2007-05-03 08:03:37 CEST
2007-05-03 08:03:37 CEST
REGULATED INFORMATION
Kemira GrowHow Oyj - Interim report (Q1 and Q3)
Interim Report 1 January - 31 March 2007
Kemira GrowHow Oyj STOCK EXCHANGE RELEASE 3.5.2007 at 9.00
- Thanks to higher sales volumes and less expensive natural gas the
first quarter result improved considerably compared with the
corresponding period in the previous year.
- Net sales increased by 28 percent and were EUR 349.5 (272.9)
million.
- The first quarter EBIT was EUR 21.4 (-19.1) million.
- EBIT excluding the effect of unrealized gas derivatives and
non-recurring items was EUR 20.8 (-20.4) million.
- Earnings per share were EUR 0.27 (-0.40).
Key figures Q1/2007 Q1/2006
Net sales, EUR million 349.5 272.9
EBIT, EUR million 21.4 -19.1
EBIT excluding unrealized gas derivatives and
non-recurring items, EUR million 20.8 -20.4
Result before taxes, EUR million 19.7 -21.2
Net result attributable to equity holders of the
parent company, EUR million 15.2 -22.3
Earnings per share, EUR 0.27 -0.40
Equity ratio, % 37.9 36.5
Gearing, % 58.0 63.8
Kemira GrowHow Group in January - March
Kemira GrowHow's first quarter was clearly better than in the
previous year. Net sales increased by 28 percent, or EUR 76.6
million, to EUR 349.5 (272.9) million in 2007.
Consolidated operating result during the first quarter of 2007 was
EUR 21.4 (-19.1) million. EBIT as a percentage of net sales improved
during the first quarter from -7.0 percent in 2006 to 6.1 percent in
2007. EBIT as a percentage of net sales, the effect of unrealized gas
derivatives and non-recurring items excluded, was 5.9 (-7.5) percent.
Net sales, EUR million Q1 Q2 Q3 Q4 Q1-Q4
2007 349.5
2006 272.9 304.2 306.6 282.5 1,166.2
EBIT, Q1 Q2 Q3 Q4 Q1-Q4
EUR million
2007 21.4
2006 -19.1 2.6 19.1 8.5 11.1
A table of net non-recurring items is presented in the end of this
interim report, in the interim financial statements part.
Kemira GrowHow's net financial expenses, excluding the share of the
result of joint ventures and associated companies, were EUR -2.8
(-2.2) million during the first quarter of 2007. Net losses on
foreign exchange were EUR -0.2 (-0.1) million during the first
quarter. Kemira GrowHow's share of the results of joint ventures and
associated companies was EUR 1.1 (0.1) million.
Income taxes for the review period were EUR -3.5 (-0.8) million.
Income tax expense for the interim period is calculated separately
for each country in which the Group operates and it is based on an
estimated average annual effective tax rate in each country. In
accordance with prudence principle, deferred tax assets have not been
recorded from the results of loss-making units.
The result attributable to equity holders of the parent company for
the January - March period of 2007 was EUR 15.2 (-22.3) million.
Earnings per share in January - March were EUR 0.27 (-0.40). Kemira
GrowHow Oyj has not issued options, warrants, convertible bonds or
similar instruments which would dilute the earnings per share.
The first quarter of the strategic business units
Crop Cultivation
Net sales of the Crop Cultivation business unit increased during the
first quarter by 32 percent compared with the corresponding period in
2006 and were EUR 276.7 (208.9) million.
The first quarter operating result was EUR 16.3 (-18.4) million. EBIT
excluding the effect of unrealized gas derivatives and non-recurring
items was EUR 16.0 (-19.8) million. The first quarter operating
result of 2007 was improved especially by less expensive natural gas
and thanks to that, higher utilization rate of ammonia plants, as
well as by higher fertilizer sales volumes. EBIT as percentage of net
sales, gas derivatives and non-recurring items excluded, increased
from -9.5 percent in the first quarter of 2006 to 5.8 percent in
2007.
One of the three nitric acid factories of Kemira GrowHow's plant in
Tertre, Belgium, suffered a fire in early February. There were no
human injuries or environmental damages. According to the latest
estimates, the production shut-down in the nitric acid plant will
last approximately 20 weeks. During the production shut-down the
fertilizer production at Tertre is reduced by approximately 25
percent. The shut-down does not influence industrial customers and
special arrangements are being used in order to minimize any delivery
disturbances of fertilizers. The nitric acid plant is insured for
property damage and business interruptions. Impairment losses
totalling to EUR 0.9 million were recorded due to the fire. EUR 0.7
million of the impairment losses were allocated to Crop Cultivation
business unit. Recognized insurance compensations during the first
quarter were EUR 2.4 million, of which EUR 1.9 million were allocated
to Crop Cultivation business unit.
Net sales, EUR million Q1 Q2 Q3 Q4 Q1-Q4
2007 276.7
2006 208.9 240.9 238.7 206.7 895.3
EBIT, Q1 Q2 Q3 Q4 Q1-Q4
EUR million
2007 16.3
2006 -18.4 -0.7 13.3 5.4 -0.4
The fertilizer business in Europe is highly seasonal in nature.
Typically the sales and profitability of European fertilizer
producers are stronger during the first and the second quarters of
the year compared with the third and the fourth quarters of the year,
since spring is the main application season for fertilizers in
Europe. The year 2006 was, however, exceptional, because high natural
gas prices substantially weakened the first half-year results and
producers were not able to pass on the gas price increases fully to
fertilizer prices. As the gas markets normalized during the latter
half of 2006, it seems that the seasonality of the European
fertilizer business is returning to the typical pattern.
Sales volumes in thousands of metric tons
Q1/2007 Q1/2006 Q1-Q4/2006
1,125 881 3,814
The first quarter sales volumes were up by approximately 28 percent
compared with the corresponding period in the previous year. The
sales volumes increased in majority of the market areas, but
especially in the British Isles and Continental Europe. The sales
volumes in Finland remained at the same level as in the previous
year. The first quarter sales prices of nitrogen fertilizers were
approximately 3 percent higher in Continental Europe and
approximately 10 percent lower in the UK than last year. Sales prices
of NPK fertilizers were approximately 3 percent higher in Continental
Europe and approximately 6 percent lower in the UK than last year.
The total effect of higher sales prices on operating profit was,
however, positive.
The price of natural gas was on average about 50 percent less
expensive than in the corresponding period in the previous year.
Thanks to less expensive natural gas and higher price of ammonia,
ammonia plants were, unlike last year, in full production through the
whole winter, and there were no additional costs due to shut-downs
and restarts of ammonia plants. There was also no need to purchase as
much ammonia as last year. Lower natural gas prices, stable operation
of the ammonia plants and lower ammonia purchases together with
higher sales volumes contributed the most to operating profit
improvement.
Industrial Solutions
The first quarter net sales of the Industrial Solutions business unit increased by 7 percent
in 2007 and were EUR 80.9 (75.8) million. The first quarter operating profit was
EUR 7.2 (0.9) million. EBIT excluding the effect of unrealized gas derivatives
and non-recurring items was EUR 6.9 (1.0) million. EBIT as a percentage of net sales,
gas derivatives and non-recurring items excluded, increased from approximately
1 percent in the first quarter of 2006 to 8.5 percent in the first quarter of 2007.
During the first quarter EUR 0.2 million of impairment losses due to the fire at Tertre
plant were allocated to Industrial Solutions business unit. Allocated insurance compensations
were EUR 0.5 million.
Net sales, EUR million Q1 Q2 Q3 Q4 Q1-Q4
2007 80.9
2006 75.8 72.2 76.0 84.9 309.0
EBIT, Q1 Q2 Q3 Q4 Q1-Q4
EUR million
2007 7.2
2006 0.9 6.4 6.3 6.3 19.9
During the first quarter, feed phosphate volumes in Europe were above
the previous year's level and prices increased on average by 5
percent.
The major contributors to improvement of operating profit were higher
phosphoric acid and feed phosphates prices, less expensive natural
gas and higher utilization rate of ammonia plants.
Financing
At 31 March 2007, the Group's net interest-bearing liabilities
amounted to EUR 190.5 million, compared with EUR 198.7 million at 31
March 2006 and EUR 185.9 at 31 December 2006. The proportion which
fixed-interest loans represented within the total amount of the
Group's interest-bearing loans was about 32 percent at the end of the
review period. Pension loans are considered to be floating rate
loans. At the end of the review period 31 March 2007 liquid funds
amounted to EUR 29.6 million (EUR 20.5 million at 31 March 2006 and
EUR 20.0 million at 31 December 2006).
The Group's equity ratio was 37.9 percent at the end of the review
period 31 March 2007 (36.5 percent at 31 March 2006 and 37.2 percent
at 31 December 2006). The gearing ratio was 58.0 percent (63.8
percent at 31 March 2006 and 59.5 percent at 31 December 2006).
Kemira GrowHow's main liquidity reserve is a syndicated revolving
credit facility that is used for general corporate purposes. The EUR
150 million credit facility is in place until the year 2010. The
utilization of the revolving credit facility as of 31 March 2007 was
EUR 80 million. Kemira GrowHow also has a EUR 300 million domestic
commercial paper program, a long-term bilateral bank loan and pension
loans. Other funding sources are financial leasing arrangements and
credit facilities with local house banks.
Cash flow during January - March 2007 was clearly better than in the
previous year as cash flow from operations was EUR 0.4 (-52.1)
million and EUR -4.9 (-66.7) million after investing activities. The
main reason for the increase in cash flow compared with the previous
year was better operating result. Due to seasonality, net working
capital increased from year end by EUR 25.6 million.
Capital expenditure
Gross capital expenditure was EUR 6.1 (25.4) million during the first
quarter of 2007. Carbon dioxide emission right allowances, EUR 0.5
(9.4) million, are included in gross capital expenditure. Emission
rights have been recorded at fair value when received. There were no
major investments made during the first quarter of 2007.
Depreciation and amortization during the first quarter were EUR 11.2
(10.8) million. Proceeds from sales of fixed assets were EUR 4.2
(6.8) million. Net gains from sales of assets were EUR 2.1 (2.1)
million.
Cash flow from investing activities in January - March was EUR -5.3
(-14.7) million.
In 2007, capital expenditure excluding possible acquisitions is
estimated to be approximately EUR 50 million, including maintenance
investments of approximately EUR 30 million. The most significant
capital expenditure in 2007 are investments in energy efficiency
improvement and scheduled maintenance of the ammonia plant at Tertre,
Belgium and investments in sulphur burning unit and automatization of
fertilizer plant at Siilinjärvi, Finland.
Personnel
As at 31 March 2007, Kemira GrowHow had 2,487 (2,615) employees. The
average number of personnel was 2,488 (2,649). The number of
personnel in Finland was 1,055 (1,072) at the end of March and 1,049
(1,078) on average.
Shares and share capital
At the end of the review period, 31 March 2007, the share capital of
Kemira GrowHow Oyj amounted to EUR 155,973,000 consisting of
57,208,857 shares (before the deduction of treasury shares). Each
share, with the exception of the treasury shares, entitles its holder
to one vote at the General Meetings of Shareholders of Kemira GrowHow
Oyj. The share has no nominal value.
The Board of Directors of Kemira GrowHow Oyj used the authorizations
issued by the Annual General Meeting of 2006 to dispose of the
Company's own shares. Based on the Board of Directors' decision,
Kemira GrowHow Oyj transferred on 15 March 2007 77,320 shares to
persons involved in the 2004 share-based incentive plan.
At 31 March 2007, Kemira GrowHow Oyj held 1,783,380 own shares,
representing in total 3.12 percent of the number of issued shares.
At the end of the review period, the quoted price of Kemira GrowHow Oyj shares stood
at EUR 10.09. The highest quoted price in January - March 2007 was EUR 10.35 and
the lowest was EUR 6.67. The volume weighted average quoted price in January - March
2007 was EUR 8.73. The share capital had a market value of EUR 559 million at
the end of March 2007. The volume of shares traded during the January - March
period was equivalent to 58 percent of the average number of shares outstanding.
Equity attributable to equity holders of the parent company was EUR
5.87 (5.61) per share at 31 March 2007. The number of shares used in
calculating this key ratio has been reduced by the number of treasury
shares.
As of 31 March 2007, Kemira GrowHow's ownership structure was the
following:
The Government of Finland 30.0%
International institutions and nominee registered shareholders 40.8%
Finnish institutions 16.0%
Finnish households 10.1%
Kemira GrowHow Oyj 3.1%
The Board of Directors of Kemira GrowHow Oyj has no authorization to issue convertible
bonds or warrants or options. The Annual General Meeting held on 3 April 2007 authorized
the Board of Directors to dispose of the Company's own shares through a share issue and
to issue new shares through a subscribed issue. These authorizations have not been used.
Annual general meeting
The Annual General Meeting of Kemira GrowHow Oyj held at 3 April 2007, approved
the financial statements and consolidated financial statements for the financial year
of 1 January - 31 December, 2006 and granted discharge from liability to the members of
the Board of Directors as well as the managing director and the deputy managing director.
The Annual General Meeting decided to distribute as dividend for the financial year of
2006 EUR 0.15 per share, as proposed by the Board of Directors. No dividend was paid
to treasury shares held by Kemira GrowHow Oyj, so the paid dividend amounted to
EUR 8.3 million. The dividend record date was 10 April 2007 and the dividend was
paid on 17 April 2007.
The Annual General Meeting re-elected Ossi Virolainen, Lauri Ratia,
Arto Honkaniemi, Satu Raiski, Helena Terho and Esa Tirkkonen as
members of the Board of Directors and Maija Torkko as a new member.
The Annual General Meeting re-elected Ossi Virolainen as the Chairman
and Lauri Ratia as the Vice Chairman of the Board of Directors.
KPMG Oy Ab was re-elected as auditor, with Petri Kettunen, APA, as
responsible auditor, and Pekka Pajamo, APA, as deputy auditor.
The Annual General Meeting decided to authorize the Board of Directors to dispose
of a maximum number of 1,860,700 Company's own shares through a share issue.
The authorization is effective until 31 May 2008.The Annual General Meeting decided
to authorize the Board of Directors to issue a maximum of 6,000,000 new shares through
one or more subscribed issues. In accordance with the authorization, the Board of
Directors may deviate from the shareholders' pre-emptive rights to subscribe for
Company shares if there is a persuasive economic reason for the company to do so.
The authorization is effective until 31 May 2008.
The Annual General Meeting decided to establish a Nomination
Committee to prepare proposals for the next Annual General Meeting on
the composition and remuneration for the Board of Directors.
Efficiency improvements
During 2007 Kemira GrowHow aims to carry out efficiency improvement
projects, which would improve result in total by more than EUR 10
million. These projects include projects to improve production
efficiency, cutting down fixed costs, savings in logistics and
development of business in Eastern Europe. The most significant
on-going project is the project to increase efficiency of the ammonia
plant in Tertre. The project is estimated to be finished in spring
2008.
The planned joint venture in the UK with Terra Industries
In October 2006 Kemira GrowHow Oyj and Terra Industries Inc. entered
into a Memorandum of Understanding which sets out their agreement to
create a joint venture to operate the fertilizer and associated
process chemicals businesses of both companies in the United Kingdom.
The joint venture would be held 50/50 by Kemira GrowHow and Terra and
would own and operate the site of Kemira GrowHow UK Limited at Ince
and the sites of Terra Nitrogen (UK) Limited on Teesside and
Severnside. Both companies produce ammonium nitrate, which is the
main nitrogen fertilizer consumed in the UK, and Kemira GrowHow
produces also compound fertilizers. The proposed joint venture would
therefore provide a complete fertilizer offering for agricultural
customers. Through the proposed joint venture, Kemira GrowHow and
Terra expect to create significant cost and operational synergies
that would enhance their ability to service and compete in
increasingly challenging markets. The Memorandum of Understanding is
subject to clearance from the UK competition authorities. The Office
of Fair Trading in the UK (OFT) referred the planned joint venture
between the Kemira GrowHow and Terra Industries to the Competition
Commission (UK) in January 2007. The Competition Commission is
expected to give a resolution in the summer of 2007.
Events after the balance sheet date
Kemira GrowHow announced in April that it expects to sell its Danish
hydrochloric acid, sulphuric acid and canning businesses to Gropa
A/S. Kemira GrowHow will, however, continue to provide its nitric
acid and ammonia based products in Denmark. If the sale is effected
Kemira GrowHow will support Gropa in the supply chain process to
guarantee deliveries to the customers for an interim period. The sale
has no material effect on Kemira GrowHow's net sales or operating
profit.
The expected sale is part of the restructuring of Kemira GrowHow's
Danish operations and securing the long-term competitiveness of
Kemira GrowHow. Kemira GrowHow remains fully committed to its
customers in Denmark in its core business.
Market overview
During the second half of last year, fertilizer deliveries of
European fertilizer producers fell by up to 10 percent compared with
the previous season. This was due mainly to a shift of last autumn's
fertilizer purchases to this spring. Globally fertilizer consumption
is expected to grow by over 4 percent during the 2006/07 season. In a
longer term, the average annual growth in global consumption is
expected to remain at about 2 percent. The decline in consumption in
Western Europe is compensated for by increasing consumption in
Eastern Europe. Consumption of nitrogen, one of the main nutrients,
is even projected to increase in the European Union. Global nitrogen
fertilizer production capacity is estimated to have increased last
year at a slower pace than anticipated. European fertilizer supply
has decreased due to plant closures. The latest closure will take
place in Sweden as Yara has announced that it will stop fertilizer
production and switch to production of technical ammonium nitrate.
As a result of the reform of the common agricultural policy of the
European Union in 2005, farm subsidies were mostly decoupled from
production. The full long-term impact of these reforms is still
difficult to assess, but they may have been a partial cause for the
decline in fertilizer demand in 2006. On the other hand, the
expanding cultivation of energy crops is assumed to increase
fertilizer use. The European Commission forecasts that in a longer
term farm income in the EU will grow at an average annual rate of
over 2 percent.
Global cereal stocks continue to be the main driver of the fertilizer
market. According to the FAO global cereal production in 2006 was
almost 3 percent lower than in 2005, but it is expected to increase
by over 4 percent this year thanks to the favourable crop outlook. In
the European Union, cereal production dropped by almost 5 percent in
2006 compared with 2005. This year cereal production in the EU is
estimated to increase by 4 percent.
The European Union has maintained the mandatory set aside
agricultural area at 10 percent for the 2006/07 season. Because the
set aside obligation does not apply to energy crops, increasing
energy crop cultivation might reduce the set aside area.
The recovery of world meat production, the surge in bioethanol
production in the United States and the currently prevailing rather
favourable global economic conditions are expected to result in
continuous growth in global cereal demand. Cereal stocks are at a
historically record low level and they are estimated to decrease
during the 2006/07 season further by 14 percent, for coarse grains by
20 percent.
Global market prices of commodity fertilizers such as urea and
diammonium phosphate have strengthened substantially during this
year, decreasing the pressure of fertilizer imports from outside of
Europe.
The prices of wheat and other cereals increased strongly during late
2006. High cereal prices improve the farmers' financial situation.
Historically, improving cereal prices have increased fertilizer
consumption.
The gas infrastructure in Northwest Europe has developed
significantly during the past 6 - 9 months. During the autumn and
winter a number of new gas pipelines connecting the United Kingdom to
the Dutch gas network and to a new gas field in the North Sea were
completed. This has increased the supply of natural gas, which has
decreased gas prices and price volatility. Combined with the
activities of the European Union to open up the European gas markets,
this is expected to improve effectiveness of the gas markets.
The feed phosphate market in Europe has remained stable. The supply
and demand balance of phosphoric acid has lately tightened further.
The market prices are substantially influenced by the price of
phosphoric acid annually agreed by India. This price has been
announced to increase more than 20 percent this year. Also the price
of DAP (diammonium phosphate) has risen strongly supporting the price
of phosphoric acid.
Current outlook
Fertilizer demand and prices are expected to remain at a good level
also during the second quarter of 2007 at the same time as the price
of the most important raw material, natural gas, is expected to be
clearly lower than in the second quarter of 2006. Thanks to strong
demand during the spring, the producers' inventories have declined
from the year end. Lower fertilizer inventories are estimated to
strengthen the initial fertilizer prices for the new season, which
begins in July. Also the high world market prices of DAP and urea
support fertilizer prices for the new season. The development during
the latter part of the year depends essentially on the price level of
fertilizers in relation to the natural gas prices during the second
half year. The most important external factors affecting the
development of fertilizer business are estimated to continue to be
positive.
The operations of the Industrial Solutions business unit are expected
to continue to develop favourably. The world market price of
phosphoric acid is increasing by 20 percent. The price increases are
expected to be partly with a delay reflected also on the prices of
feed phosphates, because Kemira GrowHow's competitors are sourcing
phosphoric acid from the markets. Kemira GrowHow has own phosphoric
acid production thanks to own mine.
In addition to positive development of fertilizer business, also
Kemira GrowHow's own actions, efficiency improvements and utilization
of new business opportunities, create additional possibilities for
result improvement in both Crop Cultivation and Industrial Solutions
business units.
Kemira GrowHow's operating profit, non-recurring items excluded, of
the second quarter and of the whole year 2007 is estimated to improve
clearly from 2006.
All forecasts and estimates mentioned in this report are based on
current judgments of the economic environment and the actual result
may be significantly different.
Material risks and uncertainties
Kemira GrowHow's business is cyclical in nature due to the general
economic conditions of the fertilizer business and the cyclical
nature of the end-user markets. In addition, seasonal weather
conditions can have a negative effect on Kemira GrowHow's operations
and result.
Adverse changes in the supply and prices of natural gas and other
essential raw materials can also negatively affect Kemira GrowHow's
result if the cost increases cannot be passed on to end product
prices. The fluctuation between natural gas and oil derivative prices
has an effect on the market value of the contracts for the Group's
natural gas purchases and they can lead to significant result
volatility as the contracts are mainly related to future years.
Imports from Russia and Eastern Europe could create an imbalance in
supply and demand in Western European fertilizer markets unless the
EU maintains adequate protective measures especially to compensate
for the price differences of natural gas. Urea or other nitrogen
products manufactured in the low-price natural gas area can replace
part of the nitrate fertilizers traditionally used in Europe. Global
market prices of commodity fertilizers have an effect on fertilizer
imports from outside of Europe.
The nature of Kemira GrowHow's businesses exposes Kemira GrowHow to
risks of environmental costs and liabilities arising from the
manufacture, use, storage, transport and sale of materials that may
be considered to be harmful to nature or health and safety when
released into the environment. Many of Kemira GrowHow's operations
require environmental and other regulatory permits that are subject
to modification, renewal or revocation by issuing authorities.
If Kemira GrowHow's proposed joint venture in the UK with Terra
Industries will not take place, the expected cost and operational
synergies will not be achieved.
Kemira GrowHow's operational and strategic risks are described in the
Board of Directors' Review for 2006.
Kemira GrowHow Oyj
Board of Directors
Additional information:
Kemira GrowHow Oyj
Heikki Sirviö, CEO
tel. +358 10 215 2442
Kemira GrowHow Oyj
Kaj Friman, Deputy CEO, CFO
tel. +358 (0)50 62 626
Distribution:
Helsinki Stock Exchange
Media
KEMIRA GROWHOW GROUP
INTERIM FINANCIAL STATEMENTS 1 JANUARY - 31 MARCH 2007
These condensed interim financial statements are unaudited. As a
result of rounding differences, the figures may not add up to the
total.
Condensed income statement
EUR million 1-3/2007 1-3/2006 1-12/2006
Net sales 349,5 272,9 1 166,2
Other operating income 6,3 6,3 29,6
Cost of sales -319,0 -286,3 -1 134,2
Fair value changes of currency
derivatives, net -0,3 -1,1 0,8
Net result of realized commodity
derivatives -0,1 - 1,0
Fair value changes of unrealized
commodity derivatives, net -3,0 - -7,9
Depreciation, amortization and impairment -12,1 -10,9 -44,4
Operating profit/loss 21,4 -19,1 11,1
Financial income and expenses -2,8 -2,2 -11,0
Share of the net result of associated
companies and
joint ventures 1,1 0,1 0,1
Net financial items -1,7 -2,1 -10,8
Result before income taxes 19,7 -21,2 0,3
Income taxes -3,5 -0,8 -6,8
Net result 16,2 -22,0 -6,5
Attributable to minority interests 1,0 0,3 1,3
Attributable to equity holders of the
parent company 15,2 -22,3 -7,8
Total 16,2 -22,0 -6,5
Earnings per share, EUR 0,27 -0,40 -0,14
Operating profit/loss, % of net sales 6,1 -7,0 1,0
Net result attributable to equity holders
of the parent company, % of net sales 4,3 -8,2 -0,7
Condensed balance sheet
EUR million 31.3.2007 31.3.2006 31.12.2006
Assets
Non-current assets
Intangible assets and goodwill 14,8 25,9 14,9
Property, plant and equipment and
biological assets 298,1 314,1 306,6
Holdings in associated companies and
joint ventures 21,4 18,9 20,4
Available-for-sale shares 15,3 0,9 15,3
Other investments 4,5 2,6 4,5
Deferred tax assets 32,6 31,0 33,1
Defined benefit pension assets 19,1 19,5 19,1
Total non-current assets 405,9 412,9 414,0
Current assets
Inventories 184,5 206,1 211,5
Receivables
Interest-bearing receivables 2,9 3,0 3,2
Accounts receivable and other
interest-free receivables 248,7 211,3 195,6
Tax receivables 0,3 0,4 0,6
Total receivables 251,9 214,8 199,3
Securities 17,3 9,0 3,3
Cash and bank 12,3 11,6 16,7
Total current assets 466,0 441,4 430,8
Total assets 871,9 854,3 844,7
EUR million 31.3.2007 31.3.2006 31.12.2006
Equity and liabilities
Equity
Share capital 156,0 156,0 156,0
Share premium account 8,5 8,5 8,5
Other reserves 0,5 0,5 0,5
Other non-restricted equity 142,2 154,4 142,2
Paid-up unrestricted equity reserve 0,7 - -
Treasury shares -10,6 -11,0 -11,0
Fair value reserve - - -
Hedging reserve 1,5 1,0 1,5
Retained earnings and translation
difference 11,5 23,1 20,3
Net result for the period
attributable to equity holders of the
parent company 15,2 -22,3 -7,8
Attributable to equity holders of the
parent company 325,6 310,2 310,1
Minority interest 2,9 1,2 2,2
Total equity 328,4 311,4 312,2
Non-current liabilities
Non-current interest-bearing
liabilities 103,7 112,2 103,9
Non-current interest-free
liabilities 0,3 1,1 0,3
Provisions for liabilities and
charges 2,7 2,5 2,7
Deferred tax liabilities 15,9 16,4 15,9
Defined benefit pension and other
long-term employee benefit liabilities 95,3 94,6 96,3
Total non-current liabilities 217,9 226,8 219,2
Current liabilities
Current interest-bearing liabilities 116,4 107,0 102,0
Short-term provisions 5,4 6,1 5,4
Accounts payable and other current
interest-free liabilities 195,3 201,0 199,6
Income tax payables 8,6 2,0 6,3
Total current liabilities 325,6 316,1 313,3
Total liabilities 543,5 542,9 532,5
Total equity and liabilities 871,9 854,3 844,7
Statement of changes in equity
Share Other Fair
Share premium Other non-restricted Hedging value
EUR million capital account reserves equity reserve reserve
Equity at 1
January,
2006 156,0 8,5 0,5 154,4 0,1 -
Cash flow
hedges,
recognized
in equity - - - - 1,3 -
Cash flow
hedges,
transfer to
income
statement - - - - - -
Other
changes - - 0,0 - - -
Tax effect
of net
income
recognized
directly in
equity - - - - -0,3 -
Net income
recognized
directly in
equity - - 0,0 - 1,0 -
Recognized
income and
expense for
the period 0,0 - 1,0 -
Equity at 31
March, 2006 156,0 8,5 0,5 154,4 1,0 -
Share Other Fair
Share premium Other non-restricted Hedging value
EUR million capital account reserves equity reserve reserve
Equity at 1
January,
2007 156,0 8,5 0,5 142,2 1,5 -
Cash flow
hedges,
recognized
in equity - - - - 0,0 -
Cash flow
hedges,
transfer to
income
statement - - - - - -
Other
changes - - 0,0 0,7 - -
Tax effect
of net
income
recognized
directly in
equity - - - - 0,0 -
Net income
recognized
directly in
equity - - 0,0 0,7 0,0 -
Recognized
income and
expense for
the period - - 0,0 0,7 0,0 -
Equity at 31
March, 2007 156,0 8,5 0,5 142,9 1,5 -
Attributable
to equity
Cumulative holders of
Treasury Retained translation the parent Minority Total
EUR million shares earnings difference company interest equity
Equity at 1
January,
2006 -1,7 23,3 -0,2 340,9 1,0 341,9
Exchange
rate
differences - - 0,1 0,1 0,0 0,2
Hedging of
net
investment
in foreign
entity - - 0,0 0,0 - 0,0
Cash flow
hedges,
recognized
in equity - - - 1,3 - 1,3
Cash flow
hedges,
transfer to
income
statement - - - - - -
Other
changes - -0,2 - -0,2 - -0,2
Acquisition
of treasury
shares -9,4 - - -9,4 - -9,4
Tax effect
of net
income
recognized
directly in
equity - - 0,0 -0,3 - -0,3
Net income
recognized
directly in
equity -9,4 -0,2 0,2 -8,4 0,0 -8,4
Share-based
incentive
plan - 0,0 - 0,0 - 0,0
Share-based
incentive
plan, tax
effect - 0,0 - 0,0 - 0,0
Net profit
for the
period - -22,3 - -22,3 0,3 -22,0
Recognized
income and
expense for
the period -9,4 -22,4 0,2 -30,7 0,3 -30,3
Dividends
paid - - - - -0,1 -0,1
Equity at
31 March,
2006 -11,0 0,9 -0,1 310,2 1,2 311,4
Attributable
to equity
Cumulative holders of
Treasury Retained translation the parent Minority Total
EUR million shares earnings difference company interest equity
Equity at 1
January,
2007 -11,0 12,3 0,1 310,1 2,2 312,2
Exchange
rate
differences - - 0,0 0,0 0,1 0,1
Hedging of
net
investment
in foreign
entity - - 0,1 0,1 - 0,1
Cash flow
hedges,
recognized
in equity - - - 0,0 - 0,0
Cash flow
hedges,
transfer to
income
statement - - - - - -
Share of
changes
recognized
directly in
associates'
and joint
ventures'
equity - 0,0 - 0,0 - 0,0
Other
changes - 0,0 - 0,7 0,0 0,7
Acquisition
/ disposal
of treasury
shares 0,5 -0,5 - - - -
Tax effect
of net
income
recognized
directly in
equity - - 0,0 0,0 - 0,0
Net income
recognized
directly in
equity 0,5 -0,5 0,0 0,8 0,1 0,9
Share-based
incentive
plan - -0,6 - -0,6 - -0,6
Share-based
incentive
plan, tax
effect - 0,2 - 0,2 - 0,2
Net profit
for the
period - 15,2 - 15,2 1,0 16,2
Recognized
income and
expense for
the period 0,5 14,3 0,0 15,5 1,1 16,6
Dividends
paid - - - 0,0 -0,4 -0,4
Equity at
31 March,
2007 -10,6 26,6 0,2 325,6 2,9 328,4
Cash flow statements
EUR million 1-3/2007 1-3/2006 1-12/2006
Cash flows from operating activities
Cash flows from operating activities
before
change in net working capital 25,9 -10,6 28,9
Change in net working capital -25,6 -41,5 -25,1
Net cash flow from operating activities 0,4 -52,1 3,7
Cash flows from investing activities
Acquisition of subsidiary shares -0,8 -0,8 -0,8
Acquisition of associated company and
joint venture shares -3,0 -3,3 -3,4
Other purchases of non-current assets -5,8 -17,4 -60,9
Proceeds from sale of non-current
assets 4,2 6,8 25,2
Net cash used in investing activities -5,3 -14,7 -39,9
Cash flow before financing -4,9 -66,7 -36,1
Cash flows from financing activities
Changes in non-current liabilities
(increase + / decrease -) -1,1 -1,8 -37,5
Changes in non-current loan receivables
(increase - / decrease +) 0,0 0,1 -1,8
Short-term financing, net (increase + /
decrease -) 16,4 43,8 65,3
Dividends paid -0,4 -0,1 -16,7
Acquisition of own shares - -11,0 -11,0
Other financing 0,1 -1,5 0,4
Net cash used in financing activities 15,0 29,4 -1,3
Effect of exchange rate fluctuations -0,5 0,9 0,5
Net change in cash and cash equivalents 9,6 -36,5 -37,0
Cash and cash equivalents at the
beginning of the period 20,0 57,0 57,0
Cash and cash equivalents at the end of
the period 29,6 20,5 20,0
Net change in cash and cash equivalents 9,6 -36,5 -37,0
Key figures
31.3.2007 31.3.2006 31.12.2006
EBITDA, % of net sales 9,6 -3,0 4,8
Operating profit/loss, % of net sales 6,1 -7,0 1,0
Net result for the period attributable
to equity holders of the parent
company, % of net sales 4,3 -8,2 -0,7
Gross capital expenditure, EUR million 6,1 25,4 66,3
Gross capital expenditure, % of net
sales 1,8 9,3 5,7
Equity ratio, % 37,9 36,5 37,2
Gearing, % 58,0 63,8 59,5
Interest-bearing net liabilities, EUR
million 190,5 198,7 185,9
Invested capital, EUR million 548,4 530,7 518,1
Return on equity, % 5,0 -6,7 -2,0
Return on equity, %, annualized 20,2 -26,9 -2,0
Return on investment, % 4,3 -3,4 2,4
Return on investment, %, annualized 17,2 -13,5 2,4
Number of personnel during the period,
average 2 488 2 649 2 589
Number of personnel at the end of the
period 2 487 2 615 2 489
Per share data
31.3.2007 31.3.2006 31.12.2006
Number of shares at the end of the
period, treasury shares excluded
(1,000) 55 425 55 348 55 348
Weighted average number of shares,
treasury shares excluded (1,000) 55 362 56 041 55 519
Earnings/share (EPS), EUR (* 0,27 -0,40 -0,14
Equity attributable to equity holders
of the parent company/share, EUR 5,87 5,61 5,60
Cash flow from operations/share, EUR 0,01 -0,93 0,07
P/E ratio, price per earnings per
share of the review period 36,77 -14,83 -48,14
Market capitalization, EUR million 559,2 326,6 375,8
Number of shares traded, % of average
number of shares 58 36 102
Number of shares traded, (1,000) 32 242 20 197 56 797
Closing price for the share, EUR 10,09 5,90 6,79
Highest quoted price, EUR 10,35 6,21 6,82
Lowest quoted price, EUR 6,67 5,54 4,11
Volume weighted average quoted price,
EUR 8,73 5,98 5,59
(* Kemira GrowHow Oyj has not issued options or warrants or similar
instruments which would dilute the earnings per share.
Definitions of key ratios
Financial ratios
Operating profit = Profit after depreciation, amortization and
impairment
EBITDA = operating profit / loss + depreciation, amortization and
impairment
Interest-bearing net liabilities = Interest-bearing liabilities -
cash and bank - current investments
Equity = Equity attributable to equity holders of the parent company
+ minority interest
Invested capital = Balance sheet total - interest-free liabilities
Equity ratio, % = Equity x 100 / (Balance sheet total - advance
payments received)
Gearing, % = Net liabilities x 100 / Equity
Return on investments, % (ROI) = (Profit before taxes + interest
expenses + other financial expenses) x 100 / (Balance sheet total -
interest-free liabilities) (average of 1 January and end of the
review period)
Return on equity, % (ROE) = (Profit before income taxes - income
taxes) x 100 /
Equity (average of 1 January and end of the review period)
Per share data
Earnings per share (EPS) = Net result attributable to equity holders
of the parent company for the review period / Adjusted average number
of shares during the review period
Cash flow from operations = Cash flow from operations, after change
in net working capital and before capital expenditure
Cash flow from operations per share = Cash flow from operations /
Adjusted average number of shares
Equity attributable to equity holders of the parent company per share
= Equity attributable to equity holders of the parent company at the
end of the review period / Adjusted number of shares at the end of
the review period
Price per earnings per share (P/E) = Share price at the end of the
review period / Earnings per share (EPS) for the review period
Share turnover = The proportion of number of shares traded during the
review period to weighted average number of shares
Market capitalization = Number of shares at the end of the review
period x share price at the end of review period
Number of shares at the end of review period = Number of issued
shares - treasury shares
CONDENSED NOTES TO THE INTERIM REPORT
Accounting policies
These condensed consolidated interim financial statements have been
prepared in accordance with International Financial Reporting
Standard IAS 34 Interim Financial Reporting. They do not include all
of the information required for full annual financial statements.
The accounting principles applied in these condensed interim
consolidated financial statements are the same as those applied by
Kemira GrowHow in its consolidated financial statements as at and for
the year ended 31 December 2006, with the exception of the following
new or revised or amended standards and interpretations, which have
been applied from 1 January 2007:
- IFRS 7 Financial Instruments: Disclosures
- Amendment to IAS 1 Presentation of Financial Statements:
Capital Disclosures
- IFRIC 9 Reassessment of Embedded Derivatives
- IFRIC 10 Interim Financial Reporting and Impairment
- IFRIC 11 IFRS 2 Group and Treasury Share Transactions
The new and amended standards will mainly have an effect on the
disclosures of the consolidated financial statements. Other new or
amended standards or interpretations are not material for Kemira
GrowHow Group.
Kemira GrowHow will apply the following new or revised or amended
standards and interpretations from 1 January 2009:
- IFRS 8 Operating Segments
- IAS 23 Borrowing Costs
Kemira GrowHow estimates that applying IFRS 8 will not have any
material effect on the financial information of Kemira GrowHow.
Applying revised IAS Borrowing Costs will change Kemira GrowHow's
accounting principles from 1 January 2009. From that date on the
borrowing costs that are directly attributable to the acquisition,
construction or production of an asset will be capitalized to the
acquisition cost of the asset. The capitalization will apply mainly
to property, plant and equipment.
Contingent liabilities
EUR million 31.3.2007 31.3.2006 31.12.2006
Mortgages 27,0 24,5 27,0
Assets pledged
On behalf of own commitments - 2,5 2,3
Guarantees
On behalf of others (* 0,3 31,9 29,5
Operating leasing commitments
Maturity within one year 7,1 7,9 9,3
Maturity after one year 29,7 33,3 27,7
(* EUR 0.0 (31.2) million of this obligation is related to the
guarantees for which Kemira Oyj has issued a counter indemnity to
Kemira GrowHow Oyj.
The Finnish Supreme Administrative Court gave a decision in April
2004 on Kemira GrowHow's appeal concerning the waste management
permit for Kemira GrowHow's Siilinjärvi plant in Finland. Although
the Court's decision was negative, the opinion of the management is
that this will not have an impact on Kemira GrowHow's financial
position. A new environmental and water management permit was issued
in October 2006 to Siilinjärvi mine and plants. The enforcement of
the permit is pending due to appeal. Kemira GrowHow estimates that
the new environmental permit will not create any new material
obligations.
Derivative instruments
31.3.2007 31.3.2006 31.12.2006
Nominal Fair Nominal Fair Nominal Fair
EUR million value value value value value value
Currency derivatives
Forward contracts 156,0 -0,1 118,5 0,7 181,9 -2,4
of which hedging
net investment in
foreign entity 1,3 -0,1 1,7 -0,1 1,2 -0,1
Currency options
Bought 99,2 0,5 164,2 0,9 61,7 0,7
Sold 29,0 -0,1 178,8 -1,4 61,7 -0,2
Interest rate
derivatives
Interest rate
swaps 70,0 1,8 70,0 1,2 70,0 1,7
Interest rate
options
Bought 10,0 0,3 10,0 0,2 10,0 0,3
Sold 10,0 0,0 10,0 -0,2 10,0 0,0
Commodity
derivatives
Swaps 172,1 -10,8 - - 136,2 -7,9
Derivative instruments are used only for hedging purposes. Nominal
values of derivative instruments do not necessarily correspond with
the actual cash flows between the counterparties and do not therefore
give a fair view of the risk position of the Group. The fair values
are based on market valuation on the date of reporting.
Property, plant and equipment
Changes in property, plant and equipment 1-3/2007 1-3/2006 1-12/2006
Carrying amount at beginning of the
period 306,4 318,1 318,1
Additions 5,6 7,6 35,2
Disposals -1,5 0,0 -6,9
Depreciations -10,4 -10,0 -41,0
Impairment losses and reversals of
impairment losses -0,9 -0,1 -0,2
Reclassification and other changes -0,2 0,0 -0,3
Exchange differences -1,1 -1,6 1,4
Carrying amount at end of the period 297,9 313,9 306,4
The amount of contractual commitments for the acquisition of
property, plant and equipment were EUR 12.0 million at the end of
March 2007.
Related party transactions
Kemira GrowHow Group's related parties include the parent company,
subsidiaries, associated companies and joint ventures. Related
parties also include the members of the Board of Directors and the
Group's Management Team, the CEO and his deputy and their family
members. Kemira GrowHow's Finnish pension foundations and funds are
legal units of their own and they manage part of the pension assets
of the Group's personnel in Finland. The Government of Finland owns
30.0 percent of the shares in Kemira GrowHow Oyj. Based on its
shareholding, the Government of Finland is able to substantially
influence in decision-making concerning Kemira GrowHow's finances and
business operations.
Kemira GrowHow follows the same commercial terms in transactions with
associated companies, joint ventures and other related parties as
with third parties.
During the review period Kemira GrowHow's related party transactions
were mainly sales to associated companies and joint ventures. During
the review period there were no related party transactions whose
terms would differ from the terms in transactions with third parties.
Segment information
Kemira GrowHow's operations are organized under two strategic
business units: Crop Cultivation and Industrial Solutions. The
Industrial Solutions business unit has strong synergies with the Crop
Cultivation business unit in production and sourcing.
The Crop Cultivation strategic business unit produces and markets a
broad range of fertilizers and other related products and services
for agriculture, horticulture and home gardening in selected markets
in Northern, Western and Eastern Europe and overseas. Kemira GrowHow
has a significant market position in fertilizer business in Finland,
Denmark, the Baltic countries, the Benelux countries, France and the
United Kingdom.
The Industrial Solutions strategic business unit provides high
performance products and innovative solutions, such as feed
phosphates and feed acidifiers, a range of nitrogen-based chemicals
and phosphoric acid. The Industrial Solutions business unit focuses
on selected customer segments, that, in addition to the animal feed
industry, include the chemical, pharmaceutical, metal, electronics
and food industries. Industrial Solutions is one of the leading
global suppliers of inorganic feed phosphates having sales in more
than 80 countries. Kemira GrowHow's Process Chemicals business is one
of the two biggest suppliers in the Benelux countries, the United
Kingdom, Finland and Denmark.
Kemira GrowHow's primary segment is business segment. Kemira GrowHow
Group's business segments are Crop Cultivation and Industrial
Solutions strategic business units. Segment information is presented
in the tables below.
Net sales by segment
EUR million
Net sales 1-3/2007 1-3/2006 1-12/2006
Crop Cultivation
External sales 275,4 208,7 894,3
Internal sales 1,3 0,2 0,9
Total 276,7 208,9 895,3
Industrial Solutions
External sales 74,1 64,2 271,9
Internal sales 6,8 11,6 37,1
Total 80,9 75,8 309,0
Internal eliminations -8,1 -11,8 -38,0
Kemira GrowHow total 349,5 272,9 1 166,2
Result by segment
EUR million 1-3/2007 1-3/2006 1-12/2006
Operating profit/loss
Crop Cultivation 16,3 -18,4 -0,4
Industrial Solutions 7,2 0,9 19,9
Segments total 23,5 -17,4 19,5
Corporate centre and other -2,1 -1,7 -8,4
Operating profit/loss total 21,4 -19,1 11,1
Share of joint ventures' and associates'
result
Crop Cultivation 1,2 0,1 0,1
Industrial Solutions -0,1 0,0 0,0
Share of joint ventures' and associates'
result total 1,1 0,1 0,1
Total segment result
Crop Cultivation 17,4 -18,3 -0,3
Industrial Solutions 7,2 0,9 19,9
Segments total 24,6 -17,4 19,7
Corporate centre and other -2,1 -1,7 -8,4
Total segment result 22,5 -19,0 11,3
Financial income and expenses -2,8 -2,2 -11,0
Result before income taxes 19,7 -21,2 0,3
Depreciation, amortization and impairment
EUR million
1-3/2007 1-3/2006 1-12/2006
Crop Cultivation 8,5 8,2 33,4
Industrial Solutions 2,8 2,7 10,6
Segments total 11,3 10,8 44,0
Corporate centre and other 0,8 0,1 0,4
Total depreciation, amortization and
impairment 12,1 10,9 44,4
Assets
EUR million
3/2007 3/2006 12/2006
Crop Cultivation 582,9 606,7 575,9
Industrial Solutions 195,3 189,8 193,6
Corporate centre and unallocated 35,4 10,1 25,1
Eliminations -7,0 -7,3 -6,7
Interest-bearing receivables 2,9 3,0 3,2
Tax receivables 0,3 0,4 0,6
Deferred tax assets 32,6 31,0 33,1
Cash and bank and current investments 29,6 20,5 20,0
Total assets 871,9 854,3 844,7
Liabilities
EUR million
3/2007 3/2006 12/2006
Crop Cultivation 245,8 258,7 253,5
Industrial Solutions 54,1 48,2 55,6
Corporate centre and unallocated 5,8 5,7 7,1
Eliminations -6,9 -7,3 -11,9
Interest-bearing liabilities 220,0 219,3 205,9
Tax liabilities 8,6 2,0 6,3
Deferred tax liabilities 15,9 16,4 15,9
Total liabilities 543,5 542,9 532,5
Gross capital expenditure
EUR million
1-3/2007 1-3/2006 1-12/2006
Crop Cultivation 3,8 19,1 51,2
Industrial Solutions 2,3 6,2 15,2
Corporate centre and unallocated - - -
Total 6,1 25,4 66,3
Quarterly development by strategic business unit
EUR million
1-3/ 10-12/ 7-9/ 4-6/ 1-3/
Net sales 2007 2006 2006 2006 2006
Crop Cultivation
External sales 275,4 206,4 238,5 240,7 208,7
Internal sales 1,3 0,3 0,2 0,2 0,2
Total 276,7 206,7 238,7 240,9 208,9
Industrial Solutions
External sales 74,1 76,1 68,1 63,5 64,2
Internal sales 6,8 8,8 8,0 8,7 11,6
Total 80,9 84,9 76,0 72,2 75,8
Internal eliminations -8,1 -9,1 -8,2 -8,9 -11,8
Kemira GrowHow total 349,5 282,5 306,6 304,2 272,9
1-3/ 10-12/ 7-9/ 4-6/ 1-3/
Operating profit/loss 2007 2006 2006 2006 2006
Crop Cultivation 16,3 5,4 13,3 -0,7 -18,4
Industrial Solutions 7,2 6,3 6,3 6,4 0,9
Segments total 23,5 11,7 19,5 5,7 -17,4
Corporate centre and other -2,1 -3,2 -0,5 -3,1 -1,7
Operating profit/loss total 21,4 8,5 19,1 2,6 -19,1
Non-recurring items
Non-recurring items include mainly capital gains and losses from sale
of assets, impairment losses, releases of provisions and
restructuring expenses.
Non-recurring items, net, EUR million 1 - 3 4 - 6 7 - 9 10 - 12 2007
Crop Cultivation 3,0 3,0
Industrial Solutions 0,6 0,6
Other - -
Total 3,6 3,6
Non-recurring items, net, EUR million 1 - 3 4 - 6 7 - 9 10 - 12 2006
Crop Cultivation 1,4 3,7 6,0 1,2 12,4
Industrial Solutions -0,1 0,0 0,3 0,2 0,4
Other 0,0 -1,5 0,0 -1,7 -3,1
Total 1,3 2,3 6,3 -0,3 9,6
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