Stock exchange release
August 9, 2004
INTERIM REPORT JANUARY ? JUNE 2004
FISKARS CORPORATION INTERIM REPORT JANUARY JUNE 2004 (Unaudited) FISKARS OPERATING PROFIT FOR SECOND QUARTER IMPROVED AND CASH FLOW CONTINUED STRONG - Operating profit improved from the previous corresponding period to EUR 17.0 million (9.0) - Net sales for second quarter was unchanged from previous year at EUR 180.4 million (180.4) - Fiskars increased its participation in Wärtsilä, which became an associated company - Holdings in EQT Funds were divested FISKARS CORPORATION April - June (3 months) EUR million Q2/2004 Q2/2003 Net sales 180.4 180.4 Operating profit 17.0 9.0 Operating profit, % 9.4% 5.0% Share of the result of asociated company 4.2 0.0 Other investment income 4.4 1.2 Profit before taxes 22.5 6.9 Earnings per share 0.30 0.11 Cash flow from operations 33.7 35.9 FISKARS CORPORATION January - June (6 months) A change in Fiskars reporting structure, impacting the accounts from the beginning of this year, took place following the increase in holding in Wärtsilä at the beginning of April. Fiskars result will now include a share of Wärtsiläs result, while in the previous years the dividends received annually from Wärtsilä were recorded as income. Fiskars share of Wärtsiläs result for the first six months was EUR 7.4 million. In the comparison period, the dividends received represented EUR 25.6 million of the total investment income of EUR 27.7 million. EUR million 6 mths/04 6 mths/03 2003 Net sales 335.9 354.0 620.3 Operating profit 29.4 18.9 -51.9 Operating profit, % 8.8% 5.3% -8.4% Share of the result of associated company 7.4 0.0 0.0 Other investment income 5.7 27.7 31.3 Profit before taxes 36.5 39.5 -30.0 Earnings per share 0.50 0.51 -0.23 Cash flow from operations 32.2 46.5 83.6 OPERATIONS FISKARS BRANDS, INC. April June (3 months) Fiskars Brands, Inc.s dollar denominated net sales totaled USD 203.7 million and exceeded the sales of the previous corresponding quarter by 5.0 per cent. Euro denominated sales remained unchanged from the previous year. The positive profitability trend of operations continued. Operating profit for the second quarter was EUR 16.6 million and accounted for 9.8% of total sales (8.8 and 5.1%, respectively). A visible trend in the operational environment was that major retail chains particularly in the United States are now reducing their product line inventories increasingly aggressively at the end of each season. This makes forecasting of demand and planning of production more difficult. Sales of garden furniture were more lively than anticipated, but on the other hand, demand for garden tools, although reasonably good, did not quite meet expectations. Poor weather conditions in continental Europe had an adverse impact on the sales. January - June (6 months) The net sales trend expressed in dollars was positive in the first half-year, and sales increased by 4% to USD 386.3 million (371.1). Euro denominated sales declined by 6% from the previous corresponding period to EUR 315.3 million (335.8). Operating result was EUR 28.6 million (19.0), or 9.1% of net sales (5.6). The operating result of the 2003 comparison period was weakened by non-recurring expenses of EUR 8.7 million. The US market for Fiskars Brands products saw moderately positive growth during the first half. Demand in Scandinavia and UK was on the increase, while general consumer demand in Germany and Italy remains weak. The School, Office and Craft (FISKARS(R)) product lines are an important operation, which, however, faces increasing competition from low-cost imports to the US market. Fiskars Brands is a leading supplier of these products in the United States and its production is competitive in spite of the tighter market situation. Overall demand for Garden Tools and Accessories (FISKARS(R)) is satisfactory, although there are variations between different markets. Implemented structural and marketing improvement measures improved competitiveness. As an individual product, the UpRoot(TM) Weeder designed in Finland turned out to be a best-seller that won recognition in a significant German design competition and reached record-high sales levels already in the first months. The garden line is a sector where Fiskars products have considerable growth potential. Flower pots, which today are largely sourced, were included in the garden line from the beginning of the second quarter. Sales of Outdoor Recreation (GERBER(R)) products which are mainly sold in the US markets continues their strong growth that started last year. At the beginning of this year, Gerber launched numerous successful new products which together with the LED lighting line acquired in January have strengthened Gerbers position as supplier of a wide variety of recreation and outdoor products both to major retailers and to specialty stores. Sales of consumer electronics (Power-Sentry(R)) also developed positively thanks to new products. Sales of outdoor furniture manufactured by Syroco(R) remained unchanged from the previous year. Profitability improved as a result of structural measures taken but was still unsatisfactory. Tight competition in the sector continued and raw material costs remained high. The European market is heterogeneous. Sales in Scandinavia developed positively and particularly garden tools and kitchenware sold well thanks to new product innovations. A principal European market for Fiskars Brands is Germany that is showing the first weak signals of a stabilizing market situation. Italy still suffers from weak consumer demand, and the UK shows slight signs of recovery. Sales of Housewares (FISKARS(R)), solely concentrated in Europe, developed well especially in the Nordic countries. Housewares sales resources were dedicated to improving the utilization of the European dealer network. The Fiskars Functional Form product line gained new foothold in the market. INHA WORKS Inha Works net sales for the second quarter increased by 33% to EUR 9.6 million (7.3) compared with the corresponding period previous year. Net sales for the first six months grew by 17% and amounted to EUR 17.3 million (14.8). Demand for Buster(R) boats continued to be record-high, and their sales growth exceeded the overall growth of the boat market. Strong demand continued both in Finland and international markets. Exports increased during the first half-year primarily in Sweden as well as in Estonia from where some of the boats are delivered further to the growing Russian market. Steady demand for hinges continued both in domestic and export markets thanks to lively construction activity. Inha Works operating profit for the second quarter was EUR 1.3 million (1.1) and for the first six months EUR 2.3 million (2.1). 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 since the beginning of 2004. The six-month result includes a share of Wärtsiläs result in proportion of Fiskars holding the respective period deducted with goodwill amortization. Fiskars share of Wärtsiläs result for the second quarter was EUR 4.2 million. At the end of the review period Fiskars held 20.5% of Wärtsiläs shares and 28.1% of votes. INVESTMENT ACTIVITIES Income from other investment activities totaled EUR 4.4 million (1.2) and includes among other things proceeds of approximately EUR 1 million from the sale of the companys placements in EQT Fund. After the EQT transaction, placements in investment funds consist of a minor holding in the American AEA Fund. According to its strategy, Fiskars will concentrate on developing its direct industrial holdings. PERSONNEL At the end of the period, the total number of corporate personnel was 3,983 (4,272); 2,088 (2,328) of these worked in North America and 958 (1,006) in Finland. CAPITAL EXPENDITURE Investments in industrial fixed assets during the first six months amounted to EUR 9.9 million (15.1). Long-term investments were EUR 22.6 million (10.9), and mainly consisted of shares in the associated company Wärtsilä. BALANCE SHEET AND FINANCING The balance sheet total was EUR 710 million (792). After the closing of the previous financial year, the balance sheet total has increased by EUR 32 million. This is in practice entirely attributable to the cyclical nature of operations. Cash flow and liquidity are strong. At the end of the review period, equity ratio was unchanged from the year-end at 51%. Net gearing improved from 57% at the year-end to 55%. Interest-bearing net liabilities were EUR 199 million at the end of the review period. Net financing costs decreased and were EUR 3.1 million (3.3) for the second quarter and EUR 5.9 million (7.2) for the first six months of the year. PURCHASE AND TRANSFER OF OWN SHARES The corporate Board of Directors had an authorization to acquire the companys own shares. It had exercised this authority by the end of 2003 to acquire 62,219 A-shares and 300 K-shares for a total price of EUR 615,007. During January 2 6, 2004, the same authorization was exercised to buy a total of 30,281 A-shares for an aggregate price of EUR 301,110. At July 31, 2004, the company held in total 91,080 of its A-shares and 300 K-shares. ANNUAL GENERAL MEETING 2004 The Annual General Meeting of Fiskars Corporation held on 16 March 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 16 March 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 A-share on the Helsinki Exchanges at the end of June was EUR 10.16 (9.40 at the beginning of the year) and the price of K-share EUR 10.01 (10.45). The market capitalization of the Companys shares at the end of June was EUR 560 million. IFRS Fiskars will according to its earlier announcement introduce IFRS as the standard for its accounting practice at the beginning of 2005. OUTLOOK For Fiskars Corporation the first part of the year was a period of stable and quite positive growth. This is important also with a view to the whole years result due to the cyclical nature of operations. Despite some positive signs of improvement the market trend is likely to continue uncertain. Fiskars Corporations operational result for the third quarter will remain on the previous years lever. The operational result for the whole year is estimated to improve from the previous year. NEXT INTERIM REPORT Fiskars will publish its interim report for January September on 10 November 2004. Heikki Allonen President and CEO CONSOLIDATED 4-6 4-6 1-6 1-6 change 1-12 INCOME STATEMENT 2004 2003 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR NET SALES 180.4 180.4 335.9 354.0 -5 620.3 Cost of goods sold -128.7 -130.9 -238.2 -255.0 -7 -448.3 GROSS PROFIT 51.6 49.4 97.7 99.0 -1 172.0 Other operating costs -34.6 -34.7 -68.4 -71.4 -4 -139.6 Restructuring cost 0.0 -5.7 0.0 -8.7 -84.2 OPERATING PROFIT 17.0 9.0 29.4 18.9 55 -51.9 Share of assoc.comp.result 4.2 0.0 7.4 0.0 0.0 Income from investments 4.4 1.2 5.7 27.7 -79 31.3 Other financial income 0.2 0.3 0.2 0.4 -52 2.1 Financial expense -3.3 -3.6 -6.1 -7.6 -19 -11.5 PROFIT BEFORE TAXES 22.5 6.9 36.5 39.5 -7 -30.0 Taxes for the period -5.9 -1.0 -8.8 -11.2 -22 17.2 PROFIT (LOSS) FOR THE PERIOD 16.7 5.9 27.8 28.3 -2 -12.8 Earnings per share, euro 0.30 0.11 0.50 0.51 -0.23 4-6 4-6 1-6 1-6 change 1-12 2004 2003 2004 2003 % 2003 Currency rates: USD average rate (I/S) 1.20 1.14 1.23 1.10 11 1.13 USD end-of-period (B/S) 1.22 1.14 1.22 1.14 6 1.26 CONSOLIDATED BALANCE SHEET 6/04 6/03 change 12/03 MEUR MEUR % MEUR ASSETS Fixed assets 200.0 255.3 -22 173.6 Long-term investments 192.6 219.6 -12 215.9 Inventories 115.3 136.7 -16 124.4 Financial assets 202.6 180.8 12 164.6 TOTAL 710.5 792.4 -10 678.4 EQUITY AND LIABILITIES EQUITY Share capital 55.4 55.4 0 55.4 Other equity 304.8 360.3 -15 293.0 PROVISIONS 7.3 7.7 -5 8.9 LIABILITIES Long-term 100.7 135.4 -26 123.4 Short-term 242.3 233.7 4 197.8 TOTAL 710.5 792.4 -10 678.4 KEYFIGURES 6/04 6/03 change 12/03 % Equity/share, euro 6.51 7.51 -13 6.29 Equity ratio 51% 52% -3 51% Net gearing 55% 58% -4 57% Equity, meur 360.2 415.7 -13 348.3 Net interest-bear.debt, meur 198.7 239.7 -17 198.6 Gross investments, meur 32.5 26.0 25 37.8 Avarage number of employees 3982 3987 0 3633 CONSOLIDATED STATEMENT 4-6 4-6 1-6 1-6 1-12 OF CASH FLOWS 2004 2003 2004 2003 2003 MEUR MEUR MEUR MEUR MEUR From oper. activities 33.7 35.9 32.2 46.5 83.6 From investm. activities -6.7 -7.9 -7.9 -22.6 -22.4 From financing -22.2 -28.3 -20.9 -27.0 -63.8 CHANGE IN CASH 4.8 -0.3 3.4 -3.0 -2.6 Cash at beginning of period 15.6 16.5 16.9 19.5 19.5 Currency transaction adjustm 0.0 0.3 0.2 0.0 -0.1 CASH AT END OF PERIOD 20.5 16.4 20.5 16.4 16.9 NET SALES BY BUSINESS AREA 4-6 4-6 1-6 1-6 change 1-12 2004 2003 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR Fiskars Brands 169 171 315 336 -6 589 Inha Works 10 7 17 15 17 24 INDUSTRY TOTAL 179 179 333 351 -5 613 Corporate & real estate 2 3 5 5 -2 10 Eliminations -1 -1 -1 -1 0 -3 CORPORATE TOTAL 180 180 336 354 -5 620 RESULT BY BUSINESS SEGMENT 4-6 4-6 1-6 1-6 change 1-12 2004 2003 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR Fiskars Brands 16.6 8.8 28.6 19.0 50 -51.4 Inha Works 1.3 1.1 2.3 2.1 11 2.5 INDUSTRY TOTAL 18.0 10.0 30.9 21.1 46 -48.9 Corporate & real estate -1.0 -0.9 -1.5 -2.2 30 -3.0 OPERATING PROFIT 17.0 9.0 29.4 18.9 55 -51.9 Share of assoc.comp.result 4.2 0.0 7.4 0.0 0.0 Income from investments 4.4 1.2 5.7 27.7 -79 31.3 CONSOLIDATED SEGMENTAL RESUL 25.6 10.2 42.5 46.6 -9 -20.6 NET SALES BY MARKET AREA 4-6 4-6 1-6 1-6 change 1-12 2004 2003 2004 2003 % 2003 MEUR MEUR MEUR MEUR MEUR Finland 12 11 23 21 9 38 Scandinavia 17 15 32 31 5 57 Other Europe 36 37 71 75 -5 119 North America 110 114 199 219 -9 389 Other 5 4 10 8 23 18 CORPORATE TOTAL 180 180 336 354 -5 620 Export from Finland 13 14 31 32 -3 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 6/04 6/03 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 49 61 54 Other contingencies 6 1 8 TOTAL CONTINGENCIES 55 63 64 NOMINAL VALUES OF DERIVATIVE INSTRUMENTS Forward exch. contracts 107 178 91 Interest rate swaps 82 88 87 FRA's 16 9 36 MARKET VALUES OF DERIVATIVE INSTRUMENTS COMPARED TO NOMINAL VALUES Interest rate swaps -3 -7 -5 FRA's 0 0 0 Nominal values also include closed contracts.