and Automation Applications 1 272 42 849
Special Components 499 404 989
Assets classified as held for sale 0 1 4
Total 1 771 446 1 842
Depreciation
Laser and Automation Applications 177 180 675
Special Components 305 406 1 434
Total 482 585 2 109
Impairment
Laser and Automation Applications 14 0 145
Special Components 0 0 90
Total 14 0 235
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 assets of Savcor Face (Guangzhou) Technologies Co., Ltd, reported as
discontinued operation, were written- off at fair value in the second quarter
of 2012 and sold in the fourth quarter of 2012.
The results and major classes of assets and liabilities of Savcor Face
(Guangzhou) Technolgies Co., are as follows:
1 000 EUR 1-3/2013 1-3/2012 1-12/2012
--------------------------------------------------------------------------------
Revenue 0 1 273 1 878
Expenses -9 -2 139 -5 620
Other opeating 0 0 1 031
income
Loss recognised 0 0 -5 833
on the
remeasurement to
fair value
Operating profit -9 -866 -8 544
--------------------------------------------------------------
Finance costs 0 -72 -62
Profit/loss -9 -937 -8 606
before tax from
discontinued
operation
Income tax 0 0 0
Profit/loss after -9 -937 -8 606
tax from
discontinued
operation
--------------------------------------------------------------
Assets
Property, plant 0 5 561 0
and equipment
Other intangible 0 551 0
assets
Inventories 0 702 0
Trade and other 36 1 996 39
non-interest-bea
ring receivables
Cash and cash 0 2 40
equivalents
Assets classified 37 8 812 79
as held for sale
--------------------------------------------------------------
Liabilities
Trande and other 1 2 093 40
payables
Provisions 0 0 0
Liabilities 1 2 093 40
directly
associated with
assets
classified as
held for sale
--------------------------------------------------------------
Net assets 36 6 720 39
directly
associated with
disposal group
--------------------------------------------------------------
Savcor Face
(Guangzhou)
Technolgies Co.,
Ltd:n net cash
flow:
1 000 EUR 1-3/2013 1-3/2012 1-12/2012
--------------------------------------------------------------------------------
Operating -41 -31 17
Investing 0 -9 -20
Financing 0 0 0
Net cash flow -41 -40 -3
--------------------------------------------------------------
Earnings/share -0,00003 -0,003 -0,03
(basic), from
discontinued
operations
Earnings/share -0,00003 -0,003 -0,03
(diluted) from
discontinued
operations
Key figures
(unaudited)
1 000 EUR 1-3/2013 1-3/201 1-12/201
2 2
--------------------------------------------------------------------------------
Net sales 2 492 4 385 15 441
Operating profit -684 350 -3 932
% of net sales -27,4 8,0 -25,5
EBITDA -188 935 -1 588
% of net sales -7,5 21,3 -10,3
Profit before taxes -670 -103 -4 776
% of net sales -26,9 -2,4 -30,9
Balance Sheet value 19 790 29 420 18 702
Equity ratio, % 22,9 55,5 25,2
Net gearing, % 151,8 25,1 132,7
Gross investments 1 771 446 1 842
% of net sales 71,1 10,2 11,9
Research and development costs 475 353 1 458
% of net sales 19,1 8,0 9,4
Order book 2 076 4 286 1 438
Personnel on average 165 333 241
Personnel at the end of the period 160 330 168
Non-interest-bearing liabilities 7 679 6 065 6 850
Interest-bearing liabilities 7 314 4 639 6 825
Share key indicators
Earnings/share (basic) -0,002 -0,003 -0,04
Earnings/share (diluted) -0,002 -0,003 -0,04
Earnings/share (basic), from continuing -0,002 -0,0002 -0,01
operations
Earnings/share (diluted) from continuing -0,002 -0,0002 -0,01
operations
Equity/share 0,01 0,05 0,01
P/E ratio -35,35 -26,93 -1,54
Highest price 0,10 0,12 0,12
Lowest price 0,06 0,07 0,05
Average price 0,08 0,1 0,08
Closing price 0,07 0,08 0,06
Market capitalisation, at the end of the 24,0 27,4 20,5
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
Fair values
(unaudited)
Carrying Fair value
amount
1 000 EUR 31.3.2013 31.3.2013
--------------------------------------------------------------------------------
Financial assets
Available-for-sale investments 10 10
Trade and other receivables 2 693 2 693
Cash and cash equivalents 439 439
The fair value of trade and other receivables is expected to correspond to the
carrying amount due to their short maturity.
Financial liabilities
R&D loan, non-current 783 783
Other liabilities, non-current 552 552
Loans from financial institutions, current 2 384 2 384
Other liabilities, current 1 146 1 146
Trade payables and other non-interest-bearing 7 079 7 079
liabilities
The fair value of non-current liabilities is expected to correspond to the
carrying amount as the loans were withdrawn in late 2012 and in 2013 and
recognized to their fair value when recorded.
Change in intangible and tangible assets
(unaudited)
1 000 EUR 31.3.2013 31.3.2012 31.12.2012
--------------------------------------------------------------------------------
Includes tangible assets, consolidated
goodwill and other intangible assets
Carrying amount, beginning of period 12 634 22 609 22 609
Depreciation and impairment -482 -585 -2 109
Additions 1 447 446 1 838
Disposals -99 -2 422 -2 989
Discontinued operations 0 -541 -6 654
Exchange rate difference 254 -328 -61
Carrying amount, end of period 13 754 19 178 12 634
Commitments and contingent liabilities
(unaudited)
1 000 EUR 31.3.2013 31.3.2012 31.12.2012
------------------------------------------------------------------------
Loans from financial institutions 1 241 1 151 1 247
Promissory notes secured by pledge 12 691 12 691 12 691
Mortgages on real estate 0 0 0
Factoring loan and export credit limit 1 130 532 1 090
Trade receivables 735 532 695
Promissory notes secured by pledge 12 691 12 691 12 691
Operating leases
Payable within one year 24 58 50
Payable over one year 11 74 38
Commitments
Payable within one year 1 096 875 922
Payable over one year 846 948 849
Commitments discontinued operations
Payable within one year 0 563 0
Payable over one year 0 3 797 0
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