Stock exchange release
November 10, 2004
FISKARS CORPORATION?S PROFITABILITY IMPROVED DURING REVIEW PERIOD
Fiskars Corporation Interim Report January September 2004 (Unaudited) FISKARS CORPORATIONS PROFITABILITY IMPROVED DURING REVIEW PERIOD Highlights of third quarter 7 9 / 2004 - Net sales Q3/2004 unchanged from previous year at EUR 134.4 million (134.1). - Resin garden furniture operations divested. - EUR 3.9 million operating profit (4.9) includes non-recurring loss of EUR 3.9 million (0.0) on sale of garden furniture operation. - Change of president in Fiskars Brands. Highlights of review period 1 9 / 2004 - Net sales declined by 3.6% to EUR 470.3 million (488,0). - Operating profit improved to EUR 33.3 million (23.8). - Fiskars share of Wärtsiläs result for the first nine months was EUR 11.2 million. In the comparison period, the dividends received represented EUR 25.6 million of the total investment income of EUR 31.0 million. FISKARS CORPORATION IN BRIEF EUR million Q3/2004 Q3/2003 9 mths/2004 9 mths/2003 2003 net sales 134.4 134.1 470.3 488.0 620.3 operating profit 3.9 4.9 33.3 23.8 -51.9 operating profit, % 2.9% 3.7% 7.1% 4.9% -8.4% share of the result of associated company 3.8 - 11.2 - - other investment income 0.2 3.3 5.3 31.0 31.3 profit before taxes 6.0 5.9 42.5 45.3 -30.0 earnings per share 0.05 0.05 0.55 0.56 -0.23 cash flow from operations 18.6 39.0 50.8 85.5 83.6 OPERATIONS FISKARS BRANDS, INC. July September (3 months) Fiskars Brands net sales were at EUR 127,6 million (128,2). Sales expressed in dollars exceeded the sales of the previous corresponding period by 8.0% and totaled USD 155.9 million (144.3) Business development was continued and garden furniture manufacturer Syroco was divested at the beginning of September. Operating profit of EUR 4.1 million for the third quarter represented 3.2% of sales (4.8 and 3.8%) and includes a non-recurring loss of EUR 3.9 million on the sale of Syrocos operating assets. Sales for the third quarter declined from the second quarter due to the cyclical nature of Fiskars Brands operations. Sales of School, Office and Craft products did not reach targets while demand for Garden Tools and Accessories was quite satisfactory. The rapid growth in sales of Outdoor Recreation products continued (44%). Sales of Consumer Electronics products also developed favorably and their products had been successfully introduced into new retail channels. Positive demand trend in Scandinavia continued while economy and Fiskars market development in southern and central Europe was unfavorable. January - September (9 months) Net sales in the first three quarters of the year totaled EUR 442.8 million (464.0) which is 4.6% less than previous year. The net sales trend expressed in dollars was positive; sales grew by 5.2% to USD 542.2 million (515.4). Operating profit improved and was EUR 32.7 million (23.8) representing 7.4% (5.1) of net sales. The operating result of the company for the review period was weakened by non- recurring expenses of EUR 3.9 million (8.7). In the first three quarters, Fiskars Brands markets in the United States saw a moderately positive development. Demand in Scandinavia was on the increase but consumer demand in Germany and Italy remains weak. Poor weather in the UK had an adverse effect on the sales for the year which had gotten off to a good start in other respects. The School, Office and Craft (FISKARS(R)) lines are an important Fiskars Brands operation in a competitive environment. The prime selling season at the beginning of the school year was somewhat weaker than anticipated. The business area has been appointed a new President, and there will be an increased focus on developing new products. Overall demand for Garden Tools and Accessories (FISKARS(R)) was satisfactory and the competitiveness continued improving. The business area has enhanced the efficiency of production and marketing of the recently integrated flowerpot and doormat product lines. It will also continue rationalization measures in order to improve the profitability of these product lines. Sales of Outdoor Recreation (GERBER(R)) products in the US market continued their strong growth. New successful products were launched during the period, LED lighting products were added to the offerings, and establishing new retail distribution channels also boosted sales. Sales of Consumer Electronics (Power-Sentry(R)) developed positively. New products and a better service standard have also supported opening of new sales channels for the product line. The European market continues to be heterogeneous. Sales in Scandinavia developed favorably, particularly as a result of successful marketing of new garden tools. Kitchenware operations were activated and new product series will be launched shortly. In September, the distribution channels began to prepare for the snow tools season. Demand trend in continental Europe has been weak to date, due to the overall economic situation and partly also to the poor weather conditions during the summer. New products were launched in the UK; this was, however, not sufficient to compensate for the slackened demand for some traditional products. A new kitchen knife line was launched in Italy and will be introduced also in other European markets. INHA WORKS Inha Works net sales for the third quarter increased by 34% to EUR 5.6 million compared with the previous corresponding period (4.2). Net sales for the first nine months grew by 21% to EUR 22.9 million (19.0). Strong demand for Buster(R) boats continued even after the normal selling season and has this year exceeded overall market growth. The new painted aluminum boats with a high quality surface finish were presented in September and will be launched next year. Interest in these novelty products has been great among dealers and media, and will be introduced to the public in Scandinavian boat shows next spring. Steady demand for hinges continued both in domestic and export markets. The forge was working at capacity. Rising steel prices have an adverse impact the otherwise good profitability of these products. Inha Works operating profit for the third quarter was EUR 0.4 million (0.3) and for the nine first months EUR 2.7 million (2.4). REAL ESTATE OPERATIONS The net sales trend and profitability of the Real Estate Operations developed positively. WÄRTSILÄ Wärtsilä is reported as an associated company in Fiskars consolidated financial statements as of the beginning of 2004. The nine-month result includes a share of Wärtsiläs result in proportion of Fiskars holding in the respective period deducted by goodwill amortization. Fiskars share of the results of the associated company for the third quarter was EUR 3.8 million and for the nine months EUR 11.2 million. At the end of the period, Fiskars held 20.5% of Wärtsiläs shares and 28.1% of the votes. The book value of the shares at the end of September was EUR 214.7 million and their market capitalization was EUR 240 million. INVESTMENT ACTIVITIES During the review period, Fiskars has divested the bulk of its investments in private equity following the sale of its interest in EQT Funds. Income from the remaining investments for the third quarter was EUR 0.2 million (3.3) and for the first nine months EUR 5.3 million (31.0). Dividend income from Wärtsilä was still included in investment income for 2003. PERSONNEL At the end of the period, the total number of corporate personnel was 3,495 (3,789); 1,572 (1,884) of these worked in North America and 900 (893) in Finland. At the end of September 2003, the number of personnel in Syroco which was divested during the review period was 261. FISKARS BRANDS, INC.S MANAGEMENT Fiskars Brands, Inc.s President and CEO Mr. William J. Denton resigned from his post at the end of September 2004. Under his four- year term of office and his leadership the new Management Group implemented far-reaching structural programs in difficult market situations. A marked improvement in the working capital was also achieved. Mr. Denton's services continue to be available to the Board of Directors. Mr. Jim Purdin, the Chief Operative Officer of the Company, was appointed President and CEO of Fiskars Brands as from 15 October 2004. CAPITAL EXPENDITURE Investments in industrial fixed assets and real estates during the first nine months amounted to EUR 13.7 million (21.1). Investments in securities were EUR 22.7 million (10.9) and mostly consisted of shares in the associated company Wärtsilä Plc. BALANCE SHEET AND FINANCING The balance sheet total was EUR 659 million (758) and has decreased by EUR 19 million since the beginning of the financial year. The decrease is attributable both to divestments and systematic reduction of working capital. Cash flow and liquidity are strong. At the end of the review period equity ratio was at 55% which is 4% higher than at the end of the financial year 2003. Net gearing improved from 57% at the year-end to 49%. Interest-bearing net liabilities decreased by EUR 24 million from the year-end and were EUR 175 million. Net financing costs decreased and were EUR 2.0 million (2.3) in the third quarter and EUR 7.4 million (9.5) for the three first quarters of the year. PURCHASE AND TRANSFER OF OWN SHARES The corporate Board of Directors has an authorization to acquire the companys own shares. The Board did not exercise this authority during the third quarter. At September 30, 2004, the company held altogether 91,080 of its shares of series A and 300 shares of series K. 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. CORPORATE GOVERNANCE The Corporate Governance Recommendation for Listed Companies issued by HEX Plc, the Central Chamber of Commerce of Finland and the Confederation of Finnish Industry and Employers entered into force on July 1, 2004. Fiskars follows the recommendations. SHARE PRICES The price of Fiskars A-share on the Helsinki Exchanges at the end of September was EUR 10.89 (9.40 at the beginning of the year) and the price of K-share EUR 10.90 (10.45). The market capitalization of the companys shares at the end of September was EUR 600 million. IFRS According to its earlier announcement, Fiskars will introduce IFRS as the standard for its accounting practice at the beginning of 2005. The January March Interim Report will be the first one prepared in accordance with IFRS. The project is progressing according to plan, reporting differences have been identified, comparison data for this year are being collected, and systems are being updated in accordance with the requirements of the new reporting practice. SIGNIFICANT EVENTS AFTER THE REVIEW PERIOD Extraordinary General Meeting: Fiskars Corporations Board of Directors has decided to convene an Extraordinary General Meeting for December 3, 2004. - The Board will propose that the Extraordinary General Meeting decide on an additional dividend payment of EUR 1.00/A-share and EUR 0.98/K-share. - The Board will also propose a rights issue under which two new A- shares will be issued for each five A-shares and two new K-shares for each five K-shares, respectively. Capital loan: In addition, Fiskars Corporations Board has decided to issue a capital loan of not more than EUR 30 million for subscription by shareholders. The loan will be publicly quoted and the listing prospectus will be published on December 2, 2004. OUTLOOK Fiskars third quarter was a sequel to the positive trend of the first six months. Sales of the last quarter will be the weakest one of the financial year due to the cyclical nature of operations but is not expected to affect the performance trend of the company. Fiskars will continue efforts to improve its activities and organize its production and organization according to the market situation. The operational result for the financial year is expected to improve from the previous year . Heikki Allonen President & CEO CONSOLIDATED 7-9 7-9 chg 1-9 1-9 chg 1-12 INCOME STATEMENT 2004 2003 % 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR NET SALES 134.4 134.1 0 470.3 488.0 -4 620.3 Cost of goods sold -93.1 -97.0 -4 -331.3 -352.0 -6 -448.3 GROSS PROFIT 41.3 37.0 11 139.0 136.1 2 172.0 Other operating costs -33.4 -32.1 4 -101.8 -103.6 -2 -139.6 Restructuring cost -3.9 0.0 -3.9 -8.7 -84.2 OPERATING PROFIT 3.9 4.9 -19 33.3 23.8 40 -51.9 Share of assoc.comp.result 3.8 0.0 11.2 0.0 0.0 Income from investments 0.2 3.3 -93 5.3 31.0 -83 31.3 Other financial income 0.1 0.4 -81 0.2 0.5 -54 2.1 Financial expense -2.1 -2.7 -22 -7.6 -10.0 -24 -11.5 PROFIT BEFORE TAXES 6.0 5.9 2 42.5 45.3 -6 -30.0 Taxes for the period -3.3 -3.1 7 -12.0 -14.3 -16 17.2 PROFIT (LOSS) FOR THE PERIOD 2.7 2.8 -4 30.5 31.1 -2 -12.8 Earnings per share, euro 0.05 0.05 0.55 0.56 -0.23 Currency rates: 7-9 7-9 chg 1-9 1-9 chg 1-12 2004 2003 % 2004 2003 % 2003 USD average rate (I/S) 1.22 1.12 9 1.23 1.11 10 1.13 USD end-of-period (B/S) 1.24 1.17 6 1.24 1.17 6 1.26 CONSOLIDATED BALANCE SHEET 9/04 9/03 chg 12/03 MEUR MEUR % MEUR ASSETS Fixed assets 185.2 249.1 -26 173.6 Long-term investments 199.9 218.5 -8 215.9 Inventories 116.8 139.0 -16 124.4 Financial assets 157.3 151.0 4 164.6 TOTAL 659.2 757.7 -13 678.4 EQUITY AND LIABILITIES EQUITY Share capital 55.4 55.4 0 55.4 Other equity 305.4 362.9 -16 293.0 PROVISIONS 4.2 6.7 -37 8.9 LIABILITIES Long-term 99.9 124.3 -20 123.4 Short-term 194.3 208.4 -7 197.8 TOTAL 659.2 757.7 -13 678.4 KEYFIGURES 9/04 9/03 chg 12/03 % Equity/share, euro 6.52 7.55 -14 6.29 Equity ratio 55% 55% -1 51% Net gearing 49% 47% 3 57% Equity, meur 360.8 418.3 -14 348.3 Net interest-bear.debt, meur 175.2 196.8 -11 198.6 Gross investments, meur 36.4 32.0 14 37.8 Avarage number of employees 3894 3660 6 3633 CONSOLIDATED STATEMENT 7-9 7-9 1-9 1-9 1-12 OF CASH FLOWS 2004 2003 2004 2003 2003 MEUR MEUR MEUR MEUR MEUR From oper. activities 18.6 39.0 50.8 85.5 83.6 From investm. activities 1.9 -0.7 -6.0 -23.2 -22.4 From financing -34.3 -31.4 -55.2 -58.4 -63.8 CHANGE IN CASH -13.8 6.9 -10.4 3.9 -2.6 Cash at beginning of period 20.5 16.4 16.9 19.5 19.5 Currency transaction adjustm. -0.1 -0.1 0.1 -0.1 -0.1 CASH AT END OF PERIOD 6.6 23.2 6.6 23.2 16.9 NET SALES 7-9 7-9 chg 1-9 1-9 chg 1-12 BY BUSINESS AREA 2004 2003 % 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR Fiskars Brands 128 128 -1 443 464 -5 589 Inha Works 6 4 34 23 19 21 24 INDUSTRY TOTAL 133 132 1 466 483 -4 613 Corporate & real estate 2 2 -13 7 7 -6 10 Eliminations -1 -1 15 -2 -2 4 -3 CORPORATE TOTAL 134 134 0 470 488 -4 620 RESULT 7-9 7-9 chg 1-9 1-9 chg 1-12 BY BUSINESS SEGMENT 2004 2003 % 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR Fiskars Brands 4.1 4.8 -14 32.7 23.8 37 -51.4 Inha Works 0.4 0.3 36 2.7 2.4 14 2.5 INDUSTRY TOTAL 4.5 5.1 -12 35.4 26.2 35 -48.9 Corporate & real estate -0.6 -0.2 172 -2.1 -2.4 -12 -3.0 OPERATING PROFIT 3.9 4.9 -19 33.3 23.8 40 -51.9 Share of assoc.comp.result 3.8 0.0 11.2 0.0 0.0 Income from investments 0.2 3.3 -93 5.3 31.0 -83 31.3 CONSOLIDATED SEGMENTAL RESULT 8.0 8.2 -2 49.9 54.8 -9 -20.6 NET SALES 7-9 7-9 chg 1-9 1-9 chg 1-12 BY MARKET AREA 2004 2003 % 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR Finland 8 7 11 32 29 9 38 Scandinavia 13 11 26 46 42 10 57 Other Europe 23 24 -2 94 98 -4 119 North America 84 88 -5 283 307 -8 389 Other 6 4 48 15 12 31 18 CORPORATE TOTAL 134 134 0 470 488 -4 620 Export from Finland 11 9 20 42 41 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 9/04 9/03 12/03 MEUR MEUR MEUR FOR THE COMPANY'S OWN COMMITMENTS Real estate mortgages 0 1 1 Pledged assets 1 0 0 Bills of exchange 0 0 1 Lease contingencies 44 61 54 Other contingencies 6 1 8 TOTAL CONTINGENCIES 51 63 64 NOMINAL VALUES OF DERIVATIVE INSTRUMENTS Forward exch. contracts 105 154 91 Interest rate swaps 40 94 87 FRA's 32 39 36 MARKET VALUES OF DERIVATIVE INSTRUMENTS COMPARED TO NOMINAL VALUES Interest rate swaps -1 -6 -5 FRA's 0 0 0 Nominal values also include closed contracts.