Stock exchange release
May 7, 2004
FISKARS CORPORATION INTERIM REPORT JANUA
FISKARS CORPORATION INTERIM REPORT JANUARY-MARCH 2004 (Unaudited) FISKARS OPERATING RESULT FROM INDUSTRIAL OPERATIONS IMPROVED, WÄRTSILÄ CONSOLIDATED AS AN ASSOCIATED COMPANY - Operating profit from industrial operations improved by 25% - Product offering streamlined; volume unchanged from previous year - Corporate net sales decreased by 10% due to 16% weaker dollar rate 16 % - Wärtsilä became Fiskars associated company at the beginning of the year Corporation, January-March EUR million Q1/2004 Q1/2003 2003 Net sales 155.5 173.6 620.3 Operating profit 12.4 9.9 -51.9 Operating result % 8.0 5.7 -8.4 Share of associated Company result 3.2 - - Other investment income 1.3 26.5 31.3 Profit before taxes 14.0 32.6 -30.0 Earnings per share 0.20 0.40 -0.23 Cash-flow from operations -1.6 10.7 83.6 FISKARS CORPORATION The market trend in the United States in Fiskars product sectors was in the first months of the year positive while the uneven development in Europe continued. Corporate net sales totaled EUR 155.5 million (173.6). Denominated in local currencies, net sales remained on the previous years level. The geographical breakdown of net sales has changed largely due to currency exchange rates. In 2002, 68% of corporate net sales were generated in North America. In 2003, the corresponding figure was 60% and in the first quarter of 2004 it was 57%. Another factor contributing to the change besides the currency rates has been the structural measures implemented in the Corporation mainly focused on the US units. Fiskars operating profit improved to EUR 12.4 million (9.9). Wärtsiläs result will be consolidated in the results as from the beginning of 2004. The impact of the holding on the first quarters results was EUR 3.2 million. Fiskars increased its holding in Wärtsilä on April 1, 2004, which resulted in a participation of 21.2% of Wärtsiläs shares and 28.7% of its votes. OPERATIONAL RESULTS Fiskars Brands, Inc. Fiskars Brands net sales totaled EUR 146 million (165). In the United States, the sales volume was unchanged from the previous year and declined slightly in Europe. Fiskars Brands streamlined its product range reducing it by more than 10% during the year. Fiskars Brands dollar denominated operating profit improved by 35% to USD 14.9 million (11.0) and the operating profit to net sales ratio improved to 8.2% (6.2). The US market for School, Office and Craft (FISKARS(R)) products was tight and sales declined from the previous years level. Profitability continued to be good. Sales by Garden Tools & Accessories (FISKARS(R)) increased by 7%. Flower pots where the production today is increasingly often outsourced, were integrated in the US Garden Tools & Accessories operations after the review period. Sales by Housewares (FISKARS(R)) developed well in Scandinavia, and operations in the UK have got off to a good start. Outdoor Recreation (GERBER(R)) products continued their extremely strong growth in the United States and their sales increased by 60%. Gerber received a significant recognition from the worlds leading retailer Wal-Mart that awarded Gerber the distinction of öSupplier of the Year 2003ö in the sporting goods category. The LED lighting business acquired in January has further strengthened Gerbers strong position as a significant supplier of equipment for recreation and leisure. Sales by Consumer Electronics declined to some extent. The products are marketed in North America mainly with the PowerSentry(R) brand. Resin Furniture manufacturer Syroco(R) increased its sales in the American market in spite of the extremely harsh competitive situation, and its result developed positively. The European markets saw a positive growth in Scandinavia and Eastern Europe but the anticipated growth in the German market has not yet materialized. Also in Italy the weakened economic trend affects demand for Fiskars products. In other Central European countries, demand remained flat on the previous year. Sales of garden products suffered to some extent of the delayed growing season. Inha Works Inha Works net sales increased moderately in the first quarter and amounted to EUR 7.6 million (7.5). Thanks to the excellent reception of new Buster(R) models, the volume of current boat orders grew. The sales and result of hinges developed positively; sales of forged products remained unchanged from the previous year. Inha Works operating profit was unchanged at EUR 1.0 million (1.0). Real Estate Operations Real Estate Operations steady sales and profitability trend continued. Wärtsilä and other investment operations Fiskars share of Wärtsiläs result was EUR 3.2 million, and income from other long-term investments amounted to EUR 1.3 million (26.5). PERSONNEL At the end of the review period, the total number of corporate personnel was 4,043 (4,385); 883 (938) of these worked in Finland and 2,191 (2,469) in North America. Fiskars Brands workforce decreased both in the United States and Finland. Attritions in Finland mainly related to fixed-period contracts. WÄRTSILÄ BECOMES ASSOCIATED COMPANY Wärtsilä is consolidated as an associated company in Fiskars financial statements in accordance with the equity method from the beginning of 2004. The result for the first quarter includes a share of Wärtsiläs result based on a holding of 19.2%. The difference between the portion of Wärtsiläs equity held by Fiskars and the cost of Wärtsilä shares acquired by Fiskars is booked as consolidated goodwill according to the Finnish Accounting Standards (FAS). Fiskars share of Wärtsiläs result for the review period was EUR 13.6 million. This result included profits from the sale of Assa Abloy shares; EUR 10.1 million of these were eliminated against the corresponding share of equity. The result booked in the income statement was EUR 3.2 million after goodwill depreciation of EUR 0.2 million. The acquisition cost of Wärtsilä shares in Fiskars balance sheet at January 1, 2004 was EUR 192 million (EUR 16.72/share). The portion of shareholders equity was EUR 176 million and consolidated goodwill was at 16 million. The total cost of the acquired Wärtsilä shares in the balance sheet at March 31, 2004 was EUR 186 million (EUR 16.25/share). The portion of shareholders equity was EUR 171 million and consolidated goodwill was unchanged at EUR 16 million. Fiskars is Wärtsiläs principal shareholder. According to its long-term investment strategy Fiskars increased its Wärtsilä holding after the review period on April 1, 2004. At the beginning of April, Fiskars held 21.2% of Wärtsiläs shares and 28.7% of its votes. The total price of the transactions was approximately EUR 22 million. CAPITAL EXPENDITURE The Corporations industrial investments during the review period amounted to EUR 4 million (7). One of the biggest items relates to Inhas extension that will be completed in summer 2004. Other investments were the acquisition of LED lighting operations and an investment in maintenance and improvement of production. INVESTMENT OPERATIONS In addition to a holding in the associated company Wärtsilä, Fiskars has made long-term fund investments whose value at the end of the period was EUR 20.8 million. The proceeds from these investments amounted to EUR 1.3 million. The total investment income of EUR 26.5 million for the first quarter of 2003 includes dividend income from Wärtsilä including avoir fiscal tax credit. BALANCE SHEET AND FINANCING The balance sheet total of the Group was EUR 706 million (824). The reduction in the balance sheet total is mainly attributable to the weaker dollar rate and impairments booked at the end of the previous financial year. Cash flow from operations was negative at EUR -1.6 million (10.7) due to Wärtsiläs dividend payments and the cyclical nature of operations. Net cash flow from investments was EUR -1.1 million (-14.7). Liquidity remained good. After dividend payments, the shareholders equity has decreased slightly since the year-end. Equity ratio was 49% (51% at the end of December 2003). Gearing stayed on a good level at 66% (57%). PURCHASE AND TRANSFER OF OWN SHARES The Board of Directors has had an authorization to acquire shares of the company. At the turn of the financial year, the Board had exercised its authority and acquired 62,219 A-shares and 300 K- shares for treasury at an aggregate price of EUR 615,007. In addition, the companys own A-shares acquired during 2 6 January 2004 on the basis of the same authorization numbered 30,281 at an aggregate price of EUR 301.110. At March 31, 2004, the company held 92,500 of its A-shares and 300 of its K-shares. ANNUAL GENERAL MEETING 2004 The Annual General Meeting of Fiskars Corporation held on March 16, 2004 decided on a dividend payment of EUR 0.31/share on A- shares and EUR 0.29/share on K-shares, in total EUR 16.8 million. The Meeting determined that the number of Board members shall be seven and the number of deputy members one. Board members Mr. Göran J. Ehrnrooth, Mr. Mikael von Frenckell, Mr. Gustaf Gripenberg, Mr. Olli Riikkala and Dr. Thomas Tallberg were reelected, Mr. Paul Ehrnrooth and Ms. Ilona Ervasti-Vaintola were elected as new members and Mr. Alexander Ehrnrooth was elected deputy member. The term of the Board members and of the deputy member expires at the Annual General Meeting 2005. KPMG Wideri Oy Ab was elected auditor. The Annual General Meeting authorized the Board of Directors to decide during one year starting from March 16, 2004 on the purchase and transfer of not more than 1,869,803 A-shares and not more than 805,618 K-shares. SHARE PRICES The price of Fiskars Series A share on the Helsinki Exchanges at the end of March was EUR 10.05 (EUR 9.40 at the end of 2003) and the price of Series K share EUR 10.15 (10.45). The market capitalization of the Companys shares increased by 4% to EUR 558 million (537). IFRS Fiskars will according to its earlier announcement introduce IFRS as the standard for its accounting practice at the beginning of 2005. OUTLOOK At the publication of this report, the selling season most critical for Fiskars products is in its most active phase. The first quarter met expectations and strengthened anticipations of recovering economy and consumer demand particularly in the United States. For Fiskars products, the sales trend of the early year prevails also in April. Changes in currency exchange rates will continue to have a significant influence on Fiskars net sales and result for the year. It is estimated that an upturn in profitability has started, and the result from the Corporations industrial operations is expected to improve. NEXT INTERIM REPORT Fiskars will publish its next interim report on Monday August 9, 2004, differently from the previously announced Friday August 6, 2004. Heikki Allonen President and CEO CONSOLIDATED 1-3 1-3 change 1-12 INCOME STATEMENT 2004 2003 % 2003 MEUR MEUR MEUR NET SALES 155.5 173.6 -10 620.3 Cost of goods sold -109.4 -124.0 -12 -448.3 GROSS PROFIT 46.1 49.6 -7 172.0 Other operating costs -33.7 -36.7 -8 -139.6 Restructuring cost 0.0 -3.0 -100 -84.2 OPERATING PROFIT 12.4 9.9 25 -51.9 Share of assoc.comp.result 3.2 0.0 0.0 Income from investments 1.3 26.5 -95 31.3 Other financial income 0.0 0.1 -65 2.1 Financial expense -2.9 -3.9 -26 -11.5 PROFIT BEFORE TAXES 14.0 32.6 -57 -30.0 Taxes for the period -2.9 -10.2 -72 17.2 PROFIT (LOSS) FOR THE PERIOD 11.1 22.4 -51 -12.8 Earnings per share, euro 0.20 0.40 -0.23 CONSOLIDATED BALANCE SHEET 3/04 3/03 change 12/03 MEUR MEUR % MEUR ASSETS Fixed assets 190.2 269.5 -29 173.6 Long-term investments 194.6 219.5 -11 215.9 Inventories 124.4 151.8 -18 124.4 Financial assets 196.3 183.3 7 164.6 TOTAL 705.5 824.2 -14 678.4 EQUITY AND LIABILITIES EQUITY Share capital 55.4 55.4 0 55.4 Other equity 288.4 355.8 -19 293.0 PROVISIONS 7.4 7.0 6 8.9 LIABILITIES Long-term 130.8 146.7 -11 123.4 Short-term 223.5 259.4 -14 197.8 TOTAL 705.5 824.2 -14 678.4 Equity/share, euro 6.21 7.43 -16 6.29 Equity ratio 49% 50% -2 51% Net gearing 66% 68% -4 57% GROSS INVESTMENTS 4.6 17.3 -73 37.8 AVERAGE NUMBER OF EMPLOYEES 4060 4127 -2 3633 1-3 1-3 change 1-12 2004 2003 % 2003 Currency rates: USD average rate (I/S) 1.25 1.07 17 1.13 USD end-of-period (B/S) 1.22 1.09 12 1.26 CONSOLIDATED STATEMENT 1-3 1-3 1-12 OF CASH FLOWS 2004 2003 2003 MEUR MEUR MEUR From oper. activities -1.6 10.7 83.6 From investm. activities -1.1 -14.7 -22.4 From financing 1.2 1.3 -63.8 CHANGE IN CASH -1.5 -2.7 -2.6 Cash at beginning of period 16.9 19.5 19.5 Currency transaction adjustm 0.2 -0.3 -0.1 CASH AT END OF PERIOD 15.6 16.5 16.9 NET SALES BY BUSINESS AREA 1-3 1-3 change 1-12 2004 2003 % 2003 MEUR MEUR MEUR Fiskars Brands 146 165 -11 589 Inha Works 8 8 1 24 INDUSTRY TOTAL 154 172 -11 613 Corporate & real estate 2 2 9 10 Eliminations -1 -1 2 -3 CORPORATE TOTAL 156 174 -10 620 RESULT BY BUSINESS SEGMENT 1-3 1-3 change 1-12 2004 2003 % 2003 MEUR MEUR MEUR Fiskars Brands 12.0 10.2 17 -51.4 Inha Works 1.0 1.0 1 2.5 INDUSTRY TOTAL 12.9 11.2 16 -48.9 Corporate & real estate -0.6 -1.3 55 -3.0 OPERATING PROFIT 12.4 9.9 25 -51.9 Share of assoc.comp.result 3.2 0.0 0.0 Income from investments 1.3 26.5 -95 31.3 CONSOLIDATED SEGMENTAL RESUL 16.9 36.4 -54 -20.6 NET SALES BY MARKET AREA 1-3 1-3 change 1-12 2004 2003 % 2003 MEUR MEUR MEUR Finland 11 11 4 38 Scandinavia 16 16 -3 57 Other Europe 35 37 -6 119 North America 89 105 -16 389 Other 5 4 12 18 CORPORATE TOTAL 156 174 -10 620 Export from Finland 18 18 -2 53 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 3/04 3/03 12/03 MEUR MEUR MEUR FOR THE COMPANY'S OWN COMMITMENTS Real estate mortgages 0 1 1 Pledged assets 0 0 0 Bills of exchange 1 0 1 Lease contingencies 53 61 54 Other contingencies 6 1 8 TOTAL CONTINGENCIES 60 63 64 NOMINAL VALUES OF DERIVATIVE INSTRUMENTS Forward exch. contracts 81 193 91 Interest rate swaps 87 92 87 FRA's 36 46 36 MARKET VALUES OF DERIVATIVE INSTRUMENTS COMPARED TO NOMINAL VALUES Interest rate swaps -4 -9 -5 FRA's 0 0 0 Nominal values also include closed contracts.