Stock exchange release
November 11, 2003
FISKARS CORPORATION INTERIM REPORT
FISKARS CORPORATION INTERIM REPORT JANUARY-SEPTEMBER 2003 (Unaudited) FISKARS SALES ON PREVIOUS YEARS LEVEL IN LOCAL CURRENCIES IN THE US AND THE EURO ZONE. CASH FLOW CONTINUES STABLE Consolidated, July-September (3 months) - Net sales EUR 134.1 million (150.5) - Operating profit EUR 4.9 million (6.2) - Pre-tax profit EUR 5.9 million (3.5) Consolidated, January-September (9 months) - Corporate net sales EUR 488.0 million (582.5) - Operating profit EUR 23.8 million (28.2) - Investment income EUR 31.0 million (59.1) - Pre-tax profit EUR 45.3 million (74.5) - Earnings per share EUR 0.56 (0.87) - Operational cash flow EUR 85.5 million (116.1) - Average US dollar rate weakened by 20% against euro FISKARS CORPORATION JulySeptember Developments in the United States, the main market area of Fiskars Corporation, were twofold during the period. In the most important product areas scissors-related operations and garden products the market leveled out, with signs of a slight upturn. In the third quarter, as earlier in the year, leisure products show the most promising developments, with a growth of about 35%. Plastic products, i.e. outdoor furniture and flowerpots, continued to underperform compared to the previous year, and these product lines were run at a loss. In Europe, sales in the UK did not reach the forecast figures, whereas in Germany sales picked up after a difficult first half of the year and fulfilled projections. In Scandinavia, sales continued to develop favorably. Inha Works domestic deliveries declined slightly. Net sales from the real estate operations remained on the same level as in the previous year, 2002. OPERATIONAL RESULTS Fiskars Brands, Inc. JulySeptember Fiskars Brands Inc. net sales for the third quarter in US dollars increased to USD 144 million (141). In euros, the net sales for the period was EUR 128 million (144) or 11% less than the previous year. Calculated in euros, sales in North America decreased by 14% and in Europe by 1%. Fiskars Brands operating profit was EUR 4.8 million (6.2) in the third quarter, with no non-recurring costs booked. JanuarySeptember In US dollars, Fiskars Brands net sales for the first three quarters were USD 515 million (513) or as in 2002. In euros, net sales for the period was EUR 464 million, a decrease of 17% compared to the previous year (557). Fiskars Brands operating profit for the first nine months was EUR 23.8 million (26.8), with non-recurring costs totaling EUR 8.7 million (19.3). The market for school, office and craft products has turned more difficult in the United States and sales volumes decreased slightly compared to the previous year. North American sales of FISKARS branded garden tools were at a good level. Sales of GERBER products continued to grow strongly, partly due to Gerber products being featured in the film Terminator 3. The poor market situation for plastic flowerpots and furniture was reflected in both net sales and profitability in North America. Low demand for these products and the high costs of raw material continued to weaken results despite the restructuring made to accommodate the market situation. As a result of these measures, the number of employees in the US has decreased by some 250 in the past year. In Europe, sales varied from country to country. The poor economic situation continued to be reflected in decreased sales in some key markets, primarily UK and Germany. In Finland, sales continued to grow in the third quarter, but taken as a whole, the European sales for the first nine months of 2003 stayed a bit below the previous years level. Inha Works Net sales for Inha Works in the third quarter was EUR 4.2 million, a decrease of 11% compared to the previous year (4.7). However, due to the strong performance in the beginning of the year net sales for the first nine months increased to EUR 19.0 million (18.7). Sales of Buster boats have continued to be good, both in the domestic and export markets. The domestic demand for hinges has also been good. Inha Works operating profit for the third quarter was EUR 0.3 million (0.4). For the first nine months the operating profit was EUR 2.4 million (2.0). The real estate operations continued to post a stable performance. Income from investment operations during the first nine months totaled EUR 31.0 million (59.1) and mainly consisted of dividends received from Wärtsilä in the first quarter and EUR 3 million from investments in funds. CORPORATE PRESIDENT AND CEO Mr. Heikki Allonen, M.Sc. (Eng.), was appointed CEO of Fiskars and Corporate President in April and assumed his post on June 16, 2003. CORPORATE MANAGEMENT Ms. Maija Kutvonen, B.Sc. (Econ.), was appointed Vice President, Corporate Control from November 17, 2003. Mr. Johan Landsdorff, LL.M., was appointed Vice President, Legal Counsel as from April 1, 2003. Mr. Jukka Suonperä, M.Sc. (Eng.) assumed his post as the new President of Inha Works on April 1, 2003. PERSONNEL The corporate workforce totaled 3,789 people at the end of September (4,139). The decrease in personnel is mainly due to rationalization of production in the United States. In North America, the corporation employed 1,986 (2,307) people, while the number of employees in Finland was 893 (893). CAPITAL EXPENDITURE AND INVESTMENTS In the first three quarters of the year, investments in industrial fixed assets totaled EUR 21.1 million (22.9), and EUR 10.9 million (3.2) was placed in long-term investments, mainly in the holdings of Wärtsilä. At the end of the period, Fiskars holds 19.2% of the Wärtsilä share capital and 24.4% of the votes. At the end of September, the market value of Fiskars' portfolio of Wärtsilä shares was EUR 141.9 million. Fiskars also has long-term holdings in capital investment funds. At the end of September, the market value of these holdings was EUR 27.7 million. BALANCE SHEET AND FINANCING The balance sheet total was EUR 758 million, which is a decrease of 11% from September 2002 (848). The cash flow from operations continued to be strong and amounted to EUR 86 million (116). The equity ratio was 55% (51) and gearing 47% (63). The Corporation's liquidity is good. Net financing costs decreased to a total of EUR 9.5 million (12.9) in the first nine months. ANNUAL GENERAL MEETING 2003 The Fiskars Corporation Annual General Meeting, held on March 13, 2003, decided to declare a dividend of EUR 0.70/A-share and EUR 0.68/K-share, in total EUR 38.4 million. The Articles of Association were amended to provide that the minimum number of Board members shall be five and the maximum number nine, and the maximum number of deputy members shall be three. Their term of office will be from their election to the end of the following Annual General Meeting. The retiring members Mr. Göran J. Ehrnrooth and Dr. Thomas Tallberg and the deputy members, Mr. Paul Ehrnrooth and Mr. Alexander Ehrnrooth were reelected. The term of all Board members and deputy members will end at the close of the Annual General Meeting in 2004. KPMG Wideri Oy Ab was appointed auditor. The Annual General Meeting authorized the Board of Directors to acquire and dispose of not more than 1,962,303 A-shares and not more than 805,918 K-shares in the company. The corresponding previous authorizations were revoked. The authorization has not been exercised. SHARE PRICES At the end of September, the price of one Fiskars A-series share on the Helsinki Exchange was EUR 9.20, compared to 7.80 at the beginning of the year, and the price of one K-series share was EUR 9.89 (8.10). The market capitalization of the company was EUR 520 million (437). OUTLOOK Predicting the development of sales for the end of the year is yet again difficult. However, there are signs that indicate that the United States economy is heading for recovery. In Europe, the outlook continues to be uncertain. The corporate net sales in euros will be considerably lower than the previous year. Fiskars announced on October 10, 2003 that it is preparing to book a goodwill and fixed asset impairment of EUR 75 million in the final quarter. The write-downs are almost entirely associated with flower-pot and garden furniture businesses acquired during the latter part of the 1990s. The operating profit for the whole year 2003 without the planned impairment measures is expected to be at the same level as the previous year. The full-year net profit is further influenced by the fact that the profits from investment operations will fall short from that of the previous year. Due to the write-downs, the net profit for the period will be negative. The financial position of the Fiskars Corporation remains however stable. Helsinki, 11.11.2003 Heikki Allonen President and CEO CONSOLIDATED 7-9 7-9 1-9 1-9 change 1-12 INCOME STATEMENT 2003 2002 2003 2002 % 2002 MEUR MEUR MEUR MEUR MEUR NET SALES 134.1 150.5 488.0 582.5 -16 725.5 Cost of goods sold -92.1 -104.3 -334.4 -402.4 -17 -501.5 GROSS PROFIT 41.9 46.2 153.7 180.1 -15 224.0 Other operating costs -37.0 -39.7 -121.2 -132.5 -9 -176.6 RESULT BEFORE RESTRUCTURING ITEMS 4.9 6.6 32.5 47.5 -32 47.4 Restructuring cost 0.0 -0.3 -8.7 -19.3 -55 -19.5 OPERATING PROFIT 4.9 6.2 23.8 28.2 -16 27.9 Income from investments 3.3 0.7 31.0 59.1 -48 59.0 Other financial income 0.4 0.2 0.5 0.3 57 1.5 Financial expense -2.7 -3.7 -10.0 -13.3 -24 -16.3 RESULT BEFORE TAX 5.9 3.5 45.3 74.5 -39 72.1 Taxes for the period -3.1 -1.6 -14.3 -26.4 -46 -22.5 PROFIT FOR THE PERIOD 2.8 1.8 31.1 48.0 -35 49.6 Earnings per share, euro 0.05 0.03 0.56 0.87 0.90 CONSOLIDATED BALANCE SHEET 9/03 9/02 change 12/02 MEUR MEUR % MEUR ASSETS Fixed assets 249.1 299.3 -17 280.1 Long-term investments 218.5 210.4 4 211.4 Inventories 139.0 161.1 -14 160.2 Financial assets 151.0 176.7 -15 157.6 TOTAL 757.7 847.5 -11 809.3 EQUITY AND LIABILITIES EQUITY Share capital 55.4 55.4 0 55.4 Other equity 362.9 375.4 -3 373.7 PROVISIONS 6.7 10.4 -35 5.5 LIABILITIES Long-term 124.3 224.8 -45 183.5 Short-term 208.4 181.6 15 191.3 TOTAL 757.7 847.5 -11 809.3 Diluted equity /share, euro 7.55 7.78 -3 7.75 Equity ratio 55% 51% 9 53% Net gearing 47% 63% -26 57% GROSS INVESTMENTS 32.0 26.1 23 35.2 AVERAGE NUMBER OF EMPLOYEES 3660 4058 -10 4095 7-9 7-9 1-9 1-9 change 1-12 2003 2002 2003 2002 % 2002 Currency rates: USD average rate (I/S) 1.12 0.98 1.11 0.93 20 0.95 USD end-of-period (B/S) 1.17 0.99 1.17 0.99 18 1.05 CONSOLIDATED STATEMENT 7-9 7-9 1-9 1-9 1-12 OF CASH FLOWS 2003 2002 2003 2002 2002 MEUR MEUR MEUR MEUR MEUR From oper. activities 39.0 61.4 85.5 116.1 130.0 From investm. activities -0.7 -5.2 -23.2 -20.5 -29.6 From financing -31.4 -42.5 -58.4 -91.1 -89.6 CHANGE IN CASH 6.9 13.7 3.9 4.5 10.9 Cash at beginning of period 16.4 0.0 19.5 9.5 9.5 Currency transaction adjustm -0.1 -0.3 -0.1 -0.6 -0.8 CASH AT END OF PERIOD 23.2 13.4 23.2 13.4 19.5 NET SALES BY BUSINESS AREA 7-9 7-9 1-9 1-9 change 1-12 2003 2002 2003 2002 % 2002 MEUR MEUR MEUR MEUR MEUR Fiskars Brands 128 144 464 557 -17 693 Inha Works 4 5 19 19 1 23 INDUSTRY TOTAL 132 148 483 576 -16 717 Corporate & real estate 2 3 7 9 -19 12 Eliminations -1 -1 -2 -2 5 -3 CORPORATE TOTAL 134 150 488 583 -16 725 RESULT BY BUSINESS SEGMENT 7-9 7-9 1-9 1-9 change 1-12 2003 2002 2003 2002 % 2002 MEUR MEUR MEUR MEUR MEUR Fiskars Brands 4.8 6.2 23.8 26.8 -11 27.3 Inha Works 0.3 0.4 2.4 2.0 21 2.5 INDUSTRY TOTAL 5.1 6.6 26.2 28.8 -9 29.8 Corporate & real estate -0.2 -0.3 -2.4 -0.5 -354 -1.9 OPERATING PROFIT 4.9 6.2 23.8 28.2 -16 27.9 Income from investments 3.3 0.7 31.0 59.1 -48 59.0 CONSOLIDATED SEGMENTAL RESUL 8.2 6.9 54.8 87.4 -37 86.9 NET SALES BY MARKET AREA 7-9 7-9 1-9 1-9 change 1-12 2003 2002 2003 2002 % 2002 MEUR MEUR MEUR MEUR MEUR Finland 7 7 29 29 0 37 Scandinavia 11 12 42 46 -9 63 Other Europe 24 26 98 108 -9 130 North America 88 99 307 383 -20 473 Other 4 6 12 16 -29 23 CORPORATE TOTAL 134 150 488 583 -16 725 Export from Finland 9 10 41 38 8 51 Short delivery times are a prerequisite in Fiskars' fields of operations. Therefore, the backlog of orders and changes in it are not of significant importance. CONTINGENCIES 9/03 9/02 12/02 MEUR MEUR MEUR FOR THE COMPANY'S OWN COMMITMENTS Real estate mortgages 1 1 1 Pledged assets 0 0 0 Bills of exchange 0 0 1 Lease contingencies 61 69 70 Other contingencies 1 0 1 TOTAL CONTINGENCIES 63 70 72 NOMINAL VALUES OF DERIVATIVE INSTRUMENTS Forward exch. contracts 154 188 167 Interest rate swaps 94 112 105 FRA's 39 51 29 MARKET VALUES OF DERIVATIVE INSTRUMENTS COMPARED TO NOMINAL VALUES Interest rate swaps -6 -11 -10 FRA's 0 0 0 Nominal values also include closed contracts.