2015-05-06 07:00:06 CEST
2015-05-06 07:00:54 CEST
REGULATED INFORMATION
Aspo - Interim report (Q1 and Q3)
Aspo Group Interim Report January 1 to March 31, 2015
ASPO Plc STOCK EXCHANGE RELEASE May 6, 2015 at 08:00
ASPO GROUP INTERIM REPORT JANUARY 1 TO MARCH 31, 2015
Aspo: A strong start for 2015
(Figures from the corresponding period in 2014 are presented in brackets.)
January-March 2015
- Aspo's comparable operating profit increased to EUR 4.3 (3.8) million. The
operating profit was EUR 3.0 million, including a EUR -1.3 million impairment
of Kaukomarkkinat's goodwill.
- Of Aspo's business operations, Telko improved its operating profit the most,
with its operating profit being EUR 3.0 (1.8) million. Operating profit of ESL
Shipping was at a good level, being EUR 3.3 (3.3) million. Furthermore, ESL
Shipping sold its shares in Alandia Insurance, recording a sales gain of EUR
4.9 million in financial items. Leipurin was able to improve its operating
profit to EUR 0.5 (0.3) million. The operating profit of Kaukomarkkinat was
reduced by the sale of the international loss-making Industrial business, as a
result of which Aspo reduced the goodwill of the Kaukomarkkinat segment. The
negative impact of the sale on Aspo Group's result was EUR 1.3 million.
- Profit for the period stood at EUR 7.0 (2.4) million.
- Earnings per share increased significantly to EUR 0.22 (0.07).
General outlook for 2015
Despite the uncertainties in markets, the operating environments of Aspo's
businesses are expected to remain stable. Aspo's euro-denominated net sales in
EU markets will increase but decrease in eastern markets. Reduced costs and
increased market shares will improve profitability, in eastern markets in
particular. It is challenging to estimate the shipping company's future
transportation volumes in the Baltic Sea.
Guidance for 2015
The guidance will remain unchanged. Aspo expects to reach a good result.
KEY FIGURES
1-3/2015 1-3/2014 Change, % 1-12/2014
Net sales, MEUR 102.0 108.0 -5.6 482.9
Operating profit, MEUR *) 3.0 3.8 -21.1 23.4
Operating profit, % 2.9 3.5 4.8
Profit before taxes, MEUR **) 7.5 2.6 188.5 19.0
Profit for the period, MEUR **) 7.0 2.4 191.7 18.4
Earnings per share, EUR 0.22 0.07 214.3 0.57
Operational cash flow, MEUR -7.4 0.5 -1580.0 22.0
Equity per share, EUR 3.57 3.33 7.2 3.42
Return on equity (ROE), % 26.2 9.5 17.8
Gearing, % 99.9 112.0 101.0
ESL Shipping, operating profit,
MEUR 3.3 3.3 0.0 16.0
Leipurin, operating profit, MEUR 0.5 0.3 66.7 4.4
Telko, operating profit, MEUR 3.0 1.8 66.7 9.9
Kaukomarkkinat, operating profit,
MEUR *) -2.0 -0.2 -900.0 0.1
*) The operating profit in 2015 includes a MEUR -1.3 impairment of goodwill.
**) The profit in 2015 includes a MEUR -1.3 impairment of goodwill and a MEUR
4.9 sales gain.
Other significant events during the review period
The state was obligated to pay about EUR 3.0 million in compensation, as well as
legal expenses and interest, to ESL Shipping over 2001-2004 as a result of legal
proceedings regarding fairway dues. Since the district court judgement is not
yet final, no receivables were recognized in the review period's result.
AKI OJANEN, CEO OF ASPO GROUP:"Aspo's comparable operating profit grew positively regardless of the
challenging economic situation.
I am especially satisfied with the ability of Telko and Leipurin, the two
business operations focusing on Russia, to further improve their profitability.
After the collapse in the value of the Russian ruble at the end of 2014, we can
safely say that our business operations are fully capable to react to economic
changes, while maintaining their profitability. The market position of our
businesses in Russia has strengthened significantly.
Within the EU, our euro-denominated net sales continued to improve in
Scandinavia and Poland.
Telko, our largest business, has a good resistance against decreases in oil
prices and changes in exchange rates. Telko has managed to strengthen its
position as the leading western operator in eastern markets. Telko's operating
profit of EUR 3.0 million and operating profit rate of 6% are good
achievements.
Leipurin proved that a strong market position and extensive experience are
rewarded as high profitability in eastern markets.
ESL Shipping succeeded well in winter operations, producing a good operating
profit of EUR 3.3 million. The international price level of dry bulk cargo rates
has sunk to a historical low. The upcoming summer will show whether or not the
Sulphur Directive has reduced the number of ships operating in the area. The
economic trend will determine how transportation volumes in the Baltic Sea
develop.
Of the businesses owned by Aspo, Telko, Leipurin and ESL Shipping improve well
according to their strategies. Aspo Group's financial position reached the
targets set for it, forming a solid base for considered investments and
structural changes. Kaukomarkkinat, our smallest business, has mainly abandoned
its international loss-making operations, and will focus on the Finnish market.
We are in a good position to move forward and develop Aspo's businesses
further."
ASPO GROUP
NET SALES
Aspo Group's net sales decreased by EUR 6.0 million, i.e. 5.6%, to EUR 102.0
(108.0) million.
Net sales by segment
1-3/2015 1-3/2014 Change 1-12/2014
MEUR MEUR % MEUR
ESL Shipping 18.2 21.2 -14.2 85.2
Leipurin 28.3 30.1 -6.0 134.9
Telko 50.0 49.6 0.8 226.8
Kaukomarkkinat 5.5 7.1 -22.5 36.0
Other operations 0.0 0.0 0.0 0.0
Total 102.0 108.0 -5.6 482.9
There is no considerable inter-segment net sales.
Net sales by market area
1-3/2015 1-3/2014 Change 1-12/2014
MEUR MEUR % MEUR
Finland 35.4 38.9 -9.0 162.0
Scandinavia 11.7 11.1 5.4 47.9
Baltic countries 11.7 12.0 -2.5 55.7
Russia, Ukraine + other CIS-countries 26.4 31.1 -15.1 153.0
Other countries 16.8 14.9 12.8 64.3
Total 102.0 108.0 -5.6 482.9
Net sales decreased in Finland, particularly regarding ESL Shipping. The
decrease in net sales in Russia, Ukraine, and other CIS countries was mainly
affected by the strong decline in local currencies compared with the reference
period. Scandinavia, the Baltic countries, and other countries either maintained
their previous level or increased their net sales.
EARNINGS
Aspo Group's operating profit in January-March amounted to EUR 3.0 (3.8)
million. The comparable operating profit was EUR 4.3 million. ESL Shipping's
operating profit remained at the reference period's level of EUR 3.3 (3.3)
million. Leipurin's operating profit increased to EUR 0.5 (0.3) million. Telko's
operating profit increased to EUR 3.0 (1.8) million and that of Kaukomarkkinat
fell by EUR 1.8 million to EUR -2.0 (-0.2) million. In connection with the
divestment of the Industrial business of Kaukomarkkinat, Aspo estimated the
goodwill of the Kaukomarkkinat segment, and recorded an impairment of EUR 1.3
million. The operating profit of other operations weakened and was negative at
EUR -1.8 (-1.4) million.
Operating profit by segment
1-3/2015 1-3/2014 Change 1-12/2014
MEUR MEUR % MEUR
ESL Shipping 3.3 3.3 0.0 16.0
Leipurin 0.5 0.3 66.7 4.4
Telko 3.0 1.8 66.7 9.9
Kaukomarkkinat -2.0 -0.2 -900.0 0.1
Other operations -1.8 -1.4 -28.6 -7.0
Total 3.0 3.8 -21.1 23.4
Earnings per share
Earnings per share were EUR 0.22 (0.07) and diluted earnings per share were EUR
0.22 (0.08). Equity per share was EUR 3.57 (3.33). The result was significantly
improved by the sales gain of EUR 4.9 million recognized in financial items
through the sale of shares in Alandia Insurance.
Financial targets
Aspo is aiming at an operating profit level which is closer to 10% than 5%, an
average return on equity of over 20%, and gearing of up to 100%.
During the first quarter of 2015, the operating profit rate was 2.9% (3.5),
return on equity was 26.2% (9.5), and gearing was 99.9% (112.0).
OUTLOOK FOR 2015
The slow growth in global economy and industry within the EU will continue.
Uncertainty will continue in eastern growth markets that are important areas for
Aspo, and any future development and resulting financial impacts are difficult
to evaluate. Currencies are expected to remain volatile, and inflation is
estimated to remain high in Russia, while GDP is expected to decrease
significantly. Oil prices will remain low, even if the price moved slightly
higher. In general, the prices of raw materials are expected to remain at a low
level. The Group will continue to increase its market shares in the
strategically important eastern growth markets after some of its competitors
have withdrawn from the markets. International dry bulk cargo rates are expected
to remain low.
Aspo's 2015 estimate is based on industrial production in Finland and the EU
continuing to show a downward trend, and the continuation of the crisis between
Russia and Ukraine. Our experience and expertise in financial crises have
usually strengthened our market position in the east.
Despite the uncertainties in markets, the operating environments of Aspo's
businesses are expected to remain stable. Aspo's euro-denominated net sales in
EU markets will increase but decrease in eastern markets. Reduced costs and
increased market shares will improve profitability, in eastern markets in
particular. It is challenging to estimate the shipping company's future
transportation volumes in the Baltic Sea.
General uncertainties in international economies have continued. Uncertainty in
Europe has increased by the political conflict between Russia and Ukraine, which
has significantly increased the regional risk in Russia, Ukraine, and other CIS
countries. If extended, the uncertainty and political conflict may cause new
financial sanctions to be imposed on Russia, the value of local currencies to
change heavily, or the economic growth in the region to decelerate even further.
Industrial production in the EU is expected to turn to an increase, while
interest rates will remain low.
Aspo's euro-denominated costs are expected to decrease significantly due to the
tight cost control in Russia, Ukraine, and other CIS countries, as well as due
to the devaluation of the local currencies.
Guidance: Aspo expects to reach a good result.
BUSINESS OPERATIONS
ESL SHIPPING
ESL Shipping is the leading dry bulk cargo company in the Baltic Sea region. At
the end of the period, the company's fleet consisted of 14 vessels, of which the
company owned 13 in full and one was leased.
1-3/2015 1-3/2014 Change, % 1-12/2014 Net sales, MEUR 18.2 21.2 -14.2 85.2
Operating profit, MEUR 3.3 3.3 0.0 16.0
Operating profit, % 18.1 15.6 18.8
International rates of dry bulk cargo continued to decrease from the fourth
quarter to a historically low level. In the review period, all vessels of ESL
Shipping mainly operated in the Baltic Sea and the North Sea, and in
international traffic from North Europe to the Mediterranean. Transportation
operations are mainly based on long-term contracts and established customer
relationships. During the review period, a number of volume contracts that
supplement contractual traffic were signed.
ESL Shipping's net sales in January-March stood at EUR 18.2 (21.2) million. The
decrease in net sales was affected by capacity which decreased by one time-
chartered vessel compared to the previous year, and the steep decline in oil
prices. The lower cost of fuel reduces the shipping company's net sales through
fuel clauses in long-term contracts.
However, profitability remained good, with operating profit being EUR 3.3 (3.3)
million. The good level of profitability was affected by the continuous
investments of the entire shipping company's staff in efficiency and energy
savings. The review period's light ice conditions helped reduce costs. Despite
the reduced capacity, ESL Shipping transported nearly as much cargo in January-
March as in the previous year, i.e. 2.6 (2.7) million tons.
The cargo price level of Supramax vessels was satisfactory over the review
period considering the poor market situation. The low freight rates for large
vessels has increased customer demand for loading and unloading at sea.
In the steel industry, both transportation volumes and open-sea operations
requiring special expertise and equipment increased compared to last year's
corresponding period. The transportation volume within the energy industry fell
due to last fall's peak levels, the mild winter and the low electricity
wholesale price. At the same time, the coal stocks of customers have grown.
The support strike threatening Finnish vessels during the review period had a
negative impact on ship cargos and operational control. The impact of the
Sulphur Directive has remained marginal due to low oil prices and the
availability of new fuels which was better than expected.
Outlook for ESL Shipping in 2015
International dry bulk cargo rates are expected to remain low in 2015. In
particular, the market freight prices of large vessels are at a historical low,
and the market situation remains a challenging one. However, a significant part
of the company's transportation capacity has been secured through long-term
contracts.
Transportation volumes in the steel industry are expected to be higher during
the remainder of the year than last year. If required, the capacity will be
adjusted according to seasonal variation in demand, by keeping the pusher fleet
at port and by chartering vessels.
Demand for loading and unloading large vessels at sea will remain high. The
shipping company is negotiating over possibilities to discover new optional
market areas for its pusher fleet outside the Baltic Sea, or for example, from
the transportation of biofuels in the Baltic Sea.
The shipping company will continue to expand its customer base outside the
energy and steel sectors, particularly towards the transportation of mining,
agricultural and bioenergy products where the independent load handling capacity
and ice-strengthening of the vessels can be utilized. The company will also
expand its operating area and reduce the impact of seasonal and industrial
cycles. Operations in the Russian arctic will be continued during the summer and
fall periods.
Transportation needs of the energy industry during the latter part of 2015 are
expected to be close to the previous year's level in combined heat and power
production but the situation depends on the competitiveness of coal prices, the
market price of electricity, and the volumes of Nordic water reserves in the
possibly decreasing production of condensing power.
In 2015, three ship units will be docked as planned.
LEIPURIN
Leipurin serves the bakery industry and other food industry by providing product
development services, raw materials needed for baking, and equipment from
individual machines to full-scale baking lines. Leipurin operates in Finland,
Russia, the Baltic countries, Poland, Ukraine, Belarus, and Kazakhstan. In
Russia, its operations cover all geographic areas. In its procurement
operations, Leipurin operates both internationally and by developing local
procurement.
1-3/2015 1-3/2014 Change, % 1-12/2014
Net sales, MEUR 28.3 30.1 -6.0 134.9
Operating profit, MEUR 0.5 0.3 66.7 4.4
Operating profit, % 1.8 1.0 3.3
The prices of sold raw materials remained at the low levels of the reference
period. In Finnish retail of bread, frozen imported bread has increased its
market share, which has reduced the total volume of bread baked in Finland. In
Russia, the volumes of raw material trade decreased from the reference period
due to the high level of inflation and elevated food prices.
The net sales of Leipurin fell slightly in the first quarter from the reference
period and stood at EUR 28.3 (30.1) million. Its operating profit grew and
amounted to EUR 0.5 (0.3) million. The profitability of bakery raw materials
improved but that of bakery machinery fell significantly from the reference
period, with operating profit being negative. The net sales and profitability of
bakery machinery were decreased by the Russian ruble which fell heavily in
2014, as a result of which Russian bakery customers both postponed and canceled
their machine orders. At the Nastola production facility, an amount of employees
were laid off during the review period.
In Russia, the purchasing power of consumers has decreased, while demand shifted
towards more inexpensive local products during the review period. Net sales in
Russia, Ukraine, and other CIS countries stood at EUR 6.3 (8.9) million. The
euro-denominated net sales of bakery raw materials fell in Russia by 26%,
whereas the ruble-denominated net sales increased by 9%. In Ukraine and other
CIS countries, the euro-denominated net sales grew. Despite the economic
uncertainty in the region and the temporarily low volumes in Russia, Leipurin
was able to maintain its operating profit level in raw material trade above the
target level of 5% in eastern markets.
Leipurin develops its overall product range according to its strategy.
Customers' business operations are developed on the basis of product development
and training services, new raw materials, an even more developed baking
equipment offering, and investment-related planning. Leipurin will continue its
investments to increase the share of raw materials sold under the Leipurin
brand, and increase the share of raw materials produced locally in Russia,
Ukraine, and other CIS countries from sales. Currently, local raw materials
account for about 40% of the total volume. The margin level of locally acquired
products is better than on average.
Outlook for Leipurin in 2015
The prices of bakery and other food raw materials are expected to remain at
their current level until the 2015 harvest season, when a new price level will
be formed. In Finland, the Baltic region and Poland, demand will continue at the
current level, and growth will be sought from the out-of-home market and after-
sales services in machine trade. In Finland, the efficiency measures carried out
are expected to produce annual cost savings of about EUR 1 million starting from
summer 2015.
Evaluating the Russian business environment remains a challenge. Uncertainty
over the Russian economic situation and the strong fluctuation in the value of
the ruble at the end of 2014 and at the beginning of 2015 make it more difficult
to predict future volumes and margin levels. Leipurin will continue to develop
its local procurement, and its aim is to increase the share of local procurement
to about 50% by the summer of 2015.
The order book of bakery machinery is smaller than in the reference period due
to slow demand in Russia. The collapse in the Russian ruble in 2014 and the
resulting discontinuation in production orders will have the highest impact
during the second quarter when employees are being laid off at the Nastola
production facility. The company strives to relieve sales and ordering decisions
by identifying and developing customer-specific financing solutions. In the long
term, the structural change within the Russian bakery industry and trade offers
good opportunities to increase machine sales. Demand for high-quality healthy
bread is expected to grow in Russia in the long run. The long-term outlook on
bakery raw materials and machine sales has remained unchanged.
TELKO
Telko is the leading expert and supplier of plastic raw materials and industrial
chemicals in the Baltic Sea region. The company operates in Finland, the Baltic
countries, Scandinavia, Poland, the Czech Republic, Slovakia, Ukraine, Russia,
Belarus, Kazakhstan, and China. Procurement operations are international.
Business is based on representation by the best international principals and on
the expertise of the personnel. Telko cooperates with its regional customers to
develop their production and competitiveness.
1-3/2015 1-3/2014 Change, % 1-12/2014
Net sales, MEUR 50.0 49.6 0.8 226.8
Operating profit, MEUR 3.0 1.8 66.7 9.9
Operating profit, % 6.0 3.6 4.4
During the review period, the general economic situation in Telko's operating
area remained weak. Indicators representing the economic situation in Russia and
Ukraine continued their downward trend. Telko's western market showed signs of
recovery in industrial production, apart from Finland. The prices of raw
materials sold by Telko turned to an increase at the end of the review period,
while the price level was significantly lower than during last year's
corresponding period.
Despite the low prices and the rate of Russian ruble, which was lower than in
the reference period, Telko's euro-denominated net sales remained at the
previous year's level at EUR 50.0 (49.6) million.
Operating profit improved significantly, being EUR 3.0 (1.8) million, i.e. 6% of
net sales. Telko's plastics businesses improved the most in terms of
profitability. In addition, industrial chemicals and lubricants improved their
result. Operating profit improved particularly in Russia, Ukraine, and other CIS
countries because of increased volumes, lower costs due to the decline in local
currencies, and improved margins. Operating profit margin in this market area
was approximately 10%. In Scandinavia and Poland, net sales increased and
profitability improved.
Net sales in Russia, Ukraine, and other CIS countries fell slightly to EUR 19.4
(20.7) million. Denominated in local currencies, Telko's net sales increased in
Russia, Ukraine, and other CIS countries. The extended political situation
between Russia and Ukraine, and unstable oil price levels maintain uncertainties
over future economic development, possibly causing fluctuations in exchange
rates. The Russian ruble, important to Telko, strengthened during the review
period. However, the exchange rates of the Russian and Ukrainian currencies
compared to EUR and USD were significantly weaker than in the reference period.
Currency risks associated with Russia and Ukraine have been reduced by lowering
the foreign currency position.
Outlook for Telko in 2015
The prices of plastic raw materials have strengthened from the beginning of the
year, and raw material prices are expected to increase moderately at least
during the first half of the year. In the markets of Russia, Ukraine, and other
CIS countries that are important to Telko, the economy is expected to remain low
in 2015. Demand in western markets is expected to remain unchanged or improve
slightly towards the end of the year. Regardless of the crisis between Russiaand Ukraine, Telko will continue to operate in Russia according to its strategy,
and expand to new metropolises. In order to further develop sales of industrial
chemicals, the investigation of the construction of a logistics terminal in St.
Petersburg has advanced, and the decision on the investment may be reached this
year.
KAUKOMARKKINAT
Kaukomarkkinat supplies products and systems that improve efficiency for the
real estate and industrial sectors, as well as tools for professionals. The goal
is to increase the energy efficiency, process efficiency and safety of our
customers, as well as the profitability of their operations. The business is
based on an in-depth understanding of customer needs, an extensive network of
principals, and the ability to combine products and systems into functional
entities. Kaukomarkkinat operated in Finland, Poland, Latvia, Russia, China, and
Vietnam.
1-3/2015 1-3/2014 Change, % 1-12/2014
Net sales, MEUR 5.5 7.1 -22.5 36.0
Operating profit, MEUR -2.0 -0.2 -900.0 0.1
Operating profit, % -36.4 -2.8 0.3
The comparable operating profit of Kaukomarkkinat fell from the reference
period. The first quarter is traditionally the weakest. The net sales of
Kaukomarkkinat stood at EUR 5.5 (7.1) million. Operating profit decreased, being
comparably negative at EUR -0.7 (-0.2) million. Kaukomarkkinat has investigated
the suitability of its international operations considering its current
strategy. During the review period, Kaukomarkkinat sold its loss-making
Industrial business which was engaged in the sale of industrial machinery and
equipment in Poland, Russia, China, and Vietnam. In addition, the net sales of
other international operations continued to decrease, producing a negative
result. In connection with the divestment of the Industrial business, Aspo
evaluated the goodwill of the Kaukomarkkinat segment and recorded a non-
recurring impairment of EUR 1.3 million. Operating profit for the review period,
taking non-recurring items into account, stood at EUR -2.0 (-0.2) million.
In Finland, demand for energy efficiency products remained at a satisfactory
level, while there was a clear increase in solar power system deliveries. The
sale of special IT equipment for the healthcare sector continued to developed
positively. Demand for tablets and laptops for special conditions remained high,
while the review period's result was decreased by the timing of customer project
deliveries in the forthcoming quarters.
After the review period, Sami Koskela (M.Sc. Eng.) started as the new managing
director of Kaukomarkkinat on April 17, 2015.
Outlook for Kaukomarkkinat in 2015
IT solutions based on special expertise in demanding working environments
connected to wireless communications will grow. Kaukomarkkinat is looking for
profitable growth in rugged computers, special IT equipment within the
healthcare sector, and demanding AV solutions. Kaukomarkkinat will operate in
Finland with a more efficient organization. Lower costs and productive sales
will allow profitability to improve significantly.
The objective of Kaukomarkkinat is to further develop its product range in the
area of energy-efficient building systems technology, even though the economic
situation within construction has remained weak. Kaukomarkkinat offers heating
solutions through a diverse range of heat pumps and solar power, and systems for
the recovery, distribution and control of heat. Demand for cooling solutions
will grow, even though general construction volumes have decreased. The demand
for energy-efficiency equipment will increase in the near future through new
energy regulations and an increase in the taxable energy price paid by
consumers. IT control solutions and wireless communications will play a
significant part in the development of building systems technology within
Kaukomarkkinat.
The divestment of the Industrial business, which specialized in industrial
machinery and equipment trade, will improve the profitability of Kaukomarkkinat,
and its possibilities to focus on the further development of its profitable
operations in Finland.
OTHER OPERATIONS
Other operations include Aspo Group's administration, the financial and ICT
service center, and a small number of other functions not covered by business
units.
1-3/2015 1-3/2014 Change, % 1-12/2014
Net sales, MEUR 0.0 0.0 0.0 0.0
Operating profit, MEUR -1.8 -1.4 -28.6 -7.0
The operating profit of other operations was negative and amounted to EUR -1.8
(-1.4) million. The decrease resulted from expenses related to profit- and
share-based rewards.
FINANCING
The Group's financing position improved compared to the reference period. The
Group's cash and cash equivalents amounted to EUR 14.9 (19.8) million. The
consolidated balance sheet included a total of EUR 123.8 (133.5) million in
interest-bearing liabilities. The average rate of interest-bearing liabilities
was 1.5% at the end of the review period. Non-interest-bearing liabilities
totaled EUR 62.3 (68.4) million.
Aspo Group's gearing was 99.9% (112.0) and equity ratio was 37.2% (33.9).
The Group's operational cash flow fell to EUR -7.4 (0.5) million. The change in
working capital was negative at the end of the review period, being EUR -13.3 (-
5.3) million. Cash flow from investments during the review period was EUR 3.6
million (-11.9), i.e., the Group's free cash flow amounted to EUR -3.8 million
(-11.4).
The amount of committed revolving credit facilities signed between Aspo and its
main financing banks stood at EUR 60 million at the end of the review period. At
period-end, EUR 3 million of the revolving credit facilities and EUR 21 million
of the commercial paper program of EUR 80 million were in use. In 2015, a term
loan of EUR 15 million will fall due. No other significant loan agreements will
expire in 2015.
On November 18, 2013, Aspo issued an EUR 20 million hybrid bond. The coupon rate
of the bond is 7% per annum. The bond has no maturity but the company may
exercise an early redemption option after three years from the issuing date.
Aspo has hedged its interest rate risk by means of an interest rate swap subject
to hedge accounting. Its fair value on March 31, 2015 was EUR -0.7 million.
Changes in fair value have been recognized in other comprehensive income, and
the financial instrument is at level 2 of the fair value hierarchy.
INVESTMENTS
The Group's investments totaled EUR 1.2 (14.0) million, consisting of
maintenance investments. The largest investment during the reference period was
the purchase of m/s Kallio.
Investments by segment, acquisitions excluded
1-3/2015 1-3/2014 Change 1-12/2014
MEUR MEUR % MEUR
ESL Shipping 0.7 13.6 -94.9 16.0
Leipurin 0.1 0.1 0.0 0.7
Telko 0.4 0.2 100.0 1.8
Kaukomarkkinat 0.0 0.1 -100.0 0.2
Other operations 0.0 0.0 0.0 0.0
Total 1.2 14.0 -91.4 18.7
PERSONNEL
Personnel by segment, period-end
3/2015 3/2014 Change, % 12/2014
ESL Shipping 218 213 2.3 226
Leipurin 290 301 -3.7 297
Telko 259 247 4.9 258
Kaukomarkkinat 45 76 -40.8 69
Other operations 27 30 -10.0 29
Total 839 867 -3.2 879
At the end of the period, Aspo Group had 839 employees (867). The number of
personnel has decreased mainly as a result of the sale of the Industrial
business of Kaukomarkkinat. Leipurin has reduced the number of employees in all
of its Finnish operations. The number of Telko's employees has increased in
Russia. The number of personnel in other operations decreased as a result of the
outsourcing plan for ledger operations made in 2014.
Rewarding
In 2012, Aspo's Board of Directors decided on a share-based incentive plan for
about 30 persons. The plan included three earnings periods, the calendar years
2012, 2013 and 2014. The reward was based on Aspo Group's earnings per share
(EPS) indicator for each earnings period of the plan. No reward was paid for the
2012 earnings period. Aspo has transferred 19,492 treasury shares to employees
included in the share-based incentive plan for the 2013 earnings period and
94,786 shares for the 2014 earnings period.
In February 2015, the Board of Directors of Aspo Plc approved a new share-based
incentive plan for about 30 persons. The plan includes three earnings periods,
the calendar years 2015, 2016 and 2017. The Board of Directors will decide on
the plan's performance criteria and required performance levels for each
criterion at the beginning of each earnings period. The reward from the earnings
period 2015 will be based on the Group's Earnings per share (EPS). The potential
reward from the earnings period 2015 will be paid partly in the company's shares
and partly in cash in 2016.
RISKS AND RISK MANAGEMENT
No rapid changes took place in Aspo's business environment as did last year, and
the environment remains fairly expectant. Economic development in western
countries has been cautiously positive, even though the European economy
continues to suffer from the consequences of the financial crisis in Greece and
the modest level of industrial production. In Finland, industrial production has
contracted further from the year before. The economic uncertainty increases
risks in all of Aspo's business fields.
Despite the good results of businesses operating in Russia and Ukraine, the
instability of the region and western sanctions, together with their counter-
sanctions, have increased both market uncertainty and any fluctuations in
currencies, having an impact on demand for products and competitiveness.
Strategic risks
It is difficult to estimate the impact of sanctions on customers of Aspo's
businesses in Russia and the product range of principals, but some optional raw
materials and products manufactured inside Russia have been entered into
production, regardless of a decrease in quality. For example, Leipurin has
increased its business in locally acquired raw materials.
As a result of an increase in the prices of imported products, consumer demand
has slowed down and the economy has contracted in Russia and Ukraine. Even
though the weakening currencies decelerate euro-denominated growth in net sales,
euro-denominated costs will also decrease in Russia and Ukraine. The
deteriorating economic situation is reflected, not only in trade, but also in
the financing markets and payments in Russia and Ukraine. Aspo has reacted to
the weakened situation in Ukraine starting from the fall of 2013 when stocks
were decreased and the turnover time of trade receivables was reduced. Aspo has
taken similar actions in Russia. Items denominated in foreign currencies have
been converted into euros, and any changes in exchange rates have rapidly been
transferred to prices. The situation is being monitored continuously.
A key element in Aspo's strategy is the implementation of various structural
changes. If the current situation in Russia extends or escalates, structural
changes within Aspo may become more difficult as investors and industrial
operators are wary of the political and operational environment in Russia.
Financial sanctions or any other obstacles caused by the current situation in
Russia may, in part, reduce coal transportation volumes, and decrease unloading
services for large ocean liners at sea. The social objective to reduce the
consumption of coal in energy production has increased in significance, which
may reduce the need to transport coal. As a result, it is more difficult to
estimate future transportation volumes. A decrease in international freight
indices and an increase in international vessels in specific size categories
have increased uncertainty over the profitability of shipping companies.
In addition to the political atmosphere, strategic risks are caused by the
outlook and production solutions of industrial customers. The current decisions
on energy production structures affected by the environmental policy and other
political choices may cause changes in industry and energy production, which may
decrease the use of fossil fuels and increase alternative forms of energy. The
flow of goods in the Baltic Sea may change as a result of the cost structures,
changes in the customer structure, such as centralization, or other reasons.
These changes may have negative consequences on operations as the need for
transportation decreases, but they may also be seen as significant
opportunities. Despite changes in the freight rates of global maritime
transport, competition for cargo may become more intense in the Baltic Sea area,
as well.
Strategic risks are affected by changes in cargo prices, investment trends, and
changes in retail structures, especially in western markets. In eastern markets,
risks are increased by such factors as political instability, social structures
or their lack of reaction to the difficulties encountered by business
operations. Rapid changes in economic structures may cause risks due to changes
in the customer or principal structure or technologies, and due to unutilized
opportunities that require a quick response. Despite the aggravation of the
political situation and the alarming direction of economic development, Aspo's
strategic risks are evened out by the distribution of business operations over
four segments, its engagement in business operations in a broad geographical
area, and its ability to react quickly to changing situations.
Operational risks
Even though economic uncertainty in the operating environment has not increased
from the year before, operational risks have remained unchanged. These include
risks related to supply chains and persons. The focus of Aspo's growth is on
emerging market areas, where growth risks are affected by factors, such as the
level of and changes in the global market prices for raw materials, exchange
rates, interest rate levels, industrial and commercial investments, customer
liquidity, changes in legislation and import regulations, and inactivity by the
authorities. Economic growth and any deceleration or decrease in production may
have an impact on demand for raw materials in the eastern markets. Currently,
the political instability in Ukraine is disturbing commercial activities and, if
the situation continues, the growth of Aspo's business operations in Ukraine
will slow down. There may be a similar trend in Russia if purchasing power
decreases. Furthermore, consumer behavior is reflected in the risks generated
through B-to-B customers and their risk levels. The growth opportunities
presented by emerging markets boost interest among competitors in launching or
expanding business in these areas. The challenging emerging markets and the
escalated situation in Ukraine have also caused competitors to withdraw from the
area, which has created new potential for Aspo's businesses, increased their
market shares and, in some areas, even improved profitability.
Hedging against exchange rate changes, particularly in emerging markets, is not
possible in all situations, and especially without interruptions. Changes in
exchange rates may also reduce equity on the balance sheet as a result of
translation differences. As changes in credit loss risks are divided between
businesses and customers, Aspo's businesses have not been subjected to any
significant credit losses. However, limits of credit insurers have become
tighter and, in general credit loss risks have increased and been realized to
some extent.
The quantity and probability of loss risks are assessed regularly. The amounts
insured are sufficient in view of the scope of Aspo's operations, but insurance
companies may restrict the validity of insurance policies in areas with military
operations.
Internal control and risk management
One of the responsibilities of Aspo's Audit Committee is to monitor the
efficiency of the Group's internal supervision, internal audits, and risk
management systems. The Audit Committee monitors the risk management process and
carries out necessary measures to prevent strategic risks, in particular. In
accordance with the internal supervision principles approved by the Board of
Directors, risk management is part of Aspo's internal supervision, and its task
is to ensure the implementation of the Group's strategy, development of
financial results, shareholder value, dividend payment ability, and continuity
in business operations. The operational management of the business areas is
responsible for risk management. The management is responsible for specifying
sufficient measures and their implementation, and for monitoring and ensuring
that the measures are implemented as part of day-to-day operational control.
Risk management is coordinated by Aspo's CFO, who reports to the Group CEO.
Aspo Group's financing and financing risk management are centralized in the
parent company in accordance with the financing policy approved by the Board of
Directors.
A more detailed account of the risk management policy and the most significant
risks has been published in the 2014 Annual Report and on the company's website.
Financing risks are described in more detail in notes to the financial
statements.
SHARE CAPITAL AND SHARES
Aspo Plc's share capital on March 31, 2015 was EUR 17,691,729.57 and the total
number of shares was 30,975,524 of which the company directly or indirectly held
478,599 shares; that is, 1.5% of the share capital. Of these company-held shares
a total of 477,612 were held by the subsidiary Aspo Management Oy. Aspo Plc has
one share series. Each share entitles the shareholder to one vote at the
shareholders' meeting. Aspo's share is quoted on NASDAQ OMX Helsinki Oy's Mid
Cap segment under industrial products and services.
During January-March 2015, a total of 1,696,035 Aspo Plc shares with a market
value of EUR 12.2 million were traded on Nasdaq Helsinki, in other words, 5.5%
of the stock changed hands. During the review period, the stock reached a high
of EUR 8.08 and a low of EUR 5.92. The average price was EUR 7.17 and the
closing price at period-end was EUR 7.96. At the end of the period, the market
value excluding treasury shares was EUR 242.8 million.
The number of Aspo Plc shareholders was 8,358 at period-end. A total of 690,543
shares, or 2.2% of the share capital, were nominee registered or held by non-
domestic shareholders.
EVENTS AFTER THE PERIOD UNDER REVIEW
Sami Koskela (M.Sc. Eng.) has been appointed the new Managing Director of
Kaukomarkkinat Ltd and a member of Aspo's Group Executive Committee starting
from April 17, 2015. Acting Managing Director Kimmo Liukkonen will continue as a
member of the Kaukomarkkinat Board of Directors.
DECISIONS AT THE SHAREHOLDERS' MEETING
Dividend
The Annual Shareholders' Meeting of Aspo Plc held on April 9, 2015 decided,
according to the Board of Directors' proposal, to pay a dividend of EUR 0.40 per
share. The payment date was April 20, 2015.
Board of Directors and Auditor
The Annual Shareholders' Meeting of Aspo Plc re-elected Matti Arteva, Mammu
Kaario, Roberto Lencioni, Gustav Nyberg, Kristina Pentti-von Walzel and Risto
Salo to the Board of Directors for a one-year term. At the Board's organizing
meeting held after the Annual Shareholders' Meeting, Gustav Nyberg was elected
to carry on as Chairman of the Board and Robert Lencioni as Vice-Chairman. At
the meeting the Board also decided to appoint Roberto Lencioni Chairman of the
Audit Committee and Mammu Kaario and Kristina Pentti-von Walzel as committee
members.
The authorized public accounting firm Ernst & Young Oy was elected as company
auditor.
Board authorizations
Authorization of the Board of Directors to decide on the acquisition of the
company's own shares
The Annual Shareholders' Meeting on April 9, 2015, authorized the Board of
Directors to decide on the acquisition of no more than 500,000 of the company's
own shares using the unrestricted shareholders' equity of the company. The
authorization includes the right to accept company's own shares as a pledge.
The shares shall be acquired through public trading, for which reason the shares
are acquired otherwise than in proportion to the share ownership of the
shareholders and the consideration paid for the shares shall be the market price
of the Aspo's share at the time of repurchase. Shares may also be acquired
outside public trading for a price which at most corresponds to the market price
in public trading at the time of acquisition. The authorization includes the
Board's right to resolve on a directed repurchase or the acceptance of shares as
a pledge, if there is a compelling financial reason for the company to do so as
provided for in Chapter 15, section 6 of the Finnish Limited Liability Companies
Act. The shares shall be acquired to be used for the financing or execution of
corporate acquisitions or other transactions, for execution of the company's
share-ownership programs or for other purposes determined by the Board.
The decision to acquire or redeem own shares or to accept them as pledge shall
not be made so that the shares of the company in the possession of, or held as
pledges by the company and its subsidiaries would exceed 10% of all shares. The
authorization will remain in force until the Annual Shareholders' Meeting in
2016 but not more than 18 months from the approval at the Shareholders' Meeting.
The Board of Directors shall decide on any other matters related to the
acquisition of company's own shares and/or accepting them as a pledge.
The authorization will supersede the authorization for the acquisition of
company's own shares which was granted to the Board of Directors by the Annual
Shareholders' Meeting on April 3, 2014.
Authorization of the Board of Directors to decide on a share issue of the
company's own shares
The Annual Shareholders' Meeting on April 9, 2015, authorized the Board of
Directors to decide on a share issue, through one or several installments, to be
executed by conveying the company's own shares. An aggregate maximum amount of
900,000 shares may be conveyed based on the authorization. The authorization
will be used for the financing or execution of corporate acquisitions or other
transactions, for execution of the company's share-ownership program or for
other purposes determined by the Board.
The authorization includes the right of the Board of Directors to decide on all
the terms and conditions of the conveyance and thus also includes the right to
convey shares otherwise than in proportion to the share ownership of the
shareholders, in deviation from the shareholders' pre-emptive right, if a
compelling financial reason exists for the company to do so. The authorization
will remain in force until September 30, 2018. The company's own shares may be
transferred either against or without payment. The Board of Directors shall
decide on any other matters related to the share issue.
The authorization will supersede the authorization concerning a share issue
which was granted to the Board of Directors by the Annual Shareholders' Meeting
on April 3, 2012.
Authorization of the Board of Directors to decide on a rights issue
The Annual Shareholders' Meeting on April 9, 2015, authorized the Board of
Directors to decide on a rights issue for consideration. The authorization is
proposed to include the right of the Board of Directors to decide on all of the
other terms and conditions of the conveyance and thus also includes the right to
decide on a directed share issue, in deviation from the shareholders' pre-
emptive right, if a compelling financial reason exists for the company to do so.
The total number of new shares to be offered for subscription may not exceed
1,500,000. The authorization will remain in force until September 30, 2018.
The authorization will supersede the authorization concerning a share issue
which was granted to the Board of Directors by the Annual Shareholders' Meeting
on April 3, 2012.
LEGAL PROCEEDINGS
On February 27, 2015, the Helsinki District Court announced its judgement in the
case between ESL Shipping and the Finnish State regarding fairway dues levied
during the years 2001-2004. According to the judgement, the Finnish State will
be required to refund to ESL Shipping approximately EUR 3.0 million in
accordance with the company's claim, as well as legal expenses and interest. If
the district court judgement becomes final, it will affect Aspo Group's result
positively with a corresponding amount.
The shipping company and ABG Shipyard in India have been involved in
negotiations concerning the compensation payable for repairs made to m/s Alppila
during the warranty period. The vessel was delivered to ESL Shipping in 2011.
The negotiations have not proceeded in the way the shipping company had hoped
and, therefore, the shipping company has currently legal proceedings underway
against ABG Shipyard.
Helsinki May 6, 2015
ASPO Plc
Board of Directors
ASPO GROUP CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
1-3/2015 1-3/2014 1-12/2014
MEUR % MEUR % MEUR %
Net sales 102.0 100.0 108.0 100.0 482.9 100.0
Other operating income 0.5 0.5 0.0 0.0 0.8 0.2
Materials and services -71.1 -69.7 -76.4 -70.7 -345.3 -71.5
Employee benefit expenses -11.3 -11.1 -10.9 -10.1 -43.5 -9.0
Depreciation, amortiziation and
impairment -4.1 -4.0 -2.7 -2.5 -11.2 -2.3
Other operating expenses -13.0 -12.7 -14.2 -13.1 -60.3 -12.5
Operating profit 3.0 2.9 3.8 3.5 23.4 4.8
Financial income and expenses 4.5 4.4 -1.2 -1.1 -4.4 -0.9
Profit before taxes 7.5 7.4 2.6 2.4 19.0 3.9
Income taxes -0.5 -0.5 -0.2 -0.2 -0.6 -0.1
Profit for the period 7.0 6.9 2.4 2.2 18.4 3.8
Other comprehensive income
Items that may be reclassified to profit
or loss in subsequent periods:
Translation differences 0.3 -4.3 -12.7
Cash flow hedges 0.0 0.0 0.0
Available-for-sale financial assets 1.8 3.1
Reclassification -4.9
Income tax on other comprehensive income 0.6 0.0 -0.6
Other comprehensive income for the
period, net of taxes -2.2 -4.3 -10.2
Total comprehensive income 4.8 -1.9 8.2
Profit attributable to shareholders 7.0 2.4 18.4
Non-controlling interest 0.0 0.0 0.0
Total comprehensive income attributable
to shareholders 4.8 -1.9 8.2
Non-controlling interest 0.0 0.0 0.0
Earnings per share, EUR 0.22 0.07 0.57
EPS adjusted for dilution, EUR 0.22 0.08 0.57
ASPO GROUP BALANCE SHEET
3/2015 3/2014 Change 12/2014
MEUR MEUR % MEUR
Assets
Intangible assets 12.0 12.8 -6.3 12.3
Goodwill 42.7 45.3 -5.7 44.4
Tangible assets 110.2 114.8 -4.0 111.4
Available-for-sale assets 0.2 0.2 0.0 3.2
Long-term receivables 3.8 4.4 -13.6 4.0
Total non-current assets 168.9 177.5 -4.8 175.3
Inventories 48.3 45.9 5.2 47.3
Sales and other receivables 63.0 60.3 4.5 56.4
Cash and cash equivalents 14.9 19.8 -24.7 19.3
Total current assets 126.2 126.0 0.2 123.0
Total assets 295.1 303.5 -2.8 298.3
Shareholders' equity and liabilities
Share capital 17.7 17.7 0.0 17.7
Other shareholders' equity 91.3 83.2 9.7 86.4
Shareholders' equity attributable to equity
holders of the parent 109.0 100.9 8.0 104.1
Non-controlling interest 0.0 0.7 -100.0 0.0
Non-current liabilities 67.7 93.7 -27.7 83.3
Current liabilities 118.4 108.2 9.4 110.9
Total shareholders' equity and liabilities 295.1 303.5 -2.8 298.3
ASSETS AND LIABILITIES BY SEGMENT
Segments' assets, MEUR
3/2015 3/2014 12/2014
ESL Shipping 119.9 123.6 119.4
Leipurin 62.6 63.3 63.7
Telko 74.0 68.4 68.3
Kaukomarkkinat 18.4 23.1 19.4
Unallocated items 20.2 25.1 27.5
Total 295.1 303.5 298.3
Segments' liabilities, MEUR
3/2015 3/2014 12/2014
ESL Shipping 9.7 9.6 12.2
Leipurin 13.3 17.0 17.7
Telko 27.1 25.6 25.3
Kaukomarkkinat 3.5 5.8 4.9
Unallocated items 132.5 143.9 134.1
Total 186.1 201.9 194.2
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
A = Share capital F = Translation differences
B = Premium fund G = Retained earnings
C = Fair value fund H = Total
D = Other funds I = Non-controlling interest
E = Treasury shares J = Total shareholders' equity
MEUR A B C D E F G H I J
Balance at Dec.
31, 2014 17.7 4.3 1.9 32.0 -3.4 -16.0 67.6 104.1 0.0 104.1
Comprehensive income:
Profit for the period 7.0 7.0
Translation
differences 0.3 0.3
Cash flow hedges* 0.0 0.0
Available-for-sale
financial assets* -2.5 -2.5
Total comprehensive
income -2.5 0.3 7.0 4.8
Transactions with
owners:
Interest on hybrid
instrument -0.3 -0.3
Share-based incentive
plan 0.7 -0.3 0.4
Total transactions
with owners 0.7 -0.6 0.1
Balance at March
31, 2015 17.7 4.3 -0.6 32.0 -2.7 -15.7 74.0 109.0 0.0 109.0
Balance at Dec.
31, 2013 17.7 4.3 -0.6 33.7 -4.3 -3.3 55.1 102.6 0.7 103.3
Comprehensive income:
Profit for the period 2.4 2.4
Translation
differences -4.3 -4.3
Cash flow hedges* 0.0 0.0
Total comprehensive
income 0.0 -4.3 2.4 -1.9
Transactions with
owners:
Share-based incentive
plan 0.2 0.0 0.2
Total transactions
with owners 0.2 0.0 0.2
Balance at March
31, 2014 17.7 4.3 -0.6 33.7 -4.1 -7.6 57.5 100.9 0.7 101.6
* net of taxes
ASPO GROUP CASH FLOW STATEMENT
1-3/2015 1-3/2014 1-12/2014
MEUR MEUR MEUR
OPERATIONAL CASH FLOW
Operating profit 3.0 3.8 23.4
Adjustments to operating profit 4.2 3.0 12.7
Change in working capital -13.3 -5.3 -8.1
Interest paid -0.8 -1.0 -4.0
Interest received 0.1 0.3 0.3
Income taxes paid -0.6 -0.3 -2.3
Total operational cash flow -7.4 0.5 22.0
INVESTMENTS
Investments in tangible and intagible assets -1.0 -13.8 -17.5
Proceeds from sale of tangible and intagible
assets 0.2
Proceeds from available-for sale intangible
assets 4.9
Subsidiaries acquired, contigent consideration -0.3 -0.3
Business operations and subsidiaries sold -0.3 0.9
Associated companies sold 2.2 2.2
Total cash flow from investments 3.6 -11.9 -14.5
FINANCING
Change in short-term borrowings -0.9 3.4 -12.3
Change in long-term borrowings 0.1 -0.1 5.3
Hybrid instrument -1.4
Dividends paid -6.4
Total financing -0.8 3.3 -14.8
Increase/decrease in liquid funds -4.6 -8.1 -7.3
Liquid funds in beginning of year 19.3 28.5 28.5
Translation differences 0.2 -0.6 -1.9
Liquid funds at period end 14.9 19.8 19.3
ACCOUNTING PRINCIPLES
Aspo Plc's interim report has been prepared in accordance with the principles of
IAS 34 Interim Financial Reporting. As of January 1, 2015, Aspo applies certain
new or amended IFRS standards and IFRIC interpretations as described in the
2014 financial statements. The adoption of these new or amended standards has
not had any substantial impact on the reported figures. In other respects, the
same accounting principles have been adopted in the interim report as in the
Financial Statements on December 31, 2014. The calculation principles of key
figures are explained on page 94 of the 2014 Annual Report. The information in
this report is unaudited.
SEGMENT REPORTING
Aspo Group's operational segments are ESL Shipping, Leipurin, Telko and
Kaukomarkkinat. Other operations consists of Aspo Group's administration, the
financial and ICT service center, and a small number of other functions not
covered by business units.
The Group reports its net sales on the basis of the following geographical
division: Finland; Scandinavia; the Baltic countries; Russia, Ukraine and other
CIS countries; and other countries.
PRESS AND ANALYST CONFERENCE
A press and analyst conference will be arranged today, Wednesday May 6, 2015 at
10.00 at the Paavo Nurmi cabinet at Hotel Kämp, Pohjoisesplanadi 29, 00100
Helsinki.
FINANCIAL INFORMATION IN 2015
Aspo Plc will publish the following Interim Reports in 2015:
for the second quarter on August 13, 2015 and for the third quarter on October
28, 2015.
Helsinki May 6, 2015
ASPO Plc
Aki Ojanen Arto Meitsalo
CEO CFO
For more information: Aki Ojanen, 09 521 4010, 0400 106 592, aki.ojanen
(a)aspo.com
DISTRIBUTION:
Nasdaq Helsinki
Key media
www.aspo.com
Aspo is a conglomerate that owns and develops businesses in Northern Europe and
growth markets focusing on demanding B-to-B customers. The aim of our strong
corporate brands - ESL Shipping, Leipurin, Telko and Kaukomarkkinat - is to be
the market leaders in their sectors. They are responsible for their own
operations, customer relationships and the development of these. Together they
generate Aspo's goodwill. Aspo's Group structure and business operations are
developed persistently without any predefined schedules.
[HUG#1918960]
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