Stock exchange release
May 11, 2006
FISKARS CORPORATION INTERIM REPORT JANUARY?MARCH 2006
FISKARS CORPORATION INTERIM REPORT JANUARYMARCH 2006 (Unaudited) Fiskars net sales increased; profitability at the same level as last year - Net sales grew by 14% and was EUR 149.5 million (131.5) - Operating profit of EUR 16.3 million (15.1) includes Fiskars' income from associate Wärtsilä - Fiskars Brands production restructuring project continues as planned FISKARS CORPORATION IN BRIEF EUR million Q1 2006 Q1 2005 2005 Net sales 149.5 131.5 551.1 Income from 8.8 6.2 28.6 associate Wärtsilä Operating profit 16.3 15.1 26.6 Operating profit, % 10.9% 11.5% 4.8% Profit before taxes 14.6 13.0 69.4 Earnings per share, EUR 0.16 0.13 0.80 Net cash from 13.2 8.2 62.7 operating activities FISKARS CORPORATION Fiskars net sales for the first quarter increased by 14% from last year to EUR 149.5 million (131.5). Around a third of the growth was due to exchange rate changes. The operating profit was EUR 16.3 million (15.1). This number incorporates the income from the associate Wärtsilä, which was EUR 8.8 million (6.2). The restructuring of production capacity and streamlining of operations at Fiskars Brands, Inc. continues according to plan. EUR 0.6 million in costs associated with the project were booked for the first quarter, as the costs associated with redundancies in the US, announced at the beginning of May, will be booked in the second quarter. Net financial items were EUR 1.7 million (2.1) and the profit before taxes was EUR 14.6 million (13.0). The profit for the period improved from last year, totaling EUR 12.5 million (10.4). Investments during the period were EUR 3.1 million (12.3). No acquisitions were made in the first quarter. FISKARS BRANDS, INC. Fiskars Brands net sales increased to EUR 138.5 million (121.1). Sales increased in all markets, and most of all in Europe. The operating profit, which includes EUR 0.6 million restructuring costs, was EUR 8.0 million or 5.8% (8.5 and 7.0%, respectively). In the US market, sales of School, Office and Craft products as well as Outdoor Recreation products and Consumer Electronics took an upward turn, whereas sales of floor mats and watering products in the Garden and Outdoor Living product category decreased from the previous year. In Europe, sales of gardening products grew significantly. Compared to the past few years, the resources spent in sales and marketing were increased particularly in the United States. Due to that spending and increased competition, the operating profit was on last year's levels despite the improved sales. The restructuring program, begun in the fall of 2005 to streamline the production structure and increase sourcing of labour-intensive products, has continued throughout the period. The total costs of the program are expected to stay within the projected EUR 50 million, of which some EUR 10 million will be booked during the current financial year. Development of the supply chain has progressed as planned. Capital expenditure during the first quarter is mostly related to investments in tools necessary to manufacture new products and product development. The investments totaled EUR 2.2 million (10.4). INHA WORKS Net sales for Inha Works increased by 21% from the previous year and totaled EUR 10.3 million (8.6). The operating profit was EUR 1.1 million (1.0). The boat market continued to grow in Buster's market areas and the plant is working at full capacity. The company is responding to the increase in demand by using more contract manufacturing. The rise in the cost of raw materials, particularly aluminum, increased the manufacturing costs. No significant investments were made during the period. REAL ESTATE GROUP Net sales for the Real Estate Group were EUR 1.1 million (2.6) and the operating profit EUR 0.1 million (0.7). No significant real estate deals were made during the period. The fair value of the standing timber increased during the first quarter by EUR 0.1 million (0.7). Investments by the Real Estate Group totaled EUR 0.7 million (0.8). WÄRTSILÄ Profits for the period for associate Wärtsilä improved from last year, with Fiskars' income from associate for the period totaling EUR 8.8 million (6.2). As the participation in Wärtsilä is reported as one of the business segments in Fiskars' IFRS-compliant financial statements, the income from associate Wärtsilä is reported as part of the operating profit. Fiskars' share of Wärtsilä stock remained unchanged throughout the first quarter and was 16.8% (20.5) with the share of votes being 30.6% (28.1). The book value of Fiskars' investment in the associate was EUR 223.7 million (238.3), of which EUR 38.1 million was goodwill. The market value of Fiskars share of Wärtsilä was EUR 484 million at the end of the period. Fiskars' shareholders' equity includes Fiskars' share of the fair value reserve calculated in accordance with the IAS 39 standard included in Wärtsilä's consolidated shareholders' equity. The value of the reserve was EUR 31.3 million at the end of the review period (37.9). PERSONNEL The number of Fiskars personnel was 3,312 (3,559) at the end of the period, having been 3,284 at the beginning of the period. The number of personnel at Fiskars Brands, Inc. was 2,986, which is a decrease of 223 staff since the end of March 2005. Changes in personnel were caused by seasonal fluctuation and the production restructuring measures already implemented. PROFITS AND TAXES Net financial items during the period decreased somewhat from that of the previous year, totaling EUR 1.7 million (2.1). The profit before taxes was EUR 14.6 million (13.0). Taxes have been calculated on the basis of the local accumulated income and the enacted tax rates while taking into consideration the estimated impact of deferred tax assets. Taxes of EUR 2.1 million (2.7) have been booked on year-to-date accumulated profit. The profit for the period totaled EUR 12.5 million (10.4). Earnings per share were EUR 0.16 (0.13). BALANCE SHEET AND FINANCING The total assets were EUR 702.4 million (702.7 at the beginning of the period). The changes from the beginning of the period in balance sheet items were minor, investment in the associate decreased because of dividends paid, and the seasonal nature of operations increased trade receivables at the beginning of the sales period. The Corporation's interest-bearing net debt increased from the beginning of the period by EUR 26.2 million to EUR 166.2 million (140.0 at the beginning of the period). The increase in debt was mainly due to dividend payout during the period. Net cash from operating activities was EUR 13.2 million (8.2) and net cash used in investing activities was EUR 8.1 million (11.6). The end-of-period equity to assets ratio was 55% (57% at the beginning of the period) and the net gearing ratio was 43% (35% at the beginning of the period). The Corporation's financial situation and liquidity remain strong. In addition to cash and cash equivalents, the Corporation has significant credit facilities available. PURCHASE AND TRANSFER OF OWN SHARES During the period and until the Annual General Meeting, the Board of Directors had an authorization to purchase and sell the Corporation's shares provided that the total nominal value of such shares and the votes carried by them did not exceed five percent (5%) of the share capital and the total votes in the company. The Board did not exercise its authorization during the year. At March 31, 2006, the company held in total 127,512 of its own A shares and 420 K shares. The holding has not changed during the review period, and the number of shares equals 0.2% of the entire share capital of the company. ANNUAL GENERAL MEETING 2006 The Fiskars Corporation Annual General Meeting held on March 20, 2006 decided to pay a dividend of EUR 0.45 per share of Series A, totaling EUR 24,667,641, and EUR 0.43 per share of Series K, totaling EUR 9,703,073.84, for a total of EUR 34,370,714.84. It was decided that the number of Board members be seven. Mr. Kaj-Gustaf Bergh, Mr. Alexander Ehrnrooth, Mr. Paul Ehrnrooth, Ms. Ilona Ervasti- Vaintola, Mr. Gustaf Gripenberg, Mr. Karl Grotenfelt, and Mr. Olli Riikkala were re-elected. The term of the Board members will expire at the end of the Annual General Meeting in 2007. KPMG Oy Ab was elected auditor. The Annual General Meeting decided to authorize the Board of Directors to acquire or divest a number of the company's own shares at the Helsinki Exchanges in a proportion deviating from the shareholders' existing proportionate holdings at share prices quoted on the Helsinki Exchanges at the time of such acquisition or divestment, provided that the total nominal value of such shares and the votes carried by them do not exceed ten percent (10%) of the share capital and the total votes in the company, whereby the authorization concerns a maximum of 5,494,449 of the company's own shares of Series A and a maximum of 2,256,570 of Series K. The authorization is valid for a period of one year from March 20, 2006. Convening after the Annual General Meeting, the Board elected Olli Riikkala its Chairman, and Alexander Ehrnrooth and Paul Ehrnrooth as Vice Chairmen. The Board appointed Gustaf Gripenberg Chairman of the Audit Committee and Alexander Ehrnrooth, Paul Ehrnrooth and Ilona Ervasti- Vaintola its other members. The Board appointed Olli Riikkala chairman of the Compensation Committee and Kaj-Gustaf Bergh and Karl Grotenfelt its other members. SHARE PRICES At the end of March 2006, the price of the Fiskars A share at the Helsinki Exchanges was EUR 10.16 (9.60 at the start of the year) and the price of the K share EUR 10.79 (9.90). The market value of the Corporation's share capital was EUR 802 million at the end of the review period. SUBSEQUENT EVENTS SINCE THE END OF THE QUARTER In October 2005, Fiskars announced that there would be a reorganization of the company's production capacity in the United States. Notification of the project's progress was given on May 3, 2006. As planned, Fiskars Brands, Inc. is expanding its sourcing activities and will discontinue manufacturing at four of its industrial locations in the US during the current financial year. These measures are targeted to create cost savings so as to improve competitiveness and profitability. Fiskars Brands will also continue implementing its strategy of concentrating on core products by discontinuing two minor non-core product categories. These decisions will reduce the number of employees in the US by approximately 430 people during the financial year. Two manufacturing facilities will be closed in Wisconsin and in future the products will be outsourced. One of the facilities will continue as a distribution center. Personnel reduction in this area will be around 300. The facilities have been manufacturing mainly cutting tools such as scissors and other craft products. Other measures will be taken in Georgia, where manufacturing and marketing of rubber floor-mats will be discontinued; and in Arizona, where the soaker hose business will be discontinued. Personnel reductions in these businesses will total 130 and they have an annual net sales level of approximately EUR 20 million. These restructuring measures will have little effect on this year's corporate net sales or operating results before restructuring costs. Due to these measures, preliminary estimates suggest that the second quarter results will include personnel and other costs related to the reorganization of some EUR 4.5 million. OUTLOOK As stated earlier, Fiskars' net sales and operating profit for the last year before the Corporation's income from associate Wärtsilä and before planned and announced restructuring costs are expected to be at last year's level. Comparing the first quarter of this year to last year and before income from associate Wärtsilä, Fiskars had a strong start even though unseasonably cold weather hit Europe towards the end of the period, influencing sales unfavorably. The positive impact of the structural measures is expected to take effect gradually during the latter part of the year and predominantly during 2007. Fiskars' income from associate Wärtsilä forms a significant part of the Corporation's operating profit. Heikki Allonen President and CEO NOTES TO THE INTERIM REPORT This interim report has been prepared in accordance with International Accounting Standard 34 (IAS 34) Interim Financial Reporting. Use of estimates Complying with the IFRS standards in preparing financial statements requires the management to make estimates and assumptions. Such estimates affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses. Although these estimates are based on the management's best knowledge of current events and actions, actual results may differ from these estimates. Income from associate The Fiskars Corporation participation in the associate Wärtsilä is one of the Corporation's reported business segments. The income from the associate is included in the operating profits as of January 1, 2006 and the figures for the corresponding periods have been adjusted accordingly. As of January 1, 2006, Fiskars complies with the following amended and new IFRS standards: IAS 39 Financial instruments: Recognition and Measurement: Amendments after March 31, 2004: - Cash flow hedges of forecast intragroup transactions, issued April 14, 2005; effective from January 1, 2006 - Financial guarantee contracts; issued August 18, 2005; effective from January 1, 2006 The adoption of these amendments has not had any significant impact on the Corporation's first quarter financial statements. IAS 19 Employee benefits: amendment of actuarial gains and losses, group plans and disclosures; issued December 16, 2004; effective from January 1, 2006. - The amendment introduces an alternative option regarding the recognition of actuarial gains and losses for defined benefit pension plans and also adds new disclosure requirements. As the Corporation does not intend to change the accounting policy adopted for recognition of actuarial gains and losses, adoption of this amendment will only impact the format and extent of disclosures presented in the annual financial statements. IFRIC 4 interpretation: Determining whether an arrangement contains a lease; issued December 2, 2004; effective from January 1, 2006. - The adoption of this interpretation has no significant impact on the Corporation's first quarter financial statements. CONSOLIDATED 1-3 1-3 chg 1-12 INCOME STATEMENT 2006 2005 % 2005 MEUR MEUR MEUR NET SALES 149.5 131.5 14 551.1 Cost of goods sold -105.9 -91.8 15 -397.0 GROSS PROFIT 43.5 39.8 9 154.1 Other operating income 0.1 0.1 9 2.3 Sales and marketing expenses -20.5 -16.7 23 -68.9 Administration expenses -13.4 -12.8 4 -46.5 Research and development costs -1.6 -1.3 18 -5.6 Other operating expenses -0.6 -0.1 -37.4 Income from associate 8.8 6.2 42 28.6 OPERATING PROFIT 16.3 15.1 8 26.6 Gain on sale of Wärtsilä shares 49.8 Financial income and expenses -1.7 -2.1 -18 -7.1 PROFIT BEFORE TAXES 14.6 13.0 12 69.4 Taxes -2.1 -2.7 -22 -7.3 PROFIT (LOSS) FOR THE PERIOD 12.5 10.4 21 62.1 Earnings per share, euro 0.16 0.13 0.80 Earnings per share is undiluted. The company has no open option programs. CURRENCY RATES 1-3 1-3 chg 1-12 2006 2005 % 2005 USD average rate (I/S) 1.20 1.31 -8 1.24 USD end-of-period (B/S) 1.21 1.30 -7 1.18 CONSOLIDATED BALANCE SHEET 3/06 3/05 chg 12/05 MEUR MEUR % MEUR ASSETS Intangible assets 12.9 11.5 12 13.5 Goodwill 12.5 30.2 -59 12.8 Tangible assets 106.6 122.2 -13 110.9 Biological assets 29.9 31.0 -4 29.9 Investment property 9.2 15.0 -39 9.4 Investments in associates 223.7 238.3 -6 231.9 Other shares 5.5 4.3 27 4.8 Other investments 1.3 1.3 4 1.3 Long-term tax receivables 9.1 10.1 -10 9.0 Deferred tax assets 34.4 36.6 -6 35.0 LONG-TERM TOTAL 445.0 500.6 -11 458.5 Inventories 126.7 124.3 2 129.3 Trade receivables 115.6 107.9 7 86.9 Other receivables 8.9 23.9 -63 6.4 Cash in hand and at bank 6.1 6.4 -5 21.7 CURRENT TOTAL 257.4 262.4 -2 244.2 ASSETS TOTAL 702.4 763.0 -8 702.7 EQUITY AND LIABILITIES Equity 387.0 354.8 9 402.7 L/t interest bear.debt 139.4 157.8 -12 124.5 L/t non-interest bear.debt 2.7 3.3 -20 2.7 Deferred tax liabilities 17.8 20.6 -14 17.6 Pension liability 15.2 13.3 15 15.5 Provisions 2.6 2.7 -3 2.9 LONG-TERM LIABILITY TOTAL 177.7 197.8 -10 163.1 S/t interest bear.debt 32.9 88.6 -63 37.2 Trade payable and other non-interest bearing debt 99.7 115.3 -14 94.6 Income tax payable 5.1 6.5 -22 5.1 CURRENT LIABILITY TOTAL 137.7 210.4 -35 136.9 EQUITY AND LIABILITIES TOTAL 702.4 763.0 -8 702.7 CONSOLIDATED STATEMENT 1-3 1-3 1-12 OF CASH FLOW 2006 2005 2005 MEUR MEUR MEUR CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxes 14.6 13.0 69.4 Adjustments for Depreciation 6.5 5.7 58.7 Income from associate -8.8 -6.2 -28.6 Investment income (net) -0.6 -0.8 -52.3 Interest expense (net) 2.3 2.9 9.5 Chg in value of biological assets 0.1 0.1 0.5 Dividends from assoc.comp. 23.7 17.1 17.1 Dividends received, other 0.0 0.0 0.1 Financial costs paid (net) -1.5 -2.1 -8.3 Taxes paid -1.8 -2.0 -6.7 Change in interest free assets -27.8 -36.4 8.1 Change in inventories 0.5 -11.5 -7.8 Change in interest free liability 6.0 28.4 3.0 NET CASH FROM OPERATING ACTIVITIES(A) 13.2 8.2 62.7 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions -5.9 -11.9 Transact. in assoc. comp. shares 74.4 Capital expenditure -3.1 -6.2 -19.0 Proceeds from sale of fixed asset 0.0 0.2 2.9 Sale of other l/t investments 0.1 0.6 1.7 Purchase of other l/t investments -5.2 -0.3 -0.2 NET CASH USED IN INVESTING ACTIVITIES(B) -8.1 -11.6 47.9 CASH FLOWS FROM FINANCING ACTIVITIES New long-term loans 15.0 5.0 Amortization of l/t loans -4.2 0.0 -32.8 Changes in short-term loans 0.8 16.7 -39.8 Financial leases, payments -0.7 -0.7 -3.7 Other financing items 0.1 -2.2 -3.1 Dividends paid -34.4 -22.8 -22.8 NET CASH FLOW FROM FINANC. ACTIVITIES(C) -23.4 -3.9 -102.3 Translation difference (D) 2.8 -1.9 -2.3 CHANGE IN CASH (A+B+C+D) -15.6 -9.2 6.1 Cash at beginning of period 21.7 15.6 15.6 Cash at end of period 6.1 6.4 21.7 STATEMENT OF CHANGES IN Other CONSOLIDATED EQUITY ATTRIBUTABLE Share Own reser-Transl.Retain. TO EQUITY HOLDERS OF THE PARENT capital shares vesadjustm earn. Total MEUR MEUR MEUR MEUR MEUR MEUR Dec.31,2004 IFRS 77.5 -0.9 0.0 -1.4 260.5 335.8 Adoption of IAS 39 Fiskars Corporation -0.4 0.4 0.1 Associated company Wärtsilä 37.8 37.8 Jan.1,2005 IFRS 77.5 -0.9 37.5 -1.4 261.0 373.7 Translation differences 1.1 1.1 Other changes in assoc. company 0.1 -7.7 -7.5 NET INCOME RECOGNISED DIRECTLY IN EQUITY 0.1 1.1 -7.7 -6.5 Net profit for the period 10.4 10.4 TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD 0.1 1.1 2.7 3.9 Dividend distribution -22.8 -22.8 Mar.31,2005 IFRS 77.5 -0.9 37.6 -0.3 240.9 354.8 Translation differences 0.3 0.3 Change in fair value reserve 0.4 0.4 Chg in investment in associates -6.9 -6.9 Other changes in assoc. company -6.4 1.2 7.6 2.4 NET INCOME RECOGNISED DIRECTLY IN EQUITY -12.9 1.4 7.6 -3.8 Net profit for the period 51.8 51.8 TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD -12.9 1.4 59.4 47.9 Dec.31,2005 IFRS 77.5 -0.9 24.7 1.2 300.3 402.7 Translation differences -0.6 -0.6 Change in fair value reserve, associate 6.6 6.6 Other changes in assoc. company 0.1 0.0 0.1 NET INCOME RECOGNISED DIRECTLY IN EQUITY 6.6 -0.5 0.0 6.1 Net profit for the period 12.5 12.5 TOTAL RECOGNISED INCOME AND EXPENSE FOR THE PERIOD 6.6 -0.5 12.5 18.6 Dividend distribution -34.4 -34.4 Mar.31,2006 IFRS 77.5 -0.9 31.3 0.7 278.4 387.0 Fiskars shares of associated company Wärtsilä's fair value reserve and its changes are specified in the other reserves above. KEYFIGURES 3/06 3/05 chg 12/05 % Equity/share, euro 5.00 4.59 9 5.20 Equity ratio 55% 46% 57% Net gearing 43% 68% 35% Equity, meur 387.0 354.8 9 402.7 Net interest bear.debt, meur 166.2 240.0 -31 140.0 Average number of employees 3293 3539 -7 3476 SEGMENTINFORMATION 1-3 1-3 chg 1-12 NET SALES 2006 2005 % 2005 MEUR MEUR MEUR Fiskars Brands 138.5 121.1 14 513.3 Inha Works 10.3 8.6 21 32.4 Real Estate 1.1 2.6 -55 8.9 Unallocated and eliminations -0.5 -0.7 -33 -3.5 CORPORATE TOTAL 149.5 131.5 14 551.1 Export from Finland 17.8 18.9 -6 55.5 SEGMENTINFORMATION 1-3 1-3 1-12 RESULT 2006 2005 2005 MEUR MEUR MEUR Fiskars Brands 8.0 8.5 -1.6 Inha Works 1.1 1.0 3.5 Real Estate 0.1 0.7 2.0 Associate Wärtsilä 8.8 6.2 28.6 Unallocated and eliminations -1.7 -1.2 -5.8 OPERATING PROFIT 16.3 15.1 26.6 SEGMENTINFORMATION 1-3 1-3 1-12 DEPRECIATION AND AMORTIZATION 2006 2005 2005 ACCORDING TO PLAN MEUR MEUR MEUR Fiskars Brands 5.8 5.1 55.9 Inha Works 0.3 0.2 1.0 Real Estate 0.3 0.3 1.3 Unallocated and eliminations 0.0 0.1 0.5 CORPORATE TOTAL 6.5 5.7 58.7 SEGMENTINFORMATION 1-3 1-3 1-12 INVESTMENTS 2006 2005 2005 MEUR MEUR MEUR Fiskars Brands 2.2 10.4 24.1 Inha Works 0.2 0.7 3.4 Real Estate 0.7 0.8 2.9 Associate Wärtsilä 30.2 Unallocated and eliminations 0.0 0.3 0.4 CORPORATE TOTAL 3.1 12.3 60.9 GEOGRAPHICAL SEGMENT 1-3 1-3 chg 1-12 NET SALES BASED ON CUSTOMER 2006 2005 % 2005 LOCATION MEUR MEUR MEUR Europe 68.9 60.0 15 220.1 USA 70.9 64.3 10 292.9 Rest of the world 9.7 7.2 34 38.1 CORPORATE TOTAL 149.5 131.5 14 551.1 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 3/06 3/05 12/05 MEUR MEUR MEUR FOR THE COMPANY'S OWN COMMITMENTS Real estate mortgages 0 Pledged assets 1 Bills of exchange 0 0 0 Lease contingencies 21 18 23 Other contingencies 1 0 1 TOTAL 22 20 24 GUARANTEES AS SECURITY FOR OTHER PARTIES' COMMITMENTS Real estate mortgages 2 TOTAL CONTINGENCIES 24 20 24 NOMINAL AMOUNTS OF DERIVATIVES Forward exch. contracts 111 138 145 Currency options 4 4 Interest rate swaps 23 FRA's 31 59 MARKET VALUE VS. NOMINAL AMOUNTS OF DERIVATIVES Forward exch. contracts 1 -1 -2 Currency options 0 0 Interest rate swaps 0 FRA's 0 0 Nominal values also include closed contracts.