2014-05-05 09:00:00 CEST
2014-05-05 09:00:50 CEST
REGULATED INFORMATION
Aspo - Interim report (Q1 and Q3)
Aspo Group Interim Report January 1 to March 31, 2014
ASPO Plc Stock Exchange Release May 5, 2014 at 10:00 a.m.
ASPO GROUP INTERIM REPORT JANUARY 1 TO MARCH 31, 2014
Aspo: Operating profit increased strongly and stood at EUR 3.8 million
(Figures from the corresponding period in 2013 are presented in brackets.)
January-March 2014
- Aspo Group's net sales decreased slightly to EUR 108.0 million (EUR 112.3
million)
- Operating profit increased to EUR 3.8 million (EUR 0.9 million)
- Profit before taxes totaled EUR 2.6 million (EUR 0.1 million)
- Profit for the period stood at EUR 2.4 million (EUR 0.2 million)
- Earnings per share were EUR 0.07 (EUR 0.01)
The guidance remains unchanged. Aspo will improve its operating profit.
KEY FIGURES
1-3/2014 1-3/2013 1-12/2013
Net sales, MEUR 108.0 112.3 476.3
Operating profit, MEUR 3.8 0.9 10.8
Share of net sales, % 3.5 0.8 2.3
Profit before taxes, MEUR 2.6 0.1 6.6
Share of net sales, % 2.4 0.1 1.4
Profit for the period, MEUR 2.4 0.2 8.6
Personnel at the end of period 867 858 869
Earnings per share, EUR 0.07 0.01 0.28
EPS adjusted for dilution, EUR 0.08 0.01 0.30
Equity per share, EUR 3.33 2.98 3.39
Equity ratio, % 33.9 29.8 34.4
Gearing, % 112.0 143.1 98.2
AKI OJANEN, ASPO'S CEO:"I consider Aspo's operating profit to be good, considering the difficult
overall situation. The strong growth in operating profit resulted from the
development of all business operations according to their own strategies. The
operating profit of the shipping company, ESL Shipping, contributed most to the
growth, being excellent for a winter season. The ice-free winter in the Baltic
Sea reduced fuel consumption, which improved profitability. During the period,
the shipping company invested approximately EUR 13 million in an Eira-class
20,000 dwt 1A Super ice-strengthened vessel, and named it m/s Kallio.
Aspo's operating profit percentage improved to 3.5%; however, lagging behind the
targeted minimum of 5%. Cash flow from operating activities was positive.
Gearing exceeded the target level of 100%, amounting to 112% due to the vessel
purchase by ESL Shipping.
Telko succeeded in improving its operating profit despite the crisis between
Russia and Ukraine. Also Kaukomarkkinat improved its performance significantly.
As expected, Leipurin developed well in bakery raw materials, and the decrease
in Leipurin's operating profit was due to the normal seasonal variation in
bakery machines. In the fall of 2013, we anticipated that the financial crisis
in Ukraine would worsen, and we reduced the financial risk level, which weakened
earnings for the fourth quarter of 2013, as reported. Now, in the first quarter,
the Russian ruble and the Ukrainian hryvna weakened substantially year-on-year,
which reduced the growth in net sales denominated in euros. The euro-denominated
net sales in the market area Russia, Ukraine, and other CIS countries remained
unchanged at EUR 31.1 million. The changes in foreign exchange rates did not
weaken operating profit significantly. Leipurin and Telko retained a good five
percent level of operating profit in the market area.
As a conglomerate, Aspo has the preconditions for building shareholder value in
a long-term manner. We have previously reported that we are reviewing the
preconditions for listing Leipurin on the NASDAQ OMX Helsinki official list
during 2014, in which case Aspo would remain a minority shareholder in Leipurin
Ltd. We will continue our studies.
During 2013, we implemented a significant strategic change in Kaukomarkkinat,
which burdened earnings in the previous year. I consider it clear that
Kaukomarkkinat's business is developing in the right direction, as planned. Its
substantially improved profitability is an indication of this.
Due to the overall global economic conditions and the political situation in
Russia and Ukraine, uncertainty about future development has increased. It is
challenging to estimate potential future economic effects. However, Aspo has
advantages in its operations that have been considered less risky than others in
Russia, and the organic growth and good profitability of its business operations
that have already continued for years."
ASPO AS A COMPANY
Aspo is a conglomerate that owns and develops business operations in northern
Europe and growth markets, focusing on demanding B-to-B customers. Aspo's strong
company brands - ESL Shipping, Leipurin, Telko and Kaukomarkkinat - aim to be
market leaders in their sectors. They are responsible for their own operations
and customer relationships, and the development of these. Together they
generate Aspo's goodwill. Aspo's Group structure and business operations are
continually developed without any predefined schedule.
Aspo's operating segments are: ESL Shipping, Leipurin, Telko, and
Kaukomarkkinat. Other operations consist of Aspo Group's administration, the
financial and ICT service center, and a small number of other operations that do
not belong to the 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.
OPERATIONAL PERFORMANCE
The uncertainty in the international economy has continued, and industrial
production has decreased, particularly in Finland. The political and economic
uncertainty in the Russian, Ukrainian and other CIS markets, important for Aspo,
has strongly increased, which has weakened the currencies in the area. The
prices of raw materials have either remained unchanged or decreased.
International dry bulk freight rates, important for the Group, have fallen from
the previous quarter.
ESL Shipping
ESL Shipping is the leading dry bulk cargo company in the Baltic Sea region. At
the end of the review period, the company's fleet consisted of 15 vessels, of
which the company owned 13 in full. One was leased and one was time-chartered.
1-3/2014 1-3/2013 Change 1-12/2013
Net sales, MEUR 21.2 19.4 1.8 77.8
Operating profit, MEUR 3.3 0.5 2.8 7.6
Personnel 213 205 8 210
The dry bulk freight rates fell from the previous quarter and are at a low
level. During the review period, ESL Shipping's vessels mainly operated in the
Baltic Sea, the North Sea, and in international traffic in the Canadian ice
area. ESL Shipping's operations in the Baltic Sea are mainly based on long-term
contracts and established customer relationships.
ESL Shipping's net sales amounted to EUR 21.2 million (19.4). Profitability
improved significantly, as operating profit was EUR 3.3 million (0.5).
The cargo volume carried by ESL Shipping in January-March amounted to 2.7
million tons (2.6). Despite the mild winter and low electricity wholesale
prices, transports for the energy industry were at an almost normal level, but
at the same time, customers' coal stocks have become higher than in the fall
season. The production of the steel industry continues at low capacity, and the
transports remained at the same level year-on-year. The Supramax vessels were in
traffic for a second winter after their completion; their operations have been
more efficient, and the vessels have established a good customer base. The
freight rate of both Supramax vessels was highly satisfactory over the review
period considering the general market situation. With regard to smaller vessel
segments, loading and unloading operations of large ocean liners taking place at
sea continued to be active.
The schedule and speed optimization of the vessels and the resulting lower fuel
consumption strongly contributed to the improvement in profitability. The easy
ice situation in the review period also reduced costs. During the review period,
as part of the preparations for the entry into force of the sulphur directive,
the shipping company was granted a state subsidy for post-investments improving
the level of environmental protection, mainly for converting the vessels to be
suitable for low-sulphur fuel. One pusher-barge unit started a service stoppage
according to plan.
During the review period, the company acquired in full a dry cargo vessel of
20,000 dwt previously owned jointly with a Swedish shipping company. In
conjunction with the transaction, the vessel was renamed m/s Kallio and
transferred to the Finnish Register of Ships. The investment's value was about
EUR 13 million, and it is estimated to increase ESL Shipping's operating profit
by approximately EUR 1.5 million annually. The competitive manning agreement
concluded with the shipping trade unions contributed to the acquisition of the
vessel.
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.
1-3/2014 1-3/2013 Change 1-12/2013
Net sales, MEUR 30.1 30.6 -0.5 136.3
Operating profit, MEUR 0.3 0.7 -0.4 5.2
Personnel 301 283 18 300
The prices of sold raw materials decreased in a number of raw material groups
year-on-year, which contributed to slowing down the growth in net sales. In
Finland, imported frozen bread has increased its market share in bread retail,
which has decreased the total amount of bread baked in Finland. In the eastern
growth markets, Russia, Ukraine, and other CIS area, growth continued normally
despite the political and economic uncertainty in the area. The net sales in the
market area amounted to EUR 8.9 million (7.1).
The net sales of Leipurin in the first quarter was at the level of the
comparison period, i.e., EUR 30.1 million (30.6), while operating profit fell to
EUR 0.3 million (0.7). Due to the periodization of the projects of bakery
machine sales, the net sales and profitability of machine sales decreased
significantly. The net sales and operating profit of bakery raw materials in
Russia, Ukraine, and other CIS countries developed strongly, as net sales grew
by 18% in euros and operating profit continued to exceed the target level of 5%.
Leipurin is developing its overall offering 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
efforts to increase the share of raw materials sold under the Leipurin brand and
continue to increase the share of raw materials produced locally in Russia,
Ukraine, and the CIS area in its sales.
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.
1-3/2014 1-3/2013 Change 1-12/2013
Net sales, MEUR 49.6 53.4 -3.8 230.2
Operating profit, MEUR 1.8 1.5 0.3 5.8
Personnel 247 264 -17 249
In Telko's operating area, the overall economic situation in the review period
was mainly weak. Indicators describing the Russian economy also developed
unfavorably. The price level of raw materials sold by Telko remained at a low
level, and prices were lower year-on-year.
Telko's net sales decreased to EUR 49.6 million (53.4), but operating profit
improved to EUR 1.8 million (1.5). Net sales were negatively impacted by the
economic uncertainty in Europe and the devaluation of local currencies due to
the conflict between Russia and Ukraine. The weakening of the Eastern currencies
against the euro also decreased the operating profit. Net sales in Russia,
Ukraine, and other CIS countries totaled EUR 20.7 million (24.0). Calculated in
local currencies, net sales increased in this market area in every country
except for Ukraine.
Telko prepared already in the fourth quarter of 2013 for the risks potentially
caused by the crisis in the Ukrainian national economy, such as the weakening of
its currency. In the review period, the crisis between Ukraine and Russia was
seen in Telko in the continuing decline in Ukrainian sales and a weakening in
demand. The political situation between Ukraine and Russia has increased
uncertainty over future economic development and the future value of their
currencies. The currency risk related to Ukraine has been diminished by reducing
the foreign currency position.
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 operates in Finland, Poland, Latvia, Russia, China, and
Vietnam.
1-3/2014 1-3/2013 Change 1-12/2013
Net sales, MEUR 7.1 8.9 -1.8 32.0
Operating profit, MEUR -0.2 -0.8 0.6 -3.6
Personnel 76 94 -18 80
Kaukomarkkinat's profitability improved significantly year-on-year.
Kaukomarkkinat's net sales amounted to EUR 7.1 million (8.9). Operating profit
improved and was negative at EUR -0.2 million (-0.8). In the second quarter of
2013, Kaukomarkkinat reported that it is attempting to achieve annual cost
savings of approximately EUR 1 million in Finland. The measures taken had their
full impact in the first quarter of 2014. The lower costs improved
profitability.
In Finland, the sales of heat pumps among energy-efficiency products developed
positively despite the weak economic situation in new and repair construction.
The mild winter enabled the installation operations of the devices to continue
almost without interruption. Interest in solar systems clearly increased. The
sales of ground-source heat pumps manufactured in Finland developed in a
promising way in Poland. The sales of tablet computers intended for professional
use developed very positively, and a number of new, competitive products were
released in February. Demand for projectors continued to be good. In Finland,
the first deliveries of special computers and displays were made to the
healthcare sector.
In China, net sales fell significantly year-on-year due to the timing of project
deliveries. The sales of machinery and equipment for the paper industry fell
from the comparison period in all market areas due to reduced industrial
investments, resulting in losses in operations. In Poland, the deliveries of
frequency converters increased year-on-year, and operations were profitable.
Reorganization was continued in Russia to achieve savings in personnel and
operating expenses.
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 other
business units.
1-3/2014 1-3/2013 Change 1-12/2013
Net sales, MEUR 0.0 0.0 0.0 0.0
Operating profit, MEUR -1.4 -1.0 -0.4 -4.2
Personnel 30 12 18 30
The operating profit of other operations was negative at EUR -1.4 million (-
1.0). Performance was weakened by the accrual of performance bonuses and share
bonuses, and expert expenses related to projects during the current year.
NET SALES
Aspo Group's net sales decreased by EUR 4.3 million, or 3.8%, to EUR 108.0
million (112.3).
Net sales by segment, MEUR
1-3/2014 1-3/2013 Change 1-12/2013
ESL Shipping 21.2 19.4 1.8 77.8
Leipurin 30.1 30.6 -0.5 136.3
Telko 49.6 53.4 -3.8 230.2
Kaukomarkkinat 7.1 8.9 -1.8 32.0
Other operations 0.0 0.0 0.0 0.0
Total 108.0 112.3 -4.3 476.3
There is no considerable inter-segment net sales.
Net sales by market area, MEUR
1-3/2014 1-3/2013 Change 1-12/2013
Finland 38.9 40.7 -1.8 156.7
Scandinavia 11.1 10.9 0.2 43.4
Baltic countries 12.0 11.8 0.2 49.8
Russia, Ukraine + other CIS countries 31.1 31.1 0.0 153.0
Other countries 14.9 17.8 -2.9 73.4
Total 108.0 112.3 -4.3 476.3
Net sales in the various market areas remained almost at the level of the
comparison period. Net sales in Russia, Ukraine, and other CIS countries
remained at the level of the comparison period in euros, amounting to EUR 31.1
million (31.1), even though the local currencies devalued significantly over the
review period.
EARNINGS
Aspo Group's operating profit in January-March amounted to EUR 3.8 million
(0.9). ESL Shipping's operating profit increased substantially to EUR 3.3
million (0.5). The operating profit of the Leipurin business fell to EUR 0.3
million (0.7). Telko's operating profit increased to EUR 1.8 million (1.5).
Kaukomarkkinat's operating profit improved by EUR 0.6 million to EUR -0.2
million (-0.8). The operating profit of other operations weakened and was
negative at EUR -1.4 million (-1.0).
Operating profit by segment, MEUR
1-3/2014 1-3/2013 Change 1-12/2013
ESL Shipping 3.3 0.5 2.8 7.6
Leipurin 0.3 0.7 -0.4 5.2
Telko 1.8 1.5 0.3 5.8
Kaukomarkkinat -0.2 -0.8 0.6 -3.6
Other operations -1.4 -1.0 -0.4 -4.2
Total 3.8 0.9 2.9 10.8
Earnings per share
Earnings per share were EUR 0.07 (0.01) and diluted earnings per share were EUR
0.08 (0.01). Equity per share was EUR 3.33 (2.98).
ASSETS AND LIABILITIES BY SEGMENT
The assets and liabilities of the business segments are presented in the tables
below.
Segments' assets, MEUR
3/2014 3/2013 12/2013
ESL Shipping 123.6 117.7 112.7
Leipurin 63.3 68.9 64.4
Telko 68.4 78.2 69.0
Kaukomarkkinat 23.1 24.4 22.4
Unallocated items 25.1 20.1 34.0
Total 303.5 309.3 302.5
Segments' liabilities, MEUR
3/2014 3/2013 12/2013
ESL Shipping 9.6 9.7 10.7
Leipurin 17.0 18.1 19.6
Telko 25.6 25.1 23.0
Kaukomarkkinat 5.8 6.8 5.6
Unallocated items 143.9 158.6 140.3
Total 201.9 218.3 199.2
INVESTMENTS
The Group's investments amounted to EUR 14.0 million (0.8), the majority of
which consisted of the acquisition of the m/s Kallio vessel. Other investments
were ordinary maintenance investments.
Investments by segment, acquisitions excluded, MEUR
1-3/2014 1-3/2013 Change 1-12/2013
ESL Shipping 13.6 0.1 13.5 2.2
Leipurin 0.1 0.2 -0.1 0.7
Telko 0.2 0.2 0.0 1.3
Kaukomarkkinat 0.1 0.2 -0.1 0.5
Other operations 0.0 0.1 -0.1 0.2
Total 14.0 0.8 13.2 4.9
FINANCING
The Group's financing position improved from the comparison period. The Group's
cash and cash equivalents amounted to EUR 19.8 million (15.6). The consolidated
balance sheet included a total of EUR 133.5 million (145.8) in interest-bearing
liabilities. Non-interest-bearing liabilities totaled EUR 68.4 million (72.5).
Aspo Group's gearing was 112.0% (143.1) and its equity ratio 33.9% (29.8).
The Group's cash flow from operations improved significantly in January-March,
totaling EUR 0.5 million (-10.9). In addition to the profitability of business
operations, the cash flow was improved by the efficient management of working
capital. At the end of the period, the change in working capital stood at EUR
-5.3 million (-13.4).
Cash flow from investments was EUR -11.9 million (-0.3) in the review period,
i.e., the Group's free cash flow amounted to EUR -11.4 million (-11.2). In the
review period, approximately EUR 13 million was invested in the shipping
company's fleet.
The amount of binding revolving credit facilities signed between Aspo and its
main financing banks stood at EUR 60 million at the end of the period. On the
closing date, EUR 14 million of the revolving credit facilities was in use, and
EUR 17 million of the commercial paper program of EUR 80 million was in use.
A convertible capital loan of EUR 10 million will fall due in 2014. No other
significant loan agreements will fall due payable in 2014.
Aspo has hedged its interest rate risk by means of an interest rate swap subject
to hedge accounting. Its fair value on March 31, 2014 was EUR -0.8 million.
Changes in fair value have been recognized in other comprehensive income, and
the financial instrument is at level 2.
Convertible capital loan
On March 31, 2014, Aspo Plc had EUR 10,250,000 in a convertible capital loan
issued in 2009. The loan period is from June 30, 2009, to June 30, 2014. The
loan will be repaid in one installment on June 30, 2014, assuming that the
repayment conditions outlined in Chapter 12 of the Finnish Companies Act and the
loan terms are met. The loan has a fixed interest rate of 7%.
The loan units can be converted into Aspo shares. Each EUR 50,000 loan unit
entitles its holder to convert the loan unit into 8,074 new shares in Aspo. The
conversion rate is EUR 6.19. The loan can be converted annually between January
2 and November 30. The conversion period ends on June 15, 2014. In January-
March, 8,074 new shares were subscribed for with one loan unit.
Hybrid instrument
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. The issue was aimed
primarily for domestic institutional investors and it was significantly
oversubscribed.
A hybrid bond is an instrument which is subordinated to the company's other debt
obligations and which is treated as equity in the IFRS financial statements. The
hybrid bond does not confer to its holders the rights of a shareholder and does
not dilute the holdings of the current shareholders.
Related party loans
Aspo Plc has granted a EUR 2.9 million loan to Aspo Management Oy, one of the
company's related parties and controlled by the company, as part of a
shareholding plan for the Group. The interest on the loan receivable is 3%. The
loan receivable falls due on March 31, 2015. It can be extended to March
31, 2016 at the latest. The loan is market-based. Aspo Management Oy may not
deposit in pledge or use as security the Aspo Plc shares it holds without Aspo
Plc's written consent. The company has been consolidated in the financial
statements.
RISKS AND RISK MANAGEMENT
The rapid political change in Aspo's operating environment has increased
strategic, operational, financing, and loss risks. The political uncertainty has
also increased the prolonged uncertainty in the international economy in Aspo's
growth areas. The germinating recovery of the European economy has only had time
to have an impact on Aspo's customers in specific countries and in a narrow
sector.
Trade sanctions have not yet been adopted as a result of the crisis between
Russia and Ukraine, but using them as a means of political pressure is possible.
It is difficult to estimate the impact of any sanctions on Aspo beforehand, but
some of the products we sell may become subject to an export ban, and Russia's
potential countermeasures may place some of our products under an import ban in
Russia and its customs area.
As a result of the crisis between Russia and Ukraine, the currencies of both
countries have weakened substantially. As the prices of products have increased,
consumer demand has decreased, and the growth of the economy has slowed down in
Russia and declined in Ukraine. As a result of the weakening of the local
currencies, net sales denominated in euros do not grow, but at the same time
costs decrease. Aspo already reacted to the weakened situation in Ukraine
beginning in the fall of 2013, at which time we started to decrease our stocks,
and reduced the turnover times of trade receivables. Items denominated in
foreign currencies have been converted to euros, and any changes in foreign
exchange rates have rapidly been transferred to prices. The picture of the
situation has been updated at least on a weekly basis.
Pressures to reduce the consumption of coal in energy production have increased,
which combined with potential trade sanctions, may rapidly reduce the need to
transport Russian coal. Despite the increase in consumption in 2013, it has
become more difficult to estimate the future transport volumes.
The weakening of sea freight rates has increased the uncertainty related to the
profitability of shipping companies, and a number of indexes for freight rates
have dropped to the level of last summer or a preceding level. ESL Shipping's
recent earnings trend has been positive, but at the current risk levels, it is
uncertain if it will continue.
Despite the aggravation of the political situation and the alarming direction of
economic development, our strategic risks are evened out by the distribution of
our business operations over four segments at the Group level and because we
engage in business operations in a broad geographical area.
In addition to the political crisis, strategic risks are caused by the outlook
and production solutions of metal industry customers, as a result of which there
may be a decrease in the demand for transport services, but also opportunities
for new transport combinations. Decisions on energy production structures
affected by the environmental policy and other political choices may cause
changes in industry and energy production, due to which strategic risks may
materialize.
The flows of goods on the Baltic Sea may change as a result of the sulphur
directive, changes in the customer structure, 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 the
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 change
due to the effects of cargo prices, investment trends, and changes to retail
structures, especially in western markets. In the eastern market, risks are
increased by such factors as political instability, social structures or the
lack of any 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.
Operational risks have remained unchanged due to the economic uncertainty in the
business environment. These include risks related to supply chains and
individuals. 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. Any
deceleration in economic growth and production may have a cyclical impact on
demand for chemical and plastic raw materials in the eastern markets. Currently,
the political instability in Ukraine is disturbing commercial activities and, if
the situation continues, Aspo's growth in Ukraine may slow down. 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 challenges posed by emerging markets and the aggravation of the
situation in Ukraine has also caused competitors to withdraw, which creates new
opportunities for Aspo, unless the situation gets worse.
Hedging against changes in exchange rates, particularly in emerging markets, is
not always possible, and Aspo aims to minimize any unstable currency positions
and keep them open as briefly as possible. Changes in exchange rates may also
reduce shareholders' equity on the balance sheet due to translation differences.
While changes in credit loss risks vary between business areas and customers,
credit loss risks in general have grown, and to some extent they have also been
realized.
The quantity and probability of the Group's loss risks are assessed regularly.
To confirm insurance amounts, the values insured have been checked, and
insurance policies for 2014 have been renewed. 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.
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.
PERSONNEL
Personnel by segment, period-end
3/2014 3/2013 Change 12/2013
ESL Shipping 213 205 8 210
Leipurin 301 283 18 300
Telko 247 264 -17 249
Kaukomarkkinat 76 94 -18 80
Other operations 30 12 18 30
Total 867 858 9 869
At the end of the period, Aspo Group had 867 employees (858). The number of
personnel has increased with the crew of ESL Shipping's new vessel and in the
Leipurin business in Aspo's growth areas, particularly in Russia, Ukraine, and
other CIS countries. The personnel of other operations increased with the
centralization of financial and ICT services, but the number of personnel in
business operations was decreased correspondingly.
Rewarding
Aspo Group has previously applied a profit bonus system, under which part of the
Group's profit was paid as a profit bonus to the personnel fund. In 2013, the
rewarding system was reformed. The profit bonus system was discontinued and the
company adopted a performance bonus program which covers the entire Finnish
personnel. Employees may invest the performance bonus in the personnel fund or
withdraw the bonus in cash. The long-term goal of the funding system is that the
personnel will become a significant shareholder group in the company. All
persons working at Aspo Group's Finnish companies are members of the personnel
fund.
In 2010, Aspo's Board decided on a shareholding plan for Aspo Group's
management. The purpose of the plan is to enable considerable long-term
ownership in Aspo for those involved in the plan. For shareholding purposes, the
participants acquired a company called Aspo Management Oy, whose entire stock
they own. Aspo Management Oy acquired 114,523 Aspo shares from the participants
at market price. In addition, Aspo assigned 322,637 shares at EUR 7.93 per share
to the company in a directed share issue. As part of the arrangement, the Board
decided to grant Aspo Management Oy a EUR 2,800,000 interest-bearing loan to
finance the share purchase. In 2011 Aspo Management Oy also subscribed to
62,452 shares in Aspo's rights issue and raised an additional loan of EUR
324,750.40 from Aspo to finance the purchases. At the end of the period the loan
amounted to EUR 2,934,750.40. In October 2013, Aspo Management Oy purchased
10,000 Aspo Plc shares, after which the company owns a total of 509,612 Aspo
shares. The plan was not dissolved in line with the original scheme in spring
2014. According to the shareholder agreement, the plan will be extended for one
year at a time if Aspo's share price at the beginning of 2014, 2015, or 2016 is
below the average price at which Aspo Management Oy acquired the Aspo shares it
owns. There are restrictions on the right of disposal of the shares for the
duration of the plan. As a rule, the participants' holding in Aspo Management Oy
remains valid until the system is dissolved.
In 2012, Aspo's Board of Directors decided on a share-based incentive plan for
about 30 persons. The plan will last for three years, but the Board of Directors
will decide on the performance criteria and participants each year. The
potential reward is based on Aspo Group's earnings per share (EPS) key figure
for each performance year of the plan (2012 to 2014). The prerequisite for
participation in the plan is that the person acquires Aspo shares, or holds Aspo
shares or Aspo Management's shares, up to the number predetermined by the Board
of Directors, and undertakes to follow the rules of the plan. No share bonus was
paid for the 2012 vesting period since Aspo's result remained below the targeted
level. The Aspo Plc has transferred 19,492 Aspo company-held shares to employees
included in the share-based incentive plan for the 2013 vesting period. Of
these shares, 444 were registered on April 2, 2014.
SHARE CAPITAL AND SHARES
Aspo Plc's share capital on March 31, 2014 was EUR 17,691,729.57 and the total
number of shares was 30,975,524 of which the company held 164,843 shares; that
is, 0.5% of the share capital. 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 Ltd's Mid Cap segment under industrial products
and services.
During January-March 2014, a total of 1,130,120 Aspo Plc shares with a market
value of EUR 6.7 million were traded on NASDAQ OMX Helsinki, in other words,
3.6% of the stock changed hands. During the period, the stock reached a high of
EUR 6.47 and a low of EUR 5.24. The average price was EUR 5.94 and the closing
price at period-end was EUR 5.36. At the end of the period, the market value
excluding treasury shares was EUR 165.1 million.
The number of Aspo Plc shareholders was 7,835 at period-end. A total of 487,481
shares, or 1.6% of the share capital, were nominee registered or held by non-
domestic shareholders.
Flagging notification
Aatos Vehmas announced on January 23, 2014 that his holdings have decreased
below 5% of the voting rights and share capital of Aspo Plc.
DECISIONS AT THE ANNUAL SHAREHOLDERS' MEETING
Dividend
The Aspo Plc Annual Shareholders' Meeting on April 3, 2014 adopted the Board of
Directors' proposal for payment of a dividend amounting to EUR 0.21 per share.
The payment date was April 15, 2014.
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 Matti Arteva 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 treasury
shares
The Annual Shareholders' Meeting authorized the Board of Directors to decide on
the acquisition of no more than 500,000 of the company-held shares using the
unrestricted shareholders' equity of the company. The authorization includes the
right to accept company-held 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 holdings 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 Board may not exercise the authorization to acquire company-held shares or
to accept them as a pledge if after the acquisition the company or its
subsidiary would possess or have as a pledge in total more than ten (10) percent
of the company's stock. The authorization is valid until the Annual
Shareholders' Meeting in 2015 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-held shares.
The authorization will supersede the authorization for the acquisition of
company-held shares which was granted to the Board of Directors by the Annual
Shareholders' Meeting on April 10, 2013.
Authorization of the Board to decide on a share issue of the treasury shares
The Annual Shareholders' Meeting in 2012, authorized the Board of Directors to
decide on a share issue involving one or more installments, carried out through
the transfer of treasury shares. A maximum of 834,529 shares may be transferred
on the basis of the authorization. The authorization is valid until September
30, 2015.
Aspo's Board of Directors has used its authorization during the review period as
the company transferred 19,492 treasury shares related to the share-based
incentive plan.
Authorization of the Board to decide on a rights issue
The Annual Shareholders' Meeting in 2012, authorized the Board to decide on a
rights issue. The authorization also includes the right to decide on a directed
share issue. The total number of new shares to be offered for subscription may
not exceed 1,500,000. The authorization is valid until September 30, 2015.
EVENTS AFTER THE REVIEW PERIOD
ESL Shipping Ltd signed a ship financing agreement with Pohjola Bank plc on
April 7, 2014. The signed loan of EUR 10 million will be used to finance the
vessel transaction reported in January this year.
In accordance with the decision made by the Annual Shareholders' Meeting,
shareholders received a dividend of EUR 0.21 per share, totaling EUR
6.470.336,25. The payment date was April 15, 2014.
OUTLOOK FOR 2014
Uncertainty in the global economy has continued. Uncertainty in Europe has been
increased by the political conflict between Russia and Ukraine, which has
significantly increased the regional risks in Russia, Ukraine, and other CIS
countries. If they continue, the uncertainty and the conflict may give rise to
trade sanctions imposed on Russia, strong changes in the value of local
currencies, or a slowing down of economic growth in the countries in the area.
Aspo will improve its operating profit.
ESL Shipping
During the remainder of the year, the transport volumes of the steel industry
are predicted to be higher than in the previous year, but seasonal variation in
demand requires the capacity of the pusher-barge system to be adapted during
part of the year by having stoppages in fleet use, similarly to previous years.
Adaptation is managed through extended classification docking periods, during
which all the alterations required by the sulphur directive will also be carried
out. The shipping company is continuously seeking opportunities to find new
employment for the pusher-barge fleet in which the shipping company's experience
in operating in ice conditions could be utilized year-round.
In the energy industry, coal transports to combined heat and power plants will
continue as planned, but the coal needs of condensate plants during the
remainder of 2014 will depend on the price competitiveness of coal, the demand
for electricity and its market price, and the volume of Nordic water reserves.
In general, no large changes in the demand for coal are expected in the near
future. The loading and unloading service for large vessels taking place at sea
will continue to be active. ESL Shipping will continue its work to expand the
company's operating area and reduce the effect of seasonal and industrial cycles
on the shipping company.
Despite the predicted improvement, the international freight market for large
vessels, particularly in the Atlantic region, has continued and will probably
continue to be weak during the current year.
In 2014, all of the company's vessels that do not yet meet the provisions of the
sulphur directive will be converted according to the provisions through vessel-
specific measures. The vessels will be converted to be suitable for low-sulphur
diesel fuel, while also retaining the possibility to use heavy oil in regions
where this is allowed. At the same time, alterations improving energy efficiency
will also be performed. During 2014, a total of four vessel units will be docked
for a fixed term.
Leipurin
In bakery raw materials, net sales will grow and profitability will increase.
Organic growth is expected to continue to be strong, particularly in the eastern
markets: Russia, Kazakhstan, Belarus, and Ukraine. Demand boosted by the
healthier and more diverse bread supply and rapidly developing retail will
increase sales. The huge need to modernize the eastern bakery industry will
continue to provide opportunities for increasing machine sales over the long
term. In Finland, the Baltic countries, and Poland, demand will continue at the
current level, and growth will be sought in the market for eating out and the
post-marketing services of machine sales. The order book for bakery machines is
normal for the period.
Telko
The prices of raw materials sold are expected to remain at a level, which is
lower than in the comparison period. It is estimated that growth will cease or
decline in the Russian, Ukrainian, and other CIS markets important for Telko,
during the remainder of the year. It is challenging to estimate the impact of
economic development in the market area on customer behavior or Telko's business
operations. The western market is predicted to remain unchanged during the
remainder of the year. Despite the crisis between Russia and Ukraine, Telko will
continue its operations in Russia in accordance with its strategy and expand
into new large cities. During 2014, Telko is estimated to open two new sales
offices in Russia.
To further develop the sales of industrial chemicals, Telko will continue its
investigations into a logistics terminal investment in the St. Petersburg
region. Due to the devaluation of the ruble, the values of land areas calculated
in euros have fallen in Russia. The relative share of technical plastics will be
sought to be increased in all Telko market areas.
Kaukomarkkinat
The aim of Kaukomarkkinat is to further increase the supply of energy-efficient
building technology in Finland. Kaukomarkkinat provides comprehensive solutions
for heating with various heat pumps and solar energy, as well as systems for
heat recovery, distribution, and heating control. The demand for cooling
solutions is expected to grow, even though the general construction volume has
declined. 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. According to long-term estimates, the role of energy
efficiency will be even more emphasized in building regulations, and the taxable
energy price paid by consumers will increase further, which will increase the
sale of energy-efficiency equipment.
The sales of reinforced computers are estimated to develop positively through
the introduction of new competitive products. The field of medical IT systems
offers potential for growth. Kaukomarkkinat will operate with a more efficient
organization in Finland. Costs that have lowered since 2013 and productive sales
will allow profitability to improve significantly. Kaukomarkkinat will utilize
Aspo's presence, particularly in the Russian Customs Union region, the Baltic
region, and Poland, with the aim of increasing sales of cleantech energy-
efficiency products. Efficiency and environmental investments in industry and
energy production will open up new opportunities in China, Russia, and Poland.
The demand for paper machines and equipment will remain at a low level, while
competition will be fiercer.
Helsinki May 5, 2014
ASPO Plc
Board of Directors
ASPO GROUP INCOME STATEMENT
1-3/2014 1-3/2013 1-12/2013
MEUR % MEUR % MEUR %
Net sales 108.0 100.0 112.3 100.0 476.3 100.0
Other operating income 0.0 0.0 0.3 0.3 0.8 0.2
Depreciation and write-downs -2.7 -2.5 -2.8 -2.5 -10.8 -2.3
Operating profit 3.8 3.5 0.9 0.8 10.8 2.3
Financial income and expenses -1.2 -1.1 -0.8 -0.7 -4.1 -0.9
Profit before taxes 2.6 2.4 0.1 0.1 6.6 1.4
Profit for the period 2.4 2.2 0.2 0.2 8.6 1.8
Other comprehensive income
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods
Translation differences -4.3 0.5 -2.8
Cash flow hedges 0.0 0.0 0.3
Income tax on other comprehensive income 0.0 0.0 -0.1
Other comprehensive income for the period,
net of taxes -4.3 0.5 -2.6
Total comprehensive income -1.9 0.7 6.0
Profit attributable to shareholders 2.4 0.2 8.6
Non-controlling interest 0.0 0.0 0.0
Total comprehensive income attributable to
shareholders -1.9 0.7 6.0
Non-controlling interest 0.0 0.0 0.0
Earnings per share, EUR 0.07 0.01 0.28
EPS adjusted for dilution, EUR 0.08 0.01 0.30
ASPO GROUP BALANCE SHEET
3/2014 3/2013 Change 12/2013
MEUR MEUR % MEUR
Assets
Non-current assets
Intangible assets 12.8 14.4 -11.1 13.2
Goodwill 45.3 45.4 -0.2 45.3
Tangible assets 114.8 106.4 7.9 103.4
Available-for-sale assets 0.2 0.2 0.0 0.2
Long-term receivables 4.4 3.0 46.7 4.2
Shares in associated companies 0.0 2.2 -100.0 2.2
Total non-current assets 177.5 171.6 3.4 168.5
Current assets
Inventories 45.9 53.1 -13.6 47.8
Sales and other receivables 60.3 69.0 -12.6 57.7
Cash and bank deposits 19.8 15.6 26.9 28.5
Total current assets 126.0 137.7 -8.5 134.0
Total assets 303.5 309.3 -1.9 302.5
Shareholders' equity and liabilities
Shareholders' equity
Share capital 17.7 17.7 0.0 17.7
Other shareholders' equity 83.2 72.6 14.6 84.9
Shareholders' equity attributable to equity
holders of the parent 100.9 90.3 11.7 102.6
Non-controlling interest 0.7 0.7 0.0 0.7
Long-term liabilities 93.7 111.2 -15.7 93.8
Short-term liabilities 108.2 107.1 1.0 105.4
Total shareholders' equity and liabilities 303.5 309.3 -1.9 302.5
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
A = Share capital F = Translation difference
B = Premium fund G = Retained earnings
C = Fair value fund H = Total
D = Other funds I = Non-controlling interest
E = Repurchased shares J = Total shareholders' equity
MEUR A B C D E F G H I J
Balance at
31.12.2013 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 difference -4.3 -4.3
Cash flow hedge, net of
taxes 0.0 0.0
Total comprehensive income 0.0 -4.3 2.4 -1.9
Transactions with owners:
Conversion of convertible
capital loan 0.0 0.0
Share-based payment 0.2 0.0 0.2
Total transactions with
owners 0.2 0.0 0.2
Balance at 31.3.2014 17.7 4.3 -0.6 33.7 -4.1 -7.6 57.5 100.9 0.7 101.6
Balance at
31.12.2012 17.7 4.3 -0.8 13.7 -4.2 -0.5 59.3 89.5 0.7 90.2
Comprehensive income:
Profit for the period 0.2 0.2
Translation difference 0.5 0.5
Cash flow hedge, net of
taxes 0.0 0.0
Total comprehensive income 0.0 0.5 0.2 0.7
Transactions with owners:
Share-based payment 0.1 0.1
Total transactions 0.1 0.1
Balance at 31.3.2013 17.7 4.3 -0.8 13.7 -4.2 0.0 59.6 90.3 0.7 91.0
ASPO GROUP CASH FLOW STATEMENT
1-3/2014 1-3/2013 1-12/2013
MEUR MEUR MEUR
OPERATIONAL CASH FLOW
Operating profit 3.8 0.9 10.8
Adjustments to operating profit 3.0 2.8 10.9
Change in working capital -5.3 -13.4 0.3
Interest paid -1.0 -0.7 -3.8
Interest received 0.3 0.1 0.5
Taxes paid -0.3 -0.6 -2.7
Total operational cash flow 0.5 -10.9 16.0
INVESTMENTS
Investments in tangible and
intangible assets -13.8 -0.5 -3.6
Gains on the sale of tangible and intangible
assets 0.2 0.4
Purchases of subsidiary shares -0.3 -0.3
Disposal of associated companies 2.2
Total cash flow from investments -11.9 -0.3 -3.5
FINANCING
Change in short-term borrowings 3.4 -9.7 -21.0
Change in long-term borrowings -0.1 15.0 8.9
Hybrid instrument 20.0
Share repurchase -0.1
Dividends paid -12.7
Total financing 3.3 5.3 -4.9
Increase / Decrease in liquid funds -8.1 -5.9 7.6
Liquid funds in beginning of year 28.5 21.4 21.4
Translation difference -0.6 0.1 -0.5
Liquid funds at period end 19.8 15.6 28.5
ACCOUNTING PRINCIPLES AND FINANCIAL REPORTING
Aspo Plc's interim report has been prepared in accordance with the principles of
IAS 34 Interim Financial Reporting. As of 1 January 2014, Aspo applies certain
new or amended IFRS standards and IFRIC interpretations as described in the
2013 financial statements. The adoption of these new or amended standards has
not had any substantial impact on the reported figures. In this financial
period, Aspo has reclassified the internal long-term loans belonging to the
Telko segment of Telko's subsidiary in Kazakhstan as net investments into
international operations under IAS 21. A corresponding principle has been
applied since 2011 to the long-term loans of Telko's Belarusian and Ukrainian
subsidiary. In other respects, the same accounting principles have been adopted
in the interim report as in the Financial Statements on December 31, 2013. The
calculation principles of key figures are explained on page 98 of the 2013
Annual report. The information in this report is unaudited.
PRESS AND ANALYST CONFERENCE
A press and analyst conference will be arranged today, Monday May 5, 2014 at
14.30 at the Akseli Gallen-Kallela cabinet at Hotel Kämp, Pohjoisesplanadi
29, 00100 Helsinki.
FINANCIAL INFORMATION IN 2014
Aspo Plc will publish the following Interim Reports in 2014:
for the second quarter on August 18, 2014, and
for the third quarter on October 28, 2014.
Helsinki May 5, 2014
ASPO Plc
Aki Ojanen Arto Meitsalo
CEO CFO
For more information:
Aki Ojanen, +358 9 521 4010, +358 400 106 592, aki.ojanen@aspo.com
DISTRIBUTION:
NASDAQ OMX Helsinki
Key media
www.aspo.com
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